Data/Airline Economics Channel

Featured Articles

Losing Bet on Hedging

By Aaron Karp

US airlines, including perenially profitable Southwest, post third quarter losses despite falling fuel prices as their hedges finish out of the money

Air Cargo Flattens Out

By Aaron Karp

With the economic slowdown deepening and spreading to all parts of the world, air cargo traffic growth has cratered.

Air Canada's pension problem: Warns that tight regulations put it at disadvantage

By Aaron Karp

February 23, 2009--The global financial crisis is forcing airlines to examine all expenditures carefully to determine which are sustainable and which are not. For Air Canada, funding its defined benefit pension plans is becoming a serious problem. The carrier is lobbying the Canadian government to alter the country's strict regulations on such benefits and warning that current laws put it at a distinct disadvantage to its competitors in the US.

A Pause in the Action

By Perry Flint

Aircraft orders spool down in time for the recession.

Tapping the Ancillary Revenue Well

By Michele McDonald

Enabling technology is an important but overlooked key to attracting more cash from passengers.

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Austrian announces 1,000 job cuts, still confident on Lufthansa takeover

Friday July 3, 2009

Austrian Airlines Group said yesterday that it will need to cut an additional €200 million ($281.6 million) in costs and will slash 1,000 jobs to help it achieve the savings target. [more]

ANA adds five 787s to order, to issue nearly $2 billion in new stock

Thursday July 2, 2009

ANA raised its firm 787 commitment to 55 aircraft from 50, according to a document released yesterday detailing the company's plan to issue 575 million new shares worth an estimated ¥182.62 billion ($1.9 billion) that will be used largely to finance new aircraft. [more]

BA's Walsh remains committed to A380

Thursday July 2, 2009

British Airways CEO Willie Walsh said he remains committed to the A380 and "could make a case to take this capacity earlier than scheduled." BA placed an order for 12 A380s in September 2007 as part of its long-term fleet modernization, with deliveries beginning in 2012. "There is a big cost reduction compared to the 747s [we currently operate]," he said yesterday. "With fuel prices over $70 and maybe heading to $100 a barrel the difference in unit cost becomes even more distinct," he told ATWOnline during a press conference at the SITA Air Transport IT Summit in Cannes. "Also in terms of capacity, there is a case. One A380 could replace two 747s," he noted, while acknowledging that other costs associated with the introduction of a new aircraft type as well as pre-delivery financing costs would "almost certainly rule out changing the delivery schedule." All new aircraft deliveries up through 2013 are financed, he confirmed. "We are fortunate to be in this position," he said.

Walsh also conceded that BA considered postponing its new all-business-class A318 service from London City to New York JFK, which is due to commence in September. "We reviewed it in May-June last year when the first signs of the credit crunch were apparent and we expected a downturn and again in September, but research convinced us to move forward with it," he said. "We see a demand for the service, and we believe it will be a very successful venture." He admitted to this website that the new route will "of course" cannibalize premium traffic on existing Heathrow-JFK service, "but equally it will give us the opportunity to cut capacity at LHR." And, he said, if the LCY-JFK operation is not a success, "we can use the aircraft on other routes" like to Dubai or certain oil-producing destinations.

Thursday July 2, 2009

GECAS and flydubai reached a sale-and-leaseback agreement covering four 737-800s scheduled for delivery in the second half of this year (two this month, one in October and one in December). Aircraft are worth $320 million. Flydubai CEO Ghaith Al Ghaith said the financing is the first secured by the startup from outside the UAE. The airline expects to operate six aircraft to "around" 14 destinations by year end. Flydubai ordered 50 -800s at last year's Farnborough Airshow (ATWOnline, July 15, 2008).

Austrian fears potential postponement of Lufthansa takeover

Wednesday July 1, 2009

Austrian Minister of Finance Josef Proell said this week that "the situation facing Austrian Airlines Group is too serious to delay a decision from the EU regarding the takeover by Lufthansa," Der Standard reported as speculation increased that the EU may postpone its ruling. [more]

East Star continues push for takeover

Wednesday July 1, 2009

East Star Airlines continues to expect to be acquired as a majority of its debtors prefer a takeover to bankruptcy, a spokesperson said at a Beijing news conference yesterday. "We have talked with almost all our debtors and 75% of them prefer takeover to bankruptcy, because a takeover offer can best safeguard their interests," the spokesperson said. Both China National Aviation Fuel Holding Co., one of the carrier's debtors, and Shanghai YuField had their takeover offers rejected by the Wuhan court (ATWOnline, June 30). "We have talked with several investors and started our contacts with Shanghai YuField about two months ago. Among all the investors, Shanghai YuField's takeover offer is the best, which includes making a capital injection of CNY500 million ($73 million) along with at least three other investors," the East Star spokesperson told ATWOnline.

It is noteworthy that Shanghai YuField has registered capital of only CNY15 million, although East Star said the investment firm has the necessary financial support to complete the deal. "If we can get the capital injection of CNY500 million from Shanghai YuField, we can pay off our debts of CNY420 million and then we can resume operation," the spokesperson said, contradicting a report from the Wuhan Zhonghuan Accounting Firm that the carrier's debt totals CNY1.01 billion. According to Chinese law, a debtors' conference will have the final say on whose takeover offer is accepted. The conference was scheduled for July 3 but has been postponed because CNAF appealed its takeover offer to a Hubei provincial court. Shanghai YuField also said it would appeal.

Wednesday July 1, 2009

Kuwait Airways should be fully privatized by year end, Kuwaiti Minister of Communications Mohammed Al Busairi said, according to the Arab Air Carriers Org. The government will keep 20% while 35% will be made available to a single investor, 5% to airline staff and 40% to the public.

Wednesday July 1, 2009

American Airlines parent AMR Corp. said it plans to issue $520.1 million in 20-year notes to finance the acquisition of 16 737-800s scheduled for delivery by the end of 2010 and to refinance four 777s.

Separately, AA said it is closing down its Windsor, Conn., reservations center, according to reports.

United Airlines said is offering $175 million in aggregate principal amount of senior secured notes due 2012. The notes, which will carry an annual coupon interest rate of 12.75%, will be secured initially by a lien on aircraft spare parts owned by UA that are located in the US. Proceeds will go toward "general corporate purposes," it said.

Air Canada said it has secured a C$100 million ($86.5 million) "revolving loan agreement" with Aeroplan to help shore up its liquidity. Under the agreement, AC can draw down money from the Aeroplan loan through June 30, 2010. The airline said that recent pension funding agreements with its unions (ATWOnline, June 23) require it "to raise at least C$600 million as a condition precedent." The Globe and Mail reported that the Canadian government may contribute as much as C$200 million.

Frontier Airlines Holdings, which is operating under bankruptcy, reported a net profit of $1.1 million for the month of May, a reversal from a $22 million net loss suffered in the year-ago month. Its $11.7 million operating profit compared to a $16.5 million loss in May 2008. Net income would have reached $5.6 million excluding special items, which included a $7.5 million book loss on an aircraft sale. May mainline unit revenue fell 8.7% to 9.02 cents and unit cost dropped 30.8% to 7.56 cents. Frontier reached agreement last week to be acquired by Republic Airways Holdings for $108.8 million (ATWOnline, June 24).

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