Airline industry news 2009

[N_Architect]

Mods & members:

I propose we establish a thread where we can post any info/data (from websites, etc. - with no violation of copyright laws of course) on airline industry news (e.g. capacity increases/decreases, reports on airlines revenues, new aircraft orders/cancellations, etc.)

In this way, anyone who wants to look for the latest info or discussion on such issues can look here for easy & quick reference.

Naturally news on deliveries/withdrawals of SQ-specific metal (Airbus A330-300, Boeing 747-400, Airbus A350-900, Boeing 787, etc.) will have to be posted on their own respective threads, as they exist now or as they will be created in the future.

[N_Architect]

News

CX - latest load/deliveries figures

http://online.wsj.com/article/SB123996677447228985.html

Cathay Pacific Airways Ltd. said it will reduce passenger and cargo capacity, delay aircraft deliveries and ask staff to take unpaid leave following a drop in first-quarter revenue. CX Chief Executive Tony Tyler said Friday 17th April the airline expects an extremely challenging 2009, with a "toxic" combination of low fares, a fall in first- and business-class travel, weak cargo loads and poor yields. "There's no visibility on how long this will last ... This makes it more challenging than anything I've experienced," Mr. Tyler said. He said he saw no signs of a recovery in demand at the moment, adding the airline will consider taking "further steps" to cut costs if necessary.

...

Cathay Pacific said it will reduce its passenger capacity by 8% from May and its China-focused unit, Hong Kong Dragon Airlines Ltd., will cut its passenger capacity by 13%. The two carriers also plan to cut their total cargo capacity by 11% from next month. Cathay Pacific said the two carriers' first-quarter revenue from passenger and cargo services fell 22.4% from a year earlier. Cathay declined to provide any revenue figures for the quarter ended March 31.

...

The Hong Kong-based airline will reduce the number of passenger flights to London, Paris, Frankfurt, Sydney, Singapore, Bangkok, Seoul, Taipei, Tokyo, Mumbai and Dubai. For its cargo operations, the airline plans to cut flights throughout the network. Mr. Tyler said the airline has deferred delivery of two Boeing 777 aircraft to 2010 and is in talks with manufacturers on delaying other orders as the carrier seeks to conserve cash in the market downturn. As part of the cost-cutting measures, Cathay Pacific said it will ask its 17,000 employees to take unpaid leave ranging from one to four weeks depending on seniority, beginning in May.

Boeing results & aircraft orders

http://online.wsj.com/article/SB124038516051442687.html

Boeing Co. cut its full-year earnings forecast as it reported a 50% drop in first-quarter profit, weighed down by charges and lower aircraft prices. The Chicago-based company and rival Airbus are working through record order books, but weak airline traffic and tight financing for customers have unleashed a wave of deferred orders.

Boeing booked 60 aircraft deferrals in the first quarter and is working on more than 60 additional deferrals, Chairman and Chief Executive Jim McNerney said Wednesday in a conference call. … Boeing's contracts allow the company to increase customer prices to offset rising production costs. But declining costs amid the recession have thrown off Boeing's revenue forecasts.
The company on Wednesday reported first-quarter net income of $610 million, down from $1.21 billion, a year earlier. Revenue rose 3.2% to $16.5 billion.

Operating profit for commercial aircraft fell 58% to $417 million. Defense-business operating profit fell 18% to $709 million. Boeing earlier announced production cuts for its most-profitable wide-body aircraft. The falling global air-freight market, expected by the industry to drop 20% this year, has led Boeing to cut production on its 777. But Boeing said Wednesday that its policy of overbooking for the narrow-body 737 means current production levels are appropriate. Boeing's total order backlog at the end of the first quarter was $339 billion, down 4% from a year earlier.

The company doesn't expect it will need to cut production on the 747-8, its supersize freighter. "Adjusting production rates is part of this business. We'll have to keep reading and reacting," Mr. McNerney said. Deferrals are more likely than cancellations, he said. "We have seen very few signs that customers are running away." If the economy picks up, Boeing could consider increasing some production a year from now, he said.

[jjpb3]

Great idea, N_Architect, unfortunately especially topical given the current economic environment . Optimistically, I've added '2009' to your thread title, but we can change that if the time horizon needs to be lengthened [knock on wood].

Could we ask SQTalkers to let the mods know when they think threads from this point on should be merged with this one through the RBP button?

[HUGE AL]

I thought feature requests were only granted to LPP's and TPP's. Are my benefits getting diluted?

RBP Button??? I've never used it anywhere. Thought it was kinda mean to do so.

[N_Architect]

http://online.wsj.com/article/SB124099855423368061.html

Singapore Air Should Handle China Eastern With Care

Tempting though entry into China's airline sector may be, Singapore Airlines must tread very carefully when it comes to China Eastern Airlines. The Chinese carrier's leadership claims Beijing is keen to revive talk of an investment from Singapore's flagship carrier.

Singapore Airlines and its parent Temasek Holdings have been down this road before: Last year their joint $923 million bid for 24% of China Eastern was stymied when state-owned Air China proposed a counter bid. It never materialized, but the Singapore effort was effectively dead despite endorsement by parts of the Beijing hierarchy.

Buying China Eastern shares would give Singapore Airlines access to China's high-potential airline industry.

Undoubtedly China Eastern could use Singapore's money and expertise. With $1.7 billion more in accumulated losses than it has capital, it also has $8.6 billion worth of loans to repay. Last year it posted a $2.2 billion loss, mainly on disastrous fuel hedging bets.

CEA's recent survival has depended on cash and loans from a government which now may well be receptive to a role for Singapore.

Buying CEA shares at a third of last year's price, Singapore Airlines would gain rare access to China's high-potential, underperforming airline industry.

But Singapore has its own real challenges, including the looming possibility it could soon swing to a quarterly loss for the first time in six years. The economic crisis is hitting the world's premium airlines the hardest as business travelers and upscale tourists stay put.

Singapore should take a chance on CEA if, and only if, Beijing guarantees it will be the preferred bidder for a sizable stake and will get substantial board representation -- not to mention a low price.

Of course, there's no way to safeguard against the political risks that would accompany an investment in China's government-run air transport apparatus. Singapore Air will be all too aware of the minefield that awaits.

[B727]

Well, now that MU is ready for some foreign cash injection, I dunno how SQ might be persuaded to view them as a suitable investment prospect. CA is already part of Star Alliance, so it's not like they need another Chinese carrier's hand in marriage, so to speak.

When SQ invested in VS, it was based on the fact that VS was a strong brand and highly profitable airline. By comparison, MU is not particularly lauded for its service or safety record, and as the article points out, is now losing money big time!

[N_Architect]

LH latest results

http://online.wsj.com/article/SB124104092181670299.html

Lufthansa Posts Loss Amid Slack Air Travel

FRANKFURT -- Deutsche Lufthansa AG said Wednesday that it swung to a net loss in the first quarter as the global recession hit demand for air travel and cargo services.

Still, the German flagship airline reiterated its full-year earnings outlook, saying it expects to report an operating profit for 2009, though it will come in considerably below the 2008 level of €1.35 billion ($1.77 billion).

"In the absence of signs that demand will recover in the short term a decline in revenue is also expected for the full year, which will be accompanied by a considerable reduction in the operating result," Lufthansa said.

For the three months ended March 31, Lufthansa reported a net loss of €256 million, compared with a year-earlier net profit of €44 million. Sales fell to €5 billion from €5.6 billion a year earlier.

The airline reported an operating loss of €44 million for the first quarter, compared with an operating profit of €172 million a year earlier.

UniCredit analyst Uwe Weinreich said operating profit was considerably better than expected. "This looks like a very solid operating performance," he said.

The company said the operating results were hit by weaker demand for passenger and cargo flights. Lower fuel costs and nonrecurrent items, for which Lufthansa didn't offer details, provided some relief to the operating performance, the company said.

The bottom line appeared to have been hit by a weaker financial result, which likely included write-downs on Lufthansa's stake in the U.K.'s British Midland Airways, or BMI.

Lufthansa shares closed up 7.1%. The shares have lost about 50% of their value in the past 12 months, first because of sharply rising fuel costs and then weakening demand for air travel amid the recession.

[N_Architect]

Fuel-hedging

http://online.wsj.com/article/BT-CO-...01-707801.html

Southwest Air CFO: Fuel-Hedging Key To Financial Planning

CHICAGO (Dow Jones)--Southwest Airlines Corp. (LUV), the airline industry's most aggressive fuel hedger, remains committed to hedging to lock in future fuel prices, Laura Wright, chief financial officer, told Dow Jones Newswires.

Amid today's volatile oil prices, Southwest has placed new hedges this year using only call options. "That's our favorite way to hedge," she said, because it offers protection against rising prices, but allows the company to pay market rates if prices remain low.

"We used call options a lot in the late 1990s, but then they got too expensive" as oil prices rose, Wright said. "In the last two years, we used a lot more collars," which combine options contracts, providing protection from falling prices but less upside protection if prices rise. "We've always used simple methods of hedging, a combination of options, collars and swaps," she said.

In the near term, Southwest expects fuel prices to be volatile but believes prices will climb higher as the world economy begins to recover and grow.

Over the years, smart bets on the future price of jet fuel have saved billions of dollars for Southwest. Hedges kept the low-cost carrier in the black as competitors went bankrupt earlier in the decade.

Southwest's hedges are not used to make money by speculating on energy prices, Wright said. Rather, they help with financial planning for the airline's low-cost business model.

Last year, Southwest and other airlines got burned by wrong-way hedges as oil prices plummeted from a record high of $147 per barrel in July. The bad bets were costly, pushing Southwest to a net loss in the third and fourth quarters of 2008, for the first third-quarter loss in 17 years.

Still, hedging worked well in the first half of the year, Wright said. "People forget that hedging saved us $1.3 billion in 2008. If we had had no hedging, our business would have lost even more money."

With crude oil prices in 2009 hovering around $50 per barrel, the airline has worked to de-hedge contracts that protected against rising fuel prices.

Historically, Southwest has relied on its low cost, along with rapid growth that fueled revenue. It now carries more passengers within the U.S. than any other airline. But this year, "we face the toughest revenue environment in our history," Chief Executive Gary Kelly said last week. The recession-hit airline reported a loss for the first quarter and said that, for the first time, it had no expansion plans for the year. Its shares recently traded up 1 cent to $6.99.

That makes cost-cutting all the more important. Since jet fuel still represents 30% to 35% of Southwest's total costs, "We need hedges for the same reason we've always needed them, so that we have a range where fuel costs will be that we can use for overall business planning," Wright said.

Last year, when oil prices fell, airlines that couldn't afford to hedge fared better than those who made bad bets. Recently reporting first-quarter results, some airlines, including JetBlue Airways Corp. (JBLU) and Allegiant Travel Co. (ALGT), said they have no plans now to hedge against volatile fuel costs.

[N_Architect]

Canada-Europe Open Skies

http://online.wsj.com/article/SB124164938854293451.html

Canada, Europe Reach 'Open Skies' Airline Deal

PRAGUE -- Canada and the European Union signed an "open skies" deal Wednesday under which airlines from the two trading partners will be able to fly freely between any airport in the 27-country EU and any in Canada.

"This will generate major benefits for consumers and airlines ... and will make the EU-Canada aviation market one of the most open in the world," European Commission President José Manuel Barroso told a news conference.

The deal will replace an existing patchwork of bilateral agreements between Canada and European states that include restrictions on routes, prices and the number of weekly flights. The agreement will also ease restrictions on control and ownership of airlines and follows a similar pact between the EU and the U.S. in March of last year.

The deal came at the start of talks on a trade pact valued at an additional $27 billion each year to the combined economies of Canada and the EU, suffering from weakening trade amid the financial crisis.

"We were trying to reach this agreement somewhere from the 1970s," Canadian Prime Minister Stephen Harper said of the trade deal. "Finally this agreement we have is a glimmer of light in the darkness of the global recession."

A study by the European Commission, the EU's executive arm, suggested the aviation agreement would generate an additional 500,000 million passengers in its first year, plus more than 1,000 jobs and economic benefits of at least €72 million ($95.9 million).

Canada already plans to raise the foreign ownership limit to 49% of an airline's voting stock from 25% -- a move welcomed by the country's main carriers, Air Canada and WestJet Airlines Ltd., which want more investment.

In a later phase of the deal, investors will be able to set up and control airlines in each other's markets, and in a final stage, airlines will be able to fly freely within each other's markets and onward from there to other regions.

[N_Architect]

Latest from Airbus

http://online.wsj.com/article/SB124160607261491383.html

Airbus Trims Jumbo Output As Carriers Defer Orders

Airbus cut its planned production of A380 superjumbo jetliners this year to 14 from 18, in a move that threatens to further delay the long-troubled plane's prospects for turning a profit. Unlike previous setbacks, which were caused by problems building the world's largest passenger plane, Airbus blamed the latest reduction in output on the global economic crisis and its impact on airlines.

"Customers approached us, and we are adapting our schedule to their needs," said Airbus spokesman Stefan Schaffrath. As recently as mid-March, Airbus had said it expected to deliver 18 A380s this year.

The cut is at least partly linked to previously announced delivery deferrals at Australia's Qantas Airways Ltd. and Dubai's Emirates Airline, people familiar with the matter said. Airbus said the reduction will have "no significant impact" on earnings before interest and taxes this year. Airbus, a unit of Franco-German European Aeronautic Defense & Space Co., said it "will take mitigating actions against the negative effects" of the shift on free cash flow, such as purchasing fewer components.

Airbus said it plans to deliver "more than 20" superjumbos next year. Airbus Chief Executive Tom Enders last May said Airbus hoped to deliver between 30 and 40 superjumbos in 2010. Airbus has firm orders from 16 customers for 200 A380s, which carry a catalog price of $327 million each, although early customers received significant discounts, airline officials have said.

The superjumbo has been plagued by troubles since its first flight in 2005, when Airbus announced that initial deliveries would be six months late. Airbus later announced more delays due to production problems that pushed the plane program more than two years behind schedule and several billion dollars over its original $12 billion budget.

Airbus initially said the program would break even when it sold 270 superjumbos. In late 2006 it raised that figure to 420 planes, and has since stopped communicating a break-even figure. Extrapolating from currently announced production rates, Airbus will deliver roughly 155 superjumbos by the end of 2013, according to AeroTransport Data Bank, a French company that tracks airplanes.

Mr. Schaffrath at Airbus said the European jet maker sees a market for 1,200 very large aircraft over the next 20 years. Airbus currently has roughly 90% of that market, which includes an updated version of U.S. rival Boeing Co.'s older 747.

The cut in A380 output comes amid a string of production cuts on smaller models at Airbus, Boeing and Brazil's Empresa Brasileira de Aeronautica SA as airlines world-wide struggle with plunging passenger demand. Airbus in February said it would cut deliveries of its popular single-aisle models to 34 planes a month from 36 and consider further cuts.

Boeing in April said it would cut production of its large 777 model to five planes a month starting in mid-2010 from seven planes a month now. Embraer early this year also announced production cuts. Airbus on Wednesday reiterated plans to deliver roughly as many planes overall this year as it did last year, when it produced 483 jetliners, a record level.

Qantas, which already has three superjumbos in its fleet, said last month that it will take its next three A380s this year but defer the following four. One of those four was planned to be delivered this year and the rest in 2010, according to a person familiar with the airline's plans.

Emirates President Tim Clark said in March that the airline expects to get seven A380s in its current fiscal year, but one of those deliveries has shifted from December to next January.

[N_Architect]

http://online.wsj.com/article/BT-CO-...d=djempersonal

SIA CEO: Will Keep Current Business To Economy Seat Ratio

SINGAPORE (Dow Jones)--Singapore Airlines will keep its current business-to-economy seat ratio even as the carrier takes a severe hit from the global economic slowdown.

"Just because shops like Wal-Mart are doing well in this kind of an environment, it doesn't mean the luxury brands will go out of business," Singapore Airlines Chief Executive Chew Choon Seng told a news conference.

Chew said that SIA will not change its business plans for now, but it could review them if the downturn continues.

SIA makes about 60% of its profit from business and first-class passengers. Thursday, SIA reported a 92% on-year drop in net profit to S$42 million for the three months to March 31 as the global economic crisis crimped demand for business and leisure travel.

He said that the airline has hedged around 25% of its fuel at US$125 a barrel.

Chew also ruled out the possibility of immediate jobs cuts.

"We are not there yet. But we can never say never. Retrenchment is absolutely the last resort," he said.

Chew said that the decline in forward bookings due to the downturn has stopped.

"There are green shoots, I hope there is no early frost. We will be happy, if we actually see forward bookings going up," he said.

On China Eastern Airlines Corp. (CEA), Chew said that talks haven't been revived, but SIA is still keen to participate in China's airline sector.

Late last month, China Eastern's board secretary, Luo Zhuping, said the Chinese government hopes that SIA will invest in China Eastern after SIA allowed its offer to lapse last year.

[KeithMEL]

http://www.theaustralian.news.com.au...-36375,00.html

Emirates net falls 80pc; extended weakness likely


Stefania Bianchi | May 22, 2009
Article from: The Wall Street Journal

EMIRATES Airline, the Middle East's largest carrier, said its fiscal full-year net profit fell 80 per cent, providing another indication that even the region's relatively strong carriers are feeling the pain from a sharp drop in travel.


The Dubai-based carrier said that its net profit fell to 982 million dirhams ($344.8 million) in the year ended March 31 from a record five billion dirhams a year earlier.

"As we move into the new financial year, the outlook is not improving," chairman Sheikh Ahmed bin Saeed Al Maktoum said in a prepared statement. "Although fuel prices are dropping, demand for business- and first-class traffic is still weak in many markets," he added.

...

[N_Architect]

http://www.bloomberg.com/apps/news?p...ransportation#

Airbus Said to Be Seeking $5 Billion State Loans for A350 Plane

June 7 (Bloomberg) -- Airbus SAS, the biggest commercial planemaker, is seeking as much as 3.6 billion euros ($5 billion) in loans from four European governments to help fund its A350 long-range aircraft, two people familiar with the plan said.

The loans from France, Germany, Spain, and possibly the U.K., will account for 30 percent of the estimated 12 billion- euro development costs for the plane, said the people, who asked not to be identified because the talks are confidential. The aircraft, designed to seat as many as 350 passengers, is scheduled to enter service in 2013.

Airbus is developing the A350 to compete with Boeing Co.’s 787 Dreamliner and the bigger 777 model, which carries as many as 368 passengers. Loan commitments may re-ignite a trade dispute between the European Union and the U.S. over subsidies for planemakers. The two governments filed dueling complaints with the World Trade Organization in 2004 about aid to aerospace companies. A WTO ruling is expected in the coming year.

...

Traditionally, Airbus gets about a third of development costs from European governments in the form of loans.

Boeing and the U.S. government contend that Airbus is getting unfairly subsidized when it accepts state lending. They argue that the loans are not at commercial rates.

Airbus and European governments say the company is paying back loans, and that past aid was allowed under a 1992 bilateral agreement. Airbus also says it has repaid 40 percent more than it’s borrowed from EU governments since 1992.

The European Union’s filing with the WTO in March 2007 argues that Boeing benefits from research work reimbursed by NASA and the Department of Defense at no cost for technologies used in the 250-seat 787 Dreamliner.

[N_Architect]

Singapore Air Customers Ask ‘Where Is Recession’ on Packed A380

http://www.bloomberg.com/apps/news?p...=aeCeC.xrtlWw#

Singapore Air Customers Ask ‘Where Is Recession’ on Packed A380

Sept. 8 (Bloomberg) -- Karl Ong hoped to find a quiet spot on his Singapore Airlines Ltd. flight home, betting that the recession and a drop in air travel would leave the double-decker Airbus SAS A380 half empty. He was wrong.

“I can’t believe that the plane was packed and I couldn’t find another empty seat anywhere else,” said the 49-year-old investment executive, who was traveling coach from Hong Kong on the world’s largest commercial aircraft. “Where is the recession? If there was one, you can’t tell from this flight.”

Singapore Air’s advantage as the only airline to fly the A380 to financial centers such as Hong Kong and Tokyo is helping it lure customers like Ong. The plane’s appeal in the two years it has been in service could ease the pain from empty seats on other aircraft and cheaper tickets that are threatening to push the carrier into its first annual loss since 1985.

“It’s certainly a competitive offering by Singapore Air to win over travelers who have not flown the A380 before,” said Steven Lim, who manages about $200 million at Daiwa SB Investments in Singapore. He declined to say whether Daiwa owns shares in the carrier.

...

“The A380 remains very popular with customers on all routes,” Ionides said. The $327 million plane features beds in 12 “suites” and the widest available business-class seats.

Besides Tokyo and Hong Kong, Singapore Air’s 10 superjumbos, the most of any airline, fly to London, Paris and Sydney. The carrier, which took delivery of its latest aircraft yesterday, will add Melbourne this month. In addition to the daily A380 flights between Singapore and Hong Kong, it also flies Boeing Co. 777-300ERs and 777-200s on the route.

“The A380 is deployed on very popular routes,” said Rohan Suppiah, a Singapore-based analyst at Kim Eng Securities Pte. “If you have a choice, you would want to fly the A380 rather than a regular service.”

...

Packing the double-decker plane alone won’t be enough to pull Singapore Air out of a travel slump caused by the deepest recession since World War II. The A380 accounts for just 9 percent of the carrier’s fleet of 109 planes.

“They could be filling the A380, but yields may be under pressure,” said Jim Eckes, managing director of industry adviser Indoswiss Aviation. “Carriers such as Singapore Air depend a lot on premium traffic and that’s still falling.”

...

Singapore Air will take delivery of its next A380 before the end of March as customers such as Ong plan to fly again.

“Just the size of the aircraft alone will take your breath away,” Ong said at Singapore’s Changi airport. “If I had to pick again, I will still probably choose to fly it.”

[N_Architect]

Airbus, Boeing Strike Optimistic Tone at Dubai Airshow

http://online.wsj.com/article/SB1000...254681034.html

(this article is public content on the WSJ.com site)

DUBAI—The world's top two civil aircraft makers said Sunday at the airshow here that their market had hit bottom and would start to improve.

John Leahy, Airbus's chief operating officer for customers, told reporters that "At this particular junction, we see the market improving, not deteriorating," and "Six to nine months ago, people were talking about delaying or canceling. I'm not hearing any of that at this airshow."

Randy Tinseth, Boeing's commercial airplane marketing vice president was less bullish but still positive, telling Zawya Dow Jones in an interview that "In 2010, you should see a continued increase in traffic levels. In 2011 you should see airlines returning to profitability and in 2012 we expect to see a demand for new airplanes."

...

Airbus, a unit of European Aeronautic Defence & Space Co. NV, announced a deal with Ethiopian Airlines for 12 A350 XWB aircraft. The deal is a confirmation of an earlier memorandum of understanding signed in July that was a breakthrough for Airbus as the airline has historically been loyal to Boeing.

The list price for the Ethiopian jet order would be about $3 billion; Airbus said it had given a discount but didn't say how much.

On Friday, before the airshow started, the European plane maker also signed a $1.8 billion agreement in principle with Vietnam Airlines for four A380 superjumbos and two A350 XWBs.

...

Mr. Leahy, however, said Airbus will this year deliver as many aircraft as in 2008 amid improving market conditions.

"This year, we can confirm that our deliveries will be at least the same as last year," he said. In 2008, Airbus delivered 483 aircraft to airlines.

...

Boeing didn't make any commercial announcements Sunday, saying it is using the air show to "deepen relations" with existing customers.