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Thursday 10th May 2012
UB Group casts off Kingfisher Airlines, BA sells off BMi and that terrible crash
UB group’s United Breweries (Holdings) Ltd has cast off Kingfisher Airlines. In a regulatory filing, the group stated that the airline has ceased to be its subsidiary on February 18, 2012, after the carrier allotted shares against optionally convertible debentures to certain entities. UB still has a significant exposure of over Rs 12,000 crore to the airline as on March 31, 2012.
The company’s exposure relating to Kingfisher Airlines is under various accounts including corporate guarantees to banks.
“The company has significant exposure on various counts to Kingfisher Airlines as on March 31, 2012. These include investment in equity/preference capital at Rs 2,118.48 crore, corporate guarantees to banks/aircraft lessors at Rs 8,925.86 crore,” the filing said.
Total exposure include “advances at Rs 1,029.75 crore and other receivables Rs 141.09 crore”, it said.
“Certain corporate guarantees have been invoked and Kingfisher Airlines is under negotiation in this regard with the beneficiaries,” the filing added.
Meanwhile, International Airlines Group, the parent group of British Airways, says it has managed to sell bmi Regional, the Aberdeen-based subsidiary of the airline it recently acquired at a discount from Lufthansa AG.
IAG said it has signed a binding agreement to sell bmi Regional to a Scottish consortium, Sector Aviation Holdings, for £8m. The sale includes all bmi Regional’s fixed assets and long-term liabilities, including owned and operating lease aircraft. Bmi Regional operates scheduled services from seven English and Scottish airports as well as a handful of northern European destinations.
The deal, once approved by the CAA, should go through within two weeks. Willie Walsh, chief executive of IAG, said: “This deal provides a future for bmi Regional and should secure around 330 jobs.” Last week IAG announced that it would be closing down the other bmi subsidiary, bmibaby, in September this year.
The purchasers, Sector Aviation, are described by IAG as “a consortium of businessmen with considerable aviation experience”. Its backers are also investors in Loganair, the Scottish regional airline.
The wreckage from a Sukhoi Superjet 100 test aircraft has been found on the side of Mount Salak on West Java, Indonesia. No survivors of have been found. The 50 people on board included crew members, journalists and airline representatives.
The aircraft disappeared yesterday during a 50-minute flight over Indonesia. The last contact the aircraft had with the ground was to request permission to descend to 6,000 feet from 10,000 feet over the mountainous terrain of West Java which is well known to have peaks in excess of 7000 feet. One question is of course was this permission granted?
Investigators have been dispatched to the scene of the crash.
Aside from the tragic loss of human life, the incident is a severe blow to the Russian aircraft manufacturer, whose new aircraft was gaining ground against rivals in the space with 240 Superjet orders. Until the cause of the crash is determined, it is premature to predict what this will mean for Sukhoi’s hopes to revitalise the Russian aircraft manufacturing industry. Many analysts are suggesting that should the fault turn out to be human error then orders will not be affected and refer to the A320 that crashed during a demonstration flight in 1988.
Philip Tozer-Pennington philipt@aviationnews-online.com
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Airline News
Easyjet marches forward
EasyJet has reduced its first half pre-tax loss by £41 million to £112 million despite an £87 million increase in its unit fuel costs. easyJet returned £196 million or 45.4 pence a share to shareholders in the period via a special dividend of £150 million and an ordinary dividend of £46 million or 10.5 pence per share at five times cover. EasyJet‟s balance sheet remains robust with gearing of 31%, net cash of £42 million and cash and money market deposits of £1,211 million at the end of the period.
The strong performance which was ahead of guidance issued in November 2011 and in January 2012 was driven by: passenger numbers growing by 5.4% for the half year as load factor increased by 1.5 percentage points to 86.9%; revenue per seat increasing by 11.9% (11.2% on a constant currency basis) to £50.47 driven by the full year effect of changes to fees implemented last year; improvements in the revenue management system and marketing and website improvements. These initiatives enabled easyJet to capitalise on capacity constraint across the market and selectively take advantage of opportunities from the exit of weaker competitors over the last few months; and cost per seat excluding fuel rising by 1.5% at constant currency. There was an £15m reduction in disruption costs as easyJet benefited from the benign winter weather across Europe. There was a strong performance in ground operations where the benefit of further contract renegotiation with ground handlers was a key factor in holding ground operations costs per seat flat year on year.
EasyJet shares, which have risen more than one-third over the past year, on Wednesday rose 17p, or 3.3%, to 526p.
Environment News
EasyJet buys its carbon requirements for 2012
EasyJet has stated that it has bought all the carbon units its needs for 2012. The airline received free permits from the EU for 74% of its emission requirements for the year, which the airline has now topped up to cover all of 2012 for €8.68 million).
Maintenance News
Malta gains further MRO capacity
Dutch company Aviation Cosmetics are bringing its €22 million operation to Malta from Eindhoven, the Netherlands. Aviation Cosmetic’s Tom Jensen said Malta proved itself attractive through the presence of other aviation companies, and said his operation would be working with similar companies like Lufthansa Technik.
The company specializes in the refitting and refurbishment of airliners and jets. Aviation Cosmetics will also be building two new hangars.
The Prime Minister noted that Malta’s success in the aviation sector is evidenced by the 1,000 people employed in this sector and said this was also acknowledged by the International Monetary Fund’s report published earlier this week.
“To me and my Government, the significance of these investments solely lies in the employment opportunities they are creating. To us, economic success equates to employment and to the opportunities we are able to create for our workers,” he said.
Regulatory News
SGI and Guernsey agree PPP deal
The agreement establishes a unique public-private partnership, whereby the responsibility for the operational aspects of the public service of an aircraft registry will be outsourced to SGI Aviation as a private provider. The aircraft registry is expected to achieve 150 Guernsey registered aircraft by 2015. Resident aircraft owners and operators from the Channel Islands will form the initial primary group of users.
The Guernsey registry will differentiate itself from competitors through its unique tax advantages, quality of service, operational flexibility and targeted marketing. SGI Aviation intends to draw on its international network of inspectors and unique expertise to add value to the proposition.
The Registry activities include safety oversight of all aircraft, applying safety standards that are on a par with the highest in the world, which are those of the European Union and the United States of America. The registration prefix is anticipated to be the number ‘2’, followed by four letters (e.g. ‘2-ABCD’), allowing unique and attractive letter combinations.
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Airline News
Emirates Group announces 24th consecutive year of profit
The Emirates Group has today announced its 24th consecutive year of profit. Released today in the Group’s 2011-12 Annual Report the company posted a AED 2.3 billion (US$ 629 million) net profit, marking its highest ever profit in 52 years of operation. The Group’s revenue reached a record high, climbing to AED67.4bn (US$ 18.4bn) an increase of 17.8% on last year’s results. The Group’s cash balance grew by 9.5% reaching a strong AED17.6bn (US$ 4.8 bn).Throughout the 2011-12 financial year the Emirates Group has collectively invested close to AED14bn (US$ 3.8bn) in new products and took delivery of some 22 aircraft expanding with 11 new destinations. The Group increased staff count by more than 10% during the year.
In the 2011-12 financial year Emirates’ fuel bill increased by 44.4% over last year to reach AED24.3bn (US$ 6.6bn). With operating costs increasing by 24% compared to a revenue increase of 16.2% over last year.
Emirates launched its highly successful US$ 1 billion bond in June last year and despite many traditional financing partners suffering from the Eurozone debt crisis, the bond was well received by global investors reflecting confidence in the Emirates business model. In addition to this, Emirates repaid a Singapore Dollar 250 million bond in full that matured in June 2011 . The bond, listed on the Singapore Stock Exchange, was originally issued in 2006 with a five year term.
Emirates revenue reached a record high of AED 62.3 billion (US$ 17 billion) growing by 14.9 percent when compared to the 2010-11 financial year. Despite this strong revenue growth, the stifling cost of jet fuel impacted Emirates’ bottom line with the airline’s profit sitting significantly lower than the previous year at AED 1.5 billion (US$ 409 million) representing a decrease of 72.1 percent over last year’s record results.
Carrying a record 34 million passengers, an increase of 8 percent, Emirates logged a Passenger Seat Factor, at 80%, remaining consistent with last year’s results. With an increase in seat capacity – Available Seat Kilometres (ASKMs) of 9.8%.
Passenger yield increased by 7.8% to 30.5 fils (8.3 US cents) per Revenue Passenger Kilometre (RPKM), up from 28.3 fils (7.7 US cents) in 2010-11.
Revenue generated from across Emirates’ six regions continues to be well balanced, with no region contributing more than 30% of overall revenues. East Asia and Australasia remained the highest revenue contributing region with AED 18.2 billion (US$ 5.0 billion) up 17.6% from 2010-11. Europe, up 18.2% to AED 17.1 billion (US$ 4.6 billion) and the Americas up 21.3% to AED 6.7 billion (US$ 1.8 billion) also saw significant growth, reflecting new destinations as well as increased frequency and capacity to these regions.
Across the rest of the globe Emirates saw strong revenue increases from West Asia and the Indian Ocean up 10.6% to AED 7.1 billion (US$ 1.9 billion), Gulf, Middle East and Iran up 15.1% to AED 6.3 billion (US$ 1.7 billion) and Africa with AED 6.1 billion (US$ 1.7 billion) in revenue, up 9.5%.
Emirates witnessed an upward trend in its premium class seat factor for a second year, up 1.9 percentage points from 2010-11. Premium and overall seat factor for the airline’s flagship A380 aircraft sat even higher, highlighting a continued demand in the product from passengers.
Emirates has 232 aircraft on order worth over US$ 84 billion. Emirates received 22 new aircraft during the year including 14 Boeing 777-300ERs, two Boeing 777Fs and six A380s from Airbus, the highest number of aircraft received in a single year of operation. With an increased fleet, Emirates launched 11 new destinations in 2011-12 including a focus on North America and South America in the final quarter with Rio de Janeiro, Buenos Aires, Seattle and Dallas-Fort Worth all launching between January and March 2012. Emirates also added capacity to 34 cities including; Manchester, Hamburg, Frankfurt, Hong Kong, Khartoum, Lahore and Tunis. Looking forward to 2012-13, Emirates has to date announced four new routes including Ho Chi Minh City, Barcelona, Lisbon and Washington D.C.
New A380 destinations for the airline in 2011-12 included; Munich, Rome, Shanghai, Kuala Lumpur and Johannesburg bringing the total number of A380 destinations to 17. In the coming financial year Emirates will launch a further three A380 destinations including: Melbourne, Tokyo and Amsterdam.
Cargo News
Emirates SkyCargo powers ahead too
The 2011-12 financial year has been a strong one for Emirates SkyCargo with revenues of AED 9.5bn (US$ 2.6bn) an 8.4$% increase on last year on account of an increase in freight tonnage and freight yield per Freight Tonne Kilometre (FTKM) which rose by 5.4%.
With the bulk of the cargo industry reporting downward tonnage, Emirates SkyCargo’s tonnage increase of 1.7% reaching 1,796 thousand tonnes showcases its persistence to grow revenues against the industry norm.
Contributing 16.2% of Emirates’ total transport revenue Emirate SkyCargo continues to play an integral role in the company’s expanding operations.
At the end of the financial year, Emirates SkyCargo freighter fleet was eight – two on wet lease and six on operating lease.
Regulatory News
Nigerian government to recover N2.37b from Lufthansa
The Nigerian Senate yesterday directed the Minister of Aviation, Mrs. Stella Oduah, to take steps to recover $14.8 million (about N2.37billion) owed the Nigerian Civil Aviation Authority (NCAA) by Lufthansa without delay.
The debit is said to have come about from Lufthansa’s failure to carry out its own side of a commercial agreement it entered into in 2008.
Chairman of the Committee, Senator Hope Uzodinma Insisted that the Ministry should liaise with the NCAA to recover the debt from Lufthansa, he warned: “If it means grounding all the aircraft to ensure that our laws are obeyed, we will do it.”
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Airline News
ACE Aviation reports first quarter results
In the first quarter of 2012, Aviation Holdings (ACE) posted a loss and reduction in net assets in liquidation of $3 million. This includes unrealized losses of $2 million on ACE’s investment in Air Canada.
On April 25, 2012, ACE’s shareholders approved a special resolution providing for the voluntary liquidation of ACE pursuant to Section 211 of the Canada Business Corporations Act, through distribution of its remaining assets to shareholders, after providing for outstanding liabilities, contingencies and costs of the liquidation, the appointment of a liquidator at a time to be determined by the board of directors of ACE and the ultimate dissolution of ACE in the future, once all the liquidation steps have been completed.
On April 30, 2012, ACE’s net assets amounted to $381 million or $11.73 per share. ACE’s underlying assets are: cash and cash equivalents of $351 million; 31 million shares in Air Canada which had a market value of $31 million based on the April 30, 2012 closing price on the TSX; and 2.5 million warrants for the purchase of Air Canada shares at exercise prices of $1.44 (1.25 million warrants) and $1.51 (1.25 million warrants) per share which had a nominal value.
At that date, ACE also had total payables and accrued liabilities of $1 million.
ACE has also declared an initial distribution in the aggregate amount of $275 million (or approximately $8.46 per common share) to common shareholders of record as of June 1, 2012, which will be payable as of June 8, 2012.
Maintenance News
JCAB approves Chromalloy’s engine component repair station
Chromalloy’s turbine engine component repair station in The Netherlands has received Approved Organization Exposition (AOE) certification from the Japan Civil Aviation Bureau (JCAB).
“The AOE certificate allows the station in Tilburg to provide Federal Aviation Administration (FAA) approved Designated Engineering Representative (DER) repairs on All Nippon Airways (ANA) and Japan Airlines (JAL) components,” said Bruce Johnson, Vice President, Engineering. “This is Chromalloy’s fifth JCAB certificate – a significant milestone that represents the company’s commitment to serving our customers in Japan.”
Chromalloy earlier received JCAB approval for four repair stations in the U.S. – Windsor, Conn.; Carson City, Nev.; Phoenix, Ariz., and San Antonio, Texas.
The certificates were issued in accordance with the 2009 Japan Bilateral Aviation Safety Agreement (BASA) that authorizes FAA DER approved repairs as part of the agreement. The certificates were awarded following rigorous audits by JCAB and determination of operational capabilities to provide repairs on various components in turbine engines powering Japanese commercial aircraft.
JCAB approval of the facilities allows the airlines to use Chromalloy DER approved repairs without the company having to apply to JCAB for individual technical approvals of new repairs.
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Airline News
Kingfisher Airline pilots strike
Pilots at Kingfisher Airlines are refusing to fly and calling in sick in protest over non-payment of salaries. The action comes as sources say the airline’s management has once again reneged on its promise to pay overdue salaries. Only one flight from Mumbai to Chennai was cancelled this morning but if the action continues more cancellations will be necessary.
Air India cancels long haul flights
Striking pilots at Air India have forced the airline to cancel long-haul international flights – the carrier has stopped taking bookings for flights to North America, Europe and the UK till May 15. The management is now moving contempt proceedings against the members of Indian Pilots’ Guild (IPG) whose pilots have continued to call in sick despite a Delhi High Court verdict calling the action illegal. The airline is also examining whether the flying licences of the pilots concerned can be suspended – either temporarily or permanently — by Directorate General of Civil Aviation (DGCA) for “highhanded behaviour and acting against public interest”.
Finance News
SIA eyes partnerships in India and China
Singapore Airlines (SIA) is looking for potential partnerships in India and China, particular with Star Alliance members, accord to chief executive Goh Choon Phong.
Goh said that discussions were on-going and an announcement would be made at a right time.
SIA is seeking more avenues to boost revenues after reporting a 69% drop year-on-year in net profit to SGD 336 million (about Rs 1,439 crore) for the financial year 2011-12. Although turnover rose by 2% to SGD 14.86 billion, the airline took a big hit from fuel costs.
“Fuel prices are expected to remain at high levels, which will adversely impact the Group’s operating performance,” said SIA in latest financial statement.
Regulatory News
CASA approves JetGo Australia
The Civil Aviation Safety Authority has granted JetGo Australia a full operating certificate. The new airline, which is owned by a syndicate of local investors, plans to target the lucrative fly-in fly-out mining market and will fly flexible charter services from Brisbane, the Sunshine Coast and Sydney to mining centres using a 36-seat Embraer 135 Regional Jet.
Director of operations Arron Mulder said JetGo, said: “We do not sell seats to the general public – we operate charter flights. We might take sporting teams on weekends and cater for resource sector workers during the week.”
Mulder said JetGo would succeed where others had failed because it “brought something new to the market”.
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