Alitalia, the Fed, AMR and Scandinavia

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By TESTCustomwebLP TESTCustomwebLP December 20, 2013 17:44

Alitalia, the Fed, AMR and Scandinavia

As mentioned here in early November, Air France, being pushed with their backs to the wall by shabby Alitalia tactics, has let Etihad Airways into the room….There is really not much more to say from what we said here over a month ago, other than to confirm what we all knew, that Etihad are in advanced talks that would see them become the largest shareholder in Alitalia with a stake possibly as high as 49% with a capital injection of around €350m.

First Jet Airways and now Alitalia – Etihad really is taking on some serious work and expense. If the management team at Etihad manage to pull off all these grand plans then it will be impressive beyond measure. For now it is a risky plan that could go either way.

Meanwhile the pressure is on weak currencies once again as the US Federal Reserve puts tapering back on the agenda as outgoing Fed chairman, Ben Bernanke said the US’s bond buying programme would be reduced by $10bn a month, starting immediately with a drop from $85bn to $75bn. The effect will be profound on the likes of airlines within India and Brazil for a start.

Meanwhile AMR Corp. has been the airline investment of 2013, even for those who purchased just before the merger turned out to be a profitable investment even for those who bought shares of the American Airlines parent company just before it merged with US Airways Group. When the merger completed last week AMR shares closed at $11.39. But in an interesting twist the intrinsic value of old AMR stock had risen to $17.19 by Tuesday’s close due to the equity that shareholders will receive in the newly formed American Airlines Group. This is a far cry from October 2012 when AMR shares were trading at 40 cents.

AMR investors need to hang in there as under the first distribution they got only $1.74 in American Airlines Group stock for each AMR share. Three more distributions are scheduled in the next few months, but if the new stock of the American Airlines Group remains at a healthy $26.20 odd then the next three distributions will be worth an additional $13.70 or there about, so this taken with the $1.74 relates to a total of $15.44 over the course of the distributions.

Now everyone is calling the AMR bankruptcy the best bankruptcy ever. We saw this coming and gave an award to those who helped make this happen in January this year. One month from today is the fourth Aviation 100 Awards sponsored by Orix Aviation and KPMG. We already know some of the winners and will be releasing details early next year as the votes and deliberations closedown for another year.

Also in the news is SAS this week, which managed to swing to a profit in the fourth quarter, but the underlying message from the carrier is stark – tough competition and weak economic growth means it won’t reach its financial targets until 12 months after the original plan. Keep an eye on NAS figures.

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By TESTCustomwebLP TESTCustomwebLP December 20, 2013 17:44
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