AWAS appoints new CEO; Latin American stats and India ATF rises

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By admin March 1, 2016 21:58

AWAS appoints new CEO; Latin American stats and India ATF rises

AWAS has announced today that it has appointed David N. Siegel as Chief Executive Officer. He will join AWAS in April 2016 and will be based in its Dublin headquarters. Many will recall that Siegel was previously Chief Executive Officer at Frontier Airlines. Prior to Frontier, Siegel held a number of senior positions within the global aviation industry including CEO of XOJET and US Airways, and senior roles in Continental Airlines and Northwest Airlines. This appointment may be a surprise, but it is a logical move – Terra Firma want to drive shareholder value as the priority and David will certainly be in line with Terra Firma management on that front. All the best to David and it is good to see him back in the driving seat.

Meanwhile, as the manic ISTAT week continues in the US, many may have missed some of the passenger stats coming out of Latin America. Avianca announced in the past few days that it has carried more than 2.4m passengers in January 2016, a 5.6% increase on January 2015. In fact, passenger traffic has been increasing steadily with seat capacity at the airline of late and it is hoped that this will continue for February 2016, although the Zika virus might make a significant impact yet. Even so it is well worth noting that Latin American traffic is showing signs of growth.

In India though there is despair this week as airline stocks fell sharply on the news that Indian Finance Minister Arun Jaitley has agreed to increases in airline turbine fuel (ATF) tax from 8% to 14%. A shocking increase. InterGlobe Aviation and Spicejet were hit hardest, falling over 6% each in trading.

It is now essential that Indian airlines pass this cost increase on to passengers – especially on the key New Delhi/Mumbai routes and investors will be watching keenly to see that this takes place.

SpiceJet should increase prices by 4% to soak-up the increases or it will be in the red on many key routes, this increase will allow Indigo to follow.

Excise duty on ATF for supply to scheduled commuter airlines from regional connectivity scheme airports in Tier II and III cities will remain unchanged at this time though and that will assist on many routes that hardly breakeven at this time. The Finance Ministry has also increased service tax through the introduction of a new 0.5% levy that will be added to airfares, this levy will likely be increased in the coming years and it is this new introduction of an APD type tax that should worry Indian aviation the most as we have seen across the globe that when governments need to raise funds, discretionary air fares are the first to be raided. The only good news for aviation was the expansion of customs duty exemption to a wider variety of equipment and tools required to be imported by an aircraft maintenance repair and overhaul (MRO) service provider and customs duty on aircraft imported for undertaking repairs has also been completely exempted at the same time the government is giving additional funding to bring old airstrips back into action across the country – thus for the MRO sector India is now open for business – Finally. The exemption has been completely streamlined with operational procedures followed by airlines, now an international airline can fly into India with passengers, get the aircraft serviced and thereafter use it to fly passengers from India.

However, as India targets the aviation MRO market as its growth sector of choice, it has rubbed salt in the wounds for privately held airlines by allocating another Rs.1,713 crore to Air India. Air India had asked for Rs.3,901.49 crore for the upcoming financial year as part of a Rs.30,000-crore package granted by the government in 2012 but Air India has received Rs.3,300 crore in the current fiscal already and Rs.22,280 crore since the bailout package was granted. The national carrier remains on life support like a dead donkey in the middle of the road all it does is prevent progress by everyone else around it. It is hoped that the Pakistani government with its PIA reforms and hopefully an IPO at the end of it, will show the way for the Indians and make politicians there see the light.

Finally today well done to the team at Qantas Airways after Moody’s restored the airline’s investment grade credit rating. Following last week’s return of $500 million to shareholders through an on-market buyback program, after reporting a record half-year underlying profit before tax of $921 million and a 23% return on invested capital during the period, Moody’s upgraded its rating on the airline to Baa3, with a “stable” outlook, from the previous Ba1 rating. Standard & Poor’s had already returned Qantas to investment grade in November, but the carrier needed the tick of approval from both ratings agencies to gain the full financial benefits of an investment grade rating. Now that normal service is resumed for Qantas the balance sheet will return to rude health at speed with much reduced interest payments now on the table. Qantas joins Southwest Airlines and EasyJet as the only three airlines globally to have an investment grade credit rating from both Moody’s and S&P. Qantas should now save around $50m per annum on its interest bill once it has been able to refinance its debt.

What a great turnaround for Qantas and what a great management team.

admin
By admin March 1, 2016 21:58