Delivery delays and FX movements as the US shutdown gives a silver lining

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By TESTCustomwebLP TESTCustomwebLP October 3, 2013 09:17

Delivery delays and FX movements as the US shutdown gives a silver lining

As the Aussie dollar rises and the US dollar falls against just about every currency, airlines across the globe will be ending the week with fuel costs far lower than at the end of last week due to the FX movements. There is some good news from the US federal government shutdown. No one really knows how long the US shutdown will go on for but it cannot continue past the point of the US debt ceiling increase deadline, so at least this time around as opposed to the 1995/6 debacle we have a maximum timeline for this shutdown. That is of course unless Capitol Hill is willing to trash the US economy, which must surely be highly unlikely even in this deadlock.

Now thus far outside of aviation the effect of the shutdown has been to lift equity markets through the expectation that major central banks are more likely to maintain loose policies, expanding the supply of money to support economic growth.

Within aviation the major effect is of course aircraft delivery delays as airworthiness certificates are on hold. This affects, though minor delays, some 10 737-900ERs, 6 737-800s, one A319, one A321, 1 A330, 3 Q400s and three E175s. In all some 82 Boeing aircraft due to be delivered in October 2013 could well be affected if the shutdown were to drag on. In the here and now American and Delta both have three aircraft each to be delivered in the next few weeks while Alaska has five, Southwest four and United two. Any delay will not be the end of the world for the airlines but it might affect Boeing cashflow – That said Boeing, even with 787 problems, has its stock at record highs as investors bank on the fact that a major delivery phase is underway no matter what happens.

In other news, airline investors were buoyed by news that Heathrow must cap its charges. Heathrow announced that UK CAA regulation proposals are the toughest it has ever faced. I am sure that IAG will be quietly confident that they can gain significantly from this news.

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By TESTCustomwebLP TESTCustomwebLP October 3, 2013 09:17
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