Global airline shares strengthen in May; Aircastle management changes

Eleanor Steed
By Eleanor Steed June 14, 2017 17:20

Global airline shares strengthen in May; Aircastle management changes

Despite a number of PR disasters, the global airline share price has risen by 7.8% in May and up by more than 20% over the past year, according to the latest report from the Airlines Financial Monitor from The International Air Transport Association (IATA).

Gains were observed in Europe, North America and Asia-Pacific but European airline shares led the way again this month, with a 14.3% rise. North American shares also performed strongly, gaining more than 8% in May, to be almost 40% higher over the past year. Asia-Pacific airline shares gained 3.3%, to be up a more modest 4.4% on their level of a year ago.

IATA do not expect the squeeze on airline profit margins, which are shown in the latest financial results for the first quarter of 2017 due to higher costs and weak yields, to endure. Still, in a sample of 49 airlines results in Q1, the EBIT margin is an even 4.0%, less than half the 8.3% outcome for the same period in 2016, while the EBIT margin is lower across all regions compared with results from a year ago. Net post tax profits are also lower, at US$1.2bn in aggregate, down from $US3.2bn.

The fall in Brent crude prices in April extended into May and despite some recovery, the monthly average price fell almost 4%. Jet fuel prices behaved in a similar fashion and were down 5.6% for the month overall.

The strong start to the year for passenger and freight demand growth has continued. The passenger load factor set a new record high in April while freight loads consolidated recent gains.  Growth in premium passenger traffic has exceeded its economy counterpart in many key markets in the past year. Passenger yields remain 3-5% lower than a year ago amidst ongoing signs that the downward trend in yields of the past three years may have bottomed, says IATA.

Meanwhile, Aircastle has announced that chief executive Ron Wainshal will step aside to focus on his health and recovery and Michael J. Inglese has been named chief executive officer and was appointed to the board of directors.

“Ron has brilliantly led the Company for the past twelve years, creating a uniquely positioned industry leader focused on driving value for our shareholders in a global and ever-evolving industry,” said Peter V. Ueberroth, Aircastle’s Chairman of the Board, speaking on behalf of the Board. “Ron is a highly respected leader in our industry, who is beloved by the entire Aircastle family. The Board is extraordinarily proud of the business he built and wishes him every blessing that he so richly deserves.”

“After consulting with my family and medical team, I concluded that I need to step aside to focus on a speedy recovery and my long-term health,” said Wainshal.  “My family and I are grateful for all the thoughts, prayers and support from our friends and colleagues, both within and beyond the aviation business, during a difficult time, and I am honored to have been given the opportunity to lead Aircastle over a decade.  I would like to thank Mike and the team for their excellent work while I was on leave.

“Aircastle is a unique company that can source attractive aviation investments all over the world, using a flexible, long-term funding structure.  I believe they can continue growing and evolving successfully under this new capable leadership team, with which I have had the pleasure of working.”

Inglese has served as Chief Financial Officer since 2007 and more recently as acting chief executive officer since Wainshal began his medical leave of absence in January 2017.  As a consequence of Inglese’s new appointment, the Board also promoted Aaron Dahlke, to chief financial officer and interim chief accounting officer of Aircastle. Dahlke has been chief accounting officer of the Company since 2005.  Roy Chandran has also been promoted to EVP, corporate finance & strategy and will report to the CEO.

Separately, Aircastle also announced that Takayuki Sakakida has been appointed by the Board to replace Ryusuke Konto, as one of Marubeni’s designees on the Board of Directors.  Konto has served on the Board of Directors since August 2013.

Eleanor Steed
By Eleanor Steed June 14, 2017 17:20