Government assistance

admin
By admin August 14, 2014 20:06

Government assistance

As Virgin America staff vote to become unionized through Transport Workers Union of America representation it can be argued that Virgin America has slightly lost some of its IPO appeal, but in all this it is still looking good as one single union is better than a smattering of conflicting unions all with a slice of staff representation as some airlines are suffering with at this time.

Meanwhile the decision by Australian authorities to increase traffic rights between Australia and Hong Kong only if regulatory approvals for Jetstar Hong Kong go through is continuing to draw adverse media attention with some arguing that resolve in Hong Kong to see Qantas sell-off some of its stake to comply with local law is now a requirement given the public nature of the debate going on. Of course if Australia manages to get its way through more traffic rights then what is stopping other nations demanding the same in the near future, all at a cost to the likes of Cathay Pacific?

Also in the news is Thai Airways which now plans a return to profit by the fourth quarter, as it aims to cut operating costs by 4 billion baht ($125m) and increase revenue by 3 billion baht. Cutting 1,500 staff from the payroll before the end of this year along with part of a plan to cut a quarter of workforce (6,250) between now and 2018 is at the core of cost cutting measures, while Air Chief Marshall Prajin Juntong is stepping down as chairman in favour of current vice chairman Areepong Bhoocha-oom who is also permanent secretary of the Thai Energy ministry at this time.

All this is very good news of course and the airline should perform far better with a lower cost base, but all should watch-out for better fleet management over the coming months to see if the will exists to slash loss making routes at speed. Thai is currently seeing some key load factors improving on European and Indian routes but everything depends on the political situation in Thailand becoming stable and that is a matter on which no one can be sure of at this time.

Thai Airways declined 3.11% today as investors took early profits without delay following the announcement – A clear indication that many current investors just wanted to off-load the stock and were waiting for an opportunity that limited any potential losses.  As IATA stated this week: The airline sector is set to only return an average of 5.4% on invested capital this year which is still very low given the size and importance of the industry. The truth is that much of this return is coming from US airlines (save for the European Low Cost majors) and the rest of the globe needs to catch-up with them – but how can it when governments keep interfering and effectively stopping the market from being open and competitive as we see again in the news today.

admin
By admin August 14, 2014 20:06