OPEC agreement solidifies expectations of a harder 2017 for airlines, but it is a mixed bag

Eleanor Steed
By Eleanor Steed December 1, 2016 15:25

OPEC agreement solidifies expectations of a harder 2017 for airlines, but it is a mixed bag

Oil prices rose over 8% across the board yesterday as OPEC agreed to cut production by 1.2 million barrels a day from 33.6 million – the first agreement in some seven years. The expectation now is that non-OPEC producers will also move to cut production by around 500-600 thousand barrels a day. This is great news for US producers that have cut their cost of production by close to half over the past five years and further investment in oil production in the US may now be back on the cards. Such a move should stem any huge increases in oil prices in the long term. But for airlines, 2017 will be a year when oil prices increase slightly ahead of the current slow moving curve; more damaging for some airlines is the moves in the currency markets as the US dollar strengthened on the back of expected strong ADP employment figures, which many now think will force the Fed to raise interest rates in December. The USD/JPY rate for example has risen to a nine-month high overnight. Meanwhile, Chinese manufacturing PMI came in above expectations at 51.7, up from 51.2 previously.

As reported here in the summer, Malaysia Airlines has confirmed it is to form a new airline, using six A380 aircraft, to service the Haj and Umrah market. MAS said yesterday that it was already transporting Islamic pilgrims on charter flights to Saudi Arabia and was “in a good position to cater to increased passenger demand on this route”. The A380 will do well in this/these market(s). MAS though has a world of trouble in its domestic and local market in Asia, it cannot penetrate into the market share of other airlines unless it rebrands and becomes a full-on LCC, re-branding and some re-fleeting will cost a fortune. MAS can move into the black but it cannot grow at speed and that may well be the thing that scuppers any IPO before 2020.

Remember to vote in the Aviation 100 Awards Survey
We are asking our friends in the aviation industry to vote for their peers in the annual Aviation 100 awards survey.

The Aviation 100 recognises the year’s most outstanding performers. The categories are: Airline, Lessor, MRO, Bank, CEO/Industry Leader, CFO/Treasury Team, Appraiser, Law Firm, and Parts Suppliers.

The top ten rankings for each category are based primarily on this industry survey vote, however the votes are then filtered to ensure fairness (votes for your own company will not count for example). Nominations for the law firm and bank of the year are also accepted and are judged using a combination of points awarded for specific criteria (see below).

The Aviation 100 also includes the Face of Aviation award, which is awarded to the individual that has made a significant contribution to the aviation industry. The winner of this category is decided through nomination, overall performance and editorial discretion.

Top ten criteria for each category

Airline of the Year
Criteria judged include: Profit, debt, load figures, RPK, orders and routes held, M&A/expansion activity

CEO of the Year
Criteria judged include: Performance of company over past 12 months, personal involvement with deals/expansions/agreements/unions among others.

CFO/Treasurer of the Year
Criteria judged include: Best finance deal in past 12 months but also looks at consistency of performance and deals book.

Lessor of the Year
Criteria judged include: Number and types of aircraft on books and increase over past 12 months, profit/turnover/debt, value of company against 12 months ago, client list – new clients won in the past 12 months, aircraft owners against aircraft managed, lease rate performance and results of the Aviation News survey for satisfaction.

MRO of the Year
Criteria judged include: Aircraft/engine types handled, contracts in place – won against lost, global facilities/new facilities/facilities planned, total number of aircraft/engines maintained during past 12 months, turnover, results of the Aviation News survey.

Law firm of the Year
Criteria judged include: Deals worked on, aerospace clients on books, Deal of the Year pitch, value of deals worked on, number of cases closed; number and office locations/employees, employee turnover in the aviation department in the past 12 months.

Appraiser of the Year
Criteria judged include: Results of the Aviation News survey, number of clients handled, number offices/employees, turnover in past 12 months, aircraft type specialism.

Bank of the Year
Criteria judged include: Number of deals closed in the past 12 months, value of deals closed, results of Aviation News survey.

Parts supplier of the Year
Criteria judged include: Parts stocked, clients on books/new clients in the past 12 months, locations/number of employees, ability to source, supply and timescale; plus results from the Aviation News survey.

Face of Aviation award
The Face of Aviation award celebrates one individual who has made the most outstanding contribution to the aerospace industry in the past 12 months. Nominations for this prestigious award are welcomed.

The aviation 100 awards gala dinner takes place during the Airline Economics Growth Frontiers Dublin conference on Monday January 16, 2016. Nominations for the overall Aviation 100 awards are now open. Cast your vote here: Aviation 100 Awards 2017. You have until December 14, 2016 to cast your vote. Please feel free to send out the link to you clients – but please note votes cast for your own company will not be counted.

The Aviation 100 Deals of the Year awards are also open for nominations.

Any company can nominate its clients or its own services for consideration to win one of the top ten categories by submitting a pitch to the Aviation 100 editorial team victoria@aviationnews-online.com. Please also send nominations for the Face of Aviation award to the same address, describing why that person deserves to win the award for the most outstanding contribution to the aviation industry in 2016.

The deadline for nominations and pitches for the Aviation 100 2016 awards is December 14, 2016.

Eleanor Steed
By Eleanor Steed December 1, 2016 15:25