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’Guest post: Steve Ridgway on the outlook for the airline industry
The Virgin Atlantic CEO writes:
Our industry has never seen anything like it. It’s been a year in which airline management teams have had to cope with major swings in oil prices and a swingeing cut in demand in recent months.
British Airways’ cash conundrum
Airlines are like grocery stores.
They have particular goods they need to sell before certain dates and at fairly fixed operating costs. The plane is going to leave with 100 people on board, or 50. It is up to the airline to fill enough seats — at high enough prices — to cover costs.
Airline cycles, redux
We think this is proof that the vast majority of long-term airline investors are stupid irrational.
That’s from Goldman Sachs, who on Monday issued a note on European airports and airlines.
The thrust of the research is that though passenger traffic appears to be stabilising,
Class struggles at Virgin Atlantic
Hot on the heels of British Airways’ dismal 2008 results comes a stunning near-doubling of pre-tax profit from self-proclaimed arch-rival Virgin Atlantic.
From Virgin’s press release:
Virgin Atlantic,
BA: Not the world’s most profitable airline
British Airways reported a record full-year loss of £401m before tax on Friday, and even though the figures were always expected to be pretty awful in light of the carrier’s recent downgrade by Moody’s,
British Airways and Iberia, a credit update
The possible merger between British Airways and Iberia has been the basis for many analysts’ “buy” or “hold” recommendations on the UK carrier.
Not so the credit agencies. This from Standard & Poor’s.
Swine fever panic – in pictures
The airline stocks.
A tour operator – Thomas Cook.
An animal breeding company – Genus.
A sausage maker – Cranswick.
But there are some winners, such as Roche and GlaxosmithKline.
Diverging strategies, airline edition
While most of the world’s airlines weather recession by hunkering down, trimming capacity to cut costs and deal with slackening demand, there are those that have a somewhat different strategy. Spot the odd ones out in this Bernstein chart.
QE and exploding pensions
Pensions, accounting and quantitative easing tend to be rather dry subjects.
But, if you put the three together, as Citi has in a research note, you get something quite interesting.
Here’s the basic premise…
A suspension of space for airlines
A sign of the times for airlines:
March 10 (Bloomberg) — European Union regulators proposed to suspend an obligation on airlines to use their airport slots at least 80 percent of the time to avoid losing them,
The return of business-class only
London’s Luton airport may once again see all-business-class flights as BWAA prepares to start services this year.
BWAA, which stands for British West African Airways, plans to fly between London Luton and Nigeria,
Moody’s downgrades BA
British Airways has had its investment grade credit rating removed by Moody’s due to its rapidly worsening financial performance. The agency said the rating also remained under review for a further possible downgrade.
A British Airways yield condundrum
British Airways has just unleashed a £127m net loss in the nine-months through Dec. 31, 2008.
It’s already guiding for a £150m operating loss in the full-year (through March 2009) because of further “economic weakness”
CDS report: Credit markets muted amid London snowfalls
Credit market indices edged tighter on Tuesday morning, though trading volumes were minimal as there was limited corporate newsflow, traders said. This, coupled with the fact that most market participants in London remained homebound following exceptionally heavy snowfalls in the UK on Monday,
Iberia dispels doubts over BA deal
The head of Iberia’s largest shareholder sought Monday to dispel doubts about the Spanish flag-carrier’s proposed merger with British Airways, saying an agreement between the two was “close”. However,
CDS Report: Car makers lead credit markets tighter
European car makers were the main outperformers in credit markets on Wednesday morning, buoyed by news of more government bailouts. On Tuesday, the UK joined France and Germany as the latest EU member to announce government aid for the auto industry.
British Airways’ nosedive
British Airways has just unleashed a bombshell of a trading statement.
Further economic weakness in January and the outlook for February and March combined with the fall in sterling, are impacting our outlook for the year ended 31 March 2009.
Flying like it’s 1991
Airline tickets, which have so far managed to resist deflationary pressures, may be moving towards a rather pronounced collapse.
Yesterday, we saw a JP Morgan economist speculate that the 34 per cent 12-month increase in air fares contained in the UK’s December inflation figure was on the verge of a “reversal”.
Where have all the bankers gone?
Fuel costs may finally be down, but it’s now a revenue game for the airlines.
To wit, British Airways has just announced a 12.1 per cent fall in premium traffic last month — its biggest decline since April 2003 (the 26.4 per cent drop in that month impacted by the timing of Easter).
BA, Qantas clashed on two key issues
British Airways and Australia’s Qantas on Thursday abandoned their ambitious plan to create a £4bn global carrier, as it emerged they had been unable to agree on the share exchange ratio each airline would command in a dual-listed structure,
BAntas dead: The autopsy
Sorry for the morbid headline. We just thought we’d add a bit more detail on the death of the BA-Qantas merger.
FT Alphaville noted yesterday that there were two major sticking points to a BA/Qantas tie-up:
BA, Qantas, RIP
British Airways and Qantas Airways have ended their merger talks, the airlines said in a statement early Thursday morning GMT.
Qantas had this to say on its website:
Qantas Airways and British Airways Plc (BA) are announcing that after detailed discussions about a potential merger of the companies,
British Airways’ pension puff
While we’re on the subject of airports, here’s a a little tidbit on British Airways’ pension deficit, sourced from a 52-page note by Citi’s airline analyst, Andrew Light:
… BA had total pension assets of £12.3bn (of which roughly £5 billion in equities) and pension liabilities of £14.0bn as of end March to give an actuarial combined deficit of £1.7bn as at last March.
Qantas cautious on BA merger talks
Merger discussions between British Airways and Qantas, the Australian flag carrier, are believed to have moved a stage further after a weekend meeting between the chief executives of the two companies,
Ryanair 50:50
Ryanair is fond of showing this chart at investor presentations, so we thought we’d reprise it here.
That’s a history of airline mergers approved by the European Commission in recent years, with Ryanair’s 2006 hostile takeover attempt of Aer Lingus the only one to have been blocked by the competition authorities.
(Tax) Pie in the Sky
Tucked away in Darling’s pre-budget report yesterday was something that may be impacting the share prices of UK and Irish airlines today — all of which, with the exception of the illiquid Aer Lingus, are down in early morning trading.
CDS update: Deepening gloom
This CDS report was written by Markit’s Gavan Nolan
Markit credit indices surged through their record wide levels today as pessimism enveloped global markets. The Markit iTraxx Europe index reached 193bp before recovering some ground this afternoon.
A profits engine, or simple engineering, at BA?
The shares may have jumped 22 per cent at the opening on Friday – but does the unexpected forecast of a 1 per cent increase in revenues at British Airways really detract from the overall gloomy picture painted by the interim figures?
From Bloomberg:
BA and Iberia in merger talks
British Airways and Spain’s Iberia on Tuesday said they were in talks on a merger that would create Europe’s third-biggest airline in the latest example of restructuring in the troubled global aviation industry.
Fuel costs threaten BA dividend
British Airways is “up to its neck in perhaps the biggest crisis the aviation industry has ever known”, the airline’s chairman warned investors yesterday, as he refused to commit to whether a dividend was likely for the year to March 2009.