Pinnacle reports better results
Pinnacle Airlines reported net income of $13.3m in the ﬁrst quarter, up slightly from net income of $12m in the year-earlier period.
Pinnacle recorded operating revenue of $207.1m, an increase of 6%. For the quarter, Pinnacle completed 102,597 block hours and 61,265 cycles, increases of 2% and 7%, respectively, over the same period in 2005.
Pinnacle’s operating margin for the ﬁrst quarter of 2006 was 10.4%, compared to an operating margin of 10.3% for the ﬁrst quarter of 2005. The improvement in operating margin is partially attributable to strong operational performance in 2006.
Pinnacle surpassed the operating performance levels contained in its airline services agreement with Northwest during the quarter. The company ended the quarter with seven consecutive days without a flight cancellation between 24 March and 30 March.
A key goal for Pinnacle in the near future remains in securing the company’s existing business relationship with Northwest Airlines.
Northwest Airlines has again extended the deadline for requesting additional security deposits from Pinnacle totalling $21.7m related to aircraft subleases between Northwest and Pinnacle to 15 May.
Pinnacle ended the quarter with cash and short-term investments totalling $90.7m. Pinnacle’s short-term obligations at 31 March, 2006 include $17m outstanding on its revolving credit facility with First Tennessee Bank.
GATX Corporation reported ﬁrst quarter net income from continuing operations of $47.9m, an increase from net income of $28.4m in the ﬁrst quarter of 2005.
First quarter results include approximately $3.4m in after-tax beneﬁts from lower depreciation on air assets, which includes the Pembroke portfolio and 36 other aircraft, targeted for sale.
Brian A. Kenney, president and CEO of GATX, stated: “GATX Air made progress on implementing its strategy of increasing fee income and initiating sales of the older aircraft in its fleet. GATX Air earned fee income of $4.5m in the ﬁrst quarter of 2006 and is focused on adding new management and remarketing contracts. The sale of air assets outlined in our December 2005 announcement continues as planned and we expect the sales to be substantially complete by year end.”
GATX Air reported net income of $11.3m in the ﬁrst quarter compared to net income of $4.8m in the prior year period.
Utilisation of the owned fleet was 97% at 31 March and lease rates on certain aircraft types continued to improve. Fee income in the ﬁrst quarter 2006 increased more than $2m over the same period in 2005 due to higher management fees from third party aircraft remarketing engagements.
Aeromexico’s parent company Consorcio Aeromexico, which also operates regional carrier Aerolitoral, reported a ﬁrst-quarter pesos 270m ($24.4m) net loss, widened from a pesos 175m net loss in the three months of last year. Consorcio Aeromexico, formerly known as Cintra, sold Mexicana and low-cost carrier Click to Grupo Posadas, but opted to keep Aeromexico after bids were rejected. In addition, its net performance in the year-ago quarter was affected by a pesos 365m special gain resulting from a victory in a tax-related court case.
For the three month period to 31 March, total revenues dropped 5.3% to pesos 4.39bn as income derived from domestic passenger services slipped 0.8% to pesos 2.75bn and international passenger revenue plunged 19.1% to pesos 1.13bn. Consorcio Aeromexico blamed the appreciation of the peso and the seasonality of the Easter holiday on its poor performance. Consorcio Aeromexico said an “integrated cost-reduction programme” largely was effective as operating costs excluding fuel and payroll were trimmed by 8.6%. However, a 14.8% jump in fuel costs to pesos 1.23bn left total operating expenses at pesos 4.12bn. As a result, operating loss came at pesos 363.4m.
SkyWest reported operating revenues of $742.9m for the quarter ended 31 March, a 118.3% increase from the same period last year. SkyWest also reported net income of $34.6m for the quarter ended 31 March, an increase of 84.3% compared to $18.8m for the same period last year.
Total operating revenues for the ﬁrst quarter increased primarily as a result of a 110.8% increase in available seat miles (ASMs) and due to increased fuel cost reimbursements by SkyWest’s major partners that are recorded as operating revenues under contract flying arrangements.
Total operating expenses and interest per ASM for the ﬁrst quarter, excluding fuel charges, of $224.7m, decreased approximately 4.9% to 9.8 cents.
Total ASMs for the ﬁrst quarter increased 110.8% from the ﬁrst quarter of 2005, primarily as a result of SkyWest increasing its fleet size to 395 aircraft, from 219 aircraft as of 31 March 2005. During the quarter, SkyWest took delivery of 15 new CRJ700 regional jet aircraft. At the end of the quarter, SkyWest’s fleet consisted of 321 regional jets (118 United and 203 Delta), 62 EMB-120 aircraft (50 United and 12 Delta) and 12 ATR-72 aircraft (all Delta).
SkyWest has approximately $345.3m in cash and marketable securities,
SkyWest’s long-term debt was $1.46bn as of 31 March, compared to $1.42bn at 31 December. SkyWest’s long-term debt reflects reﬁnancing of four CRJ700 aircraft from interim debt ﬁnancing to long-term debt ﬁnancing.
SkyWest has signiﬁcant long-term lease obligations that are recorded as operating leases and are not reflected as liabilities on its consolidated balance sheets. At a 7.39% discount rate, the present value of these lease obligations was approximately $2.3bn.
MKA Capital, an aviation leasing company with ofﬁces in Panama, China and the US, reported revenue of approximately $3.2m in 2005, mainly generated from the aircraft leasing income with gross margin of 84.4%. The high gross margin is mainly attributed to the service nature of the aircraft leasing business.
The selling, general and administrative expense was nearly $2m. The expenses include a bad debt expense of approximately $954,000 in 2005. The company has reached an agreement with its customers to collect the outstanding balance in the next 18 months with interest.
Net income before minority interest and taxes was over $800,000 in 2005, representing a 47.4% increase over 2004.
Germans eye budget airline to take on EZY/FR
TUI Group is in talks with German airlines about creating a new low-cost carrier to compete with Ryanair and easyJet, according to a report.
It is understood that German low cost/ low fare carriers such as Hapagfly and HLX could join with domestic competitors DBA and LTU, Condor or Air Berlin in the battle. Germany’s budget and holiday airlines are increasingly looking at co-operation deals.
Aeroflot-Russian Airlines reported a 4.7% decline in net proﬁt under the Russian Accounting Standards for the year 2005. The net proﬁt amounted to roubles 6.03bn ($220.5m). The airline’s operating revenue stood at roubles 62.85bn ($2.29bn), up by 11.5% from 2004.
Its gross proﬁt sank by 7.8% to roubles 9.11bn, while operating proﬁt tumbled by 23.7% to roubles 3.29bn. As of 31 December 2005, the airline’s assets totalled roubles 32.75bn, which is 34.8% more than a year before.
East African Airlines
The owners of East African Airlines have sold their interest in the airline to new shareholders. The airline was owned by FIN Investments Limited, which had a 50% stake. Benedict Mutyaba, who has been managing director, had a 40% stake, while Patrick Kabunakaki had the remaining 10%. Africa Direct Uganda and Frederick Ochieng-Obbo are now the new owners of the airline.
The airline, which operates a single Boeing 737-200, is said to have ﬁnancial and operational problems.
The Russian government has supplemented its 2006 privatisation programme with the planned sale of 25.5% of Siberia Airlines.
The sale of these blocks of shares was put back from 2005 to 2006. The Siberia Airlines sale did not take place last year as planned because the valuer hired by the Russian Federal Property Fund was unable to value the state shares.
Siberia Airlines operates 16 Western-built aircraft (10 Boeing 737-500s, two Airbus A310-200s and two A310-300s). Natalya Fileva, the ﬁrst deputy general director, owns 62% of the shares.
China reports solid performance
China Airlines posted its best quarter of earnings in four years after surcharges and rising travel demand partially shielded Taiwan’s largest carrier from surging jet fuel costs. Although ﬁrst-quarter net income fell to NT$385m, or $12m, a 53% drop from the year-earlier period, China Airlines’ proﬁt surprised few analysts and proved that its fuel-hedging policy works. The Taipei-based carrier sales rose 15% to $27.8bn. The company’s chairman, Philip Wei, has been hedging fuel costs by adding levies, simplifying China Airlines’ fleet and cutting routes to shield the carrier’s earnings. China Airlines hedges 60% of its fuel costs. China Airlines’ ﬁrst-quarter operating costs surged 23% from last year to $24bn.
As many as 3.73 million passengers travelled through Taiwan’s international airports in the ﬁrst two months of 2006, 8% more than last year. The carrier ﬁlled 76% of seats in the ﬁrst quarter, up from 75% last year.
ANA Group posted ¥26.7bn ($233.1m) in net income for its ﬁscal year ended 31 March, a 0.9% drop compared to the 2004/05 ﬁscal year when income reached ¥26.9bn. “ANA was able to achieve record revenues and operating proﬁt ... despite a number of factors beyond our control, such as a severe winter, which saw many cancellations on our domestic services; anti-Japan demonstrations in China last April, which until very recently adversely affected leisure trafﬁc between Japan and China; and the continued high price of kerosene,” commented president and CEO Mineo Yamamoto.
The company reported consolidated revenues of ¥1.36trn and a record consolidated operating proﬁt of ¥88.8bn, for the 2005 ﬁscal year ended 31 March 2006.
All business segments within the group – airline, travel services, hotels and other businesses – recorded net proﬁts for the year. Group airlines reported a 6.2% gain in revenues to ¥1.13trn and an 8.9% increase in operating proﬁt to ¥74.1bn. International passenger revenues were up 8.8% to a record ¥229.2bn while domestic passenger revenues grew 4% to ¥685bn.
For the current ﬁscal year ending 31 March 2007, ANA Group forecasts a ¥27bn net proﬁt on revenues of ¥1.42trn.
Jet Airways recorded a 15% increase in full year net proﬁt to rupees 4.5bn ($101.3m). An impressive fourth ﬁscal quarter ended 31 March allowed Jet Airways to recover from a slower ﬁrst nine months. After three quarters, Jet’s net earnings lagged 13.2% behind the same nine months in 2004, but a 71% surge in fourth-quarter proﬁt to 2.3bn rupees accounted for strong full-year results. “We remain the market leader and the most proﬁtable airline in India but we operate in a challenging environment,” chairman Naresh Goyal said.
Full-year revenues rose 39% to rupees 61.4bn while EBITDAR fell 3% to 13.6bn rupees. Jet Airways did not provide expense ﬁgures. Trafﬁc climbed 14% to 9.6 billion RPKs against an 11% lift in capacity to 13.3 billion ASKs. Load factor rose 0.7 point to 72%.
Fourth-quarter revenues grew 61% to rupees 19.7bn but EBITDAR dropped 28% to rupees 3.1bn. Trafﬁc and capacity each rose 20% to 2.8 billion RPKs and 3.9 billion ASKs respectively. Load factor declined 1.4 points to 72%.
Thai Airways announced plans for a new airline on domestic and regional flights as part of its strategy to combat cut-throat competition from budget rivals. The airline, called Euarng Luang, which means Royal Orchid, will target the mid-range market and start flying later this year within Thailand and to Laos, Cambodia and Myanmar.
“It will take about two months to set up a new company that will operate flights for domestic (routes) and neighbouring countries," commented Thai Airways new president, Apinan Sumanaseni.
Thai Airways launched Nok Air, a low-cost subsidiary, in 2004 for domestic services. Euarng Luang will be positioned differently from Nok Air and is targeted to serve the markets between premium and low-cost airlines, Apinan said.
Euarng Luang will fly from Bangkok’s existing Don Muang airport before moving to the new Suvarnabhumi Airport, which is expected to open after much delay by the end of the year.
Hainan Airlines reported an 11.7% decline in ﬁrst-quarter proﬁts to CNY12.1m ($1.5m) from CNY13.7m earned in the year-ago quarter. Its full-year 2005 result was worse as the carrier lost CNY215.8m one year after earning a proﬁt of CNY90.7m. Hainan will change its name to Grand China Air following its acquisition of three smaller carriers, and it expects to list its shares in Hong Kong by next year. It already has raised $420m in an initial private placement and share sale.
Air Paciﬁc reached agreement to acquire the assets and business of domestic carrier Sun Air. Under the terms of the agreement, Air Paciﬁc subsidiary Fiji Airlines Ltd will take over the operations of Sun Air from 1 July subject to the transfer of Sun’s licenses and AOC. Based in Nadi, Sun operates a fleet of 11 aircraft comprising Twin Otters, Islanders and Queen Airs to eight resort destinations on six islands. Air Paciﬁc said it is in negotiations for acquisition of new aircraft types “capable of operating to all airports within Fiji”. Outgoing chairman Gerald Barrack said the Fijian government asked Air Paciﬁc to re-enter the domestic market and that the airline decided the purchase of Sun Air was the preferred option.
Japan Airlines (JAL) says its goal is to achieve ¥119bn ($1bn) in annual cost savings by March 2011. It expects to return to proﬁtability in the current ﬁscal year, while by 2008 it should complete the “rebuilding of the business foundation”, enabling it to produce consistent proﬁts. By March 2010 JAL expects ‘consolidated operating proﬁt margins of 5% or more’.
Qantas to follow Air Pacific?
Now that Air Paciﬁc, the flag carrier of Fiji, has ordered ﬁve Boeing 787-9 Dreamliners, with three additional purchase rights, Qantas is expected to follow suit. Qantas is a 46% stakeholder in the carrier. According to one source, it is also possible that “Qantas will just take over Air Paciﬁc’s order”.
China Airlines is tipped to select to order 10 747-8s in a $2.5bn deal that could be signed by the end of June.
China Airlines needs aircraft that can carry more than 400 passengers each, to fly on long-haul routes to the US and Europe, chairman Philip Wei has said. The airline will choose between the A380 and Boeing’s 747-8, he said.
The airline will halve the number of aircraft types in its fleet to three next year to reduce maintenance costs, Wei added. The current fleet includes 12 Boeing 737-800s, 15 747-400s, 18 747-400Fs, six Airbus A300B4-600s, 10 A330-300s and six A340-300s.
Sale is for Sale?
Word on the street is that Singapore Aircraft Leasing Enterprise is in the market looking for a buyer. The timing is right as a number of hedge funds and private equities are searching for uses for surplus cash. Dubai Aerospace Enterprise, an investment vehicle that will channel $15bn into the aerospace industry, is also looking to acquire a portfolio of aircraft.
Singapore Airlines, Air France and Lufthansa are believed to have paid “less than the price of a A340-300” for their A380 orders, according to a source close to the deals. Airbus’ A340-300 best sale price to date (without escalation price) was $128m per aircraft and that was to a struggling carrier in Europe…
Pembroke is rumoured to be on the market for between $6m and $7m, plus “a whole lot of debt”, according to a source. Cerberus, AerCap and Blackstone are rumoured to be potential backers in the deal.
Emirates Airline said it could place orders for as many as 100 mid-sized aircraft (Boeing’s 787 Dreamliner or Airbus’ A350), double the number the company had said it was considering. “If we get what we want, then we could go for a big order, even up to 100, why not? We need more aircraft,” Emirates’ president Tim Clark said. The carrier had previously said it was considering a deal for 50 mid-sized aircraft. The carrier’s comments are in sharp contrast with GECAS president and CEO Henry Hubschman’s latest comments. Speaking to the Aero Club of Washington late last month, Hubschman argued that aircraft orders are too large. “We wish they would moderate a bit, but we don’t control that.” In Hubschman’s view “certainly by 2009 and potentially by 2008, there is a risk of an overcapacity-driven recession” in the airline industry.
The McDonnell Douglas DC-9-15 (MSN 45775) seized last month by Mexican customs ofﬁcials is the flying demonstrator aircraft of bankrupt in-flight entertainment company SkyWay Communications. The aircraft flew from Caracas to Toluca where a Falcon 50 was waiting for the 5.5 tonnes of cocaine the DC-9 transported. The aircraft belonged to Royal Sons, a charter operator based in Clearwater, Florida, owned by SkyWay Communications and local boat charter ﬁrm Royal Sons Motor Yacht Sales.
Kingﬁsher Airlines’ ‘surprise’ ﬁve aircraft order for the A340-500 high gross weight model has prompted questions on the airline’s strategy. CAR has learnt that the ﬁrst aircraft are to be delivered in 2008, but with a restriction to operate internationally (as private airlines have to wait for ﬁve years of operations in India), the carrier is to sublease the aircraft to Jet Airways and codeshare the flights.
Iberia plans to invest €24m for a 20% stake in a new independent low-cost carrier to operate from Barcelona with up to ﬁve aircraft, starting in the ﬁnal quarter of this year. Other shareholders include Cobra Group, Iberostar, Quercus, and Neﬁnsa, with a 20% stake each.
Boeing is in talks with Jet Airways for its 747-8 aircraft. Air India is also interested in the same aircraft, although an order is not yet on the cards.
Almost all airline operators in Pakistan, including the national carrier Pakistan International Airlines (PIA), owe millions of rupees to the Civil Aviation Authority (CAA). The only operator that has cleared all dues is Airblue.
The other private sector carriers owe around 300m rupees ($5m) while PIA owes 3.8bn rupees ($63.3m) to the aviation authority.