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Aviation History
1996
1996 - 0204.PDF
BUSH Lockheed Martin delivers profits KEVIN O'TOOLE/LONDON LOCKHEED MARTIN has ended its first year with profits of more dian $1 billion, confirming Wall Street optimism that consoli dation within the defence giant is already producing the promised post-merger benefits. "We are meeting, and in some cases exceeding, the consolidation schedule we announced in June 1995," says president Norman Au gustine. He points out that since the merger, which was sealed in March, the enlarged group's stock value has risen by 75%. Augustine predicts a continued improvement in results as the merger benefits continue to feed through, with the acquisition of Loral also bringing profits. Net profits of S1.1 billion repre sent a 17% improvement for the group, despite the fact that turnover remained virtually un changed at just below $23 billion. The headline profit excludes $690 million in one-time costs of the merger and ensuing consolidation. The group also delivered on promises of increased cash-flow, with around $880 million in free cash at the year end. The biggest profit gains came Augustine: merger benefits on schedule from the space and strategic mis siles segment of the business, where operating profits rose by 46% as sales grew by 12% to above $7.5 billion, making it now the group's largest single division. The aeronautics division man aged to improve margins slightly, despite a dip in sales to $6.6 billion. The group delivered 75 F-16 fight ers during the year and has a firm backlog of 412 aircraft scheduled for delivery by the end of the decade. Q Sonaca faces bankruptcy BELGIAN aerostructures com pany Sonaca has warned its state owners that it faces bankrupt cy without a major rescue plan, including fresh capital and a halv ing of the workforce. The company has drawn up a rescue plan that calls for up to BFrl billion ($33 million) in new funds and the loss of 500 of its 1,130- strong workforce. This strategy will be put to me group's owner, die regional Walloon Gov ernment, at a special meeting called for die end of January. The company produces wing leading edge slats for Airbus Industrie, and is a risk-sharing partner on fuselage components for the Embraer EMB-145 region al jet. Slow sales of the EMB-145 have left Embraer well short of die 400 deliveries needed for it to cover costs. Sonaca warns that it is losing BFr2 million a day and will be forced out of business if no action is taken soon. Sabca has already turned down an invitation to res cue its Belgian competitor. Sonaca was formed when the Walloon Government stepped in to save the Belgian arm of Fairey Aviation from bankruptcy. Q USAir turnaround ends six straight years of losses... PROFITS HAVE continued to roll in from the US airline industry, with USAir delivering on its promises of a dramatic turn around, producing its first annual profit since 1988. USAir ended the year showing net profits of $120 million, against a loss of $685 million a year ago. The result largely came from a spectacular 13 % rise in yields and an overall fall in costs. Despite the turnaround, British Airways has confirmed that it will not take up its options to invest another $450 million in its US partner. BA let the options lapse on 21 January, saying that there was no indication from the US Department of Transportation (DoT) that it would have allowed the UK airline to increase its boardroom influence in USAir, in line with the increased investment. The DoT later confirmed the view. BA will continue to maintain the existing 24.6% stake for which it paid $400 million in 1993. The UK airline has also given an enthusias tic welcome to the appointment of former United chief Stephen Wolf as USAir's new executive chairman, and says that discussions are expected to begin soon on how to "enhance the benefits" of the strategic alliance. Wolf has yet to map out his plans for the carrier, but board changes are likely, speeded by the an nouncement from LTSAir president Frank Salizzoni that he is to retire. The better profit figures compli cate Wolf's task of winning extra concessions on wages and pro ductivity. USAir warns that, despite the recovery, it still needs savings of $2.5 billion over the next five years. The plan is to re-open discussions during pending contract renegoti ations with the major unions. "Our full potential, however, cannot be realised, nor our exis tence assured, if we do not achieve a competitive cost structure," says John Harper, USAir's chief finan cial officer. He says that the air line's labour and unit costs are still the highest in the industry. • ...while Continental and United forge ahead with record results FURTHER GOOD news from the US airline industry includ ed record profits at Continental Airlines and progress from United Airlines as it ends its first full year under employee ownership. "This was a whopper year for us no matter how you measure it...we're back on the map and here to stay," says a bullish Gordon Bethune, Continental's president, revealing 1995 net profits of $224 million. It is Continental's first annual profit for half a decade, and the best ever in its history. In 1994, losses stood at $166 million. The airline's recovery stems in part from the end of the low-cost Continental Lite experiment, which ceased operations nearly a year ago. The venture resulted in a cut-throat fares battle between Continental and USAir on the East Coast. Both carriers saw yields climb by more than 13% in 1995, which more than offset an overall fall in traffic. United also turned in a record performance for 1995, posting a pre-tax profit of $621 million. That came down to $349 million after taxes and debt repayments. The 1994 employee share-own ership programme (ESOP), which gave workers a controlling stake in the group in return for wage con cessions, allowed United to improve customer service and keep down costs, says chairman Gerald Greenwald. While group revenues rose by almost $1 billion over the year, un derlying costs grew by less than 2%, excluding $504 million paid under the ESOP scheme. Wage costs were down by $150 million. "We anticipate continued suc cess for 1996, having begun the year with strong first-quarter bookings," says Greenwald. • 24 FLIGHT INTERNATIONAL 31 January - 6 February 1996
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