FlightGlobal.com
Home
Premium
Archive
Video
Images
Forum
Atlas
Blogs
Jobs
Shop
RSS
Email Newsletters
You are in:
Home
Aviation History
1997
1997 - 0794.PDF
BUSINESS Qantas disposes of Air New Zealand stake S ANTAS HAS SEVERED its last links with Air New ind, selling its 19.4% stake in the carrier. Under the terms of the long-delayed trans-Tasman single- aviation market, the move now clears the way for unrestricted Qantas entry into New Zealand domestic operations and for increased competition on interna tional routes. Qantas managing director James Strong says that the two air lines been "estranged" for some time, a situation which the sale has now formalised. The holding has been sold for NZ$425.6 million ($297 million) to the ANZ Securities investment group, which says that it has already placed the shares with insti tutional investors. It would not comment on speculation that air lines had been excluded from buy ing the shares. Brierley In vestments remains the largest sin gle ANZ shareholder, with a total holding of 42.5%. Qantas acquired its ANZ hold ing in 1988 to head off the possibil ity of British Airways taking a strategic stake. The Australian car rier, now itself a BA alliance part ner, had been entitled to nominate two places on the ANZ board, but these were given to third-party representatives in 1996. "We had not been actively mar keting the shares, but for some time now it has only been an investment for Qantas, rather than a strategic shareholding," says Strong. Both carriers had been increas ingly uncomfortable with the Qantas shareholding, particularly after the ANZ acquisition of TNT's 50% share in Ansett, and had already dissolved all commer cial links. Qantas is now believed likely to pursue initiatives to boost its pres ence in the New Zealand market, either by entering a joint venture with New Zealand interests, or by negotiating a takeover of Ansett New Zealand, the subsidiary which is still fully owned by Ansett's Australian co-owner the News Corporation. Q TWA sees losses soar KEVIN OTOOLE/LONDON NEWS THAT A SAUDI Prince has taken a 5% stake in Trans World Airlines (TWA) did little to lift the gloom sur rounding the struggling airline's heavy losses posted for 1996. Prince al-Waleed bin Talal, a member of the Saudi royal family, picked up the stake for $ 14 million and helped a slight rally in TWAs share price following its report of a net $285 million loss for the year. The Prince has stepped in to help with the rescue of prestige projects, including Euro Disney in Paris and die Canary Wharf devel opment in London's docklands. He was also recently reported to be interested in bankrupt Fokker. The investment did little to lift the concern surrounding TWAs efforts to re-organise its fleet while struggling to recover from the fall out of the July Flight 800 crash. Debt-raring agency Standard & Poor's issued a warning that the air line's liquidity and financial condi tion leave "little room for error or adverse developments". TWA ended the year with cash of $182 million, down by 40%. The group's losses follow a round of record results from the other major US airlines, which posted a collec tive profit of $3.6 billion for 1996 (Flight International, 12-18 February, P3 6). Much of the damage was done in the fourth quarter, when TWA posted a massive $257 million loss, including a charge of nearly $54 million largely to cover retirement of the ageing Lockheed L-1011 and Boeing 747 fleets. A year ago, the loss had been held to less than $2 8 million. Yields fell and load fac tors edged down. Chairman Gerald Gitner, who arrived after the mid-year manage ment shake-up, concedes that the Flight 800 tragedy has had an "unquantified but significant" impact, but blames part of the loss es on mistakes made in the first half of the year. TWA had attempted to keep its expansion going by flying used air craft to tide it over pending new deliveries. "This turned out to be a mistake which led to operational- reliability problems that in turn drove increased maintenance and crew expense," says Gitner. He says that the "bad situation" was further compounded by a steep rise in fuel and maintenance costs, which hit TWA's ageing fleet more heavily than most. Gitner pledges, however, that TWA will refocus domestic ser vices on its major hub at St Louis, Missouri, and international ser vices at New York's JFK. He says that "new marketing strategies" will be launched later this year to try to recapture business traffic. • Jeanniot warns against over-expansion PIERREJEANNIOT, director general of the International Air Transport Association (IATA) has issued a stern warning to airlines to think twice before expanding their fleets. The warning follows evidence from IATA that international air lines last year failed to repeat their record profits performance of 1995. The net result on interna tional services shows a net profit of $4 billion, down from $5.2 billion in 1995, and representing a return of less than 3 % on sales. The 1996 result was at the bot tom of IATA predictions which had suggested a range of $4-8 billion depending on what happened to the balance of yields, costs and capacity. In the event, yields fell faster than projected at 2.5% and airlines managed to keep costs down by only 1 %, in part due to the battle with soaring fuel prices. Jeanniot admits that early fig ures suggest that capacity growth of around 7.1% stayed roughly in line with a 6.9% growth in inter national scheduled passenger traf fic, but cautions that airlines Jeanniot: stern warning cannot afford to let the gap widen by cutting loose on capacity. "It is easy to buy aeroplanes. It is harder, but perhaps smarter to not buy aeroplanes," he told delegates at the IATA financial management conference in New York on 18 March. He urges airline chief exec utives "at the very least" to insist on modernising rather than simply expanding fleets. IATAs early pre dictions for 1997 show only a slight profits recovery to $4.2 billion. Jeanniot's warning follows pre dictions from US lessor, International Lease Finance (ILFC), that the next industry downturn is likely to strike bymid- 1999, although it will not be as deep as the recession of the early 1990s. "The next downturn is as sure as death and taxes, but ILFC believes it will rise as a result of increased costs which will affect the airline's bottom line," says ILFC executive vice president and chief operating officer, John Plueger. "Wage demands will lead the parade," he adds Plueger citing the on-going battles at American Airlines and US Airways. "The good news is the downturn will not be as severe or rapid because the replacement need is great," says Plueger. According to ILFC some 4,000 old aircraft, including more than 1,000 "first generation" widebodies will need to be replaced between 1998 and 2003 when they are between 25 and 30 years old. This period straddles the next downturn which is expected to begin in mid-1999 and continue through 2002. Q 26 FLIGHT INTERNATIONAL 26 March - 1 April 1997
Sign up to
Flight Digital Magazine
Flight Print Magazine
Airline Business Magazine
E-newsletters
RSS
Events
