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Aviation History
1998
1998 - 2273.PDF
BUSINESS Kitty Hawk cuts it fine in bid to acquire Southern Air Transport RAMON LOPEZ/WASHINGTON DC KITTY HAWK has revealed plans to purchase Southern Air Transport (SAT) after merger negotiations unexpectedly broke off between financially ailing SAT and Fine Air. Dallas, Texas-based Kitty Hawk, a charter passenger and cargo car rier which recently acquired American International Airways and other Kalitta companies, agreed to buy SAT for an undis closed amount of cash and stock. The letter of intent was signed after Fine Air and SAT mutually agreed to terminate their agree ment, which was announced on 20 July. Fine Air says that "...both parties decided to explore other business opportunities" after fail ing to finalise a contract. The air line reportedly began losing inter est after taking a more detailed look at SAT's finances. Fine Air had said it would use SAT's Boeing 747 freighters to extend services in South America and expand high volume cargo routes. Chief executive Barry Fine says its long-haul growth plans re main in place despite die setback. Other, unnamed opportunities are being explored. SAT says the new deal will have "a positive impact" for both compa nies. The privately held firm, based in Columbus, Ohio, operates five leased 747-200Fs and holds options for three more. Kitty Hawk's deal does not include 14 SAT-owned Lockheed L-100 Commercial Hercules freighters that remain on the auc tion block. SAT offers aircraft under long-term wet-lease contracts. Tom Christopher, the company's chair man, says the acquisition will allow Kitty Hawk "... to increase its wide- body air cargo services and capabil ities". SAT will be operated as a separate subsidiary. Kitty Hawk claims to be the world's seventh largest air freight carrier, operating 120 owned and leased aircraft, including 11 747s and 31 Boeing 727-200s, 19 McDonnell Douglas DC-8s, five DC-9-10s and eight Lockheed L-1011 Tri Star freighters. The publicly traded US com pany ended last year with $ 18 mil lion of net income on revenues of $250 million, although the inclu sion of the Kalitta results for the first half of this year has seen net profitweakeningto$3.3millionon revenues of $303 million. • Asia crisis misses Lufthansa and SAirGroup ANDRZEJ JEZIORSKI/MUNICH THE ASIAN economic crisis has failed to dent the perfor mance of two of Europe's flag carri ers, with Germany's Lufthansa Group and Swissair owner SAir Group showing big increases in pre-tax profits for the first six months of 1998. The Lufthansa Group's pre-tax profits on ordinary activities in the period rocketed 134% to DM928 million ($515 million), with an extra DM 377 million coming from the sale of its stake in Hapag Lloyd. Net earnings after tax were DM924 million, DM767 million more than the previous year. A 0.4% increase in overall load factors, to 69.6%, combined with cost-cutting measures and the sta bility of personnel expenses, all contributed to the profit boom, says Lufthansa. Group turnover for the first six months reached DM10.6 billion, a 7.6% increase over the previous year. Passenger traffic grew 10.5% to 19.44 million, yielding a 7.6% rise in passenger income to DM7.4 bil- Cargo profits improved even though freight traffic sliped marginally lion. Freight traffic dropped 0.5% to 809,000t, although income grew 2.7% to DM1.8 billion. Lufthansa says it experienced the strongest growth on European and North Adantic routes and says that it was not seriously affected by the Asian situation. "The year before we had in creases of 25% and more [in turn over] in the region. We do nothave diat now, but our revenues in the region are spread over many coun tries," says the airline. India, China and Japan performed well, com pensating for losses elsewhere. SAirGroup says the Asian crisis did leave its mark "in some business sectors", although overall results were boosted by 1996 cost-cutting measures. Group operating rev enue totalled SFr5.34 billion ($3.54 billion) compared with SFr4.8 billion the previous year. Pre-tax profit was SFr302 million against SFr251 million last year. Results for the Swiss company's SAirLines division, incorporating Swissair, Crossair and Balair/CTA, exceeded expectations and showed strong growth both in Europe and the USA. • Northrop Grumman reorganises after failure of merger NORTHROP GRUMMAN is moving to cut costs and reorganise in the wake of the failed merger with Lockheed Martin. The aim is to slash annual operat ing costs by $300 million, partly through a realignment of operat ing units. While the company is planning a large number of redundancies, these are expected to be more dian balanced by an increase in employ ee numbers in the electronics side of the business. An additional 2,100 jobs are planned to be cut largely from the company's commercial aircraft unit by the end of 2000 and come on top of cuts previously disclosed, which affected 8,400 employees - about half of which are related to the winding down of B-2 stealth bomber production. On a more positive note, the firm's information technology and electronics business workforce is expected to expand by around 2,500 people by the end of 2000. As a result, company-wide employ ment is scheduled to total 46,000 by the start of 2001 - down by 8,000 from the current level. Northrop Grumman will take a $60 million charge this year to cover the costs associated with the workforce reduction. The com- panysays that cutbacks in commer cial aircraft aerostructures production, and contract delays, will slow revenue growth. It does not expect to achieve revenues of $12 billion until 2003, a year later than previously projected. Northrop Grumman has re aligned some business units into two new operating sectors. The integrated systems and aerostruc tures sector, which will be based in Dallas, Texas, consolidates into one unit, with operations in Bethpage, New York, Dallas, El Segundo, Ca lifornia, and Melbourne, Florida. The electronic sensors and sys tems sector, to be based in Balti more, Maryland, combines the radar producing unit with the electronic systems group in Rolling Meadows, Illinois, and the Space-Based Infrared Sensors project in Bethpage. • FLIGHT INTERNATIONAL 2 - 8 September 1998 33
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