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Aviation History
2001
2001 - 2739.PDF
BUSINESS RESULTS GRAHAM WARWICK / WASHINGTON DC Honeywell blames softer economy for profit slump But the high cost of its failed merger with GE is partly responsible for plunging profits Honeywell's second-quarter net income plunged 92% to $50 mil lion after the company incurred charges of $651 million, including costs related to its failed merger with General Electric. Revenues for the quarter slid almost 4% to $6.07 billion and operating margins fell to 12.1%, from 15.4% a year ago. "Honeywell had a challenging second quarter," says new chairman and chief executive Larry Bossidy, who returned to the helm after the European Commission blocked the merger with GE. He blames the profits slump on "a softening econ omy, pronounced weakness in some business segments, cost inef ficiencies and continued high raw material costs". Performance mate rials were particularly badly hit. Aerospace fared better than other business segments, with rev enues up 5% to $2.53 billion on higher original equipment and aftermarket sales of commercial avionics "and double-digit growth in air transport and regional origi nal equipment", says Honeywell. Operating margins were lower, but nowhere on the same scale as other parts of the business. Before charges, Honeywell's net income for the second quarter was $450 million, compared with $617 million a year ago. The charges of $651 million includes $42 million in merger-related expenses, plus $123 million in repositioning charges, $140 million in contract losses, $167 million in asset impair ments and $162 million to cover legal and environmental claims. GE, meanwhile, reported its highest-ever quarterly profit, with earnings up 15% to almost $3.9 bil lion on revenues down 3% to $32 billion. Operating margin was up slightly to a record 20.6%. GE Aircraft Engines saw its quarterly profit rise 10% to $667 million on sales up 11% to $3.05 billion. United Technologies reported higher second-quarter revenues and earnings, with operating profit at Pratt & Whitney up 24% to $353 million on sales up 9% to $1.96 bil lion because of cost reductions and higher revenue at Pratt & Whitney Canada. Growth at Hamilton Sundstrand and increased ship ments at Sikorsky boosted operat ing profit at UTC's Flight Systems segment by 28% to $179 million on sales up 11% to $1.34 billion. A strong performance by its dominant Aerospace segment, which increased its revenues by 18.5% boosted Goodrich's results. RESTRUCTURING HERMAN DE WULF/ BRUSSELS Luxair looks to tie-up with Sabena Luxair has opened discussions with Sabena about a potential deal which could see the Luxembourg- based airline lease aircraft and tie- up a codesharing deal with the struggling Belgian carrier. Sabena is expected to reveal a rescue plan later this month fol lowing heavy losses and Luxair is one of a number of airlines believed to be seeking to take advantage of the Belgian com pany's need to cut routes and reduce aircraft capacity. The Luxembourg airline is understood to be talking with Sabena about points of common interest. Luxair's new chief execu tive Christian Heinzmann is famil iar with Sabena, having been boss of the airline's Sobelair charter sub sidiary before^ he left and turned Antwerp-based VLM Airlines into Belgium's only profitable carrier. Luxair has offered to wet-lease some of its under-utilised aircraft to Luxair ERJ-145S could replace DAT BAe 146/RJs on some Sabena routes serve thin Sabena routes, possibly under a codesharing agreement.* One of these is Luxembourg- Brussels which Sabena now oper ates with a wet-leased Schreiner Airways Dash 8. Luxair is hoping to provide Sabena's regional sub sidiary Bombardier DAT with two Embraer ERJ-145 regional jets to replace BAel46 and Avro RJ85/100s that are too large on certain Sabena routes. There is also a possibility of wet-leasing a Boeing 737-400 to Sobelair for a three year period. Outside of the main talks, Luxair is also looking to use Sabena's Boeing 747 rated pilots for 747- 400F freighter operations at Cargolux, in which Luxair is a major shareholder. Cargolux has also indicated interest in Sabena's Cargo department and a delegation is to visit Ostend airport in August to study the possibilities of expanding its freight operation -business.com • Air Canada and IBM have formed a seven-year, C$1.4 billion ($900 million) partnership to "e-enable" the airline and build an IT infrastructure which the carrier expects to save it C$200 million. The partners are establishing a marketing alliance which will offer solutions to other companies. The part ners will study future capabilities, such as wireless and self-ser vice applications, while IBM will manage all of the airline's IT operations. • SITA's aerospace exchange Aerospan has signed up the Arab Air Carriers Organisation (AACO) as its lat est customers. Six members of the 18 airline grouping have signed the agreement and two of these, Gulf Air and Kuwait Airlines, already use Aerospan. The deal follows a similar agree ment with the African Airlines Association. AACO airlines have a purchasing capability of approximately $3.5 billion. • Aeroxchange conducted its first fully integrated e-procurement transaction earlier this month. Founding member of the airline- led internet exchange, Cathay Pacific used the portal to pur chase 100 items across nine part numbers from airline parts manufacturer Wencor West. • Grupo TACA has signed a three-year contract with SITA to use its i-traveldirect product. The service will allow passengers of Aviateca, LACSA, NICA, TACA and TACA Peru to book tickets, select seats and request special meals over the internet. • Independent exchange PartsBase has reduced its loss and increased net revenues for the first half of the year, but chief executive Robert Hammond concedes that it is encountering a "slow down" in sales with sub scription revenues continuing to fall. Net loss for the first half of the year, excluding stock-based compensation, litigation and other costs, was $3.13 million, down 14% on last year's first half, while revenues climbed to $2.95 million from $1.49 million. To cut costs the exchange has reduced staff and salaries, but it is facing a law suit from shareholders concerning infor mation contained in its initial public offering. www.flightinternational.com FLIGHT INTERNATIONAL 31 JULY - 6 AUGUST 2001 23
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