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Aviation History
2002
2002 - 0917.PDF
BUSINESS RESULTS GRAHAM WARWICK / WASHINGTON DC Bombarcfer sees regional jet growth But manufacturer expects business jet market to remain difficult as deliveries decline from 2001-2 figures Bombardier's regional aircraft deliv eries will increase this year, but the Canadian manufacturer is offering no projections for 2003 or 2004. The company expects to deliver 226 regional jets and turboprops in its 2002-3 financial year, up from 206 in the year ended 31 January. But, because of fewer business jet sales, Bombardier's delivery total will stay at the same 370-aircraft level as in 2001-2 and 2000-1. Announcing revenues for 2001-2 of CS21.6 billion (S13.7 billion), up 36% over the previous year, and income before special items of C$1.7 billion, up 17%, president and chief executive Bob Brown says Bombardier booked orders for 206 regional aircraft last year. CRJ regional jet production "is virtually all sold out for 2003 and 60% sold for 2004", he says. Brown says the company plans to deliver 145 CRJ200 50-seaters and 45 CRJ700 70-seaters in 2002- 3, in addition to 36 Dash 8Q regional turboprops and four Bombardier 415 amphibians. Busi ness jet deliveries will decline to 140 aircraft, from 162 aircraft in 2001-2 and 202 in 2000-1. After 11 September, when Bom bardier lowered its delivery forecast from 420 to 370 aircraft, the com pany had expected its regional air craft sales to suffer the most. Instead, more regional aircraft and fewer business aircraft than expected were delivered. Brown expects regional aircraft orders to pick up "towards the end of this year or the start of next", but the business jet market "will be diffi cult for longer". Brown says Bombardier is "not interested in acquiring Fairchild Dornier". Nor is it concerned about Boeing gaining control of the rival regional jet manufacturer. Despite flat deliveries, Bombar dier's aerospace revenues for the 2001-2 financial year increased 14% to CS12 billion, with income before special items reaching C$ 1.2 billion and year-end order backlog edging up slightly to C$23.7 billion. A greater proportion of larger aircraft and higher sales of used aircraft boosted revenues, but depressed margins. Special charges included C$264 million to write off development costs on the Q400 regional turbo prop and C$69.5 million to reduce aerospace employment by 1,100. Bombardier "is still committed to turboprops", says Brown. Objectives for 2002-3 include reducing debt-to-capital ratio from 42% to 30%. Brown expects 10% earnings growth for 2002-3. FAILED MERGER Aloha and Hawaiian go separate ways Aloha Airlines plans to continue as an independent carrier after Hawaiian Airlines refused to extend the 18 April deadline for comple tion of their proposed merger. Hawaiian is expected to proceed with plans to expand its interna tional services and all-Boeing fleet. The extension was requested by TurnWorks, the Houston, Texas- based private equity firm headed by former Continental Airlines executive Greg Brenneman that was the driving force behind the merger. According to Aloha presi dent and chief executive Glenn Zander, Hawaiian refused to extend the deadline unless TurnWorks was eliminated and Hawaiian chairman and controlling shareholder John Adams, rather than Brenneman, was named president and chief executive officer. Under the original deal, Hawaiian majority owner Airline Investors Partnership (AIP) was to hold 28% of the merged carrier, Aloha Airgroup shareholders 28%, Hawaiian refuses to wait around any longer to merge with Aloha Hawaiian's public shareholders 24% and TurnWorks 20%. Aloha was to have three board members, AIP three, the unions three and TurnWorks two. According to Aloha, Hawaiian's revised proposal gave AIP five board positions, Aloha three and the unions three. Both airlines have been barely profitable for the past five years and have failed to break even on competing inter-island services. Turnworks promised to consolidate fleets and renegotiate aircraft financing. The merger had faced opposition from employees wor ried about layoffs and politicians concerned about fare increases. RECOVERY No sign of immediate relief for US airline industry Traffic levels on US airlines may not recover to pre-11 September numbers until 2004, while further losses of $2-3 billion are likely this year, warns US Air Transport Association (ATA) chief economist David Swierenga. Speaking at the Speednews sup plier conference in California last week, Swierenga says such losses are feared because higher break even operating costs, reduced load factors and low yields are slowing the recovery of US airlines. Although traffic growth is return ing to early 2001 levels, revenue passenger miles flown are still 10% below pre-September levels. Cash flow is also a severe worry, says Swierenga. "We are borrowing money like mad to pay operating costs to sustain ourselves through the trough. That's an industry in trouble, and it will be a while before we get out of it," he says. Airlines already had higher debt to equity rates than other US indus tries, and are now more heavily leveraged - around 63% compared to around 50% in 1999. Problems include high labour costs, rising jet fuel prices, and growing maintenance and materi als expense. Despite layoffs of 80,300 across the ATA members - 14°/> of total workforce - Swierenga says average labour costs per employee are expected to rise to a record $76,100 in 2002 compared with $68,700 in 2000. Only arbitra tion-type salary negotiations will "get us away from the blackmail that US airlines face from labour groups", he says. www.flightinternational.com FLIGHT INTERNATIONAL 26 MARCH - 1 APRIL 2002 25
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