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Aviation History
2002
2002 - 3093.PDF
PUBLIC OFFERING BRENDAN SOBIE / WASHINGTON DC Chautauqua and Pinnacle place IPO plans on hold Reqlonals now need to quash investment community concerns about fixed-fee contracts Chautauqua Airlines and Pinnacle Airlines have put planned initial public offerings (IPOs) on hold until at least the second quarter of 2003, unless investors' appetites for US airline stocks improve. The two regionals, along with several of their counterparts, have managed to stay profitable and maintain rapid expansion despite the financial woes of other major carriers. But investors do not believe they can remain insulated from the upheaval of the US airline industry. Chautauqua chief executive Bryan Bedford says: "We've actually accelerated our growth, not deceler ated...Unfortunately, the invest ment community has not realised this." Bedford says the biggest bar rier is overcoming investment com munity concerns that fixed-fee con tracts with major carriers are no longer relevant or sustainable. Both regional carriers have such con tracts, Chautauqua with US Airways Regional IPOs are on hold until demand for US airline stocks picks up and Pinnacle, exclusively for the next four years, with Northwest. US investment firm Wexford and Northwest Airlines tried to spin off Chautauqua and Pinnacle earlier this year on the heels of Contin ental's Expressjet IPO. While Expressjet stock sunk and is now 40% down on initial levels, Wexford and Northwest could not achieve their minimum asking price. "I don't think you can get an IPO done in this market," Bedford says. "Maybe the second quarter of 2003 will be the first opportunity." Pinnacle chief executive Phil Trenary agrees, saying Pinnacle's IPO plans are "on hold". Meanwhile, Chautauqua became an all-jet operator on 1 October and will become the first operator to feed four majors on 1 November when it begins flying two Embraer ERJ-145s for Delta Connection. Chautauqua has 17 Saab 340s wait ing to be remarketed, but Bedford claims they are not dragging down the carrier's IPO prospects. He also describes pilot talks as a non-issue. STRATEGY BAE reviews aerostructure division BAE Systems is "reviewing" its aerostructures business and may put it up for sale before the end of the year as it focuses on its core systems integration activities. Chief executive Mike Turner told unions last week that he was evalu ating the division, which employs a total of 1,500 people in Prestwick and Salmesbury, UK, and Kansas, USA. Customers include Airbus, Boeing and Cessna. BAE has ruled out job cuts, say ing "there will be no redundancies on this issue", but hints that the division would eventually be sold. "It is not core to our main activity, which is systems integration," the company says, adding "there are other companies out there where it would fit better". The division has a turnover of roughly $500 million, although it has been seriously affected by the decline in civil air craft manufacturing in the UK, cul minating in the cancellation of the BAE Systems RJX programme - the last civil jet programme in the UK. Meanwhile, the UK government's Defence Industrial Policy paper, revealed last week, contains mixed news for BAE, the country's largest defence contractor. BAE has argued that putting UK defence contracts such as the forth coming CVF aircraft carrier pro gramme out to competitive tender is a waste of money. BAE executives claim it should be awarded large contracts without having to com pete. The policy document seems to provide some support for this, say ing: "We will not use the competi tive process beyond the point where it can offer long-term advantage, and...we will provide a more appro priate risk/reward ratio for pro grammes with high technological risk." This is a more up-front invest ment and a quicker downselection. But, launching the document at the Jane's/Economist defence industry conference last week, UK defence secretary Geoff Hoon suggested that BAE's UK regis tration will not do it any favours in the future. "[Future decisions] will be less about ownership and more about where the technological investment occurs," he said. BUSINESS DISPUTE Volga-Dnepr in row with Russian authorities Outsize-cargo airline Volga- Dnepr has suspended funding completion of the Antonov An-124-100M Ruslan freighter at the Aviastar factory in Ulyanovsk in Russia over a dispute with regional authorities, which resulted in the local government recently seizing the aircraft. Volga-Dnepr is now considering moving from Ulyanovsk to escape alleged interference from the local government. The seizure broke an agree ment reached between the federal and local authorities last month, when the Ulyanovsk regional government, under pressure from the Kremlin, promised to stop using local courts to interfere with Aviastar. According to Volga-Dnepr, the disagreement began when the founder of Aviastar shareholder Sirocco, Egyptian Dr Ibrahim Kamel, allegedly refused to bribe Ulyanovsk bureaucrats and businessmen in exchange for their loyalty and non-interference with Aviastar. These actions have paralysed Aviastar and forced Sirocco to stop financing five Tupolev Tu-204-120s which were ordered from Aviastar by two Chinese carriers. Volga-Dnepr is considering "another region with a better business and investment cli mate", says the airline's director for external relations Dmitry Stolyarov. He says Volga-Dnepr is known as a Russian company with "a clear accounting system and good business reputation," and adds: "We are moving from Ulyanovsk in order to preserve these qualities." A move from Ulyanovsk may involve revising an investment agreement with International Finance under which Volga- Dnepr recently received a $29.9 million loan for completion of a Ruslan at Aviastar. www.flightinternational.com FLIGHT INTERNATIONAL 22-28 OCTOBER 2002 21
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