Air Transportation

Air France euphoria is over the top

18 Feb 2016

The French carrier has reported positive full-year earnings after four years of losses. Yet the improvement is owed partly to a lower fuel bill. Costs under Air France’s control remain bloated and returns still barely meet its cost of capital. 

HNA’s $6 bln Ingram bid has weird Chinese logic

18 Feb 2016

There’s no clear rationale for the conglomerate to buy a U.S. electronics distributor and leave its management and business untouched. But like other recent outbound Chinese deals, the acquisition gives HNA diversification, political capital, and a hedge against the sliding yuan.

Boeing nosedive reflects fear of wider turbulence

11 Feb 2016

The $78 bln aerospace giant’s shares plunged as much as 12 pct on news of an SEC investigation into its airliner accounting. It looks like an overreaction, but jangly nerves are understandable. After a record run of aircraft deliveries, 2016 is off to a bumpy start.

Magic formula fuels Ryanair’s ascent

1 Feb 2016

The lure of cheap flights has proved a match for Europeans’ fear of terrorism. The Irish carrier lowered prices after attacks in Paris, attracted 20 pct more passengers in the latest quarter than a year earlier, and even expanded its margins. High-cost rivals can’t keep up. 

United’s pesky investors chart risky flight path

27 Jan 2016

Altimeter Capital and another fund are pressuring the No. 2 U.S. airline, whose stock has sagged amid the CEO’s health problems and lower traffic at its Houston hub. Cheap oil creates room for share-lifting payouts, but United could use the cushion when future turbulence strikes.

Matching Boeing margins is Airbus final frontier

12 Jan 2016

Fortunes are turning in the epic rivalry between the two airline manufacturers. Europe’s Airbus is winning more orders, has higher shareholder returns and trades at a 20 pct valuation premium. Closing the profitability gap with U.S. Boeing is its biggest remaining challenge. 

BAE deal beats Rolls-Royce nationalisation

14 Dec 2015

The British government has concerns about the aero-engine maker that also handles some nuclear submarine work for the UK. In extremis, nationalisation is a possibility. A better scenario is that defence contractor BAE steps in. It might dust off deal ideas in any event. 

EasyJet’s brio bodes ill for Lufthansa, Air France

17 Nov 2015

On the back of an 18 pct jump in pre-tax profit in 2015, the UK budget carrier is ordering more planes to step up growth and expand into new routes. The confidence is merited. High-cost legacy carriers are too bogged down by labour unrest to fight more nimble low-cost rivals.

Rolls-Royce can emerge from turbulence intact

12 Nov 2015

Cutting next year’s pre-tax profit estimates by a third will intensify calls for a break-up of the UK engine maker. But that would neither solve Rolls’ problems, which mostly stem from past strategic errors and cheap oil– nor would it make much sense at the current share price.

Airbus success hides growing flagship problem

30 Oct 2015

Europe’s aerospace group is getting many things right, as a 12 pct third-quarter growth in operating profit shows. But demand for its ageing long-distance A380 model has peaked. The flagship jet is overdue a $2 bln or so upgrade. Airbus can afford it, but is losing crucial time.

Europe’s stricken airlines cursed with good luck

29 Oct 2015

Lufthansa and Air France-KLM reported boosts from lower oil prices and strong summer demand. The uplift is probably temporary. But try telling that to restive pilots who may push back even harder on essential cost cuts. There’s little respite for the carriers’ horrible returns. 

United board flies into risk-management failure

19 Oct 2015

The U.S. airline’s directors have been buffeted by the turbulence caused by new CEO Oscar Munoz’s illness. Apple’s handling of Steve Jobs’ terminal cancer remains a far worse example. But Goldman Sachs and JPMorgan show it’s possible to both inform investors and respect privacy.

AirAsia buyout could fly with fancy

7 Oct 2015

Co-founder Tony Fernandes would need about $800 mln of additional financing to take the embattled budget carrier private. Though buyouts are rare in the cyclical industry, it could make sense for investors willing to bet on a Malaysian recovery and on oil prices staying low.

Air France staff can beat bosses but not reality

6 Oct 2015

The assault on the troubled national airline’s HR director isn’t the first French use of unconventional negotiating techniques. It’s not totally irrational, as the government often yields to direct action. But with its swollen cost base, Air France can’t afford to be cowed. 

BBA’s $2 bln airfield deal faces bumpy takeoff

23 Sep 2015

The UK-listed aviation services outfit is buying one of its larger U.S. rivals. The operational logic is sound. But the price looks toppy. BBA Aviation will also be left with a heavy cargo of debt – despite funding half the purchase price via a rights issue.

United CEO shakeup is chance to fly right on pay

9 Sep 2015

Jeff Smisek departed abruptly amid internal and federal probes over airport dealings. He takes off with a $5 mln “separation payment” and other perks like parking spaces for life. New boss Oscar Munoz’s deal isn’t final, which means United has time to nix such absurdities.

Lufthansa has to win dogfight with pilots

8 Sep 2015

The German airline can’t afford to buy peaceful labour relations with endless concessions. By claiming damages from the pilots union for losses incurred at the 2014 strike, Lufthansa boss Carsten Spohr has drawn a line. The carrier’s bloated costs mean victory is required. 

Chinese plane-hire deal survives market turbulence

4 Sep 2015

Bohai Leasing’s $2.6 bln bid for Dublin-based Avolon confirms China’s desire to grow in aircraft rental. The $31-a-share offer is slightly below Bohai’s indicative bid a month ago. But rising interest rates and the falling yuan could have been reasons to drive a harder bargain.

Higher dividend is easyJet’s next destination

3 Sep 2015

The British no-frills carrier has upped its 2015 guidance significantly, sending shares up 6 pct. With earnings per share poised to rise by a fifth, it can easily afford topping up shareholder payouts. But future growth plans limit the scope of another 2013-like special dividend.

LaGuardia gets a refreshing clearance for takeoff

28 Jul 2015

One of the worst U.S. airports, in the country’s financial hub, is finally slated to be rebuilt, by 2021. At least $4 bln of funding will be public, private and local, but Washington played an important advocacy role. Absent a nationally led effort, it’s a decent model to follow.