Air Transportation

Big airports IPO requires faith in Spain’s future

3 Feb 2015

Aena, the $9 bln operator of airports in Madrid, Barcelona and beyond, needs flocking tourists to mint money. For now, it’s a safe bet. Low capex needs and ample capacity are a plus. But the state still calls the shots and a new regulatory regime stores up some uncertainty.

Ryanair finds it harder to get “always better”

2 Feb 2015

Europe’s largest low-cost carrier upped its fiscal-year forecast again, eyeing a 60 pct net profit jump. But sober days lie ahead. Hedges limit the impact of lower oil prices. Other costs will rise. After gaining nearly 50 pct lately, the richly valued stock looks vulnerable.  

Qatar stake is vote of confidence in BA-owner IAG

30 Jan 2015

Taking a 10 pct stake worth $1.7 bln makes Qatar Airways the biggest investor in British Airways’ parent company. The immediate strategic benefit is limited: the groups already cooperate and IAG gets no new capital. But a deep-pocketed, long-term backer can be helpful.

BA owner’s new pitch to Aer Lingus is nearly there

26 Jan 2015

British Airways owner IAG lifted its bid proposal by another 6 pct to 1.4 bln euros. It’s still not generous. But given the conditions Ireland is likely to impose, which will limit the value of Heathrow slots, this might be enough for the Irish carrier’s board to start talking.

Cheap oil comes with hidden risks for airlines

19 Jan 2015

Falling oil prices cut airlines’ fuel bills and will lift earnings this year. European carriers’ share prices are up, but weaker players will find it easier to stay in business so needed consolidation may slow down. Excess capacity could soon put pressure on ticket prices.

IAG can pay more for Aer Lingus

12 Jan 2015

The UK airline’s sweetened 1.3 bln euro offer for the Irish national carrier is still too low. The price covers the value of the target’s fleet, its Heathrow slots and net cash. But the modest 32 pct premium ascribes little worth to Aer Lingus’ growing operating business.

AirAsia’s minority structure clouds crash impact

6 Jan 2015

The Malaysian carrier owns just 49 percent of the tragedy-hit Indonesian unit. Accounting rules partly insulate the parent from profit fluctuations. But a shared brand, intercompany loans, and leasing agreements mean the woes of its minority partners aren’t neatly contained.

Aer Lingus attractive yet tricky target for IAG

18 Dec 2014

The Irish carrier has rebuffed an approach by the owner of British Airways. At the right price, Aer Lingus looks like a natural partner for IAG. But its unwieldy shareholder structure – including a large holding by Ryanair – and anti-trust concerns will be obstacles.

SpiceJet rescue is no fix for India aviation woes

17 Dec 2014

The government is cajoling banks to lend to the indebted airline, which really needs more equity. The lifeline just might prevent a repeat of Kingfisher’s high-profile failure. But high fuel taxes and the lack of a bankruptcy law will keep the industry stuck in an air pocket.

Airbus investors are caught in crosswinds

11 Dec 2014

The aircraft maker disappointed investors with a lacklustre 2016 outlook, mainly due to big R&D outlays and increasing costs of producing new planes. Yet medium-term prospects look good and a sale of the $5 bln Dassault stake could bridge temporary shortfalls.

EasyJet can finally close valuation gap on Ryanair

18 Nov 2014

Europe’s second-largest no-frills carrier has set the tone in the sector in recent years. Better customer service on cheap flights propelled a 13 pct rise in earnings. A weak euro may hurt, but the strategy is solid. A 10 pct discount to Ryanair is hard to justify. 

Virgin Galactic business model could still work

4 Nov 2014

After Friday’s fatal crash, Virgin will need to make new investments in its space programme. The start date for paid flights has been deferred. But if the safety issues can be overcome, the project might yet stack up commercially.

Ryanair can get more from its be-nice strategy

3 Nov 2014

A policy to improve customer service helped stimulate demand at Europe’s largest low-cost carrier, prompting raised guidance. Ryanair has also benefitted from rivals’ woes. Historically strained labour relations are a risk. But the airline could try a new approach here too.

Spain’s $10 bln airports IPO is just shambolic

31 Oct 2014

Auditor-related technicalities have grounded one of the largest European share issues this year. The Aena airports sale will probably go ahead in early 2015. But the IPO process will be easier to re-rail if the government makes its commitment unequivocal.

Ferrari spinoff looks great but lacks oomph

29 Oct 2014

The hottest name in sports cars is joining the spinoff bandwagon. Fiat Chrysler will sell 10 pct of Ferrari and hand the rest to investors. Fiat shares zoomed up. Yet the split is largely symbolic. Ferrari needs to stay linked to Fiat, and the cash proceeds will be limited.

Ferrovial is back in conquistador mode

22 Oct 2014

The Spanish group is chasing deals worth 1.8 bln euros in three countries including Australia. The spree echoes its 2006 pursuit of airport operator BAA, which nearly dragged it down. But these acquisitions look less risky. Thanks to savvy sales, Ferrovial has cash to spend.

Global airline IPOs still need tailwind to fly

3 Oct 2014

From America to Asia, airlines are eyeing share sales. Most offers since 2010 have lost altitude. The industry’s returns are improving but remain below the cost of capital. The latest listings will need a gimmick or something special to buck the trend of value destruction.

Frothy M&A talk will worsen San Miguel’s hangover

26 Sep 2014

The Philippine conglomerate is eyeing an overseas oil and gas deal and says it remains interested in Britain’s United Biscuits. With a mixed track record in its recent deal-making, all the chatter will only weigh on the group’s already underperforming shares.

EasyJet’s divi policy imposes useful constraint

18 Sep 2014

The budget airline has said it will now distribute 40 percent of earnings, up from one-third. That’s brave given aviation’s inherent cyclicality and the need to spend on aircraft. Still, it’s a welcome step. Management has credibility and the move will enforce discipline.

Airlines find hidden value in miles

4 Sep 2014

Loyalty schemes are reliable money spinners in a cyclical and fiercely competitive industry. In times of financial strain, carriers can also sell stakes to outside investors to raise cash. But the potential opportunity isn’t equal for all. A big home market helps.