Air Transportation

BA and Iberia a marriage of necessity

12 Nov 2009

The lossmaking UK and Spanish airlines are close to a deal after 16 months of onoff talks. The intervening fall in BA s shares means Iberia shareholders will now enjoy more of the value created. But both groups have their work cut out to demonstrate the scale of the synergies.

BA still struggling for survival

6 Nov 2009

The UK airline is haemorrhaging cash and frantically cutting costs to deal with a probable £1bn fall in sales this year. It is hard to see how BA can pull off its longdiscussed merger with Spain s Iberia in this state. But while progress is slow, BA s fortunes may be bottoming.

Ryanair should take its foot off the gas

2 Nov 2009

The budget airline says it may abandon its aggressive growth strategy from 2012 and start paying dividends. This may be a tactic to scare Boeing into sweetening terms on a massive order for planes. Either way, the discipline of dividends could support Ryanair s drifting shares.

Gatwick auction back from the dead

20 Oct 2009

Spanish infrastructure group Ferrovial postponed the sale of the London airport in May. The conditions for an auction are now more favourable and BAA, the subsidiary that owns Gatwick, is in better shape. Still, that doesn t mean the asset will fetch the £1.6bn its vendor wants.

Dividend might keep Ryanair out of trouble

28 Sep 2009

The European budget carrier has the sort of problem other airlines dream of too much cash. But its E2.8bn provides firepower that can easily be misdirected, as in Ryanair s stake in Aer Lingus. Shareholders should clamour for the cash and discipline that come with a dividend.

AMR shareholders should temper their enthusiasm

17 Sep 2009

The American Airlines parent raised $1bn by selling frequent flier miles upfront and secured $1.9bn by hocking assets. The stock soared as concerns about liquidity dissipated. But the cash may end up diverted to purposes that don't create much additional value.

Airline recovery still pie in the sky

16 Sep 2009

Things appear to be looking up for airline investors. The traffic slump is easing. August was Heathrow s busiest month ever. And the broader economy is turning. But one crucial element is missing from the apparent airline recovery: pricing power. That may never quite come back.

Ryanair land grab comes at a cost

27 Jul 2009

The European budget airline has to slash ticket prices to fill up its planes. But Ryanair is still solidly profitable while rivals are bleeding cash. As long as the company can afford its growth plans, investors should be willing to put up with some lower profits.

US corporate profit surprises may not last

23 Jul 2009

A third of the way through the US reporting season, secondquarter earnings look far better than expected thanks to cost and inventory cuts. But those are relatively quick, easy fixes. Longer term, profits depend on economic growth and rising sales. Those will come more slowly.

Shrinking jet-set doomed service for hurried rich

23 Jun 2009

Clear promised that its advanced biometric screening service would make airport security hassles obsolete. All it really amounted to was a $200 annual fee for the privilege of a special queue. That might have appealed in good times, it didn t in bad.

British Airways switches to survival mode

22 May 2009

The UK airline has axed its dividend following results that are as gloomy as they come. BA is burning cash. Its response cutting capacity, capex and costs will need to be brutal if it is to work. In the meantime, the hopedfor deal with Iberia looks further away than ever.

Argentine saga reminds investors to avoid airlines

18 Dec 2008

The tale of Aerolineas Argentinas demonstrates that airlines are among the least attractive emerging market assets for foreign investors. They are asset heavy, only modestly profitable even in good times and horribly vulnerable to nationalists when things get tough.

US airlines’ weak credit is a temporary advantage

9 Dec 2008

They mostly aren't financially strong enough to hedge fuel costs. That made them losers in 2008 but with oil prices slashed, they could squeak into the black in 2009. With the global industry flying into an economic gale, though, the boost will probably be minor and brief.

Ryanair’s E750m bid puts Aer Lingus on the spot

1 Dec 2008

The lowcost carrier is having another pop at Aer Lingus after pulling a hostile bid in 2006, and has cut its offer by 50%. Aer Lingus s poor performance has made the airline vulnerable. But investors should still price in the risks of renewed union and EU opposition to any deal.

Stelios risks trashing his own investment

17 Nov 2008

Easyjet s founder is at odds with the board over the discount airline s fundamental strategy. He wants slower growth and dividends by 2011. That sounds out of kilter in a recession, and could hurt the share price.

BA-Iberia merger can wait

7 Nov 2008

The two airlines have more than enough to do on their own. They should focus on dealing with the current bleak market. BA will find it hard to fulfil its hope of ending the year in the black. Calculating merger ratios now would be tricky, and a dangerous distraction.

Lufthansa finally gets British Midland

29 Oct 2008

This might look like a bad deal for the German airline, since it has bought a 50% stake in the UK airline as part of a put option agreed in the heady year of 1999. Valuations have since plummeted. But BMI s valuable Heathrow slots mean Lufthansa is unlikely to lose money.

Alitalia fiasco makes Italy look sick

18 Sep 2008

Union intransigence in the midst of a global crisis has torpedoed yet another deal. Berlusconi, whose electioneering rabblerousing killed off an earlier deal, now has the chance to put Alitalia out of its misery and teach the unions a lesson. But will he?

It’s time for Berlusconi to channel Thatcher

12 Sep 2008

Silvio Berlusconi has long liked to compare himself to Margaret Thatcher. Until now, that comparison was unsound. But the media baron turned Italian prime minister now has the perfect chance to emulate his hero. He can stand firm against the Alitalia unions.

Alitalia rescue is good politics, bad policy

28 Aug 2008

Berlusconi has kept his promise to find an allItalian solution for Alitalia, although the Italian airline will probably end up with a European partner. The new plan may enrich some businessmen investors, but won't calm fears that politics guide corporate dealings.