Air China Says Parent May Buy Small Wuhan Carrier
Flag carrier Air China said on Tuesday that its parent group was starting preliminary talks on the possible acquisition of East Star Airlines, a small private carrier based in the central city of Wuhan.
The group may buy all or part of East Star, but it is not yet clear whether any agreement will be reached, Air China said in a brief statement.
Air China, which owns well over 150 planes, dwarfs East Star, which has just nine planes, according to the official Securities Times. But the acquisition could help Air China expand its coverage of central China, where it is relatively weak.
Slumping air traffic has made it hard for China’s small private airlines to compete with state-owned giants such as Air China, China Eastern and China Southern.
Since December, China Eastern and China Southern have announced plans to receive a total of 10 billion yuan ($1.5 billion) in cash injections from the government to help them ride out the slump. Private carriers do not have such support.
Last month China’s first private airline, Okay Airways, which was founded in 2005, said it would indefinitely halt its passenger services because of the global financial crisis.
American Airlines Aircraft Unscheduled Landings at Seattle-Tacoma International Airport
A spokesman for the airport Seattle-Tacoma International Airport reported American Airlines jet made unscheduled landings at the airport in Seattle-Tacoma International Airport after the pilot reported a problem of air pressure inside the cabin space.
American Airlines flight from Vancouver, British Columbia, headed to Dallas carrying 330 passengers an emergency landing at Seattle-Tacoma International Airport at 15:00, on Friday.
Reported an emergency landing made by American Airlines jet that was not cause passenger injury.
Airline industry Share Prices Fallen 35%
Since the near collapse of the banking sector in September, and the intensification of recession, airline share prices have fallen 35% worldwide, according to an IATA report released today. Industry net losses have risen to US$4 billion during the first three quarters of 2008.
Meanwhile spot fuel prices have halved since July but hedging is delaying the benefit of lower fuel costs. Airline capacity slowed sharply in October but further falls in traffic reduced load factors. Aircraft deliveries slowed to 78 in October but the big change was a surge in the number of aircraft parked
to an average of almost 200 a month in September and October, reducing capacity and fuel use.
Investors have been selling across the board with declines in the airline sector ranging from 30% in Asia to 38% for European airlines. With airline stocks now down 60% from end-2007 peaks, compared with a 40% decline in the overall market, investors clearly expect airline financial performance to deteriorate more than
the average.
Certainly there has been a sharp deterioration in profits reported during the first three quarters of this year. US airlines continue to see the largest deterioration but airlines in both Europe and Asia Pacific are also now in loss, partly as Q2 hedging is now leading to hedging losses in Q3 and Q4, delaying the benefits of low spot fuel prices.
Oil and jet fuel prices have now fallen back to 2005-2006 levels with crude oil at US$50-60 a barrel, and jet fuel prices 25-30% higher. This is less than half the level fuel prices reached at their US$180 a barrel peak in July. But actual prices paid have not fallen anywhere near as far for many airlines as a result of hedges taken out earlier in the year.
This will delay the benefit of lower spot fuel costs for many airlines. In fact some airlines have been reporting hedging losses for Q3 and Q4 2008.
Falling capacity and demand
IATA reports passenger traffic still falling sharply in October with air freight down 7.9%. Recession is now the greatest threat facing the airline industry. Since the middle of the year traffic has fallen precipitously, with first air freight and then passenger markets declining.
In October international RPKs (revenue passenger kilometres) fell 1.5% over the same month a year ago. Air freight was down 7.9%.
This decline in traffic reflects the severity of the recession in major economies. Business and consumer
confidence fell sharply in October so further traffic declines are likely.
Capacity growth on international markets has now slowed to a virtual halt, IATA said.
Airlines have now reduced capacity growth almost to a halt, as plans put in place after the mid-year spike in fuel prices were implemented. By October the growth in international ASKs (available seat kilometres) was down to 0.9%. Further substantial cuts in US domestic capacity are planned over the Winter season. However, published capacity plans suggests international ASKs are set to continue to grow, albeit modestly, at close to October’s rate.
Load factors stabilised in October but further declines are likely on international markets. Load factors usually decline sharply as seasonally strong mid-year traffic falls off. This year there has been an even
greater decline as the recession reduced traffic faster than airlines have been able to cut capacity.
There was actually some modest improvement in utilisation in October, relative to September. However, it
looks as though traffic will be falling faster than capacity on international markets in the months ahead. Load factors are likely to fall further.
Dramatic rise in number of aircraft being parked
The slowdown of capacity on international markets in September and October, together with large cuts on
domestic US markets is reflected clearly in the surge of aircraft being parked. The number of new aircraft being delivered is slowing and was 78 last month. Retirements are stable at 27.
The big change has been an increase in the number of aircraft being parked from a monthly average of 6 in 2007 to almost 200 aircraft a month in September and October.
GOL Reactivate Boeing 767 Aircraft for Charter
GOL plans to reactivate two more Boeing 767s as the Brazilian carrier expands its new widebody charter operation to include flights to the US, Europe and South Africa.
The company stopped operating 767s in 2008 after dropping all long-haul services at its Varig division but at the end of last year reactivated one aircraft for charters to the Caribbean. ATI and Flightglobal reported last month the carrier was looking at re-activating additional 767s as part of a plan to expand its Caribbean charter operation, which was launched in July 2009 and now uses a mix of 767s and Boeing 737s.
Gol CEO Constantino de Oliveira Junior says the carrier has now firmed plans to reactivate two more 767s for charters. But he reveals the additional aircraft will be used to operate even longer charter flights.
“We expect to do flights between Brazil and US, Brazil and Europe and also during the World Cup we’ll do some charters to South Africa,” Oliveira told analysts at the end of last week during a conference call to discuss fourth quarter 2009 earnings.
“That’s the expectation now for the three aircraft. We’ll also have the possibility to continue the charters between Sao Paulo and Cancun that we launched on December 26.”
He says the one already reactivated 767 also was used “in January and part of February” to operate some charter flights from Buenos Aires. Oliveira says these charters may resume at some point as Gol expands its active 767 fleet to three aircraft.
Gol initially acquired 14 767s in 2007 to operate scheduled routes to Europe and North America. Over the last 18 months the carrier has been trying to negotiate early lease returns and slowly has reduced its 767 fleet to six aircraft.
CFO Leonardo Pereira told analysts that “we have two that we have either sub-leased or are in the process of subleasing. So we will be down to four.”
“Out of those four we are using three for charter flights. That is a positive thing. Without interfering in the domestic supply and demand we are using the 767 for long haul charters and consequently we will be generating revenues from this asset which was not generating last year,” Pereira says.
The 767s have been a financial drain for Gol as the company has continued to make monthly lease payments of roughly $100,000 per aircraft while the fleet has been grounded. Gol executives say the new charter operation and subleases are not a permanent solution because the charters are only seasonal and the subleases do not cover the entire remaining term of the carrier’s own leases. But they help cover some of the costs associated with the assets.
“With the charter aircraft we are working to pay the lease rate and all the cost related to the aircraft,” Oliveira explains. “With the subleased aircraft we have some cost difference. We sublease the aircraft at a lower rate than we are paying. But this will help us reduce our expenses and our cash related to the 767s.”
Gol, which at the end of last year transitioned to an all 737NG narrowbody fleet, also continues to pay monthly lease payments on grounded 737-300s. But Pereira says these costs should end in the second quarter of 2010.
“We still have some 737-300s that we are sending back,” Pereira says. “We expect by the end of the second quarter most likely all the 737-300s should be out.”
Qatar Airways Begin Daily Flight to Brazil and Argentina Use Boeing 777-200
Qatar Airways today announced that it will begin daily flights to Brazil and Argentina from June 24, marking the airline’s first online operations to South America.
With the airline’s acquisition of two brand new Boeing 777-200 Long Range aircraft in the last three months, these will be deployed on the two South American routes – to the Brazilian city of Sao Paulo and Argentine capital Buenos Aires this summer.
The date announcement comes just weeks after the airline revealed plans to serve South America, and spread its wings to yet another Continent. The flights will offer convenient connections from key markets across Asia and the Gulf to South America.
Flight QR921 will depart Doha International Airport daily at 07.40 hrs, arriving in Sao Paulo at 1600 hrs. The flight continues onto Buenos Aires, arriving at 2005 hrs. Return flight QR922 departs daily from Buenos Aires at 2305 hrs to Sao Paulo before continuing its journey at 0310 hrs the next day, arriving in Doha at 2310 hrs.
Qatar Airways Chief Executive Officer Akbar Al Baker said that adding destinations in South America to the network was a great achievement for the young airline.
“We have experienced incredible expansion over the years and by soon adding Sao Paulo and Buenos Aires to our growing network, we can proudly say Qatar Airways is a truly international airline,” said Al Baker.
Flights to Sao Paulo will be operated daily non-stop from the airline’s hub in Doha, capital of the State of Qatar. The aircraft will then continue onto Buenos Aires. Qatar Airways will be the only Five Star ranked airline operating daily to South America with the launch of the new flights.
The airline’s state-of-the-art Boeing 777-200 Long Range aircraft featuring Business Class seats that convert into 180 degree fully flat horizontal beds, will be deployed on the South American flights.
The aircraft features a total of 259 seats – 42 seats in Business Class in a 2–2–2 configuration and 217 seats in Economy in a 3–3–3 layout offering maximum space and comfort.
The aircraft is designed to operate on ultra-long routes of up to 17 hours non-stop. It already serves Houston and Melbourne, non-stop from Doha.
Added Al Baker: “We have seven new routes lined up during the first six months of 2010, and the airline plans to open up even more routes within the next 12 months as our growth strategy continues to evolve.
“The airline is receiving on average one new aircraft a month, allowing us to concentrate on enhancing our existing services, as well as opening up new routes. It’s a very exciting time for Qatar Airways.”
Qatar Airways recently launched daily flights to the southern Indian city of Bengaluru (Bangalore). Copenhagen joins the network from March 30. Flights to Ankara begin on April 5; Tokyo starts on April 26; and Barcelona from June 7.
