Tag Archives: Boeing 777

Korean Air finalizes its order for five additional Boeing 777F freighters

Boeing (Chicago, Seattle and Charleston) and Korean Air (Seoul) have finalized an order for five 777 Freighters. Korean Air currently operates an all-Boeing freighter fleet of 26 airplanes that includes 17 747-400 Freighters, five 747-8 Freighters and four 777 Freighters.

Korea’s flag carrier currently operates 86 Boeing passenger airplanes and has unfilled orders for nearly 40 additional airplanes, including 12 777-300ERs, 10 747-8 Intercontinentals, 10 787-9 Dreamliners, two 747-8 Freighters and six 777 Freighters.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Boeing 777-FB5 HL8251 (msn 37639) is beautifully captured landing at Anchorage.

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Air Canada has its best year ever, reports net income of $531 million

Air Canada (Montreal) recorded in 2014 its highest annual adjusted net income in the carrier’s 77-year history. The airline reported adjusted net income of $531 million (all amounts in Canadian dollars) or $1.81 per diluted share in 2014 versus adjusted net income of $340 million or $1.20 per diluted share in 2013, an increase of $191 million or 56.2 per cent or $0.61 per diluted share. Fourth quarter 2014 adjusted net income of $67 million or $0.23 per diluted share, an increase of $64 million or $0.22 per diluted share.

The airline today issued this financial statement:

Air Canada logo-1

Air Canada today reported full year adjusted net income(1) of $531 million or $1.81 per diluted share compared to adjusted net income of $340 million or $1.20 per diluted share in 2013, an improvement of $191 million or $0.61 per diluted share. EBITDAR(1) (earnings before interest, taxes, depreciation, amortization and aircraft rent) amounted to $1.671 billion compared to EBITDAR (excluding the impact of benefit plan amendments) of $1.433 billion in 2013, an improvement of $238 million or 16.6 per cent. On a GAAP basis, Air Canada reported 2014 operating income of $815 million, an increase of $196 million or 31.7 per cent from 2013. The airline reported net income of $105 million or $0.34 per diluted share in 2014 compared to net income of $10 million or $0.02 per diluted share in 2013.

Full year Income Statement Highlights

In 2014, on capacity growth of 7.8 per cent, system passenger revenues of $11.804 billion increased $783 million or 7.1 per cent from 2013. The increase in system passenger revenues was mainly due to traffic growth of 8.5 per cent partly offset by a yield decline of 1.3 per cent. An increase in average stage length of 2.3 per cent versus 2013, reflecting international long-haul growth, had the effect of reducing yield by 1.3 percentage points. On a stage length adjusted basis, system yield was unchanged from 2013. Modest yield declines are an anticipated and natural consequence of the successful implementation of Air Canada’s business strategy to profitably increase long-haul international and leisure flying.

Passenger revenue per available seat mile (PRASM) decreased 0.6 per cent from 2013 as the lower yield was largely offset by a passenger load factor improvement of 0.6 percentage points. In 2014, system business cabin revenues increased $109 million or 4.9 per cent on yield growth.

In 2014, operating expenses of $12.457 billion increased $694 million or 6 per cent from 2013 on capacity growth of 7.8 per cent. The unfavourable impact of a weaker Canadian dollar on foreign currency denominated operating expenses (mainly U.S. dollars) in 2014, when compared to 2013, increased operating expenses by approximately $397 million.

Air Canada’s adjusted cost per available seat mile (adjusted CASM(1)), which excludes fuel expense, the cost of ground packages at Air Canada Vacations® and unusual items, decreased 2.6 per cent from 2013, in line with the 2.5 per cent to 3.5 per cent decrease projected in Air Canada’s news release dated November 6, 2014.

In 2014, Air Canada recorded operating income of $815 million compared to operating income of $619 million in 2013, an improvement of $196 million or 31.7 per cent. The airline recorded an operating margin of 6.1 per cent compared to an operating margin (excluding the impact of benefit plan amendments) of 4.3 per cent in 2013, an improvement of 1.8 percentage points.

Fourth Quarter Income Statement Highlights

In the fourth quarter of 2014, on capacity growth of 8.5 per cent, system passenger revenues of $2.755 billion increased $195 million or 7.6 per cent from the fourth quarter of 2013. The increase in system passenger revenues was due to traffic growth of 9.4 per cent partly offset by a yield decline of 1.9 per cent. An increase in average stage length of 2.2 per cent versus the fourth quarter of 2013 had the effect of reducing yield by 1.2 percentage points. On a stage length adjusted basis, system yield marginally declined 0.7 per cent year-over-year.

PRASM decreased 1.2 per cent from the same quarter in 2013 as the lower yield was partly offset by a passenger load factor improvement of 0.6 percentage points. In the fourth quarter of 2014, system business cabin revenues increased $28 million or 5.0 per cent on yield growth of 6.7 per cent partly offset by a decrease in traffic of 1.5 per cent.

In the fourth quarter of 2014, operating expenses of $2.998 billion increased $239 million or 9 per cent from the fourth quarter of 2013. The unfavourable impact of a weaker Canadian dollar on foreign currency denominated operating expenses (mainly U.S. dollars) in the fourth quarter of 2014, when compared to the fourth quarter of 2013, increased operating expenses by approximately $89 million.

Adjusted CASM was unchanged from the fourth quarter of 2013 versus the 1.0 per cent to 2.0 per cent decrease projected in Air Canada’s news release dated November 6, 2014. This difference was primarily due to higher than forecasted employee benefits expense mainly due to revised actuarial valuations related to pension and post-employment benefits, an increase in accruals related to employee profit sharing programs, the timing of maintenance events versus what was previously projected and, to a lesser extent, the impact of a weaker than anticipated Canadian dollar.

In the fourth quarter of 2014, Air Canada recorded operating income of $106 million compared to operating income of $135 million in the fourth quarter of 2013, a decrease of $29 million. In the fourth quarter of 2013, Air Canada recorded a reduction of $82 million in operating expenses related to benefit plan amendments while no such adjustment was recorded in the fourth quarter of 2014. Air Canada recorded an operating margin of 3.4 per cent compared to an operating margin (excluding the impact of benefit plan amendments) of 1.8 per cent in the fourth quarter of 2013, an improvement of 1.6 percentage points.

For the fourth quarter of 2014, adjusted net income of $67 million or $0.23 per diluted share increased $64 million or $0.22 per diluted share from the same quarter of 2013. The airline reported fourth quarter EBITDAR of $319 million compared to fourth quarter EBITDAR (excluding the impact of benefit plan amendments) of $277 million in 2013, an improvement of $42 million or 15.2 per cent.

Financial and Capital Management Highlights

At December 31, 2014, unrestricted liquidity (cash, short-term investments and undrawn lines of credit) amounted to $2.685 billion (December 31, 2013 – $2.364 billion). Air Canada’s principal objective in managing liquidity risk is to maintain a minimum unrestricted liquidity level of $1.7 billion.

At December 31, 2014, adjusted net debt(1) amounted to $5.132 billion, an increase of $781 million from December 31, 2013, mainly due to the purchase of six Boeing 787-8 and one Boeing 777 aircraft in 2014 and the unfavourable impact of a weaker Canadian dollar as at December 31, 2014 compared to December 31, 2013 on Air Canada’s foreign currency denominated debt (mainly U.S. dollars), which accounted for an increase of $365 million to long-term debt in 2014. The airline’s adjusted net debt to EBITDAR ratio was 3.1 at December 31, 2014 versus a ratio 3.0 at December 31, 2013. Air Canada uses this ratio to manage its financial leverage risk and its objective is to maintain the ratio below 3.5.

For the 12 months ended December 31, 2014, return on invested capital (ROIC(1)) was 12.1 per cent versus 10.5 per cent for the 12 months ended December 31, 2013. Air Canada’s goal remains to achieve a sustainable ROIC of 10 to 13 per cent.

Further to Air Canada’s foreign exchange risk management practices (which are more fully described in Air Canada’s 2014 MD&A), foreign denominated revenues essentially act as a natural hedge against U.S. dollar denominated non-fuel operating expenses. As such, net U.S. dollar operating expenses are largely attributable to the airline’s fuel purchases which are currently at a much lower cost in Canadian dollars despite the impact of a weaker Canadian dollar.

U.S. dollar currency derivatives and U.S. dollar cash reserves, which, as at December 31, 2014, amounted to US$2.292 billion and US$620 million, respectively, are employed to offset approximately 60 per cent of the net U.S. dollar currency exposure in 2015 and 2016. The currency derivatives enable Air Canada to purchase U.S. dollars at a weighted average price of C$1.0884 (subject to various option pricing features, such as knock-out terms and profit cap limitations). These derivatives and U.S. dollar cash reserves will be available to mitigate certain cash flow exposure from the currency movements in 2015; however the benefit of these hedging activities is recorded as a foreign exchange gain and not within operating income.

Pension

As at January 1, 2014, the aggregate solvency surplus in Air Canada’s domestic registered pension plans was $89 million. The next required valuations will be completed in the first half of 2015. Based on preliminary estimates, including actuarial assumptions, as at January 1, 2015, the aggregate solvency surplus in Air Canada’s domestic registered pension plans is projected to be $780 million.

In December 2013, the Government of Canada formally approved the Air Canada Pension Plan Funding Regulations, 2014 (the “2014 Regulations”) under the Pension Benefits Standards Act, 1985 in respect of special payments required to be made to amortize the deficit under Air Canada’s defined benefit plans applicable to the period between 2014 to 2020 inclusively, expiring December 31, 2020. Air Canada is permitted to opt out of the 2014 Regulations and have past service payments in respect of all Air Canada pension plans, collectively, determined in accordance with normal funding rules. Air Canada would consider opting out when the annual solvency deficit payments under normal funding rules, which are determined using deficit levels over three years, would be less than $200 million and when there would be a strong basis for confidence that the airline’s de-risking strategy would make a future significant deficit unlikely to re-occur. At December 31, 2014, approximately 72.5 per cent of the pension liabilities were matched with fixed income products to mitigate a significant portion of the interest rate (discount rate) risk.

In the event that Air Canada opts out of the 2014 Regulations, based on the normal funding rules and subject to the finalization of the preliminary estimate of the pension solvency surplus of $780 million at January 1, 2015, Air Canada’s pension solvency payment would be approximately $90 million in 2015.

Current Outlook

Capacity

Air Canada expects first quarter 2015 system ASM capacity, as measured by available seat miles (ASMs), to increase 8.5 to 9.5 per cent when compared to the first quarter of 2014, and to be comprised of an increase in the total number of seats dispatched (system) of 7.0 to 8.0 per cent and an increase in average stage length (system) (measured by ASMs divided by seats dispatched) of approximately 1.5 per cent when compared to the same quarter in 2014.

Air Canada continues to expect its full year 2015 system ASM capacity to increase by 9.0 to 10.0 per cent. For the full year 2015, Air Canada continues to expect an increase in the total number of seats dispatched (system) of 6.0 to 7.0 per cent when compared to the full year 2014 and average stage length (system) is expected to increase approximately 3.0 per cent year-over-year. Approximately 55 per cent of the 2015 forecasted capacity increase will be through the continued lower-cost growth of Air Canada rouge® while approximately 38 per cent of the capacity growth will be targeted to international markets operated by the mainline carrier.

Air Canada expects its full year 2015 domestic ASM capacity to increase 3.5 to 4.5 per cent (as opposed to the 4.0 to 5.0 per cent increase projected in Air Canada’s news release dated November 6, 2014) when compared to 2014, with a large part of the growth focused on the airline’s transcontinental services. The increase on transcontinental services is partly driven by the positioning of certain Boeing 777 and 787 aircraft at Air Canada’s major hubs in Toronto and Vancouver. Furthermore, in 2015, an overlap of the aircraft brought into the fleet to replace the exiting Embraer 190 aircraft is forecasted to account for approximately 30 per cent of the projected domestic capacity growth in 2015. This overlap is designed to better match capacity with expected 2015 summer season demand. For the full year 2015, Air Canada continues to expect an increase in the total number of seats dispatched (domestic) of 2.5 to 3.5 per cent while average stage length (domestic) is expected to increase approximately 1.0 per cent when compared to the full year 2014.

Adjusted CASM

For the first quarter of 2015, Air Canada expects adjusted CASM (which excludes fuel expense, the cost of ground packages at Air Canada Vacations and unusual items) to increase 0.5 to 1.5 per cent when compared to the first quarter of 2014. If the value of the Canadian dollar were at 2014 levels, the projected adjusted CASM for the first quarter of 2015 versus the first quarter of 2014 would reflect a decrease of 2.0 to 3.0 per cent.

For the full year 2015, Air Canada expects adjusted CASM to decrease 0.75 to 1.75 per cent from the full year 2014. If the value of the Canadian dollar were at 2014 levels, the projected adjusted CASM for the full year 2015 versus the full year 2014 would reflect a decrease of 3.75 to 4.75 per cent.

Major Assumptions

Air Canada’s outlook assumes annual Canadian GDP growth of 1.75 to 2.25 per cent for 2015. Air Canada also expects that the Canadian dollar will trade, on average, at C$1.25 per U.S. dollar in the first quarter of 2015 and for the full year 2015 and that the price of jet fuel will average 66 cents per litre for the first quarter of 2015 and 67 cents per litre for the full year 2015.

Copyright Photo: SPA/AirlinersGallery.com. Boeing 777-333 ER C-FNNU (msn 43249) approach the runway at London Heathrow Airport.

Air Canada aircraft slide show: AG Airline Slide Show

 

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American Airlines and Korean Air announce a codeshare agreement

American Airlines (Dallas/Fort Worth) and Korean Air (Seoul) have signed an agreement to begin codesharing. Pending regulatory approval, Korean Air will place its code on American Airlines flights between Dallas/Fort Worth International Airport (DFW) and Incheon International Airport (ICN) in Seoul, South Korea.

Once approved, the two carriers plan to sell codeshare flights for travel beginning in April 2015. The new agreement will allow Korean Air SKYPASS members to earn miles when traveling on American-operated flights between DFW and ICN.

American began serving Seoul in May 2013.

American’s route between DFW and Seoul is operated with a Boeing 777-200 aircraft. The airline is retrofitting all 47 of its 777-200s to refresh the cabins and enhance the premium experience on international flights. The retrofitted 777-200 features a Business Class product designed especially for American’s customers, with a fully lie-flat seat, direct aisle access and a private flying experience. The plane has a modern interior – including a walk-up bar – with unique lighting, a dramatic archway and a spacious look.

Top Copyright Photo: SPA/AirlinersGallery.com. Boeing 777-223 ER N776AN (msn 29582) of American Airlines arrives in London (Heathrow).

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Cathay Pacific is coming to Dusseldorf

Cathay Pacific Airways (Hong Kong) will launch the Hong Kong – Dusseldorf route on September 1. The new route will be operated four days a week with Boeing 777-300 ER aircraft per Airline Route.

Copyright Photo: SPA/AirlinersGallery.com. Boeing 777-367 ER B-KPE (msn 36156) departs from Heathrow Airport in London.

Cathay Pacific Airways aircraft slide show:

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Etihad Airways adjusts its North American schedules to increase connectivity

Etihad Airways (Abu Dhabi) has announced a number of schedule changes to the airline’s flights between its Abu Dhabi hub and Toronto (Pearson), New York (JFK), and Chicago (O’Hare), which will start on Sunday, March 29, 2015.

The move will provide convenient schedule options for passengers travelling from Canada or the US to the UAE, enhance overall connectivity for flights to and from the Indian Subcontinent (ISC), and establish new connections to key markets such as Dhaka, Kathmandu, and Kolkata.

The new times also all connect with key Etihad Airways’ ISC destinations which include Colombo, Delhi, Karachi, Lahore, and Mumbai.

The three flights a week Toronto service, flight EY 141, will now depart at 2.50 am rather than the current time 10.25 am and the daily EY 151 flight to Chicago will move from a 9.30 am departure to 3.40 am.

Return flight EY 140 from Toronto will arrive at 12.05 pm, and EY 150 from Chicago will arrive in Abu Dhabi at 12.20 pm, which will allow for faster connection times through the hub at a non-peak period.

The new schedule will see the return flight from New York, EY 102, will now depart JFK three hours later than it currently does to ensure its arrival in Abu Dhabi to meet the early afternoon bank of flights to the ISC.

Passengers on the retimed outbound Chicago flight will continue to be processed through United States Preclearance at Abu Dhabi Airport, following the recent expansion of the facility’s hours of operation to include early morning flights to the US.

US Preclearance allows passengers to conveniently pass through all required checks including US customs, immigration and security while in Abu Dhabi before they board their flight, enabling them to avoid queues on arrival in the US and arrive as domestic passengers.

Passengers on all Etihad Airways flights from Abu Dhabi to the United States, which also includes Dallas-Fort Worth, Los Angeles, San Francisco, New York JFK, and Washington DC, are processed through US preclearance.

The schedule changes for Toronto and Chicago have been made in conjunction with Etihad Airways’ key partners, Air Canada and American Airlines in North America, and Jet Airways in India.

The partner airlines will implement new codeshare flights as well as re-accommodate guests who are affected by the new schedule.

Toronto, Chicago, and New York JFK (EY101 / EY102) flight schedule changes are from March 29, 2015:

Copyright Photo: Etihad Airways Boeing 777-3FX ER A6-ETR (msn 39687) with the promotional Abu Dhabi Grand Prix Formula 1 markings taxies at London (Heathrow).

Etihad Airways aircraft slide show:

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American Airlines to launch the new Dallas/Fort Worth – Beijing route

American Airlines (Dallas/Fort Worth) will begin operating its new daily service between Dallas/Fort Worth International Airport (DFW) and Beijing Capital International Airport (PEK) on May 7, marking the airline’s sixth daily flight to Asia from DFW and the only nonstop flight connecting DFW and Beijing. With the addition of this service, American will offer 11 routes between the U.S. and Asia. Customers may begin booking flights on the new route this Saturday, Jan. 24.

Daily DFW-PEK Service Schedule (all times local):

AA 89
Departs DFW at 10:40 a.m.
Arrives at PEK at 2:15 p.m. the following day

AA 88
Departs PEK at 4:25 p.m.
Arrives at DFW at 5 p.m.

The new flight from DFW will complement American’s existing service from Chicago O’Hare International Airport (ORD) to Beijing. With the addition of Beijing, American will offer nonstop service from Dallas/Fort Worth to five key markets in Asia – Beijing, Hong Kong, Seoul, Shanghai and Tokyo.

American will operate its service between DFW and Beijing with a Boeing 777-200 aircraft. The airline is retrofitting all 47 of its 777-200s to refresh the cabins and enhance the premium experience on international flights. The retrofitted 777-200 features a Business Class product designed especially for American’s customers, with a fully lie-flat seat, direct aisle access and a private flying experience. The plane has a modern interior – including a walk-up bar – with unique lighting, a dramatic archway and a spacious look. It also has Main Cabin Extra and all Main Cabin seats have in-seat entertainment systems.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Boeing 777-223 ER N797AN (msn 30012) arrives at Los Angeles International Airport.

American Airlines aircraft slide show (current livery only):

Boeing and Thai Airways International celebrate the 75th direct airplane delivery

777-300ER TII #1267-WE444

Boeing (Chicago) and Thai Airways International Public Company Limited (Bangkok) yesterday (January 21) celebrated the Thai flag-carrier’s 75th direct delivery of a Boeing airplane. Marking the milestone delivery, Boeing and Thai collaborated to transport 1,000 wool blankets onboard Thai’s newly delivered 777-300 ER (Extended Range). The blankets, donated by Another Joy Foundation, will be distributed by the airline to people in need in Thailand during the colder winter months.

This latest humanitarian effort, the third between Boeing and Thai, is part of Boeing’s long-running Humanitarian Delivery Flights program.

Boeing’s Humanitarian Delivery Flights program, which began in 1992, has worked in partnership with nearly 50 carriers worldwide to facilitate more than 170 humanitarian flights. On previous delivery flights, Thai and Boeing have provided medical kits and school supplies.

Thai currently operates four 787 Dreamliners and has operated nearly every model of the 777. Thai Cargo was the first carrier in Southeast Asia to utilize the 777 Freighter. The airline has an additional two 777-300 ERs on order.

Photo: Boeing. Brand new Boeing 777-3D7 ER HS-TKX (msn 42113) departs from an overcast Paine Field near Everett yesterday. The new airplane was handed over to the carrier on January 21.

Thai aircraft slide show: