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Lufthansa Group improves its financial results for the first half of 2015

Lufthansa Group (Lufthansa) (Frankfurt) today issued this financial report for the first half of 2015. The group produced a profit of €954 million ($1.0 billion) for the first six months of 2015, compared to a loss of €79 million ($86.3 million) in the same period a year ago. Here is the group’s report:

Lufthansa Group logo

The Lufthansa Group reports solid business development for the first half of 2015 and improved results in all of its operating segments. The Adjusted EBIT (Earnings Before Interest and Tax) rose by EUR 290 million year-on-year to EUR 468 million. For the six months ended June 30, sales increased by 8.5 percent to EUR 15.4 billion, with traffic revenue accounting for EUR 12.1 billion of that figure.

Yields for the Lufthansa Group’s passenger airlines rose by 2.4 percent in the first half of 2015, which was mainly exchange rate related. Had it not been for the tailwind from a weaker euro, however, yields would have been appreciably lower, in line with expectations.

In the second quarter alone, yields declined by 5.7 percent after adjusting for exchange rate effects. Although unit costs as a whole also rose mainly as a result of currency exchange rates, the EUR 309 million reduction in fuel costs coupled with improved sales and capacity utilization more than compensated for the reduction in prices. All currency effects in the first six months net to a total negative impact of EUR 158 million. The net effect is negative as Lufthansa Group has higher costs in foreign currencies, among others due to fuel spending in US Dollar, compared to the revenue side in foreign currencies.

The Group’s net result for the first six months of the year rose to EUR 954 million, compared with a net loss of EUR 79 million for the same period in the prior year. In addition to a higher operating result, this is mainly due to the increase in the financial result. More than half of the Group’s net result was attributable to an accounting effect resulting from the appreciation in equity capital of EUR 503 million following the redemption of the jetBlue convertible bond in the first quarter. In the second quarter, assessments of interest and exchange rate hedging instruments as well as fuel hedging options had a positive impact, increasing the result by a total of EUR 176 million.

Simone Menne, Chairman of the Financial and Aviation services of Deutsche Lufthansa AG said:

“Our first-half results are solid. Aside from the positive development of our business operating areas and, in particular, our passenger airlines, which gained extra momentum in the second quarter, the fall in fuel costs is largely responsible for the improvement in our results. We will, however, not be misled by that, since we assume that the price level for airline tickets will not recover. We will therefore continue to work consistently on the competitive focus of the Lufthansa Group.”

Swiss new logo

In the second quarter, the Lufthansa Group achieved an Adjusted EBIT margin of 7.6 percent. Lufthansa Passenger Airlines and, in particular, Swiss played a crucial role in this positive development. The Passenger Airline Group recorded a margin of almost 8 percent in the second quarter, with Swiss, with a margin of over 11 percent, posting an exceptionally good result – also in comparison to others in the sector.

 

 

Germanwings (2nd) (13) logo

Germanwings also remains on a successful course, and will close the current year in profit for the first time.

Simone Menne:

“Our strategic focus is right. On the one hand, our premium brands – Lufthansa and Swiss – are very successful, and at the same time Germanwings and Eurowings are also showing good business developments as secondary brands. We are focusing on the premium quality of our hub airlines and the high level of competitiveness of our secondary brands in point-to-point traffic. This approach makes us profitable and fit for the future within the airline market”.

In the first half year, Lufthansa Passenger Airlines improved its result by EUR 181 million, Swiss by EUR 90 million, based on an Adjusted EBIT of EUR 178 million.

Austrian (2015) logo

 

While Austrian Airlines reported a loss of EUR 17 million in the first half-year, it managed to increase the Adjusted EBIT by a solid EUR 27m compared with the previous year.

Lufthansa Cargo logo

 

However, in the second quarter, Lufthansa Cargo was unable to maintain its good performance of the first quarter. With the introduction of the summer timetable, Lufthansa Cargo’s competitors significantly increased their freight capacity in many markets, thereby placing prices under increasing pressure. Eventually, the logistics segment achieved an improvement of EUR 7 million in the Adjusted EBIT to EUR 50 million in the first half-year.

The other business segments also managed to improve their half-year results:

Lufthansa Technik by EUR 41 million to EUR 268 million and LSG SkyChefs by EUR 17 million to EUR 26 million.

The equity ratio rose again to 17.5 percent at the end of the second quarter due to the higher actuarial interest rate and the resultant decrease in pension provisions. The ratio was therewith higher than for the full-year 2014. Although pension liabilities declined as a result of the 2.9 percent increase in the actuarial interest rate, at EUR 6.6bn overall pension liabilities still remain at a very high level.

Simone Menne: “With regard to pension liabilities and equity, it can also be said that developments throughout the second quarter have been positive, even if they were strongly driven by external factors. The need for sustainable structures in our pension scheme and transitional pension arrangements remains unchanged, nevertheless. The ambitious investment program to which we are committed to in the coming years is part of our strategy to ensure our sustainability. In order to generate the necessary funds we need the right conditions in all the business areas and companies within the Lufthansa Group.”

In the first half, operating cash-flow rose by almost 45 percent to EUR 2.5bn. At the end of the first half-year, a free cash flow of just over EUR 1bn was reported – almost double that of the previous year. Against this background, net indebtedness decreased substantially by 31 percent compared to the full-year 2014.

As planned, capital expenditure rose year-on-year. Amongst other things, the delivery of two further Airbus A380s and four Boeing 747-8s as well as the modernization of First and Business Class on the long-haul fleet and the installation of the new Premium Economy Class were contributory factors. Gross expenditure in 2015 will total EUR 2.9 billion. For the following years, a decline in the level of investment to EUR 2.5 billion is planned.

Lufthansa confirms its outlook for the full-year 2015 with an Adjusted EBIT of more than EUR 1.5 million before strike costs.

Copyright Photo: Rolf Wallner/AirlinersGallery.com. Lufthansa is approaching the retirement of its remaining Boeing 737 fleet (Boeing 737-300s and 737-500s). The Classic 737 is likely to be retired by the end of the year depending on schedule demand although this remains fluid. Boeing 737-330 D-ABXL (msn 23531) taxies at Zurich.

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Atlas Air Worldwide reports second quarter adjusted net income of $29.4 million

Atlas Air Worldwide Holdings, Inc. (Atlas Air and Polar Air Cargo) (New York) today announced adjusted net income attributable to common stockholders of $29.4 million, or $1.17 per diluted share, for the three months ended June 30, 2015, compared with $15.9 million, or $0.63 per diluted share, for the three months ended June 30, 2014.

Atlas Air Worldwide logo

On a reported basis, net income attributable to common stockholders in the second quarter of 2015 totaled $28.4 million, or $1.13 per diluted share, compared with $29.6 million, or $1.17 per diluted share, in the year-ago quarter.

Free cash flow of $68.5 million in the second quarter of 2015 compared with $59.2 million in the second quarter of 2014.

“Earnings in the second quarter were driven by contribution and margin strength in ACMI, Charter and Dry Leasing,” said William J. Flynn, President and Chief Executive Officer.

“We are seeing good demand for our aircraft and services as we enter the second half of 2015, as many of our customers are outperforming the overall market. We are working closely with our customers to provide them with the most efficient aircraft and effective operating services for their needs.

“As we gather additional insight into second-half demand, yields and military requirements, we continue to look forward to a strong year and a significant increase in earnings compared with 2014.”

Responding to market demand and customer requirements, we are implementing several previously announced fleet initiatives that are incorporated in our framework outlook for the year: placing an additional 747-400 freighter in ACMI service with DHL Express at the start of the third quarter; acquiring a new 747-8 freighter scheduled to be delivered to us in November; returning an owned, unencumbered 747-400 converted freighter to active service to meet additional Charter demand; securing a short-term operating lease on a second 747-400 converted freighter in Charter with more favorable terms; and expanding our Titan Dry Leasing portfolio by acquiring and converting two 767 passenger aircraft into freighter configuration. The freighters will be leased to DHL on a long-term basis when they are delivered in the fourth quarter.

 

Second-Quarter Results

Revenue and direct contribution in ACMI in the second quarter benefited from an increase in block hour volumes, driven by the start-up of four additional 767 CMI aircraft and an improvement in 747 cargo aircraft utilization. Segment contribution also benefited from lower heavy maintenance expense. These were partially offset by a reduction in revenue per block hour, which reflected the impact of payments received from a customer in 2014 in connection with the return of an aircraft as well as an increase in CMI flying in 2015.

In Charter, significantly higher segment revenues reflected an increase in commercial cargo demand and improvements in military passenger and cargo demand. In addition, segment contribution benefited from those higher flying levels and a reduction in heavy maintenance expense. The decrease in revenue per block hour was primarily driven by the impact of lower fuel prices.

In Dry Leasing, revenue and profitability grew as we realized revenue from maintenance payments related to the scheduled return of a 757-200 cargo aircraft in April. This aircraft was subsequently leased to DHL Express on a long-term basis during the quarter.

Reported earnings for the second quarter of 2015 included an effective income tax rate of 31.0%, which reflected our continued reinvestment of the net earnings of certain foreign subsidiaries outside of the U.S.

Half-Year Results

For the six months ended June 30, 2015, adjusted net income attributable to common stockholders totaled $55.2 million, or $2.20 per diluted share, compared with $27.1 million, or $1.07 per diluted share, for the six months ended June 30, 2014.

On a reported basis, first-half 2015 net income attributable to common stockholders totaled $57.6 million, or $2.29 per diluted share, compared with $37.5 million, or $1.49 per diluted share, in the first half of 2014.

Free cash flow totaled $148.8 million in the first six months of 2015 compared with $96.1 million in the first six months of 2014.

Liquidity and Capital Resources

At June 30, 2015, our cash, cash equivalents, restricted cash and short-term investments totaled $554.9 million, compared with $330.7 million at December 31, 2014.

The change in position reflected net cash of $171.1 million provided by operating activities; net cash of $104.4 million provided by financing activities, which included $99.1 million of debt payments; and net cash of $59.4 million used for investing activities.

In June 2015, we issued $224.5 million of convertible senior notes due June 2022 with a cash coupon of 2.25%. We used a portion of the approximately $218 million of net proceeds from the offering in June to fund the $16.6 million net cost of convertible note hedges and warrants related to the notes. These transactions are intended to offset any actual dilution from the conversion of the notes and to effectively increase the overall conversion price from $74.05 to $95.01 per share.

During the third quarter of 2015, we expect to use approximately $113 million of the net proceeds to retire higher-rate Enhanced Equipment Trust Certificates (EETCs) related to five of our 747-400 freighter aircraft. The redemption amount gives effect to the company’s ownership interests in the EETCs being retired, which have an average cash coupon of 8.1%.

We expect to use the remaining net proceeds from the convertible note issuance for working capital and capital expenditures, repayment or refinancing of debt, and general corporate purposes.

Outlook

We are encouraged by our strong first-half performance. We are seeing good demand for our aircraft and services this quarter and for the remainder of the year. And we continue to anticipate significant growth in adjusted diluted earnings per share in 2015.

On a sequential basis, we expect earnings per share in the third quarter of 2015 to be slightly better than our second-quarter 2015 adjusted earnings, followed by further earnings improvement in the fourth quarter.

Taking our first-half 2015 earnings strength into account, we continue to expect approximately 55% of our earnings to occur in the second half.

In addition, we anticipate that block-hour volumes this year will increase approximately 10% compared with 2014, including the impact of the 747-8 freighter scheduled to be delivered in November and 747-400BCF that we returned to service at the end of the second quarter. More than 70% of our total block hours should be in ACMI and the balance in Charter. Our ACMI outlook reflects expected growth in both 747 freighter operations as well as CMI flying. Our Charter outlook reflects our strong presence in the global charter market and military demand that is holding up well compared with 2014 levels.

In Dry Leasing, our portfolio is expected to include our recent acquisition and subsequent conversion of two 767 passenger aircraft to freighter configuration. Following their conversion, which should be completed during the fourth quarter of this year, the aircraft will be leased to DHL Express.

Given the flying levels that we anticipate, we continue to expect that aircraft maintenance expense in 2015 should total approximately $190 million. In addition, depreciation should be approximately $125 million. We also anticipate an effective income tax rate of approximately 30%. Core capital expenditures, excluding aircraft and engine purchases, are expected to total approximately $45 million, mainly for spare parts for our fleet. Expenditures for additional aircraft and engines should total approximately $240 million.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Polar Air Cargo’s Boeing 747-46NF N454PA (msn 30812) in DHL colors departs from scenic Anchorage, Alaska.

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Has a part of missing Malaysia Airlines flight MH370 been discovered off Reunion Island?

Malaysia Airlines (Kuala Lumpur) flight MH370, from Kuala Lumpur to Beijing with 239 passengers and crew members on board, disappeared somewhere in the Indian Ocean on March 8, 2014 based on the data received from the aircraft.

A possible part, possibly a 777 flap, has been found and may be from the missing pictured Boeing 777-2H6 ER 9M-MRO (msn 28420). The debris was discovered off the coast of St. Andre on Reunion Island in the western Indian Ocean. Prevailing currents could have pushed the debris to this area.

The debris is being inspected by the authorities for confirmation. Boeing is also involved.

Read the full report from CNN: CLICK HERE

More information to follow.

Copyright Photo: Stefan Sjogren/AirlinersGallery.com. Boeing 777-2H6 9M-MRO (msn 28420) lands at Stockholm (Arlanda) before the tragic disappearance.

Map: Google Maps.

Reunion Island

Cathay Pacific flight CX884 to Los Angeles diverts to Shemya Island in the Aleutians with smoke in the aircraft

Cathay Pacific Airways (Hong Kong) flight CX884 has made a safe emergency landing on Shemya Island in the Aleutian Islands, Alaska after smoke was detected in the aircraft. The airline issued this statement:

Cathay Pacific 2014 logo

Cathay Pacific is making special arrangements to help passengers affected by the precautionary diversion of flight CX884 to Shemya military airport in the Aleutians Island near Alaska get to their intended destination of Los Angeles.

Flight CX884 made a precautionary diversion at around 21.30 Hong Kong time on its way from Hong Kong to Los Angeles on July 29 when smoke was detected in the aircraft, a Boeing 777-300ER. There were 276 passengers and 18 crew on the flight.

The airline is mounting a relief flight, operating as CX884D, which departed from Hong Kong International Airport at 03.45 local time this morning and will form part of the effort to help those affected by the diversion of CX884 to fly to Los Angeles.

Cathay Pacific Director Service Delivery James Ginns said: “Safety is always our top priority at Cathay Pacific and the Captain of CX884 made exactly the right decision to divert the flight as a precautionary measure. We understand that this action resulted in a long and arduous journey for those onboard the diverted flight and we apologise for the inconvenience caused. We will launch a thorough investigation into what caused the smoke that was detected on the aircraft operating CX884.”

Flight CX884 was operated as a codeshare flight with American Airlines AA8937 and Lan LA6082.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. The aircraft involved is the pictured Boeing 777-367 ER B-KPQ (msn 36162) arriving previously at Los Angeles International Airport.

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Jin Air celebrates the delivery of the first direct Boeing 737-800

Jin Air.com 737-800 WL HL8012 (08)(Grd) BFI (Boeing)(LRW)

Jin Air (subsidiary of Korean Air) (Seoul) and Boeing (Chicago, Seattle and Charleston) on July 27 celebrated the airline’s first direct-delivered Next-Generation 737-800 in Seattle.

Jin Air logo (small)

Jin Air is the low-cost affiliated company of Korean Air. The delivery marks the 13th Boeing 737-800 to join Jin Air’s all-Boeing fleet. The airline currently serves 16 routes in Asia and operates a total of 15 airplanes, including two 777-200 ERs.

Photo: Boeing. The pictured Boeing 737-8SH HL8012 (msn 41348) was handed over at Boeing Field in Seattle on July 27.

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UPS exceeds forecasts for the second quarter, international operating profit jumps 17%

UPS (United Parcel Service) (UPS Airlines) (Atlanta and Louisville) today announced second quarter 2015 diluted earnings per share of $1.35, a 12% increase over adjusted results for the same period last year. All three segments improved operating profit and margin, led by International and Supply Chain and Freight performance.

The company continued:

UPS-We Love Logistics logo

Highlights:

  • All Segments Improve Profitability and Expand Margins
  • International Operating Profit Jumps 17%
  • Export Shipments up 5.5% with Strong Intra-Europe Growth
  • Supply Chain and Freight Operating Profit Climbs 18%
  • Revenue Growth Dampened by Changes in Currency and Fuel Prices
  • 2015 EPS Growth at Higher End of 6%-to-12% Guidance Range

Currency exchange rates and lower fuel surcharges reduced total reported revenue growth. Total revenue declined 1.2% from the same quarter last year to $14.1 billion. Pricing initiatives continue to drive base rates higher.

“During the quarter, UPS continued to invest for the future by expanding capacity and launching new capabilities that provide higher value to customers,” said David Abney, UPS chief executive officer. “The strong momentum in our International segment is expected to continue and gives us confidence in achieving the upper end of our guidance range.”

On a reported basis, operating profit increased $1.2 billion, and diluted earnings per share was up $0.86. In the second quarter of 2014, UPS reported diluted earnings per share of $0.49, which included a $665 million after-tax charge for the transfer of certain post-retirement liabilities to defined contribution healthcare plans.

Total company shipments increased 2.1% over the second quarter last year to 1.1 billion packages, led by U.S. Deferred Air products and International Export shipments.
Cash Flow

For the six months ended June 30, UPS generated $3.3 billion in free cash flow. The company paid dividends of $1.3 billion, an increase of 9.0% per share over the prior year. UPS also repurchased 13.5 million shares for approximately $1.4 billion.

U.S. Domestic Package

U.S. Domestic revenue increased $140 million over the second quarter last year to $8.8 billion. Shipment growth was led by Deferred Air products up 15% and UPS SurePost which increased more than 8%. Total daily deliveries grew 1.8% due to a slower pace of B2C (business-to-consumer) growth.

Operating profit was $1.2 billion, up $35 million or 3.0% over prior-year adjusted results. Operating margin expanded to 13.6% as improved pricing and productivity offset higher benefit costs.

On a reported basis, operating profit increased $992 million after the transfer of certain post-retirement liabilities to defined contribution healthcare plans, which occurred in the second quarter of last year.

Continued improvements in base rates were offset by lower fuel surcharges. Revenue per package was flat, as changes in fuel surcharges dropped reported yield by almost 300 basis points.

International Package

Currency-adjusted International revenue was up 1.5% over the same period last year. UPS daily Export shipments increased 5.5%, primarily due to an 8.5% increase in intra-Europe shipments. The strong dollar drove U.S. imports higher, while U.S. exports were down slightly.

International operating profit increased $81 million, or 17% over the adjusted results for the same period in 2014. Network improvements, volume growth and pricing initiatives all contributed to expanded operating margin and increased profitability. The segment experienced growth from middle-market accounts and improved premium product sales.

On a reported basis, operating profit increased $108 million after the transfer of certain post-retirement liabilities to defined contribution healthcare plans in the second quarter of last year.

Underlying base rates were up across all regions, though revenue per package decreased 2.4% on a currency-neutral basis. Lower fuel surcharges reduced reported revenue per package by about 350 basis points.

Supply Chain & Freight

Supply Chain & Freight revenue declined 4.5% to $2.2 billion, due to Forwarding revenue management initiatives, currency and lower fuel surcharges at UPS Freight. Operating profits improved $31 million, or 18% over the adjusted results for the same quarter 2014, driven by gains in Forwarding.

On a reported basis, operating profit increased $113 million after the transfer of certain post-retirement liabilities to defined contribution healthcare plans that occurred in the second quarter of 2014.

UPS Forwarding operating profit and margin expanded as the business unit continued to implement a disciplined pricing strategy across key trade lanes. The unit also benefited from improved market conditions and customer mix. Forwarding tonnage and revenue dropped during the quarter, primarily due to revenue management initiatives and the impact of currency fluctuations.

Distribution revenue increased at a mid-single digit growth rate. Growth in Mail services, Healthcare and Aerospace industries contributed to revenue improvements.

UPS Freight revenue declined 2.5% due to lower fuel surcharges and a drop in tonnage driven by changes in customer mix and slowing market growth. LTL (less-than-truckload) revenue per hundredweight growth remained positive, with a 1.4% gain.

Outlook

“The second quarter results reflect continuing gains in our International business,” said Richard Peretz, UPS chief financial officer. “Even though the U.S. economy appears to be growing at a slower pace, our global portfolio and performance reinforces our expectations to attain the higher-end of the guidance range.”

The company’s guidance for 2015 full-year diluted earnings per share is $5.05 to $5.30, a 6% to 12% increase over adjusted 2014 results.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Boeing 767-34AF N302UP (msn 27240) arrives in Anchorage, Alaska.

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Xiamen Air launches the Xiamen – Amsterdam route

Xiamen Airlines (Xiamen Air) (Xiamen) has launched its first route to Europe. The Chinese airline issued this statement:

Xiamen Air logo

On July 26, Xiamen Airlines officially launched the carrier’s very first intercontinental route, the Xiamen-Amsterdam route. The new route marks a key milestone in the airline’s implementation of its globalization strategy.

Xiamen Airlines will operate the new route, flight numbers MF811 and MF812, with a Boeing 787 Dreamliner featuring 4 seats in first class, 18 in business and 214 in economy. The flight departs Xiamen at 11:50 p.m. every Tuesday, Thursday and Sunday, and arrives at Amsterdam’s Schiphol at 5:45 a.m. the next day. The flight duration is 11 hours and 55 minutes. The return journey departs Amsterdam at 12:35 p.m. every Monday, Wednesday and Friday, and arrives in Xiamen at 5:30 a.m. the next day, with a flight duration of 10 hours and 55 minutes. The above are all local times, and were arranged to facilitate connections to other flights after passengers reach their destinations.

The new route complements KLM Royal Dutch Airlines’ existing Xiamen-Amsterdam route — also on a three-times-a-week schedule, signifying that, starting from July 26, there will be six direct flights between Xiamen and Amsterdam weekly.

Xiamen Airlines has upgraded both the air and ground services for the new intercontinental route, with a concerted effort on integrating Chinese cultural elements into its services. As an example, the new tableware for the first class and business class cabins are made of blanc de chine, and authentic highly-reputed lapsang souchong tea will be on offer in the two cabins.

Xiamen Airlines operates a fleet of 119 Boeing jets, which is the biggest all-Boeing fleet in China. The fleet now has 5 Boeing 787-8 Dreamliners, with the sixth to be delivered soon. As part of the expansion plans for further intercontinental routes originating from Fujian province, the airline has ordered 4 more advanced Boeing 787-9aircraft, forming a fleet of 10 Boeing 787s.

Chairman and general manager Che Shanglun explained that Xiamen Airlines will launch a direct Xiamen-Sydney route at the end of this year. Next year, the carrier plans to launch routes to North America, completing a route network covering Europe, America and Australia, and supporting China’s “One Belt, One Road” strategy by creating a “Silk Road in the Sky.”

Copyright Photo: Ton Jochems/AirlinersGallery.com. Boeing 787-8 Dreamliner B-2762 (msn 41542) taxies at Amsterdam.

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