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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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NTSB blames the Southwest Airlines captain for his “failure to comply with standard operating procedures” for the July 22, 2013 hard landing at New York’s LaGuardia Airport

National Transportation Safety Board (NTSB) (Washington) has issued this statement and report on the July 22, 2013 hard landing of a Southwest Airlines Boeing 737-7H4 (N753SW) at New York’s LaGuardia Airport:

NTSB logo

The National Transportation Safety Board determined that the captain’s failed attempt to recover from an unstabilized approach by transferring airplane control at low altitude instead of performing a go-around, caused a hard landing at LaGuardia International Airport (LGA) in Queens, New York.

On July 22, 2013, a Boeing 737, operated as Southwest Airlines flight 345, landed hard, nose-first, on runway 4 at LGA. Of the 144 passengers and five crewmembers on board, eight sustained minor injuries and the airplane was substantially damaged.

Contributing to the accident was the captain’s failure to comply with standard operating procedures during the approach. NTSB found that the first officer was conducting the approach, and the captain took control away from the first officer, but not until the plane was 27 feet above the ground. This late transfer of control from the first officer to the captain resulted in neither pilot being able to effectively monitor the airplane’s altitude and pitch attitude. According to the Southwest Airlines Flight Operations Manual, the captain should have called for a go-around well before this point in the approach instead of trying to salvage the landing.

For example, Southwest’s stabilized approach criteria require an immediate go-around if the airplane flaps are not in the final landing configuration by 1,000 feet above the ground. In this case, the flaps were not correctly set until the airplane was 500 feet above the ground.

Read the full report: CLICK HERE

WestJet reports record second quarter net earnings

WestJet (Calgary) today announced its second quarter results for 2015, with net earnings of $61.6 million (all amounts in Canadian dollars) ($47.3 million US), or $0.49 per fully diluted share, as compared with the net earnings of $51.8 million, or $0.40 per fully diluted share reported in the second quarter of 2014.

The airline continued:

WestJet logo

WestJet achieved an on-time performance rate of 91.3 percent in the second quarter, a year-over-year improvement of 6.8 percentage points, placing WestJet as the top performing North American airline during the quarter. Based on the trailing twelve months, the airline achieved a return on invested capital of 16.0 per cent, up 0.2 percentage points from the 15.8 per cent reported in the previous quarter.

“I would like to congratulate our more than 10,000 WestJetters on these exceptional second quarter results which marked our 5th quarter of consecutive record adjusted net earnings,” said WestJet President and CEO Gregg Saretsky. “The second quarter is historically our most challenging quarter as capacity is transitioned from southern to domestic markets, so it is particularly rewarding to turn in a double digit margin this quarter. With another quarter of record earnings, and after having exceeded our ROIC target for 12 consecutive quarters, we are pleased to announce that we are increasing our target to 13 to 16 per cent, while continuing our commitment to our brand of friendly, caring service and affordable fares.”

WestJet 2Q15 Results Table

On July 27, 2015, WestJet’s Board of Directors declared a cash dividend of $0.14 per common voting share and variable voting share for the third quarter of 2015, to be paid on September 30, 2015, to shareholders of record on September 16, 2015. All dividends paid by WestJet are, pursuant to subsection 89(14) of the Income Tax Act, designated as eligible dividends, unless indicated otherwise. An eligible dividend paid to a Canadian resident is entitled to the enhanced dividend tax credit.

In other news, WestJet today announced it has begun rolling out its new inflight entertainment system featuring wireless Internet connectivity and more than 450 movies and television programs. Called WestJet Connect, the system will be activated on all of WestJet’s Boeing 767-300 ER aircraft and more than 30 percent of WestJet’s Boeing Next-Generation 737 aircraft by end of 2015, with installations on the majority of the 737 fleet expected to be completed in 2016.

Mobile devices and tablets using either iOS or Android operating systems will need the latest version of the WestJet app prior to boarding. Guests will also be able to access WestJet Connect using their laptops. Tablet rentals will be available on flights longer than three hours and 20 minutes for guests who do not have their own device. The WestJet app will take guests to the WestJet Connect home page where they can begin accessing content. Seats on WestJet Connect-equipped aircraft have 110-volt and/or USB power outlets, allowing guests the opportunity to charge or power their devices.

At launch, WestJet Connect will feature 85 movies and 329 TV programs, including expanded content in French. Content will be refreshed on a monthly basis and will be offered at no charge for an introductory period. The system’s Internet connectivity will be available at an introductory price of $7.99 plus applicable taxes for the duration of each flight.

Once installation is complete, WestJet Connect will be available on all WestJet flights operated on Boeing Next-Generation 737s or 767-300 ER aircraft.

Copyright Photo: TMK Photography/AirlinersGallery.com. WestJet Airlines’ Boeing 737-8CT WL C-GWSZ (msn 37092) in the special Walt Disney World – Magic Plane scheme arrives at Toronto (Pearson).

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LOT announces increased frequencies to North America and new destinations

LOT Polish Airlines (Warsaw) in the winter season of 2016/2017 will enhance its presence in the US by increasing frequencies from New York (JFK) and Chicago (O’Hare) to Warsaw. The Polish carrier has also announced several new long-haul destinations from its Warsaw hub to Bangkok, Seoul and Tokyo (Narita). LOT will also launch more than a dozen new European connections, thus expanding its hub and providing convenient connecting flights to passengers flying to such cities as Ljubljana, Zurich, Cluj-Napoca and Nice.

The airline continued:

Long-haul flights are the most important part of LOT’s strategy. The first new long-haul flight is scheduled for January 13, 2016 and will be to Tokyo–the first direct connection from Poland and New Europe (Central and Eastern Europe) to Japan. Bangkok and Seoul will start in autumn 2016. The Polish carrier will also enhance its presence in New York and Chicago by adding two additional frequencies to its winter schedule from each city.

“Opening new long-haul destinations is essential for our development, which is why we will launch them as quickly as possible,” said Sebastian Mikosz, CEO of LOT Polish Airlines.

“Even now, connections operated by the Dreamliner (above) are the most profitable part of our business.

LOT is the only airline that offers on a larger scale, convenient, regular flights from Poland and New Europe to New York, Chicago, Toronto and Beijing. Four current connections will be supplemented with three more, and later this year, LOT will announce two new long-haul destinations to operate in 2016. After opening these five new destinations next year, LOT will more than double its network of long-haul connections compared to today. We want our hub to develop along with us. Opening more than a dozen European connections guarantees even more convenient transfers for new passengers from Poland and the entire region. But the new connections are just the start. Next year we plan to enhance our presence in those destinations where we already operate. This means, for example, an increased frequency of flights from Chicago and New York in the winter season.”

In addition to the new long-haul flights, LOT will begin to fly to three new destinations in Europe in 2016: from Warsaw to Venice and Cluj-Napoca (January) and to Ljubljana (March). LOT will also return to routes that were suspended due to the Restructuring Plan. Thus LOT’s passengers will be able to fly directly from Warsaw to Barcelona (January) and to Athens, Nice, Zurich and Beirut (March). From January 2016, flights between Warsaw and Belgrade, Dusseldorf, Yerevan, Chisinau, Zagreb and between Gdansk and Krakow will be restored, many of which are the connections suspended since July this year, as part of the final pool of compensatory measures required by the European Commission.

LOT is able to operate the entire first phase of its network development using only existing aircraft.

Copyright Photo: Chris Sands/AirlinersGallery.com. Boeing 787-8 Dreamliner SP-LRC (msn 35940) departs from Calgary.

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Air Canada to transfer more winter routes to rouge

Air Canada (Montreal) is planning to transfer additional routes to its leisure subsidiary Air Canada rouge (Toronto-Pearson) (YYZ) for the upcoming winter season. According to Airline Route, the carrier will transfer or start the following routes:

Toronto – Sarasota/Bradenton (A319) (October 24)

Toronto – Fort Lauderdale/Hollywood (A319 and 767-300) (October 25)

Toronto – Panama City (767-300) (October 25)

Montreal – Fort Lauderdale/Hollywood (A319 and 767-300) (December 16)

Vancouver – Kona, Hawaii (767-300) (December 19)

Montreal – Tampa (A319) (January 15, 2016)

Montreal – West Palm Beach (A319) (January 15)

Montreal – Nassau (A319) (January 17)

Toronto – Barbados (767-300) (January 7)

Copyright Photo: TMK Photography/AirlinersGallery.com. Not operating under the rouge brand, Air Canada’s Boeing 767-3Q8 ER C-FJZK (msn 29386) waits for the next assignment at the YYZ base.

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Korean Air to become a new passenger Boeing 747-8 Intercontinental operator

Korean Air (Seoul) is already a Boeing 747-8F Intercontinental freighter operator. The flag carrier will soon to be welcomed to the 747-8 Intercontinental passenger club with the pending delivery of its first copy (above). The company has 10 Super Jumbos on order and will replace their older Boeing 747-400s with new type. The older 747-400s will be phased out by 2017.

Korean Air logo

Like Lufthansa, Korean Air will soon operate both the Airbus A380 and the Boeing 747-800.

Copyright Photo: Joe G. Walker/AirlinersGallery.com. The first, the pictured Boeing 747-8B5 HL7630 (msn 40905), taxies into position on the runway at Paine Field near Everett for a test flight.

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