Monthly Archives: July 2015

Emirates retires its last standard Boeing 777-200

Emirates (Dubai) has phased out and retired its last standard Boeing 777-200. The last 777-200, Boeing 777-21H A6-EMF (msn 27249), was ferried from Dubai to Arizona via Boston on July 14 for storage according to the carrier with this statement and video below.

Emirates still operates the newer Boeing 777-200 ER (Extended Range) and LR (Longer Range) models.

Read more from The National: CLICK HERE

Copyright Photo: Antony J. Best/AirlinersGallery.com. Sister-ship Boeing 777-21H A6-EME (msn 27248), now also retired, arrives at London’s Gatwick Airport in the past.

Emirates aircraft slide show: AG Airline Slide Show

Emirates logo-1

Emirates recently phased out A6-EMF, the last remaining Boeing 777-200 from its fleet. The aircraft departed from Dubai International to Arizona via Boston for de-registration on July 14. Since joining the Emirates fleet in 1996, A6-EMF flew an estimated 60 million kilometers (enough to fly to the moon and back nearly 80 times) and transported hundreds of thousands of passengers to destinations as far and wide as Warsaw and Ho Chi Minh City.

 

Air Canada takes delivery of its first Boeing 787-9 Dreamliner

Air Canada 787-9 C-FNOE (04)(Tko) PAE (Air Canada)(LR)

Air Canada (Montreal) announced the delivery of its first Boeing 787-9 Dreamliner (C-FNOE, msn 35265) with this statement:

Air Canada logo-1

Air Canada announced today it has taken delivery of its first Boeing 787-9, a larger version of the Dreamliner 787-8 already in its fleet that has proven extremely popular with customers with its new international product standard. The Dreamliner is the world’s most modern commercial aircraft and the larger 787-9 version’s greater range and capacity will enable Air Canada to further expand its international network.

“Air Canada is very excited to take delivery of its first Boeing 787-9. This new aircraft’s larger capacity and greater range will accelerate our international expansion strategy and allow us to offer customers more non-stop services to new international destinations. Already, we have announced two new 787-9 routes to Delhi and Dubai from Toronto beginning this fall and as more of these aircraft enter the fleet we will expand our international network even further,” said Benjamin Smith , President, Passenger Airlines at Air Canada.

The aircraft is due to arrive at Toronto Pearson this evening and the first designated routes for the Boeing 787-9 are nonstop services from Toronto to Delhi beginning November 1, 2015 and to Dubai beginning November 3, 2015 . In the interim, customers will have the opportunity to preview the new aircraft on select flights between Toronto and Vancouver during August and between Toronto and the cities of Munich and Milan during September and October. Future deployments of the 787-9 Dreamliner will be announced as new aircraft enter service.

Air Canada took delivery of its first Dreamliner in May 2014 and will receive a total of 29 new 787-9 Dreamliner aircraft by 2019, in addition to eight 787-8 aircraft already in operation. All Dreamliners will feature Air Canada’s redesigned interiors in a three-cabin configuration, including International Business with fully lie-flat seats, Premium Economy and Economy. Air Canada’s next generation seatback in-flight entertainment system will be available throughout. The Boeing 787-9 will seat 298 passengers and have a range of 15,372 kilometres, compared with the Boeing 787-8, which is configured to carry 251 passengers with a range of 14,500 kilometers.

Photo: Air Canada. Boeing 787-9 Dreamliner C-FNOE (msn 35265) departs from Paine Field near Everett.

Air Canada aircraft slide show: AG Airline Slide Show

Air Canada’s Boeing 787 Routes:

Air Canada 787 Routes

Facebook More Airline News (600)

 

Syphax Airlines suspends all operations

Syphax Airlines (Sfax, Tunisia) yesterday (July 30) announced it had suspended all operations from Tunisia.

Syphax logo-2

The company was launched in 2011 by Mohamed Frikha, CEO of TELNET Group, Syphax Airlines is a limited company.

The airline commenced operations on April 21, 2012 as previously reported.

Syphax was based at Sfax Thyna, and its network consisted of international destinations, mainly to France and Turkey.

Tunisia has seen a dramatic drop in tourism after it suffered severe blows following the Bardo National Museum attack and the Sousse attack in 2015.

Copyright Photo: Christian Volpati Collection/AirlinersGallery.com. Airbus A319-112 TS-IEF (msn 3853) wears a special livery as the “Official Airline of the Carthage Eagles”, the Tunisia national football (soccer) team.

Syphax Airlines aircraft slide show: AG Airline Slide Show

AG Prints-6 Sizes

SkyWest reports a second quarter net profit of $31.5 million

SkyWest, Inc. (SkyWest Airlines and ExpressJet Airlines) (St. George, Utah) reported its financial and operating results for the quarter ended on June 30, 2015:

SkyWest (red-blue) logo (LRW)

SkyWest generated $31.5 million of net income for Q2 2015, or $0.61 per diluted share. This represents an improvement of $46.2 million from Q2 2014, which had a net loss of $(14.7) million, or $(0.29) per diluted share. Operating income for Q2 2015 was $70 million, which represents SkyWest’s best quarterly operating income since 2008.

ExpressJet 2011 logo

SkyWest reported $41 million of net income for the first half of 2015, or $0.79 per diluted share, a $79 million improvement compared to the first half of 2014 which had a net loss of $(38) million, or $(0.73) per diluted share.

Q2 2015 Financial Highlights

  • Pre-tax income increased $58 million in Q2 2015 from Q2 2014, primarily due to improved operating performance, additional flying contracts with improved profitability and a reduction in the number of aircraft operating under unprofitable flying contracts.
  • SkyWest generated $135 million in EBITDA in Q2 2015, compared to $77 million in Q2 2014. For the first half of 2015 EBITDA was $234 million, compared to $112 million for the first half of 2014.
  • Revenue included improvements of $32 million from the additional E175 operations, improved contract rates from renewals of SkyWest’s existing flying contracts and improved contract performance incentives compared to Q2 2014. Revenue also improved from Q2 2014 by $11 million from higher flight completion rates. These improvements provided a significant offset to the revenue decrease from a reduced fleet size and less scheduled production for a net decrease in revenue of $28 million year over year.
  • Operating expenses were down by $85 million compared to Q2 2014, primarily driven by operating efficiencies from improved completion rates, a net decrease in production, maintenance cost initiatives and a reduction in fuel costs.

Q2 2015 Operational Update

  • Excluding weather cancellations, the adjusted flight completion rate for ExpressJet Airlines, Inc. (“ExpressJet”) improved to 99.8% in Q2 2015 from 99.0% in Q2 2014. The adjusted flight completion rate for SkyWest Airlines, Inc. (“SkyWest Airlines”) also improved to 99.2% in Q2 2015 from 99.0% in Q2 2014.
  • Including weather cancellations, ExpressJet’s raw flight completion rate was 97.5% in Q2 2015 compared to 95.3% in Q2 2014. SkyWest Airlines’ raw flight completion rate improved to 98.4% in Q2 2015 compared to 97.4% in Q2 2014.
  • Total aircraft in service went to 676 at June 30, 2015, from 693 at March 31, 2015, summarized as follows:

1. Added six new E175 aircraft with United Air Lines, Inc. (“United”)

2. Added three new E175 aircraft with Alaska Air Group (“Alaska Airlines”)

3. Added ten used ERJ 145 aircraft with American Airlines, Inc. (“American”)

4. Removed 24 ERJ 145/ERJ 135 aircraft from service

5. Removed twelve EMB-120 turboprop aircraft from service

  • Under its fleet transition, SkyWest generated approximately 24,000 additional block hours with its dual class aircraft (CRJ700s/900s and E175s) compared to Q2 2014. SkyWest also had a reduction of approximately 72,000 block hours with its 50-seat and smaller sized aircraft (CRJ200s, ERJ145s/135s and EMB120s) compared to Q2 2014. The total aircraft in service decreased to 676 at June 30, 2015 from 752 at June 30, 2014.
  • Under an agreement announced in Q2 2015, SkyWest Airlines will place 8 additional E175 aircraft into service with Alaska Airlines, for a total of 15 E175s with Alaska Airlines. SkyWest Airlines is scheduled to take delivery of the remaining twelve new E175 aircraft for Alaska Airlines between Q4 2015 and Q4 2016.
  • Under a previously announced agreement, SkyWest Airlines is scheduled to take delivery of five new E175 aircraft for United during Q3 2015.

    Commenting on the results, Chip Childs, SkyWest, Inc. President, said,

    “Our second quarter results reflect meaningful progress in our action plans to secure profitable flying contracts, remove unprofitable aircraft and provide solid operating performance. These actions are the primary drivers for the strong earnings momentum we are generating. We remain committed to disciplined deployment of capital and resources as we continue the process of optimizing our fleet size and mix.”

Q2 2015 Capital and Liquidity Update

  • SkyWest had $505 million in cash and marketable securities at June 30, 2015, an increase of $24 million from March 2015. SkyWest made capital investments of $40 million during the quarter to acquire nine E175 aircraft including spare parts and engines.
  • SkyWest repurchased 1.25 million shares of its common stock for $18.7 million in cash during Q2 2015
  • The company issued $229 million in new long term debt to finance spare engines and the nine new E175s delivered during the quarter.
  • SkyWest anticipates using approximately $30 million in cash as investments in E175 aircraft scheduled for delivery in Q3 and Q4 of 2015.

SkyWest’s two airline companies provide commercial air service in cities across the United States, Canada, Mexico and the Caribbean with more than 3,500 scheduled daily flights. SkyWest Airlines operates through partnerships with United, Delta, US Airways, American and Alaska Airlines. ExpressJet operates through partnerships with United, Delta and American.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. SkyWest is rapidly reducing the amount of 50-seat regional jets as the report states above. Its largest Bombardier CRJ200 customer is United Airlines but that too will continue to be reduced. Bombardier CRJ200 (CL-600-2B19) N956SW (msn 7871) in United Express colors departs from Los Angeles International Airport.

United Express-SkyWest aircraft slide show: AG Airline Slide Show

SkyWest Route Map: (click on the map for the full size view):

SkyWest 7.2015 Route Map

ExpressJet Route Map (click on the map for the full size view):

ExpressJet 7.2015 Route

Qatar Airways submits a “white paper” to the U.S. Government in support of “Open Skies”

Qatar Airways (Doha) today issued this statement concerning its on-going battle with the U.S. “Big Three” concerning alleged government subsidies and Open Skies:

Qatar Airways logo

Qatar Airways has yesterday submitted a ‘White Paper’ to the United States Government which fully refutes the subsidy allegations levelled against it by the Big 3 US carriers.

The detailed submission comprehensively addresses and answers all issues raised in the ‘Open Skies’ debate, which has put into question the longstanding US policy of allowing carriers to fly to and from the United States with minimal government interference.

The Big 3 – American Airlines, Delta Air Lines and United Airlines (and their unions) have been pressing the US Government to depart from its pro-Open Skies stance and impose unilateral limits on the services operated by Gulf airlines, even though the U.S. Open Skies policy was specifically designed by the US Government to ensure that US carriers were free to operate their extensive networks without foreign government restrictions on the level and routings of the services they offer.

The biggest US carriers have made ample use of their behind-country (Sixth Freedom) traffic rights, and have fought hard to preserve their own access to those rights, and to carry Fifth Freedom (third country) traffic as well. Given that these policies were created by and for US carriers, it is ironic that they are now describing the use of these traffic rights to be “unfair” when exercised by Gulf carriers.

In its report, Qatar Airways demonstrates that the many of the market changes complained of by the Big 3 are not the product of “unfair competition” (or anything remotely related to subsidy), but are instead the byproduct of important advances in aircraft technology and significant demographic changes. With ultra-long range Boeing 777 and Boeing 787 aircraft, passengers bound for the Middle East and India can now over-fly congested European hubs, and enjoy convenient one-stop services to their destinations, instead of making longer two-and three stop journeys. These technological changes have shortened travel times, and have brought families and businesses closer together.

Qatar Airways also demonstrated that although US carrier market share to the Indian subcontinent may have shifted over time, the market as a whole has grown, and US carriers are carrying more traffic in absolute terms.

Qatar Airways also disproved the claim that its services harm any US carrier, noting that it does not compete against any US carrier on any nonstop route, and serves cities that have never been served by US carriers, such as Cochin, Karachi and Amritsar. In fact, the services operated by Qatar Airways benefit US carriers. Qatar Airways works cooperatively with and feeds traffic to US carriers, including American Airlines (its code-sharing and oneworld alliance partner) and JetBlue Airways. The report also proves that the airline’s operations to the US market have significantly contributed to the economy in terms of jobs, cargo and overall passenger traffic (tourism and business travel growth), as well as providing benefits for non-aligned US passenger carriers, cargo carriers and airports.

In addition to benefiting American travellers, Qatar Airways has strongly supported the US aerospace industry. As of today, the airline has 162 aircraft flying to 150 destinations, of which over 40 per cent are Boeing jets worth over $19 billion USD.
Qatar Airways Group Chief Executive, Mr. Akbar Al Baker, commented: “Qatar Airways was a relatively unknown airline when it first launched a service to the United States in 2007.

“Since then, we have built up a significant brand presence on the routes that we operate to the United States. Our passengers have come to know us, not through size alone, but by the signature service and quality of the product on board – and also the breadth of our network.

“There has been significant demand for our services from the U.S. not just to the Middle East – but beyond – where no other carriers fly. This makes us a natural choice for consumers, and is a reflection of how globalised our world has become. People are travelling further than ever before and it is important that in an economy focused on open market principles, our wings remain open for business, rather than closed.”
Qatar Airways also demonstrated that its services are lawful and consistent with the US-Qatar Agreement, which in Article 11.2 says that “neither Party shall unilaterally limit the volume of traffic, frequency or regularity of service, or the aircraft type or types operated by the designated airlines of the other Party.” Despite this clear language, the Big 3 are urging the US Government to ignore its obligations by imposing a unilateral limit on Qatar Airways’ capacity.

Other US airlines have noted that foreign governments often try to block competition from strong US airlines by challenging “excess” capacity offered by US carriers, and cautioned the US Government against deviating from a free trade policy that has worked to the overwhelming benefit of US airlines.

As Qatar Airways GCEO Mr. Akbar Al Baker observed: “The US Government should reject calls to “freeze” the US-Qatar Open Skies Agreement, and recognize these allegations for what they are – a transparent attempt by the Big 3 to block air services that compete with their own.”

Qatar Airways also examined and rebutted each of the subsidy allegations made, noting that US carriers benefit from many of the same policies they have attacked. Indeed, the claims of subsidy advanced by the Big 3 include items of support that US carriers have themselves received for decades, and items that have never been viewed as a form of subsidy. In fact, many other airlines (including US airlines) have acknowledged publicly that they and the Big 3 have themselves been long-time beneficiaries of subsidies and favorable US policies and support.

While Qatar Airways is used to strong competition, it expressed concern about the efforts of the Big 3 to persuade the US Government to refer to rules that do not apply to aviation to resolve their complaints. The application of WTO trade principles, and US domestic trade laws to these complaints – rules that apply solely to trade in goods – would be completely unlawful.

Qatar Airways GCEO Mr. Akbar Al Baker added:

“It is puzzling to see the biggest US carriers describe Qatar Airways as a “threat,” given our small size and lack of direct competition with them. Their long-standing focus on other markets, and large (and growing) profits completely undercut this claim. The Open Skies model was developed by the American carriers and has demonstrated how an Open Skies paves the way for an open economy. We are concerned to see the Big 3 seek to change the rules of the game as soon as they see US consumers respond well to the services offered by a competitor. Qatar Airways is proud of its signature five-star service, brand identity, and the high standards we deliver to our passengers onboard.”

Photo: Qatar Airways.

Qatar Airways aircraft slide show: AG Airline Slide Show

AG Visit the new-look AG

 

 

British Airways to bring the Airbus A380 to Vancouver

British Airways (London) has announced that from May 1, 2016 it will begin flying its Airbus A380 Super Jumbo daily between Vancouver International Airport, Canada and London (Heathrow). This marks the first A380 for the city of Vancouver and will be the only scheduled A380 service in western Canada.

All four Canadian cities that British Airways serves will now have the latest aircraft in British Airways’ fleet, with Toronto, Montreal and Calgary operating the 787 Dreamliner.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Airbus A3380-841 G-XLEC (msn 124) departs from Los Angeles.

British Airways aircraft slide show: AG Airline Slide Show

AG Thousands of photos and galleries

 

ADA – Aerodesierto Airlines ceases operations in Chile

ADA – Aerodesierto Airlines (Calama, Antofagasta) has suspended operations. The short-lived airline halted operations on July 15 per Alvaro Romero of ModoCharlie reporting from Chile. The last flight was flown by ONE Airlines Boeing 737-36N CC-AIT for the airline on July 19.

ADA logo (LRW)

The new airline launched operations on April 27, 2015 as previously reported.

Copyright Photo: Alvaro Romero/AirlinersGallery.com. Boeing 737-2Q3 CC-CVI (msn 22367) loads last minute bags before departure from La Serena, Chile.

ADA aircraft slide show: AG Airline Slide Show

JustPlanes 25 Years banner

 

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.

Lufthansa aircraft slide show: AG Airline Slide Show

AG Full screen views

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.

Atlas Air aircraft slide show: AG Airline Slide Show

Polar Air Cargo aircraft slide show: AG Airline Slide Show

DHL-Polar Air Cargo aircraft slide show: AG Airline Slide Show

AG Prints-6 Sizes

Virgin America produces a second quarter GAAP net profit of $65.0 million

Virgin America (San Francisco) today reported its financial results for the second quarter of 2015. Key highlights from the second quarter include:

  • Second quarter 2015 net income was $64.4 million excluding special items1, an increase of $27.5 million from the second quarter of 2014. Operating income and operating margin excluding special items were $67.1 million and 16.7 percent, respectively.
  • On a GAAP basis, net income was $65.0 million. Operating income and operating margin on a GAAP basis were $67.7 million and 16.9 percent, respectively.
  • Fully diluted earnings per share excluding special items was $1.46. On a GAAP basis, fully diluted earnings per share was $1.47.

 

Virgin America logo-1

“Our latest quarterly results are an affirmation of Virgin America’s business model – specifically, they demonstrate that we can deliver a better product and guest experience while also generating strong financial returns,” said David Cush, Virgin America’s President and Chief Executive Officer. “The progress we have made on financial performance over the past two years is remarkable, and we continue to outperform domestic industry unit revenue trends. Our guests love the outstanding product and service that our teammates provide and it shows in our financial results.”

The airline continued:

Second Quarter 2015 Financial Highlights

  • Operating Revenue: Total operating revenue was $400.9 million, an increase of 0.5 percent over second quarter of 2014.
  • Revenue per Available Seat Mile (RASM): Passenger revenue per available seat mile (PRASM) increased 0.5 percent compared to the second quarter 2014, to 11.24 cents. Year-over-year PRASM growth was driven by a 0.2 point increase in load factor and a 0.3 percent increase in yield. Total RASM increased 0.6 percent year-over-year. Virgin America’s PRASM was positively impacted by a $3.2 million adjustment related to Elevate loyalty revenue, which increased PRASM by 0.9 percent.
  • Cost per Available Seat Mile (CASM): Total CASM excluding special items decreased 5.1 percent compared to the second quarter of 2014, to 10.43 cents. Decreases in fuel costs and reduced heavy maintenance activity contributed to the decline in CASM, partially offset by increases in salaries, wages and benefits. Salaries, wages and benefits costs included a $6.7 million accrual for teammate profit sharing and related payroll taxes. CASM excluding special items, fuel costs and profit sharing for the quarter increased 7.1 percent year-over-year, to 7.27 cents.
  • Fuel Expense: Virgin America realized an average economic fuel cost per gallon including taxes and the impact of hedges of $2.20, which was 29.3 percent lower year-over-year. This amount includes certain fuel expense adjustments described as special items below.
  • Special Items: Special items in the second quarter of 2015 relate to a net $0.6 million adjustment for fuel hedges that settled during the second quarter of 2015 but for which unrealized gains or losses had been previously recorded under GAAP and mark-to-market adjustments for fuel hedges that mature subsequent to June 30, 2015 which did not qualify for hedge accounting treatment.
  • Operating Income: Second quarter 2015 operating income excluding special items was $67.1 million, an increase of $20.0 million as compared to 2014. The Company’s operating margin excluding special items of 16.7 percent improved by 4.9 points year-over-year.
  • Net Income: Net income excluding special items for the second quarter increased by $27.5 million year-over-year to $64.4 million.
  • Fully Diluted EPS: Fully diluted earnings per share excluding special items was $1.46 for the second quarter of 2015. Second quarter 2015 fully diluted earnings per share was $1.47 on a GAAP basis.
  • Capacity: Available seat miles (ASMs) for the second quarter of 2015 remained flat year-over-year compared with the second quarter of 2014. Virgin America ended the quarter with 53 Airbus A320-family aircraft, unchanged from the second quarter of 2014. Subsequent to quarter end, the Company took delivery of the first of five Airbus A320 aircraft scheduled to be delivered in 2015.
  • Liquidity: Unrestricted cash was $500.5 million as of June 30, 2015. Virgin America benefited from the release of cash collateral held by its credit card processors in addition to strong operating cash flow performance to generate a net increase of $82.2 million in unrestricted cash during the quarter. The new agreement with its credit card processors also allowed the Company to terminate a $100 million letter of credit facility, resulting in ongoing annual savings of approximately $5.5 million per year.

“Virgin America made great strides in improving its balance sheet and financial position during the second quarter of 2015,” said Peter Hunt, Virgin America’s Chief Financial Officer. “We increased our unrestricted cash balance by $82 million during the quarter thanks to strong operating cash flow and the release of collateral held by our credit card partners. We also terminated a financing facility that will save us over $5 million in financing costs annually. In addition, we arranged bank debt financing for five A320 aircraft deliveries occurring later in 2015 at interest rates that will average under five percent. These accomplishments will continue to reduce Virgin America’s cost of capital and position us for future earnings growth.”

Second Half 2015 Outlook

The Company’s expectations for the second half of 2015 and full year 2016 are based on currently available information. These expectations are forward-looking, and actual results could differ materially depending on market conditions and the factors set forth under “Forward-Looking Statements” below. You should not place undue reliance upon these expectations.

The Company expects capacity, as measured by available seat miles, to increase by approximately 2.0 percent to 3.0 percent for the third quarter of 2015 as compared to the third quarter of 2014. Based on current revenue trends, the Company expects PRASM to decrease between 2.0 percent and 4.0 percent versus the third quarter of 2014. The Company expects CASM excluding fuel and profit sharing to increase between 10.5 percent and 11.5 percent versus the third quarter of 2014. CASM excluding fuel and profit sharing is increasing in the third quarter due primarily to Virgin America’s previously announced pay and benefit initiatives that were implemented earlier in the year. Third quarter CASM excluding fuel and profit sharing will also be impacted by a decrease in average stage length year over year of approximately 8.0 percent resulting from previously implemented capacity at Dallas — Love Field. In addition, the company expects to incur additional maintenance costs during the quarter related to an engine maintenance overhaul.

Based on Virgin America’s hedge portfolio and current market prices for aviation fuel products, the Company expects Virgin America’s economic fuel cost per gallon inclusive of related taxes and hedge costs to average between $1.90 and $2.00 for the third quarter of 2015. This number may change depending on fluctuations in market prices for jet fuel during the quarter.

Virgin America is scheduled to take delivery of five A320 aircraft during the second half of 2015, and expects to place four aircraft into operational service prior to year-end. The Company currently expects fourth quarter 2015 capacity to increase between 9.0 percent and 10.0 percent as compared to the fourth quarter of 2014. In addition, the company expects CASM excluding fuel and profit sharing to increase between 2.0 percent and 3.0 percent for the fourth quarter of 2015.

2016 Initial Outlook

The Company has completed its preliminary fleet and capacity plans for 2016. Virgin America currently expects to take delivery of an additional five A320 aircraft between January and June 2016. In addition, Virgin America does not expect to retire any existing aircraft from its fleet, ending 2016 with 63 aircraft in its operating fleet.

Further, the Company currently expects capacity, as measured by available seat miles, to increase between 13% and 15% for the full year 2016. The Company is also targeting for its CASM excluding fuel costs and profit sharing to decrease between 1% and 2% for the full year 2016 based on these fleet and capacity projections.

1 Please see “GAAP to Non-GAAP Reconciliations” for reconciliations of non-GAAP financial measures used in this release and the reasons management uses these measures.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Virgin America will end 2016 with 63 Airbus A320 Family aircraft. Airbus A320-214 N844VA (msn 4851) taxies to the runway at Seattle-tacoma International Airport bound for the San Francisco hub.

Virgin America aircraft slide show: AG Airline Slide Show

Virgin America Route Map (click the map for the full size):

Virgin America 7.2015 Route Map

AG We are not A.net