Monthly Archives: April 2018

IAG’s statement on Norwegian

Response to Press Speculation on Norwegian Air Shuttle ASA

International Airlines Group (IAG) notes the recent press speculation that it is considering making an offer for Norwegian Air Shuttle ASA (Norwegian).

IAG considers Norwegian to be an attractive investment and has acquired a 4.61 per cent ownership position in Norwegian (minority investment).

The minority investment is intended to establish a position from which to initiate discussions with Norwegian, including the possibility of a full offer for Norwegian.

IAG confirms that no such discussions have taken place to date, that it has taken no decision to make an offer at this time and that there is no certainty that any such decision will be made.

A further announcement will be made if appropriate.

Enrique Dupuy de Lôme

Chief Financial Officer

Flydubai launches flights to Dubrovnik and Krakow

Dubai-based flydubai’s first flight touched down on April 11 in Dubrovnik (DBV). On board the flight there was a delegation of representatives from the airline together with members of the media and social media. The delegation was met by the State Secretary of the Ministry of Tourism of Mr. Tonči Glavina, the Managing Director of Dubrovnik Airport, Frano Luetić, the airlines’ representative in Croatia, Predrag Popovic and the Country Manager, Austria and Croatia for Emirates Martin Gross. On arrival, the inaugural flight was met with a traditional water cannon salute.

flydubai will operate Dubrovnik as a seasonal summer route, offering four flights a week between April 10 and October 25, 2018. With the launch of flights to Krakow in Poland on April 8 and the upcoming launch of flights in June to Catania in Italy and to Thessaloniki in Greece, flydubai’s route network in Europe will reach 26 points with 135 weekly flights.

Emirates will codeshare on this route as part of the Emirates flydubai partnership announced in July 2017. For bookings under the codeshare, Emirates passengers will receive complimentary meals and the Emirates checked baggage allowance on flights operated by flydubai in Business and Economy classes. With the partnership, passengers from the hundreds of destinations spanning six continents in over 80 countries will have an opportunity to travel to Dubrovnik via Dubai.

Photo: Flydubai.

Spirit Airlines announces new Caribbean routes from Fort Lauderdale/Hollywood

Spirit Airlines has announced it will again grow in the Caribbean. On April 12, 2018, Spirit started to connect Fort Lauderdale-Hollywood International Airport (FLL) with Cap-Haïtien International Airport (CAP) in Haiti’s second largest city. This new flight marks the second destination for Spirit in Haiti, complementing existing service to Port-au-Prince (PAP).

Additionally, low fare flights to St. Maarten’s Princess Juliana International Airport (SXM) resume on May 5, 2018 as recovery continues and tourism opportunities grow after the impact of last year’s hurricanes. Spirit will also connect South Florida to St. Croix’s Henry E. Rohlsen Airport (STX), Spirit’s second destination in the U.S. Virgin Islands, starting on May 24, 2018.

Spirit’s commitment to expansion in the Caribbean also includes expanded seasonal daily service from Fort Lauderdale/Hollywood to Norman Manley International Airport (KIN) in Kingston, Jamaica.

Caribbean service expansion / resumption:

Routes:	Start Date	Frequency
Fort Lauderdale (FLL) to/from
Cap-Haïtien, Haiti (CAP)	April 12, 2018	3x weekly, year-round
Kingston, Jamaica (KIN)	April 12, 2018	Daily, seasonal
St. Maarten (SXM)	May 5, 2018	Saturdays, year-round
St. Croix (STX)	May 24, 2018	3x weekly, year-round

Spirit Airlines aircraft slide show:

Delta to take delivery of the first Bombardier CS100 in late 2018

Delta Air Lines’ CEO Ed Bastian yesterday, in the first quarter 2018 earnings call, confirmed the first delivery of the new 110-seat Bombardier CS100 will be in the fourth quarter of 2018. The airline is planning to inaugurate CS100 services at the start of 2019. Delta has 75 copies on order.

The CS100 will begin to replace the McDonnell Douglas MD-88s and MD-90-30s.

Image: Bombardier.

Donghai Airlines is coming to Australia

Donghai Airlines on May 30 is planning to launch the Shenzhen – Darwin route. The new route will be two days a week with Boeing 737-800 aircraft according to Airline Route.

Donghai Airlines aircraft slide show:

Rolls-Royce provides an update on the Trent 1000 Package C engine issues

Rolls-Royce provided this update on the engine issues:

At our 2017 Full Year results on 7 March 2018 we outlined our management of certain Trent 1000 engine in-service issues and the estimated costs relating to our implementation of the solutions to address those issues.

As part of our ongoing inspection and testing of those engines we have decided to carry out additional engine inspections to those previously planned. The increased inspection frequency is driven by our further understanding of the durability of the Trent 1000 Package C compressor, a condition that we highlighted earlier this year. These inspections will be supported by service management and flight operations guidance to airlines to be issued by the airworthiness authorities.

This will unfortunately lead to additional disruption for our customers. There are 380 Package C engines currently in-service with airlines. This new regime does not impact Trent 1000 Package B engines or Trent 1000 TEN engines.

While the compressor technical issue was known at the time of our results, the requirement for more regular inspections will lead to higher than previously guided cash costs being incurred during 2018. We are reprioritising various items of discretionary spend to mitigate these incremental cash costs and our guidance for 2018 FCF remains unchanged at Group FCF for 2018 of around £450m +/- £100m.

Warren East, CEO, Rolls-Royce, said: “Our focus is on supporting our customers and doing all we can to minimise any impact on their operations. We sincerely regret the disruption this will cause to our customers and our team of technical experts and service engineers is working around the clock to ensure we return them to full service as soon as possible. We will be working closely with Boeing and affected airlines to minimise disruption wherever possible.”

Copyright Photo: Robbie Shaw. One of LATAM Airlines’ (Chile) Boeing 787-8 is in storage at Victorville due to the engine problems.

As a result, Boeing issued this follow-up statement:

We are aware that Rolls-Royce made a financial disclosure today in connection with increased inspections of the Trent 1000 Package C engine.

About 25 percent of the 787 Dreamliner fleet is powered by this Rolls-Royce engine variant. This issue does not affect current production 787s, the Trent 1000 Package B, Trent 1000 TEN or GEnx-1B engines.

An existing EASA Airworthiness Directive for the Package C engine requires inspections of an intermediate pressure compressor blade at certain flight cycles. If a durability issue is found, the blade will be replaced. This is a known issue and we will continue to work with Rolls-Royce, our customers and the regulators to fully resolve it. Boeing is deploying support teams to mitigate service disruption.

Safety is our highest priority. The 787 has safely flown more than 3.2 billion miles since entering commercial service in 2011.

Hi Fly to add two Airbus A330-200s

Hi Fly, an European airline specializing in wet lease, will welcome two new Airbus A330-200 to its fleet this summer.

The two Airbus A330s, coming from a direct order to Airbus Industries, are currently in final assembly stage in Toulouse and will be delivered to Hi Fly one in June and the other in July 2018. Both aircraft have a 2-class cabin configuration with the total capacity of 274 passengers allocated between Business class (18) and Economy class (256).

The aircraft will be equipped with Rolls-Royce Trent 700 engines and state-of-the-art technology and finishing. According to Paulo Mirpuri, president of Hi Fly, “we are putting a great effort towards enhancing the aircraft and on-board features, so to offer our clients the best possible product as we always strive to do.”

In its interior, passengers can expect a spacious 2-aisle cabin and each seat to be equipped with RAVE Centric, the latest In-seat AVOD In-Flight Entertainment System. This high-definition system will allow passengers in both business and economy cabins to enjoy great entertainment options and an optimized user experience.

Hi Fly is the largest wide body aircraft wet lease specialist operating an all Airbus fleet, mostly Airbus A330’s, A340’s and soon the A380. Hi Fly has specialized for over a decade in worldwide aircraft leases and ACMI services on short, medium and long term contracts mainly for airlines, governments, tour operators, companies and individuals. Hi Fly is EASA and IOSA certified and FAA approved, with AOC’s in Portugal and Malta, and licensed to operate globally.

Photo: Airbus/Hi Fly.

Zimbabwe Airways to operate two Boeing 777-200s

From Reuters:

Zimbabwe has bought two Boeing 777 aircraft and an Embraer plane from Malaysia, the finance minister said on Wednesday, adding the planes would be leased to a new local airline until national carrier Air Zimbabwe returned to profitability.

Patrick Chinamasa said Harare had agreed with an unidentified Malaysian firm to buy four Boeing 777 planes for $70 million but had so far paid for two.

The government had also paid for a small Embraer plane and plans to add five more such aircraft.

The new planes are owned by a state-owned special purpose vehicle called Zimbabwe Aviation Leasing Company.

During a ceremony to receive the first Boeing 777 (Z-RGM, ex 9M-MRP) in Harare, Chinamasa said the aircraft would be used by Zimbabwe Airways, a new carrier whose ownership was not immediately disclosed.

Local media reports had linked Zimbabwe Airways and the new planes to former president Robert Mugabe’s family, but Chinamasa said that was false.

Chinamasa would also not comment on speculation the government could be the owner of the new airline and would ultimately dissolve the troubled Air Zimbabwe.

He said, however, the government could not continue supporting loss-making Air Zimbabwe because it was like “putting resources into a bottomless pit.” Air Zimbabwe has debts of more than $300 million.

“Air Zimbabwe must put their house in order and as long as they don’t put their house in order, these planes I can lease to any third party who can pay treasury the lease fees for the utilizations of the aeroplanes,” Chinamasa said.

Chinamasa said the Boeing planes had a lifespan of 15 to 20 years.

Videos: The first ex-Malaysia Airlines 777 arrives in Zimbabwe:

Delta Air Lines announces a first quarter profit

Delta Air Lines today reported financial results for the first quarter (march) of 2018. Highlights of those results, including both GAAP and adjusted metrics, are below and incorporated here.

Adjusted pre-tax income for the March 2018 quarter was $676 million, a $104 million decrease from the March 2017 quarter, as record revenues were offset by higher fuel prices and other increased costs including a $44 million impact from severe winter weather.

“The Delta people delivered a strong March quarter, and our record revenue was a direct result of the great service and operational reliability they provided for our customers. It’s an honor to recognize their hard work with $183 million toward our 2018 profit sharing,” said Ed Bastian, Delta’s chief executive officer. “We have confidence in our plan to grow earnings in 2018 through top-line growth, improving our cost trajectory, and leveraging our international partnerships.”

Revenue Environment

Delta’s adjusted operating revenue of $9.8 billion for the March quarter improved 8 percent, or $715 million versus the prior year. This revenue result marks a March quarter record for the company, and was driven by improvements across Delta’s business, including a 23 percent increase in cargo revenue and a $78 million increase in total loyalty revenue. Delta’s Branded Fares initiative drove $421 million in premium up-sell revenue in the period, a 23 percent increase from the prior year.

Total unit revenues excluding refinery sales (TRASM) increased 5.0 percent during the period, with foreign currency contributing just over 0.5 points of benefit. This marks the fourth consecutive quarter of year-over-year growth, with all geographic regions delivering positive results.

“We are seeing Delta’s best revenue momentum since 2014, with positive domestic unit revenues, improvements in all our international entities, strong demand for corporate travel and double-digit increases in our loyalty revenues,” said Glen Hauenstein, Delta’s president. “With our solid pipeline of commercial initiatives, delivered with industry-leading Delta service, we expect to maintain this momentum and deliver total revenue growth of 4 to 6 percent for the full year.”

June 2018 Quarter Guidance

For the June quarter, Delta expects solid top-line growth and an improving cost trajectory will mitigate the impact of higher fuel prices. The company will also benefit from a reduction in its book tax rate.

Cost Performance

Total adjusted operating expenses for the March quarter increased $817 million, driven by higher fuel prices, investments in employee wages and profit sharing, and higher depreciation expense.

Adjusted fuel expense increased $317 million, or 20 percent relative to March quarter 2017, as the year- over-year increase in market fuel prices was tempered by the lapping of prior year hedge losses and improved fuel efficiency. Delta’s adjusted fuel price per gallon for the March quarter was $2.01, which includes $0.05 of benefit from the refinery.

CASM-Ex increased 3.9 percent for the March 2018 quarter compared to the prior year period driven by April 2017 wage increases and accelerated depreciation due to aircraft retirements. Unit costs were further pressured by approximately 1 point from the impact of severe weather and foreign exchange. Delta expects this period will mark the highest non-fuel expense growth for the year.

“We expect unit cost growth of 1 to 3 percent in the June quarter, as we lap prior year investments in our people and our business,” said Paul Jacobson, Delta’s chief financial officer. “As we move through depreciation pressure from our fleet retirements and gain benefits from our upgauging and One Delta initiatives later in the year, we are on track for our 0 to 2 percent full year unit cost target.”

Adjusted non-operating expense was flat year-on-year for the March quarter as a $62 million improvement in pension expense was offset by higher interest costs and the seasonality of joint venture partner earnings. The company expects 2018 full-year adjusted non-operating expense to be $200-250 million lower than 2017, due to pension expense savings.

Tax expense declined $117 million for the March quarter, primarily due to the reduction in Delta’s book tax rate from 34 percent to 23 percent.

Cash Flow and Shareholder Returns

Delta generated $1.3 billion of operating cash flow, as the seasonal build of cash was partially offset by the $1.1 billion profit sharing payment to employees and a $500 million voluntary pension contribution in the March quarter, completing funding for the full year. Delta generated $173 million of free cash flow during the quarter, after the investment of $1.2 billion into the business primarily for aircraft purchases and improvements.

For the March quarter, Delta returned $542 million to shareholders, comprised of $325 million of share repurchases and $217 million in dividends.

Strategic Highlights

In the March quarter, Delta achieved a number of milestones across its five key strategic pillars.

Culture and People

Named one of Fortune magazine’s Most Admired Companies for the fifth consecutive year.
Named one of the 2018 Fortune “100 Best Companies to Work For” for a second straight year.

Operational Reliability

Delivered 52 days of zero mainline cancellations and 19 days of zero system cancellations, up 9 days from the March quarter 2017.
Achieved mainline on-time performance (A0) of 74.2% for the March quarter, up from 73.5% in the prior year.

Network and Partnerships

Increased efficiency through upgauging strategy with domestic seat capacity increasing 3.4% on 0.9% higher departures in the March quarter. As part of its refleeting, Delta added 43 more Boeing 737-900s and Airbus A321s (above) into service, contributing to the 105 additional AVOD equipped aircraft across the fleet year-over-year.

Received final approvals from regulatory authorities for new joint venture partnership with Korean Air, offering one of the most comprehensive route networks in the trans-Pacific market.

Customer Experience and Loyalty

Experienced double-digit growth in co-brand spend, helping drive $85 million of incremental value from Delta’s American Express agreement in the March quarter. New card acquisitions set a record for the March quarter, following a record 2017 with over 1 million new card acquisitions.
Introduced more seamless check-in experience at 32 Delta Sky Clubs with roll-out of ambassador handheld devices. Delta installed CLEAR check-in technology in 50 Delta Sky Clubs, further streamlining the check-in process for CLEAR members.

Investment Grade Balance Sheet

Made a $500 million voluntary contribution to the pension plan and ended the quarter with an unfunded liability of $6.3 billion, a $642 million reduction from the end of 2017.

Changes to Accounting Standards

On January 1, Delta adopted several new accounting standards, including the new revenue recognition standard which drove 0.5 points of margin and $0.05 per share of pressure in the March quarter. This represents substantially all the margin and earnings impact related to new accounting standards for 2018.

The prior periods presented here have been recast to reflect adoption of these new standards. In addition, Delta made the following changes to its income statement:

Delta is no longer disaggregating passenger revenue by mainline and regional carriers.
Ancillary business expenses have been consolidated into a single operating expense line item.
Regional carriers fuel expense is now reported within aircraft fuel and related taxes instead of within regional carrier expense.

March Quarter Results

Special items for the quarter consist primarily of mark-to-market adjustments on refinery fuel hedges and unrealized gains/losses on investments.

Delta Air Lines aircraft slide show (Airbus):

In March Lufthansa Group airlines increased capacity utilization to a new record level despite significantly increased services

Occupancy rate rises by 3.9 percentage points to 81.2 percent in March
Number of flights increases by 8.1% at the same time
Around 11.1 million passengers fly with Lufthansa Group Airlines , 15.7 percent more than a year earlier
Currency adjusted yield indication stable
Lufthansa grows especially in Munich
Point-to-point airlines carry around a third more passengers

In March 2018, the airlines of the Lufthansa Group welcomed around 11.1 million passengers. This shows an increase of 15.7% compared to the previous year’s month. The available seat kilometers were up 9% over the previous year, at the same time, sales increased by 14.5%. The seat load factor increased by 3.9 percentage points compared to March 2017 to 81.2%. This is a new record which is partly also connected with the postponement of the Easter holidays from April to March. Capacity utilization also reached an all-time high of 77.8 percent in the first quarter of 2018. Around 28.6 million passengers flew with the airlines of the Lufthansa Group in the first three months of this year.

The currency adjusted yield indication remained stable in March compared to previous year.

Cargo capacity increased four percent year-on-year, while cargo sales were up 0.4% in revenue tonne-kilometer terms. As a result, the Cargo load factor showed a corresponding reduction, decreasing 2.6 percentage points in the month to 71.3%.

Network Airlines

The Network Airlines, Lufthansa German Airlines, Swiss and Austrian Airlines, carried 8.2 million passengers in March, ten percent more than in the prior-year period. Compared to the previous year, the available seat kilometers increased by 5.3% in March. The sales volume was up 10.4% over the same period, increasing seat load factor by 3.7 percentage points to 81.1%.
Lufthansa German Airlines transported 5.7 million passengers in March, a 10.2% increase compared to the same month last year. A 4.8% increase in seat kilometers in March corresponds to a 9.2% increase in sales. Furthermore, the seat load factor was 81.5%, therefore 3.3 percentage points above the prior-year’s level. Lufthansa is growing above all at its Munich location. In March, 12.6% more passengers took off from the Bavarian 5-star hub than a year earlier. This means that growth in Munich was a third higher than in Frankfurt, where 9.2% more passengers flew than in the same month last year.

Point-to-Point Airlines

The Lufthansa Group’s Point-to-Point Airlines – Eurowings (including Germanwings) and Brussels Airlines – carried around 2.9 million passengers in March. Among this total, 2.7 million passengers were on short-haul flights and 260,000 flew long-haul. This amounts to an increase of 35.4% in comparison to the previous year. March capacity was 30.6% above its prior-year level, while its sales volume was up 39.1%, resulting in an increased seat load factor by five percentage points of 81.3%.

On short-haul services the Point-to-Point Airlines raised capacity 34.8% and increased sales volume by 48.4%, resulting in a 7.3 percentage points increase in seat load factor of 79.3%, compared to March 2017. The seat load factor for the long-haul services increased by 1.6 percentage points to 85% during the same period, following a 23.5% increase in capacity and a 25.8% rise in sales volume, compared to the previous year.

Eurowings aircraft slide show: