Tag Archives: DHC8

SAS to implement a new “Final Call” austerity program, including eliminating 800 jobs, reduced wages and pension obligations and an asset sale including the sale of Widerøe

Scandinavian Airlines-SAS (Stockholm) has announced a new restructuring plan to achieve profitability including selling some of its assets including subsidiary airline Widerøe’s Flyveselskap AS (Bodo and Oslo) in Norway. The airline wants to reduce costs by another $440 million annually.

The company issued several statement this morning including this:

A new comprehensive plan will pave the way for a new, strong and competitive SAS. The plan needs to be fully implemented and new collective agreements must be signed in a very short space of time in order for SAS to have access to necessary funding.

This plan will give SAS a fresh start and will create a completely new platform for the future. It is a profound plan that demands a lot from the entire organization, but that needs to be implemented to allow the company to adapt to the current market conditions. It will enable SAS to compete effectively in the expanding private travel market, while retaining its strong position in the important business travel market. SAS will therefore be able to continue to offer its 27 million passengers a superior network and competitive travel services.

This plan will ensure that the conditions in all of the collective agreements are fully in line with the market, it will eliminate complexity by centralizing and reducing administration, and it will make SAS more flexible by outsourcing more work to external suppliers.

SAS’s banks and main shareholders have given this plan their full support and will make credit available to SAS on equal terms. However, this support is conditional upon SAS delivering fully to this plan and upon the new collective agreements being signed in a very short space of time.

The plan will result in total annual savings of around SEK 3 billion and will also see some of SAS’s assets being sold at a value of around SEK 3 billion. This will make SAS less dependent on external lenders in the future.

The Board has given its unanimous support to this plan and recommends that all of the company’s employees support it as well. The Board will meet again on Sunday November 18, 2012 to decide if the conditions for the implementation of the plan exist.

“This truly is our ‘final call’ if there is to be a SAS in the future. We have been given this final chance to make a fresh start and to carry on these fundamental changes. I know that we are asking a lot of our employees, but there is no other way. I hope that our loyal and dedicated employees are willing to fight for the survival of SAS and for our jobs. If we do this, we will be able to invest in new aircraft in the long term and to further develop our operations. This will ensure that SAS will continue to play an important role for millions of people in Scandinavia in the future,” says Rickard Gustafson, President and CEO of SAS.

Internal meetings will be held today and over the next few days to inform SAS employees of the plan and the requirements contained in the new agreements.

The 4 Excellence Plan, which was announced in September 2011, is on target to deliver approximately 5 bn SEK in EBT effect. Despite this success, SAS foresees the need for further improvements to secure its long-term competitiveness. In a challenging environment for airlines, SAS must take decisive action to address its cost structure, improve its capital structure on a long-term basis, and takesteps to reduce the negative impact on equity in 2013 due to changed pension accounting regulations.

4 Excellence Next Generation to improve profitability

The Board of SAS has approved the 4 Excellence Next Generation (4XNG) plan to address the issues facing SAS. The 4XNG plan will improve EBT by approximately 3 bn SEK on an annualized basis and improve the overall cost flexibility through:

· New union agreements for personnel
· Centralization of administration functions
· Reduction of compensation to market levels
· New pension terms
· Outsourcing of Call Centers and Ground Handling

1.5 bn SEK in improved EBT is expected to be realized in the financial year 2012/13, with most of the remaining annualized benefits realized in the financial year 2013/14. The plan is self-financing and requires no new capital.

The restructuring cost and one-off implementation costs will be approximately 1.5bn SEK, whereof 0.9-1.0 bn SEK in financial year 2012, and will be fully funded from expected savings.

New pension terms will mitigate the need for new equity

As a result of the revised IAS19, that will be applied by SAS as of November 2013, the SAS Group’s shareholders’ equity will be reduced when all unrecognized deviations from estimates and plan amendments will be recognized in full in shareholders’ equity. The 4XNG plan will result in a transition, for the majority of the employees, from the current defined benefit plans to defined contribution plans. These changes will mitigate the negative impact on equity by an estimated 2.8 bn SEK, reduce defined benefit obligations by 19 bn SEK (58%) and reduce volatility in future earnings resulting from changes in pension assumptions. These pension changes, together with the other actions announced today, provide SAS with the confidence that it will retain a strong equity position.

Asset Disposal and Financing Plan to increase liquidity

The Plan involves a commitment to complete an asset disposal and financing plan, which totals approximately 3 bn SEK in potential net cash proceeds. The proceeds will improve SAS’ internally generated financial preparedness and allow SAS to further reduce its financial leverage. The asset disposal and financing plan includes:

· Widerøe, a subsidiary regional airline in Norway
· Airport realated real estate interests;
· Ground handling; and
· Aircraft engines

In addition, SAS will also actively consider opportunities to realize further value from its financed aircraft portfolio and other assets.

3.5 bn SEK Revolving Credit Facility conditional on signed union agreements and parliamentary approvals

SAS has reached an agreement to increase its existing 3.1 bn SEK revolving credit facility to 3.5 bn SEK and extend the term of the facility to 31 March 2015. SAS’s bilateral facilities in the amount of 1.25 bn SEK will be cancelled as these facilities provide limited benefit at a significant financial cost.

This new revolving credit facility alongside SAS’ cash resources will provide the required financial preparedness while it completes its asset sales and realizes the full benefits from its cost reduction plans.

The new revolving credit facility is being provided by seven current lenders and SAS’ core shareholders (The Kingdom of Denmark, the Swedish State, the Kingdom of Norway and KAW) on equal terms. The availability of the new revolving credit
facility is subject to final documentation, parliamentary approval where required, and it is conditional on signed union agreements that are a central and integral part of the 4XNG plan.

SAS has initiated discussions with its relevant unions and will initiate a broad communication effort towards its employees to obtain their consent to the changes in the union agreements within a very short time.

Oddly SAS also reported a third quarter net profit of $64 million.

Read the local media report by The Copenhagen Post: CLICK HERE

Copyright Photo: Ton Jochems. Wideroe’s Bombardier DHC-8-103 LN-WIO (msn 417) waits for its passengers at Trondheim above the Arctic Circle in Norway.

Scandinavian Airlines-SAS:

Wideroe:

Horizon Air and its pilots tentatively agree on a six-year contract extension

Horizon Air (Alaska Horizon) (Seattle/Tacoma) and the International Brotherhood of Teamsters have announced they have reached tentative agreement to extend the current contract for the carrier’s 610 pilots for six years.

A ratification vote by union members is expected to be completed by mid-December. If ratified, the new contract would become amendable on Dec. 14, 2018. The current contract was ratified in November 2010 and becomes amendable in December 2015.

Copyright Photo: Joe G. Walker. Bombardier DHC-8-402 (Q400) N437QX (msn 4240) in the Bronco State Broncos climbs away from Portland, Oregon.

Alaska Horizon:

Aegean Airlines to acquire rival Olympic Air from MIG for €72 million ($93.1 million)

Aegean Airlines (Athens) appears to be finally successful in acquiring rival Olympic Air (3rd) (Athens). Previously on February 22, 2010 the two Greek airlines announced they had agreed to merge. However on January 26, 2011 the European Commission rejected the merger due to anti-competitive concerns.

Now Aegean Airlines and the Marfin Investment Group, the owner of Olympic Air, have agreed to a buy-out by Aegean of Olympic Air for €72 million ($93.1 million). Initially the two airlines will be operated as separate brands and airlines but the deal is still subject to the same anti-competitive concerns of the European Commission.

Both airlines have been losing money, especially with the austerity measures and EU protests in Greece.

Aegean Airlines has issued the following statement:

Aegean Airlines and Marfin Investment Group agreed on October 22, 2012 on the sale of 100% of Olympic Air to Aegean.

Following the completion of the transaction, Olympic Air will become a subsidiary of the listed Aegean. The brand names and logos of the two companies will be maintained and each will have distinct aircraft and flight staff. The unification of administrative, planning, purchasing and commercial functions will lead to substantial economies of scale, in buying power and elimination of duplicate systems. Fleet usage and network planning will be optimized to improve efficiencies and connectivity while improving coverage and product offer.

The deal is subject to approval by the Competition Authorities, a process which will also determine the timing of its execution.

The consideration for 100% of Olympic Air has been set at €72 million with payment in installments to MIG by Aegean. The shareholding structure of Aegean is not affected by the transaction.

Theodoros Vassilakis, Chairman of Aegean Airlines, commented on the deal: “Aegean Airlines and Olympic Air in recent years have invested $2 billion in a brand new fleet. Their service quality has been recognized with the receipt of numerous industry Awards. The two companies contribute in excess of €270 million to the Greek state revenues in airport taxes, fees, social security contributions. However, our subscale size, combined with the effects of the unprecedented Greek crisis, restrict our ability to successfully compete within the European and Global Aviation market leading us to further losses and further reductions of size and scope. As a result we are faced with the immediate danger of Greek Tourism, an industry essential for the country’s recovery, becoming entirely dependent on foreign carriers with permanent losses in local employment and state revenues.

Aegean still possesses the financial reserves to lead the consolidation of aviation in Greece to the benefit of tourism and state revenues as well as our employees and shareholders. The synergies from this agreement will allow us to reduce unit costs and offer enhanced network coverage with competitive prices to the consumers. We hope that all Greeks will support us in this challenging, ambitious and necessary endeavor.”

Companies’ Profiles

Fleet October 2012

	AEGEAN	OLYMPIC AIR
A321	4
A320	22	5
A319	3	2
Airbus Α320 Family	29	7


Bombardier Q400	0	10
Bombardier Dash 8-100	0	4
Total	29	21

Routes (Scheduled network – Summer 2012)

	AEGEAN	OLYMPIC AIR
Domestic	19	38
International	51	7

Annual Financial Results FY 2011 (in million €)

	AEGEAN	OLYMPIC AIR
Revenue	668.2	240.5
Net losses after taxes	(27.2)	(37.6)

Passenger traffic 2012 (estimate in million passengers)

	AEGEAN	OLYMPIC AIR
Domestic	2.6	2.3
International	3.4	0.6
Total	6.0	2.9

Top Copyright Photo: Wingnut. Airbus A321-231 SX-DVO (msn 3462) is pictured on the ramp at London (Heathrow).

Aegean Airlines:

Olympic Air (3rd):

Bottom Copyright Photo: Ole Simon. Flybe’s Bombardier DHC-8-402 (Q400) G-JECV (msn 4148), operated for Olympic Air, arrives at Frankfurt.

Air Canada to deploy the Bombardier Q400 on the Toronto – New York JFK route and in Western Canada

Air Canada (Montreal) is adding the Bombardier DHC-8-402 (Q400) on the Toronto (Pearson-New York (JFK) route starting on November 1. In addition, the carrier has announced that it is boosting capacity on regional routes across Western Canada this fall and winter to meet demand. The airline will also be gradually introducing Bombardier Q400 aircraft operated by Jazz Aviation (Halifax) under the Air Canada Express brand on key markets from Calgary and Edmonton beginning next year.

Starting next February, Air Canada will be scheduling new Q400 aircraft on regional routes across Western Canada to replace smaller Bombardier CRJ200 aircraft. Air Canada Express flights are scheduled to enable convenient, point-to-point same day business travel, as well as convenient and easy connections to Air Canada’s extensive domestic, US and international network at Calgary, Edmonton and Vancouver. Increased services this fall and winter compared to last year include:

Calgary-Fort McMurray	7 daily (from 6 daily)	350 daily seats (from 300)
Calgary-Grande Prairie	5 daily (from 4 daily)	250 daily seats (from 200)
Calgary-Yellowknife	2 daily (from 1 daily)	100 daily seats (from 50)
Edmonton-Fort McMurray	7 daily (from 6 daily)	350 daily seats (from 300)
Edmonton-Regina	2 daily (from 1 daily)	100 daily seats (from 50)
Edmonton-Saskatoon	2 daily (from 1 daily)	100 daily seats (from 50)
Vancouver-Fort St. John	5 daily (from 4 daily)	250 daily seats (from 200)
Vancouver-Nanaimo	7 daily (from 6 daily)	350 daily seats (from 300)

As mentioned, in February, 2013, Air Canada will begin gradually deploying 74-seat Bombardier Q400 aircraft on routes within Western Canada, replacing 50-seat CRJ200 aircraft. The Q400s will initially be scheduled on the following routes:

Calgary-Fort McMurray	February, 2013
Calgary-Regina	February, 2013
Calgary-Saskatoon	February, 2013
Calgary-Yellowknife	April, 2013
Calgary-Grande Prairie	March, 2013
Calgary-Victoria	March, 2013
Calgary-Edmonton	March, 2013
Edmonton-Fort McMurray	March, 2013
Edmonton-Yellowknife	April, 2013
Edmonton-Winnipeg	May, 2013

Copyright Photo: TMK Photography. Bombardier DHC-8-402 (Q400) C-GGOY (msn 4365) of Jazz Aviation is pictured at the Toronto (YYZ) hub.

Air Canada Express-Jazz Aviation:

Widerøe is awarded European Airline of The Year

Wideroe (Widerøe’s Flyveselskap AS) (Bodo and Oslo) has been selected as the European Airline of the Year by the European Regions Airline Association.

The company has issued the following statement:

Widerøe is awarded European Airline of the Year 2012 by the ERA (European Regions Airline Association). The ERA Airline of the Year Award was established in 1991 and aims to recognize excellence and achievements of intra-European airlines. The price is awarded every year on the base of quality, economy and position of the airline.

This year Norwegian Widerøe went all the way to the top. Feedback from the judging panel on the gold medal is that Widerøe is a well-managed airline that remains predictable at a top level in unpredictable surroundings.

This is a great honor and recognition of the work and effort put in by all Widerøe’s employees, states Managing Director in Widerøes Flyveselskap, Lars Kobberstad. It is particularly exciting to win an award rewarded by the industry itself, continues Kobberstad.

ERA’s Airline of the Year Award is presented every year. Competition is fierce between the various airline members of the European Airline organization. Widerøe has previously won both bronze and silver, however this is the first time the company wins the gold medal and is awarded Airline of the Year in Europe.

Of course it is fantastic for a small Norwegian company to go all the way to the top, states Kobberstad, and promises that there will be a big celebration when he returns to Norway with the trophy.

In his Dublin speech Thursday night, Director General of ERA Mr. Mike Ambrose stated that the judging panel was impressed by Widerøe’s performance in many aspects. In particular Widerøe’s ability to excel in all operational and financial parameters impressed the judging panel.

The judging panel also points out Widerøe as a truly regional airline and even if the airline operate in challenging weather conditions, most of the measures of performance are at the top.

Lars Kobberstad approach is slightly more humble; -This is truly a great acknowledgement. However, new challenges present itself every day and we cannot afford to slow down in our efforts to increase the quality and efficiency of our service offering. This is never the less an important step towards fulfilling our vision of becoming the leading regional airline company in Europe.

In other news, the growing airline is acquiring three additional ex-SAS Bombardier DHC-8-402s (Q400s).

Wideroe:

Frameable Color Prints and Posters:

Route Map:

Please click on the map for the full size view.

Colgan Air operates its last revenue flight

Colgan Air (2nd) (Memphis) is now in the history file. The airline has operated its last revenue flight. As planned, Colgan Air operated its last flight, flight UA 3923, from Washington (Dulles) to Albany, NY as an United Express carrier on September 5.

United Express-Colgan Air:

Eurolot converts six Bombardier Q400 options to firm orders

Eurolot (eurolot.com) (Warsaw) has converted options on six Bombardier DHC-8-402s, marketed as the Q400 NextGen airliners, to a firm order that will increase its fleet to 14 aircraft.

Eurolot’s firm order for eight airliners with 12 options was announced on March 9, 2012, and delivery of the first aircraft was announced on May 17, 2012.

Including this transaction, Bombardier has booked firm orders for 460 Q400and Q400 NextGen turboprops,and delivered aircraft are in service with more than 40 operators in 33 countries, on six continents. These aircraft have transported more than 227 million passengers and have logged more than 3.5 million flight hours and over 3.8 million take-offs and landings.

Eurolot:

Frameable Prints and Posters:

airBaltic turns itself around, achieves a profit

airBaltic (airBaltic.com) (Riga) has been successful in turning around the fortunes of the company by achieving a profit through its reorganization program. The airline issued the following statement:

“In July 2012, Latvian airline airBaltic reported a profit, as summer travel peaks and airBaltic ReShape restructuring programme gathers pace.

Martin Gauss, Chief Executive Officer of airBaltic: “We are delighted to see that airBaltic ReShape restructuring program brings consistently better net results every month. We are very satisfied to achieve a net profit of LVL 1.4 million.”

In July 2012, airBaltic operated 4,520 flights, or 19% less than in July 2011 when airBaltic operated 5,590 flights.

The airline carried 322,430 passengers in July. During the first seven months of 2012, airBaltic transported a total of 1,732,920 passengers.

The airline’s load factor, which represents the number of passengers as a proportion of the number of available seats, was stable high at a level of 80% in July 2012, compared to the same month a year ago. The airline’s load factor for the first seven months of 2012 was at a level of 73%, unchanged compared to the same period last year.

The 15-minute flight punctuality indicator for airBaltic was at a level of 89.5% in July 2012. This means that 89 of every 100 airBaltic flights in July departed at the planned time or with a delay of no more than 15 minutes.”

	July ’12
Number of flights	4 520
Number of passengers	322 430
Load Factor	80%
	January-July ’12
Number of flights	28 270
Number of passengers	1 732 920
Load factor	73%

Copyright Photo: Stefan Sjogren. Part of the success has been the transition to more fuel efficient aircraft and dropping unprofitable routes. Bombardier DHC-8-402 (Q400) YL-BAE (msn 4289) climbs away from Stockholm (Arlanda) bound for the Riga hub.

airBaltic Slide Show:

Frameable Color Prints and Posters:

Chorus Aviation posts a second quarter net profit of $22.9 million

Chorus Aviation Inc. (Jazz Aviation) (Air Canada Express) (Halifax) has announced its second quarter 2012 earnings, with net income of (all currencies in Canadian dollars) $22.9 million or $0.18 per share, and adjusted net income¹ of $27.4 million or $0.22 per share.

Q2 2012 Highlights:

Operating revenue of $426.3 million.
Free Cash Flow¹ of $38.7 million, or $0.31 per share.
Operating income of $36.6 million.
Net income of $22.9 million, or $0.18 per share.
Adjusted net income¹ of $27.4 million, or $0.22 per share.

The full report:

Financial Performance -Second Quarter 2012 Compared to Second Quarter 2011

Operating revenue increased from $402.0 million to $426.3 million, representing an increase of $24.2 million or 6.0%. Passenger revenue, excluding pass-through costs, increased by $25.7 million or 10.8% primarily as a result of $9.0 million related to the early termination of the Thomas Cook Flight Services Agreement, rate increases made pursuant to the CPA, an adjustment of $1.8 million related to the new rates which were retroactive to January 1, 2012, a higher US dollar exchange rate, and a $1.4 million increase in incentives earned under the CPA with Air Canada; offset by a $1.9 million or 1.2% decrease in pass-through costs from $161.1 million to $159.2 million, which included $5.3 million related to fuel. Other revenue increased by $0.3 million.

Operating expenses increased from $378.1 million to $389.7 million, an increase of $11.6 million or 3.1%. Controllable Costs increased by $13.5 million, or 6.2%; offset by a decrease in pass-through costs of $1.9 million. Controllable operating expenses were impacted by the changes in the fleet ownership structure for the Q400 aircraft. CRJ100 aircraft, previously under operating leases, are being replaced by owned Q400 aircraft, whose ownership costs are comprised of depreciation under operating expenses, and interest under non-operating expenses. The Q400 aircraft lease revenue under the CPA is captured under operating revenue and is designed to provide compensation to Chorus for both depreciation and interest expense. As interest expense is shown below the operating margin, operating income increased by a similar amount on a quarter over quarter basis.

Depreciation and amortization expense increased by $4.0 million, of which $3.0 million is related to the purchase of Q400 aircraft, with the balance due to the increased major maintenance overhauls and increased capital expenditures on aircraft rotable parts and other equipment; offset by certain assets reaching full amortization.

Aircraft maintenance expense increased by $2.3 million as a result of increased Block Hours of $0.4 million, the effect of the increase in the US-dollar exchange rate on certain material purchases of $1.3 million, and increased other maintenance costs of $2.6 million; offset by a decrease in engine maintenance activity due to the return of CRJ aircraft of $2.0 million.

Salaries, wages and benefits increased by $2.8 million as a result of wage and scale increases under new collective agreements, increased Block Hours, and increased pension expense resulting from a revised actuarial valuation; offset by a reduction in the number of full time equivalent employees.

Other expenses increased by $3.4 million primarily due to increased general overhead expenses (crew expenses increased due to increased activity, rates and training expenses) and professional fees.

Non-operating expenses increased $7.8 million. This change was mainly attributable to a foreign exchange loss of $4.8 million (of which $4.5 million was related to an unrealized foreign exchange loss on long-term debt and finance leases) arising as a result of the change in value of the Canadian dollar relative to the US dollar, and increased interest expense related to the Q400 aircraft financing of $2.1 million.

EBITDA¹ was $50.4 million compared to $33.9 million in 2011, an increase of $16.5 million or 48.9%. Free Cash Flow was $38.7 million, an increase of $15.4 million or 66.5% from $23.3 million.

Operating income of $36.6 million for the three months ended June 30, 2012, was up $12.6 million or 52.6% over second quarter 2011 from $24.0 million.

Net income for the second quarter of 2012 was $22.9 million or $0.18 per share, an increase of $6.0 million or 35.3% from $16.9 million or $0.14 per share.

CPA rate setting negotiations

On August 7, 2012, Jazz and Air Canada finalized an agreement on the establishment of new rates for controllable costs that are payable by Air Canada under the CPA in respect of the years 2012 to 2014 inclusive. This rate review and adjustment is required under the terms of the CPA. The new rates are retroactive to January 1, 2012, and the parties have reconciled the amounts previously paid to the amount owing based on the new rates. The reconciliation is conducted so that the parties will be in the same position they would have been had the new rates been in effect as of January 1, 2012.

Update on investment in South American regional carrier Pluna.

On April 30, 2010, Chorus purchased a 33% non-voting interest in Latin American Regional Aviation Holding Corporation (LARAH). LARAH held an indirect 75% equity interest in Pluna Líneas Aéreas Uruguayas S.A. The remaining 25% equity interest in Pluna was held, indirectly, by the Government of Uruguay.

In the second quarter of 2012, it was announced that Pluna was in financial difficulty, and that the Uruguayan government had taken control of the airline, allowing it to continue operating. All of the shares in Pluna held indirectly by LARAH, including the portion indirectly owned by Chorus, were placed in trust with the Montevideo Stock Exchange in return for certain conditions and indemnities from the Uruguayan government. As a result, Chorus recorded a write-down of $16.4 million to the fair value of the investment through other comprehensive loss, as there is no indication that the LARAH shares hold any current value, and there can be no assurances that a successful recapitalization of Pluna will result in Chorus holding an ownership stake in the resulting entity.

Subsequent to June 30, 2012, Pluna announced that it had ceased operations indefinitely. The situation with Pluna has no effect on Jazz operations or current cash flows.

¹ Non-GAAP Financial Measures

Air Canada Express-Jazz:

InterSky orders two ATR 72-600s

InterSky (Bregenz, Austria and Friedrichshafen, Germany) ordered two ATR 72-600 for delivery in December 2012 and March 2013, to supplement the Bombardier DHC-8-300s.

Read the press release from the airline (in German): CLICK HERE

Copyright Photo: Keith Burton. The new ATR 72-600s will supplement the existing Bombardier DHC-8-300s. DHC-8-311 OE-LSB (msn 525) completes its final approach into Zurich.