Europe Airline Daily: Main News: 1 May 2008

 

Silverjet stated (30-Apr-08) it has received a USD100 million investment pledge, which sent its shares 26% higher in London trade on 30-Apr-08. The all-Business Class airline will obtain USD25 million through debt and equity from an unidentified Abu Dhabi investor, in return for a 28% stake. The agreement also includes “intent'' by the investor to provide a further USD75 million in capital, to help to develop the airline's operations in the future, particularly in the Middle East, Asia and Africa. Prior to the latest share price bounce, Silverjet's share price had falled by 90% since it listed 18 months ago.
 
Silverjet: “We are delighted to have entered into this Memorandum of Understanding with a long term strategic investor. This investment places Silverjet in a strong position to further develop our brand and proposition. It is particularly encouraging to have secured this agreement in a challenging environment for all airlines. The support of this investor demonstrates the strength of Silverjet’s exclusively business class model”, Lawrence Hunt, CEO. Source: Silverjet, 30-Apr-08.

Silverjet: “Following recent material increases in fuel prices and tightening of credit conditions in the airline industry, Silverjet’s working capital has deteriorated and its residual reserves are limited… Completion of these agreements will secure the future of Silverjet and its long term development. In the unlikely event that these agreements are not completed, Silverjet will have to source alternative means of funding as a matter of urgency”, Spokesman. Source: Silverjet, 30-Apr-08.


Virgin Atlantic: "When BA and AA first tried to get together nearly ten years ago, the regulators ruled it was against the consumer interest. Nothing has changed. A link-up between BA and AA is still anti-competitive and now they have the cheek of trying to add Continental to the mix, too. This triple whammy would reduce effective competition across the Atlantic, and the regulators should make it absolutely clear that it would have no chance of getting off the starting grid,” Sir Richard Branson, President. Source: Dallas Morning News, 30-Apr-08.

Alitalia has received a EUR1 billion offer from Brazilian turnaround specialist, Multi-Long Corp (AP, 30-Apr-08). Multi-Long stated however it does not have financing in place for the acquisition, but believes it can obtain funding from European and Brazilian banks. Multi-Long offered USD800 million for Varig in a 2006 bid that was rejected by Brazilian officials. Meanwhile, the European Commission confirmed it would refuse all new state aid for Alitalia.
 
Multi-Long Corp: “They asked if we had any experience in aviation. We said no. But one plus one is two, and we know numbers”, Michael Breslow, CEO. Source: AP, 30-Apr-08.

European Commission: “Alitalia cannot receive state aid until 2011, no matter in what form. Whether by one means or another, one instrument or another, if there is the intention of giving state aid, it risks being declared illegal”, Benoit Le Bret, Spokesman. Source: AP, 30-Apr-08.

Alitalia has filed a counter-claim for damages against Milan's airport operator, SEA, for underinvesting in Malpensa Airport and damaging Alitalia's sale prospects by suing it in Feb-08 over the airline’s service cuts at the airport (Reuters, 30-Apr-08). Meanwhile, Alitalia’s net debt stood at EUR1.35 billion as at 31-Mar-08, down EUR15 million from the end of Feb-08 after it sold Air France-KLM shares worth EUR79 million.
 
Association of Asia Pacific Airlines (AAPA) has strongly criticised (30-Apr-08) the UK Government’ proposal to replace its existing Air Passenger Duty (APD) payable by air passengers with a revised scheme under which Aviation Duty (AD) would be payable per plane rather than per passenger. AAPA stated the UK Government also seems intent on maintaining the APD/AD even after the planned inclusion of aviation in the comprehensive EU Emissions Trading Scheme (ETS) in 2012. The industry body added, “such a stance runs counter to the publicly stated position of the European Commission, that once a comprehensive EU ETS scheme is in place, Member States should repeal existing aviation or passenger taxes based on environmental grounds”.
 
AAPA: “No amount of intellectual contortion can disguise the fact that the existing UK Air Passenger Duty and the proposed UK Aviation Duty are primarily tax raising measures, with only lip service being paid to the purported environmental objectives. Neither the APD nor the AD satisfies the stated design principles of being simple and transparent, nor are they coherent in terms of addressing the stated environmental objectives…Rather than impose arbitrary and punitive taxes, we urge governments to work towards reaching agreement within the ICAO framework on a globally harmonised emissions trading scheme”, Andrew Herdman, Director General. Source: AAPA, 30-Apr-08.


US Federal Open Market Committee lowered (30-Apr-08) the federal funds rate by 25 basis points to 2%.

Federal Open Market Committee: “Recent information indicates that economic activity remains weak. Household and business spending has been subdued and labour markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters…The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully”, FOMC Statement. Source: Federal Open Market Committee, 30-Apr-08.

US Commerce Department reports (30-Apr-08) the US economy expanded by 0.6% in 1Q08 – the same rate as in 4Q07.

US President, George W Bush, stated the nation is in “very difficult times, very difficult, adding there are “no quick fixes” to address current economic challenges (New York Times, 30-Apr-08).

US Government: “If there was a magic wand to wave, I'd be waving it, of course. But there is no magic wand to wave right now…Those who worry about recession, slowdown, whatever you want to call it, ought to make [the proposed] tax cuts permanent”, George W Bush, President. Source: New York Times, 30-Apr-08.

Aer Lingus Group confirmed (30-Apr-08) it has concluded a contract with Lufthansa Technik for components maintenance of its A320 and A330 aircraft. Maintenance services under the new contract will commence from 01-Nov-08 and will be primarily provided in Germany. The contract has been awarded for a ten-year period to 2018 and includes an option for Aer Lingus to renegotiate terms at defined future dates in the event of changes in market pricing for engineering services during the contract period.

bmi Chairman, Sir Michael Bishop, stated the delayed terminal moves at London Heathrow Airport’s Terminal 5 could impact the development schedule of the new Terminal East, which will replace Terminal 1 (businesstraveleurope.com, 30-Apr-08). BAA is planning to open the facility in time for the London Olympics in 2012. Meanwhile, British Airways CEO, Willie Walsh, stated the state of London Heathrow International Airport is damaging the country's reputation and economy (Thomson Financial, 30-Apr-08). American Airlines Head of Customer Services Europe, Don Langford, recently labeled the airport a "bit of a dump" and the "worst" among major European air hubs.

British Airways: "I believe it is in the interest of the country that the reputation of Heathrow is restored on a lasting basis as quickly as possible. For the sake of the UK economy and London's place as a business capital, Heathrow has to catch up. If things continue to decline, UK businesses will lose competitiveness and might be forced to consider relocating abroad. Businesses will also find it difficult to attract inward investment,” Willie Walsh, CEO. Source: Thomson Financial, 30-Apr-08.

American Airlines: "Heathrow is not just bursting at the seams. I think the seams have burst…I would have to say that Heathrow is in many ways the worst of all the airports that my company flies to in Europe," Don Langford, Head of Customer Services Europe. Source: Thomson Financial, 30-Apr-08.

Jet2.com launched eight new routes from Leeds Bradford Airport on 01 May-08. It is the biggest single route expansion in the history of the airline, bringing the total number of destinations served by Jet2 from Leeds Bradford to 36. The new routes are: Hamburg, Madrid, Olbia (Sardinia), Paphos (Cyprus), Heraklion (Crete), Avignon, Jersey and La Rochelle. Meanwhile, Jet2.com and Yorkshire Tourist Board announced plans to jointly launch a marketing campaign aimed at attracting more German visitors to the region. Regional development agency, Yorkshire Forward, is funding the GBP400,000 campaign, timed to coincide with the launch of Jet2.com's Leeds-Hamburg service. 

Menzies Corporate Restructuring confirmed (30-Apr-08) it has been appointed as joint administrators in the UK in connection with the recent US Chapter 11 bankruptcy filing of Eos Airlines. On 26-Apr-08, Eos filed a voluntary petition for bankruptcy protection under Chapter 11 of the US Bankruptcy Code. The petition was filed in US Bankruptcy Court in the Southern District of New York, and Eos ceased operations on 27-Apr-08. 

Monarch Airlines launched its Winter 2008/09 schedule, covering almost 1.75 million seats from London Luton, London Gatwick, Birmingham International and Manchester Airports. [more at Peanuts.aero].

Air Berlin commenced five times weekly service from Dusseldorf to Beijing and Shanghai on 01-May-08 with A330 equipment. The carrier operates feeder services for the China operation to Dusseldorf from Berlin, Hamburg, Munich, Nuremberg, Stuttgart, Zurich and Vienna.

ARINC Inc and Gate Gourmet signed (30-Apr-08) a memorandum under which the companies agreed to work together to market on-board sales programmes for airlines and passenger rail systems. Gate Gourmet will offer ARINC's SkyBuy sales technology as the standard in its buy-on-board programmes, while ARINC will work exclusively with Gate Gourmet on outsourced catering and buy-on-board projects. The two companies plan to introduce SkyBuy to existing retail programmes at easyJet, Norwegian and Jetstar. [more]

Austrian Airlines announced (30-Apr-08) changes to its Supervisory Board, with Klaus Edelhauser, nominated by investor, Al Jaber, to be elected into the Board at the next Ordinary Meeting of Shareholders on 07-May-08. At the same time, Dr Herbert Koch, who has been Deputy Chairman of the airline since Mar-01, will retire from the Supervisory Board. The European Commission adopted (30-Apr-08) a Communication on the application of the slot allocation Regulation. The Communication clarifies a number of issues to ensure a better implementation of the existing rules and to improve the efficient use of scarce capacity at congested Community airport. In particular, it signals the acceptance of "secondary trading" of airport slots between airlines. [more]

Icelandair launched its inaugural service to Toronto Pearson International Airport on 02-May-08, with up to five times weekly service from Reykjavik.

Air Malta announced plans to launch four times weekly Malta-Paris Charles De Gaulle service from 2009 (Times of Malta, 30-Apr-08). The decision follows the double-digit growth registered on the French routes during Winter-07. 

Czech Airlines announced plans to resume twice weekly Prague-Damascus service during the Northern Summer, seven years after withdrawing from the route (Syria Times, 30-Apr-08). 

LOT Polish Airlines announced plans to add capacity on Warsaw-London Heathrow route, replacing its current 108-seat B737-500 aircraft with a larger 147-seat B737-400 (just4airlines.com, 30-Apr-08). The carrier has recorded growth of more than 50% in business travellers since the introduction of its Summer schedule (30-Mar-08), when it became the only carrier operating on the route, after British Airways shifted its Warsaw services from London Heathrow to London Gatwick. LOT’s B737-400 aircraft has a flexible business class cabin configuration.

Malev confirmed (30-Apr-08) it has passed the global airline industry’s benchmark operational safety audit, meaning IATA, the auditing organisation, has renewed the company’s IOSA registration for a further two years.

Malev Hungarian Airlines launched Budapest-Milan Malpensa service on 30-Apr-08 – see Route Changes Table for more information.

SAS Scandinavian Airlines announced (30-Apr-08) plans to remove 11 aircraft from its fleet over 2008, cutting capacity by approximately 5%, as well as reducing its workforce by 1,000. The measures aim to "turn around the earnings trend and manage the challenging market situation". SAS reported a loss of EUR121 million for the three months ended 31-Mar-08.
SAS’s ‘BB’ longterm corporate credit rating from Standard & Poor's Ratings was placed on a 'negative' watch, reflecting “deteriorating industry conditions, rising oil price and intensifying competition”, which could affect the group's performance and “place additional pressure on its financial profile”.

United Aviation Corporation, the Russian state aircraft holding company, stated that the first test flight for the Sukhoi Superjet 100 is scheduled for the first half of May-08. Sukhoi has 73 firm orders for the aircraft and hopes to sell at least 800 aircraft, with production of 60 to 70 planes a year by 2010.

American Airlines launched New York JFK- Milan Malpansa service on 01-May-08 – see Route Changes Table for more information.

Emirates Airline reports (30-Apr-08) the following financial highlights for the 12 months ended 31-Mar-08:

  •    Revenue: USD10,800 million, +32.3% year-on-year;
  •    Fuel costs: USD2,800 million, (equivalent to 30.6% of total costs, +1.9 ppts);
  •    Net profit: USD1,370 million, +62%;
  •    Traffic (tonne kilometres): 14,739 million, +16.6%;
  •    Capacity (tonne kilometres): 22,078 million, 13.7%;
  •    Yield: USD.064 per revenue tonne kilometre, +8.5%;
  •    Passenger load factor: 79.8%, +3.6 ppts;
  •    Break-even load factor: 62.7%, +2.8 ppts.


Emirates: “It was another record year… in spite of a challenging business climate, particularly in the second six months where the soaring cost of jet fuel made a big dent, although the impact was partly offset by other operating gains. Despite the long-term forecast of a decrease in the number of passengers travelling in First and Business class, I am happy to report that Emirates once again bucked the trend and boosted our seat factor in the forward cabins. I believe the threat of an economic downturn will be offset for Emirates by the boom in the Middle East, especially the thriving travel industry of tourism and commerce,” Sheikh Ahmed bin Saeed Al-Maktoum, Chairman & CEO, Emirates Airline and Group. Source: Company statement, 30-Apr-08.