China Southern Airlines will carry out an equity diversification plan that will involve the injection of 30 billion yuan ($4.36 billion) of capital from three investors, the firm announced on Saturday.
The Guangdong Hengjian Investment Holding Corporation, the Guangzhou Urban Construction Investment Group and the Shenzhen Penghang Equity Investment Fund will each inject 10 billion yuan into the airline, as part of the country's efforts to diversify ownership structures among state-owned firms.
The move will significantly improve the company's debt-to-asset ratio, generate funds for its growth and help modernise its decision-making mechanisms, the announcement said.
It will also use the funds to serve its main air transportation business, pay for construction related to China's Belt and Road Initiative and support aviation development in cities in the southern province of Guangdong.
China Southern is one of 96 enterprises owned and administered directly by the central government. Its profits slumped nearly 50% last year as a result of rising fuel costs and a weak yuan currency. ($1 = 6.8812 yuan)
The U.S. Department of Transportation (DOT) on Friday granted American Airlines Group Inc and Qantas Airways Ltd final approval to operate a joint venture after a prior effort was rejected in 2016.
The department last month had issued an order tentatively approving the agreement and granting antitrust immunity to the airlines covering international service.
U.S. Transportation Secretary Elaine Chao announced the approval on Friday afternoon, noting it was the first completed review of an airline joint venture proposal during the Trump administration.
Reuters was the first to report on the planned announcement earlier on Friday.
An application for a joint venture covering the United States, Australia and New Zealand was rejected in November 2016 by former President Barack Obama's DOT. It tentatively concluded after a 17-month review that the venture "would reduce competition and consumer choice."
The deal will allow the airlines to coordinate planning, pricing, sales and frequent flyer programs, with new options and customer service improvements. The two OneWorld alliance carriers are planning up to three new routes within the first two years as well as increased capacity on existing routes, the department has said.
American Airlines did not immediately comment on Friday, but Chief Executive Doug Parker said last month the joint venture would also create new jobs in the airlines and industries.
In June, JetBlue Airways Corp told the DOT that it took no position on the alliance, but said it would "substantially reduce competition in relevant markets and concentrate a huge level of market share and power in the hands of immunized alliances."
It also said the three major global airline alliances - OneWorld, SkyTeam and StarAlliance - will control 86% of the U.S.-Australia market.
U.S. regulators in 2001 approved similar joint venture agreements for United Airlines and Air New Zealand Ltd, and in 2011 for Delta Air Lines Inc and Virgin Australia.
The U.S. DOT is, however, requiring American and Qantas to perform a self-assessment of the venture's impact on competition seven years after it takes effect and report their findings to the government.
Regulators in Australia and New Zealand approved the first application for the joint venture before it was initially rejected by the U.S. DOT.
American and Qantas in February 2018 made a second attempt to gain U.S. regulatory permission under President Donald Trump's administration for a venture that would let them coordinate prices and schedules. They threatened to cancel services if it was rejected and argued it could "unlock" up to $310 million annually in consumer benefits.
The revised application made significant changes, including removing a provision that would have barred either carrier from code-sharing with other carriers. Code-sharing allows two or more carriers to publish and advertise a single flight under their own flight number.
The airlines argued in their 2018 application that the venture would lead to lower fares and higher capacity as a "more viable third competitor," and drive other carriers to improve quality, schedules and prices.
Qantas said last year the joint venture would allow the two airlines to "significantly improve service" and "stimulate demand."
The airlines said the agreement could generate up to 180,000 new trips between the United States and Australia and New Zealand annually.
U.S. President Donald Trump met on Thursday with the chief executives of major American airlines to discuss their accusations that subsidies by Qatar and United Arab Emirates are costing jobs in the United States.
The meeting between Trump and the CEOs of American Airlines , United Airlines , JetBlue Airways Corp , FedEx Corp and Atlas Air included Vice President Mike Pence, the White House said.
The meeting also included the CEO of state-owned Qatar Airways, Akbar al-Baker, who was also at the White House last week to tout its decision in June to buy five new Boeing 777 freighters.
The White House did not immediately provide details of the meeting.
Since 2015 the largest U.S. carriers - Delta Air Lines , American and United Airlines - have argued their Gulf rivals are being unfairly subsidized by their governments, distorting competition and costing U.S. jobs - something the Gulf carriers deny.
The Partnership for Open & Fair Skies, a group representing Delta, American, United and aviation unions, said it had a "productive meeting" with Trump.
"The president shares our concerns and instructed us to keep working with the U.S. Department of Transportation, which we plan to do," Scott Reed, the group's managing partner, said in a statement.
The CEOs of JetBlue, FedEx and Atlas Air have warned that restricting the rights of Qatar Airways could lead to retaliation against U.S. carriers and added, in an April letter, it could lead to "a rapid unraveling of hard-fought aviation rights around the world when other governments take similar action to shield their state-owned airlines from competition."
Last week, the CEOs of Delta, United and American wrote a joint USA Today op-ed urging the White House to act "decisively to hold Qatar and the UAE accountable." They suggested that failing to respond would "signal to other countries that they too are free to exploit American workers."
In April, Secretary of State Mike Pompeo said the administration was scrutinizing Qatar Airways' acquisition of a 49% stake in Air Italy, which has been flying to U.S. destinations since 2018 in a move seen by U.S. lawmakers as flouting a deal not to add new flights to the domestic market.
Both Republicans and Democrats in Congress have said they were concerned that the deal with the Italian carrier contravened an understanding Qatar Airways reached with the United States in early 2018.
Qatar Airways acquired the 49% of Italian airline Meridiana in 2017, rebranded it Air Italy and transformed it into a carrier with five announced nonstop U.S. destinations from Milan.
The Qatari government said in 2018 it was unaware of any plans to launch flights from Qatar to U.S. destinations via stops in Europe known as "Fifth Freedom" flights.
(Steve Holland, David Shepardson and Jeff Mason - Reuters)
Russia’s national carrier, Aeroflot, is to expand its Airbus fleet with plans to introduce nine A320neo Family jets in a deal worth over $870 million. But the flag carrier is lagging behind with the introduction of the “neo” compared to some other Russian airlines, and has so far expressed no interest in the Boeing 737 MAX, while its low-cost subsidiary awaits deliveries of the planes by year’s end.
According to state procurement documents, Aeroflot will order six medium-haul A320neos (A320-251N) from the European manufacturer. The two-part bidding process, launched on July 15, 2019, includes leasing six aircraft for a 12 year-term. Both contracts are worth $566.4 million total.
Earlier in the month, on July 5, 2019, Aeroflot announced a tender for three A321neo jets (A321-251NX), planning to lease the aircraft for 12 years in a deal worth $304.2 million, Russian Aviation Insider reports. This takes the airline’s current orders for the type to nine jets for a total sum of $870.6 million. All nine A321neo planes are to be delivered in 2020.
The new planes will be an addition to Aeroflot’s already substantial Airbus fleet, which does not include the new generation A320 Family jets. The only Russian carrier currently operating the “neo” is S7 Airlines, one of the largest airlines in the country. The carrier received its first A320neo in 2017 and now flies both the A320neo and A321neo variants.
As for Aeroflot, the airline currently operates 78 A320ceo as well as 35 A321ceo jets. The flag carrier also flies 17 long-haul A330-300 planes, according to Airbus orders and deliveries log (as of June 30, 2019). Aside of these, Aeroflot operates Boeing 777-300ER and 737-800 airliners, but does not have any 737 MAX planes on order, as Boeing’s order book (through June 2019) shows.
The ‘MAX’ issue
Back in March 2019, in the wake of the MAX groundings following a second deadly crash involving the aircraft, RT news channel reported that contracts for the purchase of several dozen of aircraft by Russian airlines, including Aeroflot’s low-cost subsidiary Pobeda, S7 Airlines, Ural Airlines and UTair, had been suspended indefinitely. Aeroflot’s CEO Vitaly Savelyev had gone as far as to say that the company would refuse operating MAX planes ordered by Pobeda.
Pobeda is expecting delivery of its first Boeing 737 MAX in November 2019, latest information by Reuters indicates. State news agency Interfax has recently reported that Ural Airlines is expecting to receive its first MAX in December 2019, and is also awaiting delivery of its first A320neo this August, with four more of the type to be received by the end of the year. Meanwhile, UTair Aviation has 28 unfilled orders for the MAX, Boeing’s log indicates. S7 Airlines states it was the first carrier in Russia to receive the MAX in autumn of 2018.
‘Made in Russia’
Earlier this year, state-owned Aeroflot received formal approval by the Russian government to acquire up to 100 Boeing and Airbus aircraft, to be delivered from 2019 to 2023. The national carrier was hence allowed to purchase 22 long-haul A350s together with 74 Airbus and Boeing aircraft of unspecified types, Russian Aviation Insider reported in April 2019. Airbus’ latest order summary shows the state carrier has 14 A350-900 planes on order.
Despite this interest in Western-manufactured aircraft, according to its new strategy, Aeroflot plans to increase the number of Russian-built planes in its mainline fleet by up to 190 jets by 2023, Russian Aviation Insider added. This includes an order for 100 Russian-made Sukhoi Superjet 100 aircraft, in addition to the 49 SSJ100s the airline already has in its mainline fleet, as well as 50 of the medium-haul MC-21 passenger jets.
To make things even more interesting, the Boeing 737 is the main competitor to the Airbus A320 Family, and both types are considered as direct competitors to the in-development MC-21.
Bjoern Kjos, CEO of Norwegian Air Shuttle ASA, attends a press conference presenting quarterly report of the company, in Oslo.
Norwegian Air's Bjoern Kjos stepped down on Thursday as chief executive of the airline he co-founded and turned into Europe's third-biggest budget carrier by passenger numbers.
The airline has shaken up the long-haul market with cut-price transatlantic fares, but its rapid expansion has left it with hefty losses and high debts and it had to raise 3 billion crowns ($350 million) from shareholders earlier this year.
"I am way overdue," Kjos, 72, laughing, told a news conference, announcing his plans to quit the top job. A former fighter pilot, Kjos helped to expand what was a tiny Norwegian airline housed in pre-fabricated barracks on the edge of Oslo airport.
He will have a new role as an adviser to the chairman.
"Bjorn has been the driving force behind the business – the big question now is whether Norwegian Air can maintain momentum as he takes a less active role," Bernstein said in a note to clients.
The airline also said it expected its 18 grounded Boeing 737 MAX aircraft to return to service in October, compared with its previous view that they would return to service in August.
The jets have been grounded worldwide since March following two fatal crashes and Norwegian Air has said the disruption could scupper its plans to return to profitability this year.
The company reported second-quarter earnings that beat expectations on Thursday.
Its net profit came in at 82.8 million Norwegian crowns ($9.7 million), down from 300.3 million in the same period last year, but ahead of the average forecast of 76.2 million from five analysts compiled by Refinitiv.
The company cut its target for passenger carrying capacity growth to 0-5%, compared with the previous guidance for 5-10%.
It said earnings before interest, tax, depreciation and amortisation and restructuring or rent costs (EBITDAR), excluding "other" losses or gains for items such as foreign currency contracts and forward fuel contracts, were expected to reach 6–7 billion crowns in 2019, up from 3.2 billion in 2018.
The boss of Europe's Ryanair warned on Wednesday the impact of the prolonged grounding of Boeing's 737 MAX on the airline's growth plans may start to spill over to next summer if the airplane is not flying again by November.
Europe's largest budget carrier needs up to eight months to take delivery of some 50 newly built planes left at the factory by the grounding crisis, so it may have to trim its capacity growth plans for summer 2020 if 737 MAX flights have not resumed by November, Chief Executive Michael O'Leary told Reuters.
"Boeing are telling us at the moment they expect to be back flying by the end of September," O'Leary said in an interview on the sidelines of a meeting of the European airlines lobby A4E, which he also chairs.
"I think it will fly before the end of this year. I am not sure they will meet the end of September date, but I take comfort from the fact that it seems that now the American, European, Brazilian and Canadian regulators are working together," he added.
In May, O'Leary predicted a return to service by July but the U.S. Federal Aviation Administration has since reported a new potential safety risk that it says must be addressed first.
"We are continuing to engage with global regulators and providing information to them as we work towards the safe return to service for the MAX," a Boeing spokesman said by email.
Boeing's top-selling jet was grounded in March in the wake of crashes in Ethiopia and Indonesia which killed 346 people. The planemaker is working on a software fix that people familiar with the matter have said Boeing hopes to present to regulators in September.
"The challenge for us is that we need to see the plane back flying by the end of September, October, November at the latest, so as not to disrupt our growth for the summer of 2020," O'Leary said.
Ryanair can take delivery of no more than six to eight planes a month because of the complexity of the delivery process and the availability of trained MAX pilots.
"PRESSURE" ON BOEING AFTER IAG DEAL
O'Leary also responded to a surprise move by British Airways owner IAG to buy 200 MAX jets at what analysts say must have been very attractive prices as the grounding drags on.
He described the preliminary order, which gave the 737 MAX a boost at last month's Paris Airshow, as a "great move" by IAG Chief Executive Willie Walsh, even though at this stage the deal is only a letter of intent (LOI).
"Let's see what happens with that. I suspect it certainly puts more pressure on Airbus. And we, as a result of IAG’s LOI, are putting much more pressure on Boeing."
Ryanair benefits from a clause in its contract guaranteeing it lower prices than its competitors, echoing a similar arrangement for Southwest in the United States, analysts say.
Asked whether Ryanair could take advantage of the IAG deal to expand its order for 135 MAX on even better terms, O'Leary said any new deal would be unlikely during the grounding but could be up for discussion once the jet was back in service.
"You could do that in September or October this year when the aircraft is back flying. We will stick close to Boeing on it and we are also talking to Airbus about the possibility of aircraft for Laudamotion."
O'Leary told Reuters in March, shortly before the second crash that triggered a worldwide grounding of the 737 MAX 8 and 9 models, that Ryanair was interested in Boeing's larger 737 MAX 10 "at the right price" as well as at least 100 Airbus A321 for recently acquired Austrian unit Laudamotion.
O'Leary said in May Ryanair was also talking to Boeing about compensation for the grounding, but that it had to be determined whether this would be paid in cash or as lower aircraft prices.
The head of the Boeing Co.’s troubled 737 jet program will retire from the company in the coming weeks.
Eric Lindblad, who has led the 737 program for less than 12 months — brought in last year to lead it when the company's biggest concern was ironing out supply chain issues — will depart after 34 years with Boeing.
Those concerns were soon overshadowed, however, by two deadly crashes of the jet in five months.
The CEO of Boeing Commercial Airplanes, Kevin McAllister, notified employees of the change in a memo provided to the WBJ by the company following initial media reports Wednesday afternoon.
“I have admired Eric’s resolve and drive, and we are grateful for his service and dedication,” McAllister said, adding that Lindblad had already expressed a desire to retire last year.
The 737 MAX, Boeing’s fastest-selling aircraft ever, has been grounded since the middle of March.
Lindblad will be succeeded as the head of the 737 program by Mark Jenks, who had previously been leading the company’s development efforts of a potential new mid-market airplane (NMA).
“He will work closely with Eric over the next several weeks to ensure a seamless transition as we approach the safe return to service of the 737 MAX,” McAllister said.
Mike Sinnett, vice president of product strategy and future airplane programs for Boeing, will take the lead on NMA.
Wichita’s largest employer, Spirit AeroSystems Inc., builds around 70 percent of the structure on the 737.
While Spirit continues to build on the program at the rate of 52 aircraft per month, Boeing has trimmed its own monthly output on the 737 to 42 jets. Spirit is holding the excess components in inventory and still being paid by Boeing for the work.
Not all of the 737s still being delivered are MAXs, though the new variant was expected to account for around 90 percent of program deliveries this year.
Boeing has halted its own MAX deliveries to airline customers amid the grounding, which stretches on without a known timeline for when regulators expect to sign off on Boeing’s proposed upgrades and return the jet to service.
Company CEO Dennis Muilenburg confirmed last month at the Aspen Ideas Festival that some employees had either been fired or reassigned due to the MAX crisis, though he declined to elaborate beyond describing them as “personnel changes” in an on-stage interview with Axios.
Air China, China's flagship carrier, will buy 20 A350-900 jets from Airbus worth $6.54 billion based on list prices, the carrier said on Thursday.
Air China, which has 10 of the fuel-efficient widebody aircraft in its fleet already, said the deliveries were scheduled from 2020 to 2022.
It was not immediately clear if the order would bolster the Airbus order book or if it had previously been attributed to an unidentified customer. Airbus did not respond immediately to requests for comment.
A fresh order would help Airbus narrow a deficit in wide-body orders against Boeing as trade tensions persist between the United States and China.
Boeing won a positive total of 61 wide-body orders in the first half this year against Airbus' negative tally of 35 jets, meaning the European company had more cancellations than orders for twin aisle aircraft in the period.
Air China said it has the right to swap 5 out of 20 jets for the larger A350-1000.
(Stella Qiu and Se Young Lee and Tim Hepher - Reuters / Yahoo Finance)
The Boeing 737 Max hasn’t been taking off, neither literally nor figuratively. The jets have been grounded worldwide since this spring after two fatal crashes—one last October in Indonesia, and another in Ethiopia in March—that killed 346 people and raised serious questions about the plane’s features.
Now, Boeing is facing cancellation of a lucrative contract to sell 20 Max 737s to a Saudi Arabian airline, signaling that the company’s troubles are far from over.
Boeing announced on Sunday that Flyadeal, a subsidiary of state-owned Saudi Arabian Airlines, canceled a provisional order for 20 of its Max 737 jets over concerns about Boeing’s ability to deliver the planes in timely fashion. “We understand that flyadeal will not finalize its commitment to the 737 MAX at this time given the airline’s schedule requirements,” a Boeing spokesperson said, according to Reuters.
The deal would have earned the company billions of dollars. The list price for the 20 Max 737s, each of which costs about $117 million, would normally run $5.9 billion, though Flyadeal would have gotten an undisclosed discount.
Boeing’s loss is Airbus’s gain. The budget Saudi airline is going instead with the Airbus 320. Flyadeal announced in a statement today that it will run an all-Airbus 320 fleet in the future and expects to add 30 such jets to its current collection by 2021, Reuters states.
Meanwhile, Boeing is trying to pick up the pieces after a disastrous year. Last week, the company announced that it would pay out $100 million to a fund for families of victims of the crashes, separate from any lawsuits over the matter. The fund would to support ”education, hardship and living expenses for impacted families, community programs, and economic development in impacted communities,” according to a statement by Boeing CEO Dennis Muilenberg. He apologized to the victims’ families, saying, “We at Boeing are sorry for the tragic loss of lives in both of these accidents and these lives lost will continue to weigh heavily on our hearts and on our minds for years to come.”
In June, ahead of the Paris Air Show, Muilenberg admitted for the first time that his company mishandled concerns over its 737 Max aircraft and that mistakes were made in how it communicated about the planes, especially after the accidents. He said that Boeing is focused on rebuilding trust after the crashes, which he called a “defining moment” that will result in a “better and stronger” organization. He noted, too, that he didn’t expect to see many orders for 737s at the air show but expected global aviation regulators to allow the plane, grounded since March, to fly again before the end of the year.
On June 18, things seemed to be looking up for Boeing. IAG, which owns British Airways, signed a letter of intent to purchase 200 Max 737 jets from Boeing. It wasn’t a firm deal but was widely seen by industry insiders as a vote of confidence and a sign that the company would soon recover from its recent woes. “We have every confidence in Boeing and expect that the aircraft will make a successful return to service in the coming months having received approval from the regulators,” wrote IAG CFO Enrique Dupuy de Lôme in the letter.
But it seems that this confidence isn’t shared by all, as evidenced by the Flyadeal cancellation. In April, Boeing had said it would slow production of 737s, scaling back from 52 to 42 jets per month. Judging from the recent news, the slowdown was merited.
Bombardier expects to begin deliveries of its new Learjet 75 Liberty in 2020.
(Photo by Bombardier)
Bombardier today announced the Learjet 75 Liberty as its newest offering in the storied business jet brand. It’s “a rescoped aircraft that’s going to be cost-competitive from an operating cost perspective but also purchase cost perspective with Part 23 light jets,” Bombardier Business Aircraft spokesman Mark Masluch told AIN. To accomplish this, the Liberty will have fewer seats and options than the original Learjet, shaving about $3 million off the price tag while keeping the performance, the Canadian airframer said.
Bombardier hopes the lower price tag will drive a new segment of buyers to the Wichita-assembled aircraft, which has seen steadily declining deliveries over the past five years to just a dozen last year, according to data from the General Aviation Manufacturers Association.
At $9.9 million, the Liberty sheds two seats in the forward cabin—for a total of six seats—replaced by two fold-down ottomans and fold-out tables, creating what it calls the “executive suite” for the two remaining seats in the forward section of the cabin, which is separated from the cockpit by a sliding pocket door. In the aft cabin, the four remaining seats are placed in a club configuration.
“You’re getting a light jet that not only flies faster, flies farther but [also] has the largest seated room in the cabin [in the light-jet category],” Masluch added.
The jet retains its 51,000-foot ceiling and its two Honeywell TFE731-40BR engines, each with 3,850 pounds of thrust. High-speed cruise remains Mach 0.79 but range improves by 40 nm to 2,080 nm with NBAA IFR reserves. Also standard on the Liberty is the Bombardier Vision flight deck with the recently announced upgrade to the jet's Garmin G5000 avionics, as well as Gogo ATG 4G wireless connectivity. Deliveries are expected to begin in 2020.
What was standard on the Learjet 75 will be optional on the Liberty, such as the APU and external lights, Masluch explained. “It’s a little bit more flexible approach to the program that allows us to get in the price range to more directly compete with light jets in the Part 23 realm,” he said, noting that the Liberty will retain the Learjet 75’s Part 25 certification.
Liberty essentially replaces what the market has known as the Learjet 75. Customers who would want a Learjet 75 would simply order the options that come with the Liberty, as well as an eight-seat cabin.
“Having a product that’s competitive and aligned with market demand is going to really help stabilize the long-term manufacturing part of the Wichita site,” Masluch added. “This really kind of provides a lot of leg room in terms of our production capacities for Learjet aircraft with a product that’s rightly scoped for the market and competes more directly with light jets that are Part 23 certified.”