HSBC Global Research: AirAsia Earnings Plans Rise Joint Venture with Domestic Firm to Develop By Domestic Business

The earnings of AirAsia, the leading low-cost carrier in Asia is supported by Malaysia’s domestic business, says HSBC Global Research.

In its research note on “Asian Airlines”, HSBC Global Research said AirAsia’s planned listing of joint ventures in Indonesia and Thailand, will help reduce strain on the balance sheet.

“The prospects of contributions from joint ventures listing is rising,” it added.

On the risk side, HSBC Global Research said a strengthening of the US dollar versus the ringgit, will negatively impact business.

“Earnings are sensitive to a further rise in fuel prices,” it added.

HSBC Global Research has a overweight call on AirAsia.

On the airline industry, HSBC Global Research said economic uncertainties and collapsing share prices, normally signal the best time to revisit the Asian airlines.

“Timing the cycle will be more complicated than in the first quarter of 2009, but similar valuations suggest stocks are attractive,” it added.

The focus of HSBC Global Research was on Asian premium carriers, namely Cathay Pacific Airways and Singapore Airlines.

It has upgraded Cathay Pacific to an overweight from neutral amid its strong home base, which is the best positioned gateway into southern China, while the weakening Hong Kong dollar should provide a superior medium-term outlook.

HSBC Global Research also upgraded Singapore Airlines to neutral from underweight as it believes the airline will remain profitable over the next year due to its strong brand and high margin at home.

Emirates Airlines Reported Full Year Profit Increase 51.2 percent as Premium Travelers Traffic Growth

The parent of Emirates Airline on Tuesday reported a 51.2% rise in full-year profit as the world’s largest international carrier by traffic saw business from premium travellers return to pre-crisis levels.

The Dubai-based airline shrugged off the impact of turmoil in the Middle East and North Africa as traffic through its hometown hub surged, with double-digit gains in both passenger and cargo volume.

Emirates’ rapid expansion and huge order book–at $66 billion it accounts for 10% of outstanding commercial business at Airbus and Boeing Co. (BA)–makes it a key barometer of the global airline industry.

The airline’s operating margin of 9.9% in its fiscal year to Mar. 31 topped almost every other large international airline, and the record earnings saw a four-fold rise in the bonus paid to staff to an equivalent of 12 weeks pay, pushing labor expenses up 20%

“We are fortunate to be based in the Middle East where regional passenger seats grew by 17.8% compared to a global 8.2% growth,” said Sheik Ahmed Bin Saeed Al Maktoum, chairman of the state-controlled group.

Sheik Ahmed said profit would have been AED1 billion ($272 million) higher had it not been for the increase in oil prices, with fuel expenses last week accounting for a record 43% of operating costs.

Transfer traffic through Dubai accounts for around 60% of the airline’s total business, with passenger numbers up 15% to 31.4 million over the past year, and cargo rising almost 12%.

Emirates and rivals such as Abu Dhabi-based Etihad Airways and Qatar Airways have capitalized on their geographical location to use new long-range aircraft to funnel business through their hubs.

Nigel Page, Emirates head of the Americas, said the airline has leveraged changing trade patterns to capture business, with flows to and from Africa now going through the Gulf rather than via European airports.

The Americas was Emirates’ fastest-growing region last year with revenue up 37.9% while sales in its largest geographical area of operations–east Asia and Australiasia–rose by 30.9%.

Business in the Gulf and the Middle East was still up 14.2% despite regional turmoil which saw flights to Tunisia temporarily halted, while Libyan services remain shuttered. Flights to the Ivory Coast resume on May 12.

Page said the regional problems had actually helped Dubai’s financial recovery after its own debt crisis as companies relocated staff to the emirate.

Emirates Group reported net profits of AED5.46 billion in 2010/11 compared with AED3.62 billion a year earlier, with revenue–which includes its airport and travel arms–up 29 at 53.1 billion.

The airline unit’s passenger seat factor, a key measure of capacity utilisation, rose to a record 80%, from 78.1% in the year before, with profit rising to $1.5 billion from $964 million on a 25% rise in revenue. Capacity rose 15.8%.

Emirates expect delivery of six Airbus A380s and 13 Boeing 777 planes this year, while four new routes will be added: Geneva, Copenhagen, Buenos Aires and Rio de Janeiro. It is the largest operator of both aircraft types.

Last week, Sheik Ahmed said the government-owned airline is in no hurry to sell shares to the public. He said the decision on whether to launch an initial public offering rests with the government, but ruled out any IPO in either 2011 or 2012.

American, British and Iberia Promise Better Deals on Trans-Atlantic Flights

A new airline alliance announced better deals on flights between the US and Europe.

Reportedly, more access to cheaper fares, bigger choice of flight times and easier connecting journeys shall become reality for transatlantic fliers with the launch of the new joint business between American Airlines, British Airways and Iberia.

According to media reports, the CEOs of the three oneworld® airlines met in London for the official start of the new trilateral relationship, which enables oneworld to compete far more effectively with other global alliances on routes between Europe and North America.

The new routes: American Airlines, British Airways and Iberia announced four new routes that will start from next April as an early benefit of the new joint business. They are: New York JFK-Budapest and Chicago-Helsinki (operated by American), London Heathrow-San Diego (operated by British Airways) and Madrid-Los Angeles (operated by Iberia).

The participating airlines have also placed code shares on a significant number of additional routes, greatly increasing the number of destination choices available to customers. American will add its code to 322 British Airways and Iberia flights serving 101 destinations, British Airways will add its code to 2063 American and Iberia flights serving 181 destinations and Iberia will add its code to 354 American and British Airways flights serving 96 destinations.

There will be further opportunities to increase code shares in the future. In total, customers will be able to travel more easily on the airlines’ combined route network, which will serve more than 400 destinations in 105 countries with around 5,200 daily departures.

Additional customer benefits include:
- Greater access to a wider choice of fares
- Coordinated schedules on joint routes to provide customers with better flight choice and timings
- Dedicated support teams for customers transferring at five of the airlines’ hubs: New York JFK, London Heathrow, Madrid, Chicago and Miami.
- Online check in and boarding pass printing with either the airline operating the flight, or the one the ticket was booked through
- Integrated online flight information on all three airlines’ websites
- Increased opportunity to earn and redeem frequent flyer benefits on transatlantic flights
- More integrated account management for corporate customers

Gerard Arpey, chairman and chief executive of AMR Corp, the parent company of American Airlines, emphasized: “We’ve been waiting for 14 years to be able to bring these benefits to our customers and it’s great news that we can now put our plans into action. Our revenue-sharing partnership will further boost one world, in what has been a momentous year for the alliance, and enable us to reduce costs and attract new business. It will provide additional stability for the airlines and our customers, employees and shareholders and allow us to invest in new products and services”.

Air New Zealand Increase Net Profits end of June $58 million, Signal Airline Industry Recovery

Air New Zealand has reported a fourfold increase in profits, leading signs of recovery in the airline industry.

The flag carrier said net profits for the year to the end of June totalled 82m New Zealand dollars ($58m; £37m), up from NZ$21m in the previous year.

In a busy day for company reporting, airlines elsewhere in the world also delivered positive news.

Both Air China and Australian budget carrier Virgin Blue also reported a recovery in profits.

Air China, one of China’s three major state-owned airlines, said its profits in the first half of the year were up 60% on last year, when the global economic downturn hit passenger numbers.

Virgin Blue also reported a return to profit in the last 12 months.

Net profits for the year were up to 21m Australian dollars ($19m; £12m), the carrier said, following the A$160m loss recorded a year ago.
Passenger demand rises

But despite the improvement in profits, the airlines remain cautious over the outlook for the industry.

“Conditions continue to be volatile [and] the soft growth seen at the end of the fiscal year is not sufficient to suggest a consistent across-the-board improvement in conditions,” warned Virgin Blue in a statement.

Air New Zealand’s chairman also admitted that continued uncertainty in the strength of the global economic recovery had suppressed demand for air travel.

Much of its profits came from cost cutting, which saw operating costs reduced by nearly NZ$600m over the year, and lower fuel bills.

But Air New Zealand insisted that there were “signs of recovery”, with demand for air travel expected to continue to gradually improve.

Earlier this week, figures from the International Air Transport Association (Iata) suggested that growth in demand for air travel was continuing to rise.

International passenger demand was 9.2% higher in July than a year earlier, while international scheduled freight traffic was up 22.7%.

But Iata’s director general Giovanni Bisignani warned that continued growth would still depend on the strength of the recovery in the wider economy.

“The recovery in demand has been faster than anticipated. But, as we look towards the end of the year, the pace of the recovery will likely slow [and] further growth will be largely determined by consumer spending which remains weak,” he said.

In Europe, Germany’s second biggest airline Air Berlin gave further details of its second quarter earnings.

On Tuesday, it said the disruption caused by the cloud of volcanic ash that crossed Europe in May had pushed it into the red between April and June.

Revenue for the three months fell to 877m euros ($1.1bn; £718m) from 935m euros a year earlier, meaning losses for the period totalled 57m euros against a profit of 4.7m euros a year ago.

Continental Airlines Chairman : Struggling Airlines Look To Serve Airports With Low Fees

Continental Airlines Chairman and CEO Larry Kellner said yesterday that while the airline industry has seen slight economic improvement this year as fuel costs have lowered and credit markets have loosened, “we’re still bouncing along the bottom.”
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Global Airline Industry Slight Increase In August 2009

Capacity in the global airline industry showed a slight increase in August 2009, the first recorded monthly growth for a year.

That is according to the latest research from OAG, which revealed airlines have 314.2 million seats on offer this month, a rise of 0.2 per cent over August 2008 levels.
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