Tag: Reuters (Page 28 of 49)

United Technologies & Raytheon to Create Defense Giant

June 10, 2019 / WIL BALDWIN

United Technologies, Raytheon to create $120 billion aerospace and defence giant

(Reuters) – United Technologies Corp agreed on Sunday to combine its aerospace business with U.S. contractor Raytheon Co and create a new company worth about $121 billion, in what would be the sector’s biggest ever merger.

The deal would reshape the competitive landscape by forming a conglomerate which spans commercial aviation and defense procurement. United Technologies provides primarily commercial plane makers with electronics, communications and other equipment, whereas Raytheon mainly supplies the U.S. government with military aircraft and missile equipment.

While United Technologies and Raytheon have some common customers, their business overlap is limited, an argument the companies plan to make once U.S. antitrust regulators start scrutinizing the merger.

However, the two major commercial aircraft makers, Boeing Co and Airbus SE, as well as the Pentagon, have been known to use their significant purchasing power to seek concessions from their suppliers and may not welcome a potential lessening in competition among them.

When United Technologies rebuffed an acquisition offer from Honeywell International Inc in 2016, United Technologies chief executive Greg Hayes justified the decision partly by predicting that Boeing and Airbus would never accept having a supplier that would “build the plane from tip to tail.”

United Technologies has said it is on track to separate its Carrier air conditioning and Otis elevator businesses, leaving the company focused on its aerospace business through its $23 billion acquisition of Rockwell Collins, which was completed in 2018, and the Pratt & Whitney engines business.

Chinese authorities scrutinized the acquisition of airplane parts maker Rockwell Collins closely, given the companies’ footprint in that country’s market. This resulted in the deal closing in November 2018, as opposed to the targeted third quarter.

Trade tensions between the United States and China were blamed at least partly by analysts for that delay, but a source close to the deal said the companies did not expect this to be repeated because Raytheon does not do business in China.

Under the deal announced on Sunday, Raytheon shareholders will receive 2.3348 shares in the combined company for each Raytheon share. The merger is expected to result in more than $1 billion in cost synergies by the end of the fourth year, the companies said.

United Technologies shareholders will own about 57% of the combined business, called Raytheon Technologies Corporation, which will be led by Hayes. Raytheon shareholders will own the remaining stake, and Raytheon CEO Tom Kennedy will be named executive chairman. The companies negotiated the terms over several months, according to the source, who requested anonymity discussing the confidential deliberations.

The deal has been structured so that no shareholder of either company will receive a premium. United Technologies and Raytheon have market capitalizations of $114 billion and $52 billion, respectively.

The deal is expected to close in the first half of 2020.

The newly created company is expected to return between $18 billion and $20 billion of capital to shareholders in the first three years after the deal’s completion, the companies said. The new company will also assume about $26 billion in net debt, they added.

DEFENSE SPENDING RISE

Raytheon, maker of the Tomahawk and the Patriot missile systems, and other U.S. military contractors are expected to benefit from strong global demand for fighter jets and munitions as well as higher U.S. defense spending in fiscal 2020, much of it driven by U.S. President Donald Trump’s administration.

However, Pentagon spending is projected to slow down after an initial boost under Trump. A deal with United Technologies would allow Raytheon to expand into commercial aviation.

Conversely, United Technologies could benefit from reducing its exposure to commercial aerospace clients amid concerns that the rise of international trade protectionism will suppress economic growth and weigh on the flow of goods through air traffic.

The International Air Transport Association, which represents about 290 carriers accounting for more than 80% of global air traffic, cited these concerns earlier this month, when it said the industry is expected to post a $28 billion profit in 2019, down from a December forecast of $35.5 billion.

The deal with Raytheon could put pressure on General Electric Co, which competes with United Technologies for commercial aerospace clients, to seek scale. It could also push other defense contractors, such as Lockheed Martin Corp, to explore expanding their commercial businesses.

Last year, military communication equipment providers Harris Corp and L3 Technologies Inc announced an all-stock merger that, once completed, will create the sixth-largest U.S. defence contractor.

Morgan Stanley, Evercore Inc and Goldman Sachs Group Inc were financial advisers to United Technologies, while Wachtell, Lipton, Rosen & Katz was its legal adviser. Citigroup Inc was financial adviser to Raytheon, and RBC Capital Markets LLC provided a fairness opinion. Shearman & Sterling LLP was legal adviser to Raytheon.

(Reporting by Harry Brumpton and Kate Duguid in New York; Additional reporting by Mike Stone in Washington and Rama Venkat in Bengaluru; Editing by Richard Chang and Rosalba O’Brien)

Bulgaria Sees F-16 Jet Deal With U.S. at $1.2 Billion

June 4, 2019 / WIL BALDWIN

Defence Minister says $1.2 bln is a reasonable price
Final talks to start once Bulgaria gets draft contract
Cost will be based on final Bulgarian requirements-U.S. Embassy (Adds defence minister comment, U.S. embassy to Sofia)

SOFIA, June 4 (Reuters) – NATO member Bulgaria expects the United States to offer to sell it eight new F-16 fighter jets for its air force at a discounted price of $1.2 billion, the defence ministry said on Tuesday.

The U.S. State Department approved the possible sale of eight F-16 aircraft and related equipment at an estimated cost of $1.67 billion, a Pentagon agency said on Monday.

Bulgaria, which is also a member of the European Union, is looking to replace its ageing Soviet-made MiG-29s and improve compliance with NATO standards.

A deal for Lockheed Martin’s F-16 Block 70 would be the Balkan country’s biggest military procurement since the fall of Communist rule some 30 years ago.

The defence ministry said the U.S. approval outlined the upper threshold of the cost and it expected a draft contract from Washington within two weeks.

“There is a two-week timeline in which the U.S. government will present to Bulgaria a draft Letter of Offer and Acceptance in which the expected price for the eight jets with a package of necessary related equipment will be within $1.2 billion,” the ministry said in a statement.

The expected price comes above the initial estimate for the deal at 1.8 billion levs ($1 billion) but the Bulgarian parliament has given the defence ministry a green light to go over that.

Defence Minister Krasimir Karakachanov said that the deviation from the initial budget should not be big.

“About 2 billion levs ($1.2 billion) is the upper threshold of a reasonable price,” he told reporters.

The U.S. Embassy in Sofia said that the Departments of State and Defense allow for a margin in all notifications to the U.S. Congress and that the actual cost will be based on Bulgaria’s final requirements.

Final talks on the deal will start once Sofia receives the draft contract. The cost’s reduction would most likely be achieved by scaling down some of the related equipment, local analysts say.

“At that stage…the Bulgarian government may re-scope and re-define the requirements before arriving at the ultimate cost,” the embassy said in a statement. ($1 = 1.7397 leva)

(Reporting by Tsvetelia Tsolova Editing by Keith Weir)

American Airlines & Qantas Win Tentative U.S. Approval

June 3, 2019 / WIL BALDWIN

WASHINGTON (Reuters) – American Airlines Group Inc and Qantas Airways Ltd have been given the U.S. government’s tentative approval to operate a joint venture after a prior effort was rejected in 2016.

The U.S. Department of Transportation on Monday issued an order tentatively approving the joint business agreement and tentatively granting antitrust immunity to the airlines covering international service. An application for a joint venture covering the United States, Australia and New Zealand was rejected by former President Barack Obama’s administration.

The deal would allow the airlines to coordinate their planning, pricing, sales and frequent flyer programs, with new options and customer service improvements. The airlines planned up to three new routes within the first two years and increased capacity on existing routes, the department said.

American Airlines said a final decision is expected in the coming weeks.

“The joint business will also create additional jobs at our respective companies and in the industries we serve,” said American Chairman and Chief Executive Officer Doug Parker.

The department will require the airlines perform a self-assessment of the joint venture’s impact on competition seven years after it takes effect and report their findings to the government, which could subsequently take action.

Regulators in Australia and New Zealand approved the first application for the joint venture before it was initially rejected by the U.S. Transportation Department.

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 is an arrangement between airlines in which two or more carriers publish and advertise a single flight under their own flight number.

The airlines argued in their 2018 application that the venture would lead to a reduction in fares and higher capacity as a “more viable third competitor” and require other carriers to respond with improvements in 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. regulators in 2001 approved similar joint venture agreements for United and Air New Zealand Ltd and in 2011 for Delta Air Lines Inc and Virgin Australia.

(Reporting by David Shepardson; Editing by Dan Grebler and Grant McCool)

An American Airlines Boeing 737-800 airplane takes off at Simon Bolivar International Airport in Caracas, Venezuela January 25, 2019. REUTERS/Andres Martinez Casares

Qantas Expects Final Proposals for Sydney-London Jet

June 3, 2019 / WIL BALDWIN

Airline could place an order for A350 or 777X by year end
21-hour flight would be the world’s longest
Qantas plans economy class section, including stretching zone (Adds details on aircraft configuration)

SEOUL, June 3 (Reuters) – Qantas Airways Ltd has asked Airbus SE and Boeing Co to present their “best and final offer” for planes capable of flying 21-hours non-stop from Sydney to London by August, the airline’s chief executive said on Monday.

“Hopefully by the end of the year … we will come to a conclusion one way or another,” Qantas CEO Alan Joyce told reporters on the sidelines of an airline industry conference in Seoul. “If the business case works we will put in an order.”

Qantas is aiming for the planes to be delivered from late 2022, with the first Sydney-London flights likely in 2023, he said. The route would be the world’s longest commercial flight and Qantas is examining A350 and 777X models.

The airline is in talks with pilots about changing a labour contract to increase productivity to help support the business case for an order, Joyce said.

Qantas plans to have four service classes on the airplane, including first, business, premium economy and economy, with a zone for economy and premium economy-class passengers to stretch and hydrate, he said.

Singapore Airlines Ltd has only business class and premium economy on the world’s current longest route, from Singapore to New York.

Joyce said Qantas’ success in selling around 90% of economy-class seats on its Perth-London flights showed there was demand for economy class on the even longer Sydney-London route.

“There still will be a large economy,” he said.

Qantas also planned other routes with the new jets such as Melbourne-London, Sydney-New York and possibly flights from the east coast of Australia to other cities in Europe, the U.S. east coast and Brazil, he said.

(Reporting by Jamie Freed; Editing by Stephen Coates)

Aeroflot Scales Back Superjet Flights After Fatal Crash

June 3, 2019 / WIL BALDWIN

Sukhoi plane crash-landed on May 5, killing 41
Investigation into crash is ongoing
Aeroflot has flown at least 129 fewer Sukhoi flights since the crash
Petition to ground plane has over 200,000 signatures

MOSCOW, June 3 (Reuters) – Russian airline Aeroflot has scaled back the number of Sukhoi Superjet 100 flights it operates after one of its planes made a crash-landing last month, killing 41 people, according to data provided by a flight tracking website.

Flightradar24 data shows Aeroflot has also at times substituted Airbus or Boeing planes for the Superjet, the first new passenger jet developed in Russia since the Soviet Union collapsed.

Fallout from the crash risks undermining the aircraft’s reputation at a time when Russia is promoting another domestically made passenger plane, the M-21, as a rival to Boeing and Airbus.

Aeroflot and Sukhoi Civil Aircraft, the Superjet’s maker, declined to comment on the data or on the use of other aircraft instead of the Russian plane. Both the airline, Russia’s national flag carrier, and the manufacturer have said in the past that the aircraft meets all relevant international safety standards and will continue to be made and used.

The cause of the May 5 crash, the second deadly accident involving the Superjet in nine years of service, has not yet been established. Russian authorities said afterwards there was no reason to ground the Superjet.

Yet Aeroflot flew 129 – or about 7% – fewer Superjet flights in the two weeks after the crash than in the previous fortnight, the Flightradar24 data showed.

In one case, frightened passengers on a Sukhoi refused to continue their journey after an aborted take-off, forcing Aeroflot to lay on an Airbus instead, an airline industry source with direct knowledge of the matter said, a version of events corroborated separately by Russia’s RIA news agency.

Aeroflot after the crash began paying extra attention to safety checks and to scale back the Superjet’s usage to try to reassure passengers, the same source said.

More than 213,000 people have signed a petition demanding the plane be grounded since May 5.

‘WHO NEEDS IT?’

Some Russian and foreign operators have complained about the difficulty of servicing the Superjet due to delays in sourcing spare parts. Irish airline CityJet and Belgian carrier Brussels Airlines turned their back on the Superjet citing those reasons.

State officials and airline executives say the airliner spends about half its time on the ground undergoing maintenance, and can fly only about a third as much as foreign-made rivals in a 24-hour period when in use.

They blame a lack of readily available spare parts and the complexity of servicing its engines.

Vitaly Savelyev, Aeroflot’s CEO, told Russian news agency TASS in 2017 that his company, which is majority-owned by the Russian state, might not have bought the Superjet at all if it was a private company.

Aeroflot, which has promised to buy a further 100 Superjets on top of the 49 it has already, is in a difficult situation because of the project’s political importance for Russia.

There are signs however that even some allies of President Vladimir Putin are growing weary of the aircraft.

Valentina Matviyenko, speaker of the upper house of parliament, in November publicly rebuked the transport minister over the large sums she said had been pumped into the Superjet in vain.

Russian newspaper Novaya Gazeta estimated in 2012 that $7 billion had been spent on the project, while Sukhoi has put the figure at $2 billion.

“Who needs it? … It’s not good for anything,” said Matviyenko. “Aeroflot says we bought them and they sit on the ground. Nobody abroad is buying them … What have we achieved?”

Mexican low-cost carrier Interjet, citing maintenance and parts problems, told Mexican daily newspaper El Universal just over a week after the crash that it was trying to sell its 20 Superjets and favoured Airbus 320s instead.

Regional carrier Yamal Airlines, Russia’s second biggest Superjet operator after Aeroflot, said a day after the crash that it was cancelling its planned purchase of 10 of the planes. It cited high servicing costs.

And RusLine, another regional carrier, told Kommersant it was scrapping provisional plans to obtain 18 Superjets as part of a leasing deal. The paper cited RusLine’s owner Nikolai Ulan as saying he thought the plane was safe but that passengers would be afraid to fly on it, making it harder for him to break even. RusLine did not respond to a request for comment.

PASSENGER FEARS

The Superjet, which entered service in 2011, is predominantly operated inside Russia by regional airlines, corporations and government entities. Sukhoi had hoped to sell hundreds, but slack demand means only 138 of the planes are in use.

On the Moscow-Murmansk route, the one taken by the plane involved in the fatal crash, Aeroflot replaced the Superjet with either Boeing 737s or Airbus A320s in the five days after the accident, a practice it partially continued the week after.

This was done in direct response to the crash in order to try to calm passenger fears, the same airline source said.

There have been a spate of safety-related incidents and cancellations since May 5.

In one case, a Superjet flight from Moscow to Riga was held up after passengers noticed a burning smell and demanded a new plane. Engineers found nothing wrong, one of the passengers told state TV.

In another, on May 18, passengers on a Moscow-bound flight from the city of Ulyanovsk took fright after their Superjet aborted take-off because of a warning about the hydraulic system.

“Passengers were told that the flight was being delayed for technical reasons. Of course, after the catastrophe, they started to panic and refused to fly on the same plane. The psychological factor came into play,” the airline source with direct knowledge of the situation told Reuters.

Aeroflot flew the passengers to Moscow the next day on an Airbus A320 and engineers found nothing wrong with the Superjet involved in that incident either, the transport prosecutor’s office said.

Yevgeny Dietrich, Russia’s transport minister, said the situation was not “radically changed” from the pre-crash period.

“In fact, delays and cancellations occurred previously. You simply wrote about them less,” Dietrich told reporters.

His statement and the crash have highlighted the fact that many Superjets do not fly very often.

Flightradar24 data shows that 37 of 127 Superjets in commercial use globally did not make a single flight from April 22 until May 19, and that 45 did not make more than 10 flights during that period.

That tallies with expert reports, which have said foreign-made planes in Russia average nine hours flying time in every 24-hour period compared to between just three and four hours for the Superjet.

The same industry source said only about 50% of Aeroflot’s Superjets flew regularly and that Superjet pilots, who are paid for completed flights, had their salaries topped up to compensate for time spent on the ground.

(Writing by Andrew Osborn and Gleb Stolyarov; Editing by Giles Elgood)

CORRECTED – Azerbaijan Cancels $1 Billion Boeing Contract

June 3, 2019 / WIL BALDWIN

(Corrects “cancels” to “plans to postpone” in the first paragraph after AZAL changed its comment. Removes quote)

MOSCOW, June 3 (Reuters) – Azerbaijan airline AZAL plans to postpone a $1 billion contract with Boeing to purchase 10 737 MAX jets, a spokesman said on Monday, following fatal crashes involving the aircraft in Ethiopia and Indonesia.

Boeing’s top-selling aircraft, the 737 MAX, has been grounded worldwide since the March 10 disaster, which killed 157 people and came just five months after a Lion Air crash in Indonesia that killed 189 in a plane of the same model.

Many countries barred 737 Max jets from taking off or landing at local airports.

(Reporting by Nailia Bagirova; writing by Margarita Antidze)

JetBlue in Talks With Airbus on A321XLR Airplane

June 3, 2019 / WIL BALDWIN

SEOUL (Reuters) – JetBlue Airways Corp is in discussions with Airbus SE about the European planemaker’s plans for a longer-range version of its A321neo family as it prepares to jump into the transatlantic market, Chief Executive Robin Hayes said on Monday.

The sixth-largest U.S. carrier has 85 A321neo aircraft on order, of which it has already decided to convert 13 into a longer-range version called the A321LR for its planned launch of daily flights from New York and Boston to London in 2021.

But if the low-cost carrier decides to fly to other European cities such as Brussels or Amsterdam, it will need a plane with more stamina. It is studying the A321XLR, which Airbus has been promoting ahead of a formal product announcement in June.

“London is the biggest opportunity because it has the highest fares, but there would be other opportunities if we had an airplane that had more range. The XLR gives us more range,” Hayes said on the sidelines of a global airlines meeting in Seoul.

“We’re still working through how many aircraft it would be (but) any XLRs would be linked to the planes we have on order today,” he told Reuters in an interview, adding any purchases would be converted from existing orders rather than generating completely new ones. No decision has yet been taken.

JetBlue is betting on its Mint business class product for narrowbody aircraft to succeed in the highly competitive premium transatlantic market. As of now, its U.S. customers have to fly to London on rival carriers where business class seats can cost as much as $12,000.

In the United States, JetBlue has argued that its Mint seats have driven a 50 percent decline in premium fares on some competing routes, and by sticking with narrowbody jets Hayes believes seats will be full.

U.S. carriers like American Airlines Group Inc and United Airlines service London with widebody aircraft that Hayes said can be tough to fill during off-peak travel.

“The transatlantic market is very seasonal. In the summer you tend to do very well but in the winter you’re flying a bunch of empty seats, so the LR helps us manage significantly the risk of the winter because we’re not flying such an expensive airplane.”

A handful of Europe-based budget carriers have tried to penetrate the transatlantic market in recent years, but only cash-strapped Norwegian Air is still standing.

Hayes said he expects to work on code-share agreements with partners that have a strong presence in Europe, where the airline wants to eventually build up its brand.

A number of JetBlue’s 50 airline partners have already reached out, he said.

(Reporting by Tracy Rucinski; Editing by Tim Hepher, Christopher Cushing)

Seven South Koreans Dead in Danube River Boat Disaster

May 31, 2019 / WIL BALDWIN

BUDAPEST (Reuters) – Hungarian rescue officials said there was little chance of finding survivors after a boat with South Korean tourists on board sank on the Danube River in Budapest, with seven people confirmed dead and 21 missing.

The boat was cruising when it collided with a larger luxury passenger boat during a rainstorm on Wednesday evening, causing it to capsize and sink with 33 South Korean tourists and tour guides and two Hungarian crew aboard.

“I wouldn’t say there is no hope, rather that there is a minimal chance (of finding survivors),” Pal Gyorfi, a spokesman for the Hungarian national ambulance service, told the M1 state broadcaster.

“This is not just because of the water temperature, but (also) the strong currents in the river, the vapor above the water surface, as well as the clothes worn by the people who fell in,” he added.

Police said the smaller boat turned on its side and sank within seconds of the collision under a bridge near Hungary’s parliament building.

They said a criminal investigation was under way to determine the cause of the accident. Police declined to say if the bigger vessel, the 135-meter (443 ft) Viking Sigyn, put out any signals for help.

Police said its investigation yielded evidence that raised personal responsibility, so it questioned the Viking Sigyn captain, a 64-year-old Ukrainian, as a suspect, and later moved to take him into custody for reckless misconduct in waterborne traffic leading to mass casualties.

Police said it initiated the formal arrest of the captain, identified as C. Yuriy from Odessa.

Officials said the hull of the Mermaid, a 27-meter (89-ft) double-decker river cruise boat, had been found on the riverbed a few hundred meters from its usual mooring point.

A crane ship docked near the wreck on Thursday in preparation for recovery operations and divers prepared equipment. Police said the rescue efforts were hampered by high water levels, strong currents and bad visibility.

“Those who were trapped in the hull or were stuck underneath can be lifted only once the wreckage is pulled out,” a police statement said.

Hungarian Prime Minister Viktor Orban offered his condolences to Seoul. South Korean President Moon Jae-in said the authorities would work with the Hungarian government to investigate the cause of the accident.

“What’s most important is speed,” Moon said in Seoul.

Some South Korean relatives of those on board started to depart for Hungary. Several family members were seen at Incheon International Airport in Seoul on Thursday night.

South Korean rescue teams and officials including South Korean Foreign Minister Kang Kyung-wha also left for Budapest on Thursday. She will hold a news conference with Hungarian Foreign Minister Peter Szijjarto at 0730 GMT on Friday.

Reporting by Gergely Szakacs, Marton Dunai and Krisztina Than; Additional reporting by Hyonhee Shin, Joyce Lee, Do Gyun Kim and Minwoo Park in SEOUL; Editing by Jon Boyle, Ros Russell and Richard Chang

Turkey Says No Delays in Delivery of Russian S-400’s

May 31, 2019 / WIL BALDWIN

ANKARA, May 31 (Reuters) – The delivery schedule for Russia’s S-400 missile defence systems to Turkey is continuing as planned, Turkish Foreign Ministry Spokesman Hami Aksoy said on Friday, dismissing reports of delay.

The U.S. and Turkey have been at odds over Ankara’s decision to purchase the S-400’s, which Washington says are not compatible with NATO systems and poses a threat to the F-35 stealth fighter jets. Ankara has proposed to form a working group to assess the U.S. concerns, but has not received a response yet.

On Monday, broadcaster Haberturk quoted Turkish Defence Minister Hulusi Akar as saying that the delivery of the S-400’s may not happen in June, when Turkey previously said the missiles were due to arrive, but added the agreement was a done deal.

“Reports in some media outlets about Turkey evaluating delaying the S-400 procurement upon the request of the United States do not reflect the truth,” Aksoy said in a statement, adding that Ankara’s offer for a joint working group with Washington was still valid.

(Reporting by Tuvan Gumrukcu and Ece Toksabay)

AirAsia in Talks to Buy Proposed New Airbus A321XLR

May 31, 2019 / WIL BALDWIN

May 31 (Reuters) – Malaysian low-cost carrier AirAsia is in negotiations to buy a proposed new longer-range version of the best-selling Airbus A321 passenger jet, two people familiar with the matter said.

Airbus has begun tying up customers for the A321XLR ahead of a possible formal announcement of the modified version at the Paris Airshow in June, though the timing of any deal between Airbus and AirAsia remains unclear.

Airbus declined to comment. AirAsia was not available for comment.

(Reporting by Tim Hepher; editing by Richard Lough)

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