PARIS (Reuters) – Airbus <AIR.PA> deliveries rose 50% in June compared with May and reached their highest level since the coronavirus crisis spread to Europe in March, but the accelerating recovery failed to prevent first-half deliveries from sliding to a 16-year low.
Figures released by the European planemaker late on Wednesday underscored a collapse in aerospace industry fortunes since early this year, hours after Airbus workers facing job cuts staged their first strike in 12 years.
Deliveries rose to 36 aircraft in June from 24 in May and a low of 14 in April. For the first half, deliveries fell by 49% to 196 planes compared with 389 in the same period last year.
Airbus has said it faces an average 40% drop in business over the next two years, forcing it to cut 15,000 jobs, or 11%, of its workforce. Unions oppose compulsory cuts.
Facing a slump in demand, planemakers have been urging airlines to take planes that have already been built in return for agreement to defer others due at later dates.
Some aircraft, however, are going straight into storage because travel demand is recovering slowly, experts say.
June’s figures suggested negotiations were partially paying off as Airbus handed over three wide-body A350-900 aircraft for European airlines despite a glut of large jets.
But deliveries of many other wide-body aircraft at Airbus and U.S. rival Boeing <BA> remain hampered by weak demand for long-haul travel as a result of the crisis.
Sources said last month that Airbus had sent out dozens of default notices to airlines in a bid to keep deliveries moving.
With airlines focusing on survival, Airbus posted no orders for a second month.
Gross orders so far this year remained at 365 jets, but net orders adjusted for cancellations slipped by one unit to 298, after lessor Avolon cancelled one of 10 A330neos it has ordered.
(Reporting by Tim Hepher and Benoit Van Overstraeten; Editing by Chizu Nomiyama and Leslie Adler)
DEARBORN, Mich. (Reuters) – Investors sent Ford Motor Co shares skidding on Tuesday after the company delivered a weaker-than-expected 2020 forecast, warning of higher warranty costs, lower profits at its credit arm and continued investments in future technology such as self-driving cars.
Shares in the No. 2 U.S. automaker plunged 9.4% in after-hours trading, shaving more than $3 billion off the company’s value. In comparison, electric carmaker Tesla closed up nearly 14%, pushing its market cap to $160 billion, more than four times the size of Ford’s $36.4 billion.
“The results were not OK in 2019,” Ford Chief Financial Officer Tim Stone told reporters at the company’s headquarters outside Detroit.
“As I look to 2020 and beyond, I’m very optimistic,” he said, while cautioning that Ford’s lower guidance does not yet account for the potential impact of the coronavirus outbreak in China.
In an after-hours call with financial analysts, Chief Executive Jim Hackett was more blunt about the challenge of balancing Ford’s protracted turnaround efforts with its continuing work on future technology, including electric and self-driving cars.
“I don’t think this company can keep straddling the old and new worlds forever … This company has to change,” Hackett said.
Ford said it expects 2020 operating earnings to be in the range of 94 cents to $1.20 a share. Analysts were expecting $1.26 a share.
Stone said Ford expects to continue its quarterly dividend of 15 cents, which could cost the company $2.4 billion in 2020. Asked about continuing the dividend after lowering its 2020 guidance, Hackett said, “We like to return value to shareholders.”
The disappointing 2020 forecast, coming after Ford previously trimmed its 2019 outlook, is a blow for Hackett, who took the helm in May 2017.
He has been asking investors to be patient with a restructuring that has seen the formation of a wide-ranging alliance on commercial, electric and autonomous vehicles with Volkswagen AG <VOWG_p.DE> and the sale of its money-losing operations in India to a venture controlled by India’s Mahindra & Mahindra.
But by Ford’s own accounting, the restructuring is far from complete. It has booked $3.7 billion of the projected $11 billion in charges it previously said it would take, and expects to book another $900 million to $1.4 billion this year.
For the fourth quarter of 2019, Ford reported a net loss of $1.7 billion, or 42 cents a share, compared with a loss of $100 million, or 3 cents a share, a year earlier.
The quarter included a loss of $2.2 billion due to higher contributions to its employee pension plans, something it disclosed last month.
Revenue in the quarter fell 5% to $39.7 billion, above the $36.5 billion Wall Street had expected.
Ford’s adjusted free cash flow fell 67% in the fourth quarter to $500 million, including the $600 million cost of bonuses related to a new labor deal with the United Auto Workers union. The UAW deal also played a role in driving North American automotive profit margins down to 2.8% in the fourth quarter.
Ford said its operating losses in China last year totaled $771 million, including a loss of $207 million in the fourth quarter. It lost $1.5 billion in 2018. Ford’s market share in China in the fourth quarter fell to 2% from 2.3% last year.
In December, Ford said it would halve its operating loss in 2019 and nearly halve it again in 2020, followed by further improvement in 2021.
However, that forecast was before the appearance of the fast-spreading coronavirus and its crippling effects on China’s economy.
Ford’s China sales fell about 15% in the fourth quarter and 26% for the year as it continued to lose ground in its second-biggest market. Ford has been struggling to revive sales in China since its business began slumping in late 2017.
Detroit rivals General Motors Co and Fiat Chrysler Automobiles are scheduled to report their results on Wednesday and Thursday, respectively.
(Reporting by Ben Klayman and Paul Lienert; Editing by Tom Brown)
Nov 29 (Reuters) – Airlines that fly to and from Hong Kong will be able to keep their prized airport slots even if they temporarily cut capacity due to weak travel demand through March, according to the Hong Kong Civil Aviation Department.
Many airlines, including flagship home carrier Cathay Pacific Airways Ltd, South African Airways and Malaysia’s AirAsia Group Bhd have cut flights to and from Hong Kong temporarily as a result of sometimes violent anti-government protests that have led to a sharp fall in tourist and business travel demand.
More than 5,800 people have been arrested since the unrest broke out in June over a proposal to allow extraditions to mainland China, the numbers grew in October and November as violence escalated.
Under more normal conditions, it is tough for airlines to get take-off and landing slots at Hong Kong’s airport because it lacks capacity until a third runway will come into operation in 2024.
A “use-it-or-lose-it” rule stipulates an airline normally only keeps slots out of historic precedence if it can demonstrate it used them at least 80% of the time in the previous airline scheduling season.
The current winter season, which began on Oct. 27, ends on March 28, 2020.
Hong Kong’s Civil Aviation Department said in a statement to Reuters on Thursday evening that in order to provide airlines with greater flexibility in aircraft deployment to deal with the fall in passenger demand, the “use-it-or-lose-it” rule had been temporarily suspended for the winter season.
Airport Authority Hong Kong reported declines in October of 13% in passengers and 6.1% in the number of inbound and outbound flights – the steepest falls since the unrest began.
(Reporting by Jamie Freed in Sydney Editing by Marguerita Choy)
Sees first Max deliveries in October (Adds quotes; details on Max 737 delays)
DUBLIN, May 20 (Reuters) – Ryanair reported its weakest annual profit in four years on Monday and said earnings could fall further as European airlines wage what Chief Executive Michael O’Leary described as “attritional fare wars.”
After initially falling 6%, the shares made up some ground after O’Leary, who helped to develop the no-frills airline model in Europe, argued that lower fares and profitability for a couple of years were a price worth paying to boost market share and hasten consolidation.
O’Leary said the lower fares and profit were cyclical and that four or five European airlines were likely to emerge as the winners in the sector.
“Our strategy would be to keep adding capacity as quickly as we can in all the markets where we can,” said O’Leary, who has been in charge of Ryanair since 1994.
“Will it be painful for a year or two, yes it will. But will it shake out more of the competition, yes it will.”
Ryanair, Europe’s largest low-cost operator, had already signalled a sharp fall in profitability due largely to overcapacity in two warnings last year.
Its 29% fall in after-tax profits to 1.02 billion euros ($1.14 billion) for its financial year to March 31 was in line with investor forecasts.
But its profit forecast for the current financial year to end-March 2020 of between 750 million and 950 million euros, was “considerably worse than expected,” Goodbody analyst Mark Simpson said in a note.
A company poll of analysts published ahead of the release had forecast a figure of 977 million euros.
O’Leary said the forecast was effectively for profits to remain flat as the 2020 figure includes recently acquired and loss-making Laudamotion unit for the first time and would be a “very good outcome.” The equivalent figure in 2019 would have been 880 million.
737 MAX GROUNDING
Several rival airlines have warned of a worse trading environment – partly due to overcapacity and partly because European travellers are holding off booking their summer holidays for fear of how the Brexit process will pan out.
Alistair Wittet, portfolio manager at Comgest, which has a 0.74% stake in Ryanair according to Refinitiv Eikon, said some investors appeared to have been convinced by O’Leary’s line of argument.
“The long-term opportunity is fantastic for a company like Ryanair because that capacity will come out” even if Ryanair has to go through a lot more pain than expected in the meantime, Wittet said.
Ryanair has also been affected by delays in the delivery of the Boeing 737 MAX after its worldwide grounding in March following a fatal Ethiopian Airlines crash.
The airline, which has ordered 135 737 MAX 200s and has options on 75 more, was expecting to receive its first five planes between April and June but said it now expects them to be flying by November. O’Leary said he was “reasonably confident” it would have around 50 MAX aircraft flying next summer.
The grounding has forced Ryanair to cut around 1 million seats in the year to March 2020. But it still expects to fly 153 million passengers in the period, up from 139 million last year.
The airline plans to have a conversation with Boeing about “modest compensation”, Chief Financial Officer Neil Sorohan said.
Ryanair’s shares were trading down 3 percent at 10.46 euros at 1250 GMT, down over 40% from a peak of 19.39 euros in August 2017, before the airline was hit by a wave of industrial unrest, fare weakness and the grounding of the MAX.
In what O’Leary described as a vote of confidence from the board, Ryanair will begin a 700 million euro share buyback in the coming days. ($1 = 0.8966 euros)
(Additional reporting by Helen Reid; Editing by Subhranshu Sahu and Louise Heavens)
(Reuters)
– Virgin Atlantic on Wednesday reported an annual pretax loss for the
second consecutive year, hit by a shaky economy, the higher costs of
fuel generated by a weaker British pound and problems with Rolls Royce’s
Trent engines.
The
airline, the 1980s brainchild of British billionaire Richard Branson,
fell back into the red in 2017 after three years of profits, as
competition intensified and the weakening of the pound added to already
rising fuel costs.
Best
known in Europe for the trans-Atlantic planes it flies with Air
France-KLM and Delta, Virgin said its loss before tax and exceptional
items was 26.1 million pounds ($34.12 million) for the year ended Dec.
31, compared to a loss of 49 million pounds in 2017.
Total
revenue rose 5.8 percent to 2.78 billion pounds, as passenger numbers
grew just under 5 percent to 5.4 million and revenue per customer rose
1.7 percent.
The
company said performance had suffered from economic uncertainty and the
weaker pound – which increases costs because fuel is priced in dollars –
as well as the well-documented problems of the Trent 1000 engines used
on its Boeing 787 jets.
“While
a loss is disappointing, our performance has improved in 2018 despite
challenging economic conditions and put us on a trajectory for growth
and return to profitability,” Chief Executive Officer Shai Weiss said in
a statement.
Rolls-Royce
on Wednesday agreed to an early inspection of some Trent 1000 TEN
engines by regulatory authorities, a week after Singapore Airlines
grounded two Boeing 787-10 jets fitted with the units.
British
Airways owner IAG in February chose Boeing 777-9s, rather than a
competing package from Airbus in part powered by Rolls, underlining the
risks to airlines from the engine issues.
Since
then the industry has been thrown into chaos by the grounding of
Boeing’s new 737 MAX planes after a second fatal crash within six
months.
The
pound fell 5.6 percent against the U.S. dollar, in 2018 as Britain
contended with the political and economic uncertainty generated by its
negotiations on leaving the European Union.
Finance
chief Tom Mackay said that while economic factors would continue to
challenge the carrier in the year ahead, Virgin Atlantic was in a strong
cash position.
The
results are the company’s first since its acquisition of troubled
regional airline Flybe for $2.8 million earlier this year, in a joint
bid with Stobart Group and Cyrus Capital.
($1 = 0.7649 pounds)
(Reporting by Noor Zainab Hussain and Pushkala Aripaka in Bengaluru; Editing by Anil D’Silva)
(Reuters)
– Southwest Airlines Co cut its forecast for first-quarter revenue per
seat mile on Wednesday, citing weak passenger demand and a $60 million
hit to first-quarter sales from the longest partial U.S. government
shutdown.
The
more than month-long hiatus in U.S. government decision-making
prevented the country’s fourth-largest airline from launching its new
route to Hawaii and led to widespread delays at airports.
Southwest
had said previously that it expected a $10 million to $15 million
impact on revenue in the first three weeks of January.
On
Wednesday, it quadrupled that for the full quarter and cut its growth
estimate for unit revenue to a range of 3 percent to 4 percent from an
earlier range of 4 percent to 5 percent.
Shares
of the company, which has also been cancelling flights in recent days
due to a conflict with maintenance staff and weather issues, fell nearly
5 percent in early trading, with a Goldman Sachs “sell” recommendation
for investors adding to the pain.
Though
the company has now received permissions for test flights to Hawaii,
Goldman Sachs analyst Catherine O’Brien argued the shutdown would result
in a shortened selling window for the airline, forcing it to discount
fares heavily.
“Most
of the company’s schedule is published eight months in advance and we
would have expected a three to six month selling window for its Hawaii
flights,” O’Brien wrote in a note, downgrading the stock to “sell” from
“neutral”.
“We
now expect initial flights to have a one to one and a half month
selling window, putting more pressure on management to fill planes in a
shorter time frame,” she added, cutting price target on the stock to $54
from $66.
Southwest shares were last down 4.1 percent at $55.30.
The
company said on Tuesday it would be investigating a doubling of the
number of planes grounded with mechanical problems in recent days as it
continues talks with its mechanics union on a new contract that have
been ongoing since 2012.
Flight
cancellations by Southwest accounted for roughly 24 percent of the
nearly 800 total flights canceled across the United States on Tuesday,
according to flight-tracking service FlightAware.com.
About
half of the cancellations were related to unscheduled maintenance
issues but the airline said it had yet to calculate the impact of the
groundings on its results.
(Reporting by Ankit Ajmera and Rama Venkat in Bengaluru; Editing by Anil D’Silva)
TOULOUSE,
France (Reuters) – Loved by passengers, feared by accountants, the
world’s largest airliner has run out of runway after Airbus decided to
close A380 production after 12 years in service due to weak sales.
The
decision to halt production of the A380 superjumbo is the final act in
one of Europe’s greatest industrial adventures and reflects a dearth of
orders by airline bosses unwilling to back Airbus’s vision of huge jets
to combat airport congestion.
Air
traffic is growing at a near-record pace but this has mainly generated
demand for twin-engined jets nimble enough to fly directly to where
people want to travel, rather than bulky four-engined jets forcing
passengers to change at hub airports.
And
while loyal supporters like top customer Emirates say the popular
544-seat jet makes money when full, each unsold seat potentially burns a
hole in airline finances because of the fuel needed to keep the huge
double-decker structure aloft.
“It’s
an aircraft that frightens airline CFOs; the risk of failing to sell so
many seats is just too high,” said a senior aerospace industry source
familiar with the program.
Once
hailed as the industrial counterpart to Europe’s single currency, the
demise of a globally recognized European symbol coincides with growing
political strains between Britain, France, Germany and Spain where the
plane is built.
That’s
in stark contrast to the display of European unity and optimism when
the engineering behemoth was unveiled in front of European leaders under
a spectacular light show in 2005.
British
Prime Minister Tony Blair called the A380 a “symbol of economic
strength” while Spanish premier Jose Luis Rodriguez Zapatero called the
rollout “the realization of a dream”.
Passengers
marveled at the European giant with room for 70 cars on its wings,
looking rather like the hump-backed Boeing 747 but with the top section
stretching all the way to the back.
Airlines had initially rushed to place orders, expecting it to lower operating costs and boost profits as the industry crawled out of a slowdown in tourism since September 2001.
Airbus boasted it would sell 700-750 A380s, which nowadays cost $446 million at list prices, and render the 747 obsolete.
In
fact, A380 orders barely crossed the 300 threshold and the 747 has
outlived its rival, after reaching the age of 50 this week.
FALL FROM GRACE
The seeds of the A380’s fall from grace were already present behind the scenes of the 2005 launch party, insiders say.
Despite
public talk of unity, the huge task was about to expose fractures in
Franco-German co-operation that sparked an industrial meltdown. When the
delayed jet finally reached the market in 2007, the global financial
crisis was starting to bite. Scale and opulence were no longer wanted.
Sales slowed.
At
the same time, engine makers who had promised Airbus a decade of
unbeatable efficiencies with their new superjumbo engines were
fine-tuning even more efficient designs for the next generation of
dual-engined planes, competing with the A380.
Finally,
a restless Airbus board started demanding a return and stronger prices
just when the plane desperately needed an aggressive relaunch and fresh
investment, insiders said.
“It was a triple whammy,” said a person close to the debate.
As demand see-sawed, so did the plane’s marketing: starting with luxuries including showers, then vaunting its green credentials with the messianic slogan ‘Saving The Planet One A380 at a Time” before joining the race to squeeze in more people and cut costs.
Yet
despite its own deep industrial problems, Boeing was winning the
argument with its newest jet, the 787 Dreamliner. It was designed to
bypass hubs served by the A380 and open routes between secondary cities:
a strategy known as “point to point”.
Airbus fought back, arguing that travel between megacities would nonetheless dominate air transport.
But
economic growth would splinter in ways Airbus did not predict.
Intermediary cities are growing almost twice as fast as megacities,
according to a 2018 paper posted by the Organisation for Economic
Co-Operation and Development.https://bit.ly/2P28F3h
That’s a boon for twinjets like the Boeing 787 and 777 or Airbus’s own A350, which has outsold the A380 three to one.
Airbus
Chief Executive Tom Enders, who was rarely seen as an enthusiastic
backer of the A380, toyed with ending the project about two years ago
but was persuaded to give it a last chance.
But with Emirates unable to hammer out an engine deal needed to confirm its most recent A380 order, time had finally run out.
“Airbus
tends to think of it as a flagship; Enders looks at it and sees a lack
of orders,” said a person close to the German-born CEO, who steps down
in April.
Some insiders worry that Airbus will lose a valuable symbol of pride and commercial audacity when production ends in 2021.
Now,
airline bosses are seeking assurances that Airbus will support the A380
with spare parts for years to come. Many invested in the A380 as their
flagship while airports also spent heavily on new facilities.
Some customers like Air France and Lufthansa may not shed too many tears, analysts say.
They
too invested in the A380 but may also be relieved to see a potent
weapon removed from Gulf rivals like Emirates, whom they accuse of
flooding the market.
Emirates insists it plays fairly and has called the A380 a “passenger magnet,” misunderstood and badly marketed by rivals.
Its
chairman said on Thursday he was disappointed in the A380’s demise, but
added “we accept that this is the reality of the situation”.