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Weak economies in Latin America continue to drag down the results for Panama’s Copa Airlines, reflected in a 10.4ppt drop in its 2Q2015 operating margin to 9.1%. The airline’s results were worse than expected, driven by a particularly challenging Jun-2015.
Central American poster airlines Copa has been battling difficult dynamics in Venezuela and Brazil for roughly a year, and during 2Q2015 some challenges emerged in its Colombian markets. The airline is taking steps to adjust its network to lessen its exposure to those regions, but they still comprise a sizeable portion of Copa’s operations.
Copa does foresee some slight sequential improvement in its yield performance from 2Q2015 to 3Q2015, but third quarter yields are still expected to decline in the double digits.
The company has issued a second downward revision to its unit revenue and operating margin guidance for CY2015, and it seems some of the obstacles Copa has faced throughout the last year are lingering into 2016.
IAG grows quarterly profit once more. Iberia long-haul growth to accelerate with additional aircraft
With its 2Q2015 results, IAG took another step towards achieving its longer term financial targets. Its 2Q operating profit grew by 39% year on year and its rolling 12M return on invested capital increased by 0.7ppts. Both revenue and operating costs were inflated by currency movements, with a net positive impact. Nevertheless, adjusting for foreign exchange, IAG cut unit cost at a faster rate than the drop in unit revenue.
At the level of the operating airlines, both BA and Iberia enjoyed improved operating profits. Vueling remains the most profitable airline in the group, but the Spanish LCC's result dipped slightly. Its business is highly seasonal and 3Q should be its strongest quarter, so it still has a chance to end the year with better figures.
IAG's results for the quarter were again stronger than those of its major European legacy airline group rivals Lufthansa and Air France-KLM. Its growing confidence is reflected in its decision to exercise options with Airbus for additional narrowbody and widebody aircraft, including up to five A330-200 growth aircraft for Iberia.
Volga-Dnepr Group's MoU to acquire 20 Boeing 747-8F aircraft, signed at the Paris Air Show in Jun-2015, will result in a significant capacity expansion for the operator of the aircraft, AirBridgeCargo Airlines - making it one of the world's largest operators of the 747 and the biggest with the 747-8.
Assuming it is finalised, a firm order will also be a major boost for Boeing and the 747 programme, increasing the total number of 747-8s on order to 51, including 33 freighters.
Aeromexico transitions to 787s, phasing out 767s; non-stops Mexico City-Tokyo and upgrade for London
Aeromexico has made significant improvements to its long haul operation following the transition to 787s on two of its three European routes and schedule changes on its two Asian routes. Further improvements are expected as Aeromexico takes delivery of additional 787s, enabling it to phase out its remaining 767s and 777s and pursue growth.
London, which was launched in late 2012 with three weekly 767 frequencies, has performed particularly well since the transition to 787s in 2014, prompting the carrier to add two more frequencies. The new five times per week schedule gives Aeromexico a better product for the key corporate market.
Aeromexico hopes eventually to serve all its long haul markets, including Shanghai and Tokyo, with at least five weekly flights and potentially a daily service. Newly available higher thrust ratings for its 787-8s will also enable Aeromexico to begin serving Tokyo non-stop from Mexico City by the end of 2015.
Norwegian Air Shuttle 2Q2015 back to operating profit. Long haul load factor 91%; leasing draws near
Norwegian's 2Q2015 results show further positive momentum after FY2014's slump into losses. Not only did unit revenue grow, driven by a sharp increase in passenger load factor, but also unit cost fell.
However, the fall in unit cost (and more than half of the improvement in operating profit versus 2Q2014) was due to lower fuel prices. Norwegian's ex fuel unit costs have risen year on year for the past three quarters. The current quarter, 3Q2015, will be the key to FY2015 results and Norwegian's management appear comfortable with booking trends and the yield outlook.
Norwegian also gave data on its long haul network, two years after its launch. Passenger numbers in 2Q2015 more than doubled from 2Q2014 and the long haul load factor was 91% in 1H2015. Norwegian must now prove its claim that this part of the business can make a positive contribution to profits. And it has no time to relax: its next new business, aircraft leasing, will be fully operational in 2016, when it plans to lease out all four A320neo aircraft due from Airbus.
At the Paris Airshow, Wizz Air signed a MoU with Airbus for the purchase of 110 Airbus A321neo aircraft, with deliveries to start in 2019, and uncommitted purchase rights over an additional 90 A321neo aircraft. The order is subject to a final purchase agreement and approval by the shareholders of Wizz Air, which listed on the London Stock Exchange earlier this year.
Such approval is typically forthcoming and the new aircraft should provide significant unit cost improvements. Nevertheless, Wizz Air's order is very large compared with its size today and follows large orders for narrow body aircraft in recent years for other leading European LCCs, including Ryanair, easyJet, Norwegian and Vueling (the latter as part of an IAG group order).
Norwegian has admitted that it may not be able to use all of its planned aircraft and Wizz Air's order now provides an opportunity to review the data on the number, and types, of narrow bodies on order in Europe. Narrowbody deliveries to Europe look set to rise, at a time of rising global deliveries. Success is not guaranteed for all. Meanwhile the expanding role of LCCs in both leisure and business markets continues to undermine the positions of legacy airlines on short haul routes.