Northern Ireland Stormont Assembly abolished (07-Nov-2012) Air Passenger Duty (APD) on long-haul services from Jan-2013. Northern Ireland's Finance Minister Sammy Wilson welcomed the abolishment as the Final Stage of the Air Passenger Duty Bill was passed in the Assembly on 06-Nov-2012 meaning that Air Passenger Duty on direct long haul flights departing from Northern Ireland airports will be reduced to zero with effect from Jan-2013. Welcoming the decision, the Minister said: “The Executive committed in the Programme for Government to reduce the Air Passenger Duty for direct long haul flights to zero. The legislation passed today delivers on this commitment and is good news for our economy in these challenging financial times.... Abolishing Air Passenger Duty on long haul flights will help to protect and improve our international air access and ensure the competitiveness of our airports.” Belfast International Airport MD John Doran said: “Given the increasing differential with regard to direct long haul Air Passenger Duty levels between the UK and Republic of Ireland, and the very specific problems which this caused for Northern Ireland connectivity, we are grateful to the Northern Ireland Executive and HM Treasury that decisive action has been taken. As the International Airport we now look forward with renewed vigour to building upon the success of our direct US air links, as well as reaching out into key additional long haul markets in Canada and the eastern hemisphere, in partnership with the investment and tourism authorities.” [more - original PR]
Ireland Air Passenger Duty reduced to zero on long-haul flights from Jan-2013
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CAPA's previous analysis of the 3Q2016 results of Europe's big three legacy airline groups highlighted a fall in their collective operating margin, after growth in 1H2016. This report shows that Europe's five leading LCCs, in aggregate, also suffered a fall in profit and margin in the quarter.
Three of the five – Ryanair, Norwegian and Wizz Air – improved their profit margin in the quarter, but easyJet's drop in margin was heavy enough to bring down the collective result. Pegasus' margin also declined.
Nevertheless, the LCC five remain collectively far more profitable than the legacy three. Moreover Europe's two most profitable airlines, Ryanair and Wizz Air, look set to increase their margin lead this year. Even easyJet, which has had a bad year by its standards, achieved a higher margin for calendar 9M2016 than the most profitable of the big three legacy groups, which was IAG.
The divergence of results in the European sector suggest that not all airlines are following the same cycle. However the collective margin decline for the continent's leading LCCs, and its major legacy airline groups, at least gives reason to question whether or not the cyclical upswing may have run its course.
IAG lowers plans for capacity growth, fleet investment & profit, but keeps return on capital target
IAG's Capital Markets Day on 4-Nov-2016 was the first since its formation in 2011 when it lowered any of its medium term financial targets. It cut its 2016-2020 average EBITDAR goal, in spite of adding in Aer Lingus for the first time. This followed two cuts to 2016 operating profit guidance during the course of this year, as a result of "a tough operating environment". It has been hit by adverse currency movements, mainly resulting from the UK's Brexit vote, in addition to ATC strikes and terrorist events.
To its credit, IAG has responded to the more challenging trading conditions by lowering its planned capacity growth and capital expenditure during its 2016-2020 strategic plan. These steps are necessary if it is to have a chance of meeting its ambitious goal to sustain a 15% return on invested capital. This target is unchanged, despite the lower profit outlook.
In 3Q2016, IAG's rolling four quarter return on capital fell, after rising more or less continuously since it began to target this measure in 2013. It has consistently been more profitable than either of its two main European legacy airline group rivals (Air France-KLM and Lufthansa). Nevertheless, the downward step highlights the challenge in meeting its own demanding target.