US National Transportation Safety Board (NTSB) stated microscope examination revealed fatigue cracks emanating from at least 42 of the 58 rivet holes connected by the fracture in the lap joint of a piece of the B737 fuselage from Southwest Flight 812 (AINOnline, 02-May-2011). Misshapen and misaligned rivet holes in parts of the fuselage removed from the aircraft has lent more credence to theories that a manufacturing flaw led to the eventual failure of the lap joint during an 01-Apr-2011 accident in which a five foot long tear opened in the roof of the aircraft.
NTSB finds more evidence of manufacturing flaw on Southwest B737
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Air Canada Part 2: Financial progress makes investment grade metrics more tangible
A decade ago it would have been unheard of for Air Canada to contemplate reaching an investment grade credit rating. The airline had emerged from bankruptcy protection, but was still struggling financially. It would teeter on the verge of another formal restructuring before setting out on a course to restructure its financial foundation – a process that has allowed the airline to improve its balance sheet and leverage.
Air Canada’s leverage targets for YE2018 will not meet the general proxy for an investment grade rating; however, its lower capital commitments and debt refinancing could create an opportunity for achieving that status beyond 2018.
Attaining an investment grade credit rating likely remains a longer term goal for Air Canada as its major financial goals in the short term remain paying down debt that is creeping up due to a fleet renewal, as well as funding growth to drive long-term shareholder value. More meaningful shareholder returns will likely occur once the company reaches what it deems as acceptable progress in debt management, and reaches a certain maturity level in growing its international network.
This is Part 2 in a two part series on Air Canada. Part 1 dealt with long haul LCC subsidiary, rouge.
Alaska, jetBlue and Southwest: popular airlines show commendable balance sheet results.
The US LCCs Southwest and Alaska Air Group have arguably been two of the country’s most successful airlines measured by balance sheet achievement, compared with the historically dismal performance of the US global network airlines. American, Delta and United have all enjoyed the benefit of shedding debt obligations through the Chapter 11 bankruptcy process, while Southwest and Alaska have managed their debt and cash flows favourably without the help of a clean slate ushered in by bankruptcy protection.
The reward for Southwest and Alaska was attaining coveted investment-grade status from US ratings agencies, which allows those airlines access to credit at favourable interest rates. Southwest enjoys a long-standing investment-grade status and Alaska attained that ranking two years before Delta Air Lines, during a time when it was under attack from Delta at its Seattle hub. Alaska faces some headwinds generated by its planned merger with Virgin America; but for now there is little reason to doubt Alaska’s ability to maintain its balance sheet integrity during the integration.
The other large US LCC jetBlue sits at a different stage in its balance sheet evolution, but its adjusted debt-to-cap performance has significantly improved during the last couple of years. The company’s bolstered balance sheet has provided jetBlue with flexibility to pay cash for new aircraft deliveries in order to maintain an adjusted debt-to-capital ratio of 30% to 40%.