CAPA's Annual India Aviation Outlook is keenly anticipated by the industry each year as the leading analysis of the direction of one of the world’s most important emerging markets. CAPA has a strong and established track record in accurately identifying key trends and developments in the Indian market, both on an annual and long term basis. We operate India’s leading dedicated aviation advisory and research practice offering unrivalled analysis and data across the value chain.
Our India Aviation Outlook is used by the leading industry players to shape their strategies and decisions in the market. The 2013/14 edition will be released on 25 May 2013. Click here for more information.
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Pinnacle Airlines reported (28-Jan-2013) the following financial highlights for Dec-2012:
LOT majority stake attracts airline interest, but restructuring and potential synergies will be key
Recent legislation allows the government of Poland to sell a majority stake in state-controlled national carrier, LOT Polish Airlines (LOT). According to media reports, LOT has appointed Rothschild as its privatisation adviser and a number of carriers have indicated their interest in investing. A lifeline loan from the government in Dec-2012 has been approved by the European Commission, partly conditional on a new restructuring plan expected in Jun-2013.
With losses for each of the four years 2008 to 2011 and a fifth loss expected for 2012, LOT’s cost base is too high for its revenue-generating capabilities. Moreover, it is inefficient versus the LCCs that compete on short/medium-haul, which accounts for 88% of LOT’s seat capacity and where its ageing 737 fleet needs replacing.
A handful of long-haul monopoly routes are finally benefitting from new 787s, but it is difficult to find many other features for LOT’s advisers to highlight. Interest in buying LOT will depend very much on the pricing and potential synergies a buyer might bring to the table.
IATA raises profit forecasts - the world’s airlines can now upgrade from an espresso to a sandwich
Speaking at IATA’s AGM in Cape Town in early Jun-2013, IAG CEO Willie Walsh expressed his optimism about the airline industry: “Anybody who looks historically at what has happened to try to forecast what’s going to happen in the future should forget about it and start with a blank sheet of paper. I genuinely think we’re an industry that for the first time will start exceeding our cost of capital” (Bloomberg 3-Jun-2013).
At the same time, IATA raised its 2013 industry net profit forecast from USD10.6 billion to USD12.7 billion, an increase of 67% on 2012, but still only 1.8% of revenues. As IATA CEO Tony Tyler put it, 2013 airline profits will be around USD4 per passenger, “less than the price of a sandwich in most parts of the world”. Moreover, IATA’s forecast represents a return on capital of 4.8%, well below the 7%-8% cost of capital (the return expected by investors).
At least this year’s sandwich should be more than the espresso coffee covered by last year’s profits. But it's not yet time to break out the champagne.