SkyWest Airlines announced (02-Aug-2012) it will receive another 29 Bombardier CRJ900s as part of a MoU signed with Delta Air Lines. The carrier plans to ground 66 50-seat CRJ200s and will add 34 larger dual-class regional jets including five 66-seat CRJ700s and 29 76-seat CRJ900s. Delta has reportedly allowed SkyWest to return 41 of the 66 CRJ200s financed by Delta without obligation. SkyWest will be responsible for the remaining 25 CRJ200s which it financed itself. [more - original PR]
SkyWest to receive 29 CRJ900s as part of Delta MoU
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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.
The US Big 3 work to preserve their unit cost performance as labour talks heat up
The paradox of margin expansion and unit revenue contraction will continue for most US airlines into 2Q2016 as those companies work to alleviate investor concern and set a course for a positive unit revenue trajectory. But maintaining favourable unit costs is key for the continued margin expansion forecast by the three large US airlines – American, Delta and United.
Although fuel prices have been rising, energy costs remain below historical levels, which is helping American, Delta and United to keep their unit costs in check. Excluding fuel, each airline has varying forecasts for 2016 driven by different inputs, including rising labour costs and profit-sharing.
American’s unit costs during the past year have been affected by labour contracts it reached with pilots and flight attendants in 2015. Delta and United will also likely need to weather labour cost increases as both companies are in the process of negotiating contracts with different employee groups. Many US airlines face uncertainty in their cost performance in the future as they work towards favourable contract terms that preserve their efforts to contain costs. And so the wheel turns.