MN Airlines LLC, operating as Sun Country Airlines, filed a Chapter 11 reorganisation plan in US Bankruptcy Court in St Paul (Minnesota) that would cede ownership of the company to creditors, including current owner, Petters Aviation (Bloomberg/Pioneer Press/Star Tribune, 06-Apr-2010). The carrier, which specialises in service from Minnesota to warm-weather locations in the Caribbean and Mexico, filed for creditor protection in Oct-2008. The reorganisation plan would give certain unsecured creditors 100 shares of stock in the newly formed company for each USD1,000 of their claims. MN estimated the claims at USD80 million. MN stated “expressions of interest” in acquiring the company indicated a range of valuation from USD10 million and USD30 million, although these expressions resulted in “no definitive offer". Under the plans to exit bankruptcy, current CEO, Stan Gadek and the airline's management team would remain, while creditors would approve a new Board. The airline handled 983,000 passengers in 2009, a 23% year-on-year reduction. The carrier reported a profit of USD1.4 million in 2009, on revenues of USD202 million, and paid USD3.5 million in bankruptcy-related expenses. The carrier reporting a profit of USD1.9 million in Jan-2010 and Feb-2010, on revenues of nearly USD40 million.
Sun Country Airlines files plan to exit bankruptcy; profitable in 2009
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Part 1 of CAPA's analysis of Vueling examined its capacity growth and profitability trends since its acquisition by IAG in 2013. Vueling's operating margin and return on invested capital are on a downward trend, hence the new initiative to reverse these trends.
This second part of CAPA's analysis considers the profit improvement programme. During this programme Vueling's fleet will remain broadly flat to 2018, before resuming growth thereafter. Focus markets for Vueling are domestic Spain and Spain-Europe. It has strengths in these markets but faces growing competition from its lower-cost rival Ryanair, which has also been raising its service quality – closing the gap to Vueling's more premium positioning on the LCC spectrum.
Vueling NEXT Part 1: return on capital falls to make IAG's LCC the group's poorest performer
Since the end of 2015 Vueling has slipped from being IAG's best performer on the key financial metric of return on invested capital to its worst performer for the four quarters ended 3Q2016. The group's LCC has suffered more than its sister airlines from disruption in Europe, caused by ATC strikes and terrorist activity.
However, since its acquisition by IAG in 2013 Vueling's revenue growth has not matched its capacity growth and unit costs have grown. The benefits of lower fuel prices have been dissipated by higher ex-fuel unit costs, including lower labour productivity. Vueling's new CEO, Javier Sanchez-Prieto, is now leading a programme ('Vueling NEXT') to improve its profitability.
Part 1 of this CAPA analysis of Vueling examines its capacity growth and profitability trends since becoming part of IAG. It also looks at the development of its RASK and CASK. Part two will highlight the seasonality in Vueling's schedule and look at the profit improvement programme.