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Airbus develops, produces and supports commercial aircraft in the 100 seat and above range. In 2001 Airbus became a single fully integrated company incorporated under French law as a simplified joint stock company. The four national entities which had previously formed the Airbus consortium transferred their Airbus-related assets to the new company and became shareholders in Airbus -- Airbus France, Airbus Deutschland and Airbus Espana merging as the European Aeronautic Defence and Space Company (EADS) with 80% shares and BAE Systems with 20%. In 2006, following the sales of BAE Systems' shares, Airbus became an EADS company.
Manufacturing, production and sub-assembly of parts for Airbus aircraft are distributed around 12 sites in Europe, with final assembly in Toulouse and Hamburg.There are also centres for engineering design, sales and support in North America; and sales and customer support centres in Japan and China. Airbus has a joint engineering centre in Russia with Kaskol. Airbus is managed by an Executive Committee headed by a President and Chief Executive Officer appointed by the EADS Board of Directors.
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A beleaguered United Airlines has outlined ambitious goals for its investors that entails an annual cost cutting scheme of USD2 billion and a pledge to begin returning cash to shareholders by 2015.
After battling operational, revenue and cost challenges during the last couple of years, United has no choice but to crystallise a plan to improve its performance in the medium term. Its target of rewarding shareholders is likely to be a competitive response to Delta Air Lines, who recently outlined plans to return USD1 billion to its shareholders during the next three years.
Additionally, United believes it can increase pre-tax earnings by two to four times during the next four years. Taken together it is tall order for a company that is still trying to deliver on its merger synergy targets. Now that United has declared those goals, the challenge is to deliver a successful execution, something that sceptics might have a right to be weary of.
easyJet's FY2014 pre-tax profit increased by more than 50% to its highest ever level and its operating margin returned to double digits after more than a decade at less than 10%. Its pursuit of a more passenger-focused and business-serving LCC model has driven it to improve and innovate in terms of product, with features such as allocated seating and a user-friendly website now being copied by the likes of Ryanair.
This customer focus, together with what the company has called “a benign capacity environment”, as competitors were forced to reduce seat numbers, has led to impressive unit revenue growth, while management has not lost sight of cost control. Its confidence in the future was signalled by a dividend totalling GBP308 million.
Looking into FY2014, however, the outlook for unit revenues is less certain as capacity growth steps up a little, and profits are unlikely to grow as rapidly as they did in FY2013. Nevertheless, easyJet's business model remains robust and should deliver sustained healthy returns.
Air Canada reached a milestone in 3Q2013 as its return on invested capital (ROIC) as of 30-Sep-2013 was 10.8% compared with 7.7% at YE2012. The improvement is notable as the company broaches its stated objective of achieving an ROIC between 10% and 13% on a sustainable basis by 2015.
It is a laudable achievement given a couple of years ago the carrier was working feverishly to combat significant financial challenges and battled labour strife throughout much of 2012 in order to forge collective bargaining agreements that it believes will aid in its ultimate goal of sustainable profitability.
Obviously the carrier still has a long road ahead in proving its mettle in regular profitability, but for the moment it seems to be holding its own against increased competitive pressure from WestJet while getting its own new low-cost carrier Air Canada rouge off the ground.
Latin America’s powerhouse LATAM Airlines Group believes it has turned a corner in its Brazilian operations after enduring weak margin conditions within Brazil’s domestic environment since the merger of LAN and TAM officially closed a little over a year ago.
The company’s overall 3Q2013 results were somewhat buoyed by a 19% improvement in Brazilian domestic unit revenues year-on-year as LATAM slashed its supply within Brazil by 6% during the quarter. For the 9M2013 time period LATAM’s ASKs within Brazil contracted by 9%.
While the rebound within Brazil in commendable LATAM still faces challenges with respect to the devaluing of the BRL, which fell 13% during 3Q2013 against the USD. LATAM is attempting to blunt the effects of currency fluctuations through hedging schemes and transitioning TAM’s debt to the LATAM balance sheet, which is denominated in the USD.
Profit growth of nearly 98% by Spirit Airlines in 3Q2013 was dampened by the carrier’s revelation that it will encounter some cost headwinds at YE2013 and into 2014. These are driven by possible expenses related to an engine failure incident that occurred in Oct-2013, increasing costs due to new flight duty and rest time regulations for pilots and a 22% average growth rate during the next couple of years.
As those warnings cause some uncertainty around the carrier’s unit cost containment, Spirit’s rapid expansion into the continental US during the past few years is resulting in a typical pattern of perhaps strong 1Q and 3Q profits, and 2Q and 4Q performances that do not quite reach the levels recorded in the peak periods. The airline has stated that its 4Q2013 results should be similar to 1Q2013 – when top-line revenue grew 23% and net income increased 31% year-on-year.
JetBlue continued the trend of most US carriers turning strong financial performances during 3Q2013 as its profits grew 57% year-on-year to USD71 million driven by a demand environment the carrier deemed as healthy.
The carrier is still battling some cost inflation as FY2013 unit costs excluding fuel and profit sharing are projected to rise between 2.5% and 4.5%. JetBlue stresses it is taking measures to battle the unit cost inflation, noting its sharklet programme for its Airbus A320 fleet to lower fuel burn and fleet changes that include the deferral of 24 100-seat Embraer 190s to support a fleet of 60 of the smaller jets.
Even as JetBlue is taking steps to whittle away at unit cost pressure it has experienced for the last year, the carrier is fielding questions about how it intends to proceed with margin expansion and if it will hit its return on invested capital targets.
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