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Boeing is a leading manufacturer of commercial and military aircraft, rotorcraft, electronic and defense systems, missiles, satellites, launch vehicles and advanced information and communication systems. Headquartered in Chicago, Boeing employs more than 170,000 people across the United States and in 70 countries.
Boeing is organised into two business units: Boeing Commercial Airplanes and Boeing Defense, Space & Security. Supporting these units is Boeing Capital Corporation, the Shared Services Group and Boeing Engineering, Operations & Technology.
Boeing’s main commercial products are the B737, B747, B767 and B777 families of aircraft and the Boeing Business Jet. New product development efforts are focused on the B787 Dreamliner, 737Max, 777X and the B747-8. The company has nearly 12,000 commercial jetliners in service worldwide, which is roughly 75% of the world fleet.
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Mexican low cost airline VivaAerobus ended 2015 on a positive note, reversing its losses from the year prior and charting solid EBIDTAR margins. The airline is in the final stretch of a fleet revamp; this entails shedding Boeing 737 Classics operated since its 2006 launch and transitioning to a much younger fleet of Airbus narrowbodies.
Among the new crop of Mexican low cost airlines that formed in the mid-2000s (VivaAerobus, Interjet and Volaris), VivaAerobus remains the smallest measured by market share. Aeromexico, Interjet, Volaris and VivaAerobus are Mexico’s dominant airlines, but VivaAerobus’ 12% in 2015 share was a distant fourth. That could change as VivaAerobus expands its fleet with larger-gauge aircraft, taking steps to broaden the expanse of its network.
VivaAerobus suspended a number of short-lived transborder routes in 2015, and it appears to be focused on rounding out its domestic network in 2016, before resuming international expansion in 2017. During the next few years VivaAerobus could elevate its position in the Mexican market if there is enough demand to sustain the growth plans of the country’s largest airlines.
LATAM Airlines Group is working to maintain adequate liquidity levels during 2016 to withstand the still challenging economic situation in much of Latin America. Although its ratios ticked up at YE2015, those metrics have actually remained relatively stable during the last couple of years.
Brazil’s recession remains a drag on the region, and as a result LATAM has decided to expand its planned capacity decreases, both in the country’s domestic market and also on routes between Brazil and North America. Although currency devaluation remains a drag in LATAM’s Spanish-speaking markets, demand in those countries continues to be relatively healthy, with Argentina in particular showing signs of strength.
LATAM has also reduced its fleet commitments for the 2016 to 2018 time period and has financing for the USD2 billion in aircraft that it plans to spend for 2016. The company is taking necessary steps to weather some of the toughest conditions it has experienced in decades – against a backdrop of a slow and uncertain recovery.
Panama's Copa Airlines managed to remain profitable in 2015 in what was the most challenging year that the airline had faced in decades. A contracting economy in Latin America, driven by Brazil’s crippling economic weakness, created significant challenges for all airlines operating in the region. Copa posted double digit declines in yields and passenger unit revenues for the year, which helped to erode the benefits of lower fuel costs on the airline’s profitability. Its net income plummeted nearly 49% year-on-year.
Throughout 2015 and into 2016 Copa is making capacity and fleet adjustments to combat the economic realities in Latin America. But the airline is not taking an optimistic view with its passenger unit revenue guidance for 2016, which is lower than 2015’s performance even though Copa anticipates some faint signs of stability emerging in 2H2016.
For now, it seems that all that any Latin American airline can do is attempt to reset their networks in order to diminish their exposure to the weakest areas in the region. Copa is making all the necessary moves to withstand the economic pressure, but in the short term its margins and profits will continue to fall below historical highs.
The beginning of 2016 held much promise for aspiring ULCCs in Canada as NewLeaf Travel unveiled its routes for a Feb-2016 debut. But the company postponed its launch while Canadian regulators review certain licensing procedures. The ULCC movement in Canada began with much fanfare in late 2013, but then quietened down until a third new entrant – Enerjet– outlined its plans to adopt the model in Canada, in mid-2015.
After NewLeaf delayed its debut, the first company to emerge as a ULCC contender in Canada, Jetlines, firmed a deal to engage in a second reverse takeover with a company listed on the Toronto Stock Exchange. The proposed transaction is designed to raise the necessary funds for launch. Jetlines’ first attempt at a similar transaction resulted in litigation that was later settled out of court.
All the fits and starts among the pool of upstart Canadian ULCCs are creating some scepticism about their tenure in the country’s duopolistic airline industry, and they will need customer confidence. In parallel, the current Canadian economic environment may not prove to be the most fertile ground for new entrant airlines.
Air Canada plans to deploy the bulk of its 2016 capacity growth to international markets, after having cut some capacity in Western Canada during 2015. The airline is less exposed to that region than rival WestJet, which is headquartered in Western Canada and is projecting steep unit revenue declines in early 2016 due to weakness from lower demand in the oil and gas sector.
Air Canada embarked on the year 2016 by placing a letter of intent to purchase 45 Bombardier CSeries jets. In parallel, the Quebec government (which now has a stake in the CSeries) dropped a lawsuit against the airline related to aircraft maintenance performed in the province. However, Air Canada contends that it faced no political pressure to place an order for the beleaguered CSeries. Air Canada’s order gives the Canadian manufacturer a dependable national customer now that Porter’s order remains in doubt, and the aircraft's other North American customer, Republic Airways Holdings, has entered bankruptcy protection.
After trading at a discount for most of 2015 Air Canada has opted not to provide yield, unit revenue or capacity guidance on a quarterly or annual basis. The company’s rationale for the decision is a focus on its long-term strategy laid out to its investors in mid-2015, with specific ROIC, ratio and EBITAR margin targets. The company has emphatically stated that if short-term investors are not happy with the new policy, they are free to look elsewhere.
Boeing's 777-300ER was a late bloomer. The variant rolled out in 2002 and had its first delivery in 2004. Yet half of the variant's orders were placed in 2010 and beyond. Two of its record years of sales, 2007 and 2011, coincided with sharp rises in jet fuel, resulting in airlines accelerating retirement of their four engined aircraft. Boeing largely kept business within the family, as the 777-300ER effectively rendered the 747 obsolete; Airbus' A340 succession plan was not so clear.
The world's most powerful twin-engine has come to define the long haul fleets of its biggest operators. The largest, Emirates, operates 114 – almost as many as the next three largest operators combined: Cathay Pacific (53), Air France (40) and Qatar Airways (31). The -300ER variant has 796 orders, comprising over half of all orders for the 777 family. A late bloomer became popular. In Feb-2016 SWISS commenced 777-300ER services, its first time operating the 777. United and Kuwait Airways will also take their first -300ERs in 2016. Orders have slowed since the 777X came into the picture, and in Jan-2016 Boeing announced a production decrease. Boeing still needs to sell new 777s to bridge the production gap until the 777X, but airlines are focusing on growth through second hand acquisitions: British Airways is interested, while Turkish Airlines is taking Kenya Airways' -300ERs.