Air Canada prioritise debt payments; UPS expanding intra-Asia services


The majority of North American airline stocks fell on Thursday (23-Sep-2010) as the Dow (-0.7%) was down on a surprise rise in weekly jobless claims late in trading. The declines were despite news the US' Leading Economic Index increased 0.3% in Aug-2010 and existing home sales increased 7.6% to a seasonally adjusted annual rate of 4.13 million in Aug-2010.

Latin American carriers were mostly up for the day, as wider markets gained. Brazil’s Bovespa (+0.7%) closed at its highest level since Apr-2010, as investors awaited the pricing of Petrobas’ share offer. GOL (+1.0%) and TAM (+0.4%) rose as a result. Chile’s IPSA (-0.9%) was down, echoing the US market.

Air Canada prioritise debt payments

Air Canada announced plans to make paying down its debt a priority over increasing its fleet. The carrier is due to take delivery of its first B787 in 2H2013. CFO Michael Rousseau stated Air Canada expects capital spending for 2010 and 2011 to be CAD150 million annually, not counting maintenance expenses that will be recorded under new international financial accounting rules. According to Mr Rousseau, Air Canada has “almost a billion dollars of debt coming due in the next two years and certainly we would like to pay some, if not all, of that back” and has financing commitments of CAD3.1 billion in place, covering 31 of 37 expected deliveries. He added the carrier is being “very, very disciplined” on adding capacity, as it needs to make money first.

See related CAPA Profile: Aircraft Leasing and Finance

Air Canada subsidiary, Jazz Air Income Fund (+0.9%) was among the few carriers to gain for the day. Competitor, WestJet (+0.3%) was also up, despite a 0.4% decline in Canada’s TSX.

UPS expanding intra-Asia services

United Parcel Service (UPS) (-1.7%) was also down. During trading, the carrier stated it plans to add intra-Asian services and larger aircraft in 2011. UPS international president Dan Brutto stated some of its five new B767 aircraft will most likely serve intra-Asian trade routes. UPS is also considering adding services, facilities and service offerings in Mexico. Israel's high-tech and pharmaceutical industries make it another growth prospect, Mr Brutto said.

See related CAPA Profile: Air Freight

Elsewhere, Republic Airways (-3.1%) was down the most for the session, with Alaska Air (-2.6%) and Atlas Air (-2.5%) closely behind.

North & South America selected airlines daily share price movements (% change): 23-Sep-2010

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