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Air France and China Southern sign JV; 'As good as it gets' for British Airways

Analysis

European airline shares made minor gains on Tuesday (21-Sep-2010), despite a slip in wider markets and another rise in oil prices (+0.2%) to USD74.97, albeit small. Markets declined in afternoon trading as investors became cautious ahead of the US Federal Reserve's monetary policy meeting.

Summary
  • European airline shares made minor gains despite a slip in wider markets and a rise in oil prices.
  • Air France and China Southern signed a joint venture agreement, focusing on sharing revenues on operations between Paris and Guangzhou.
  • British Airways received a "reduce" rating from Charles Stanley, with the analyst stating that the carrier's stock price is "as good as it gets."
  • British Airways announced plans to expand its international operations, including launching London Heathrow-Tokyo Haneda service and increasing services to Buenos Aires and the Caribbean.
  • Thomas Cook Group plans to base a fourth aircraft at Newcastle International Airport, resulting in the resumption of several routes and an increase in seat capacity.
  • Overall, European airline shares experienced mixed movements in the market.

In key markets, UK's FTSE (-0.5%), France's CAC (-0.1%) and Germany's DAX (-0.3%) all slipped for the session.

Air France and China Southern sign JV agreement

Air France (+3.3%) gained after signing a JV agreement with China Southern Airlines, effective 01-Nov-2010, based on sharing revenues on operations between the two carriers' hubs, Paris and Guangzhou. Air France and China Southern will have joint governance of the JV. A management committee will be implemented, with five working groups in charge of implementing the JV agreements in the fields of network management, revenue management, sales, products and finance.

Since 2004, Air France and China Southern have been operating codeshare between Paris and Guangzhou: China Southern operates four times weekly and Air France operates three times weekly on the sector. China Southern has also operated daily services between Guangzhou and Amsterdam in codeshare with KLM since 2001, with KLM also operating codeshare services with China Southern on Amsterdam-Beijing sector since Jun-2006. Air France CEO Pierre-Henri Gourgeon stated the carrier expects to sign a similar contract with China Eastern Airlines on Paris-Shanghai services.

See related CAPA Profile: Codesharing and Interlining

'As good as it gets' for British Airways

British Airways (+0.3%) rose only marginally after Charles Stanley initiated coverage of the carrier with a "reduce" rating and a target price of GBP 200 pence. Charles Stanley analyst, Douglas McNeill, stated the carrier's stock price is "as good as it gets", based on the carrier's performance over the past five years, over which it had "two good years, two bad ones, and one veritable cracker".

Also during trading, the carrier announced plans to expand its international operations. BA plans to launch London Heathrow-Tokyo Haneda service in Feb-2011, supplementing the carrier's daily London Heathrow-Tokyo Narita service. The carrier also announced plans to launch direct services to Buenos Aires rather than via Sao Paulo, with both cities to have their own direct daily services, and increased services to the Caribbean from 27-Mar-2011 from London Gatwick, with plans to also increase London Gatwick-Cancun and London Gatwick-Tampa frequency. Capacity on London Gatwick-Orlando services will be reduced.

See related CAPA Profile: Route Changes

Thomas Cook to base fourth aircraft in Newcastle

Thomas Cook Group (-0.5%) slipped for the day. During trading, its airline announced plans to base a fourth aircraft at Newcastle International Airport in summer 2011. As a result, the airline plans to resume Newcastle-Bourgas service, and add frequencies Paphos, Larnaca, Dalaman, Izmir, Mahon, Ibiza, Palma and Tenerife services. The new aircraft will offer approximately 70,000 extra seats throughout the summer season, taking the total number of seats to around 300,000.

Europe selected airlines daily share price movements (% change): 21-Sep-2010

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