Big Three Gulf Carriers’ financials

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By Vincent Valery

Introduction

Nov. 4, 2019, © Leeham News: The rise of the Big Three Middle Eastern carriers since the mid-2000s has been nothing short of astounding.

They took full advantage of an advantageous geographical location: 85% of the world population is within a 10-hour flight from either Qatar or the UAE. Emirates and Qatar Airways connect all continents, except Antarctica.

This transformation into super connectors did not come without controversies. The most vocal are the Big Three US legacy carriers, through the Partnership for Open and Fair Skies. They accuse the Gulf Carriers of benefiting from massive subsidies that allow them to underprice their competitors.

As part of a deal between Qatar, the UAE, and the USA, the Big Three Gulf Carrier started publishing audited financial statements. Emirates’ and Qatar Airways’ financial statements are publicly available on their websites since 1994 and 2015, respectively. Etihad Airways has been releasing some income statement information since 2010.

Ahead of the upcoming Dubai Air Show Nov. 18-19, LNA had a look at those financial statements. We outline our takeaways in this article.

 

Summary
  • Very high growth at all three airlines;
  • Funded by different means;
  • Global slowdown and Geopolitical tensions force strategy rethink;
  • Varying levels of earnings quality;
  • An unsuspected (significant) source of revenues.

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Airbus 2019 results hit by A320neo delivery delays

By Bjorn Fehrm 

October 30, 2018, © Leeham News: Airbus announced 3Q 2019 results today. Revenue and profits for the first nine months were up from last year but the company is still wrestling with delivery problems for A320neos from its Hamburg factories. The delays during the first nine months cannot be caught up and the delivery guidance for 2019 is now 860 aircraft instead of 880-890.

Guided free cash flow will suffer as a result while profits for the year are guided unchanged as the first nine months delivered healthy profits.

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Lower interest rates, a tailwind for new orders

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By Vincent Valery

Introduction

Sep. 16, 2019, © Leeham News: Over the last few weeks, LNA outlined significant production gaps from 2022 onwards for the major widebody programs at Airbus and Boeing. The OEMs expect airlines to place large fleet renewal orders to fill those.

Aircraft deliveries need to be financed one way or another. Access to affordable financing is crucial for airlines and lessors to make good on their orders.

Interest rates in the world’s major currencies hit an all-time low a few weeks ago. The 30-year US Treasury yield dipped below 2%, while the 10Y German Bund was at -70 basis points.

Corporations duly took advantage of the lower rates to issue record amounts of debt in US dollars during the first week of September. United Airlines and Bank of China Aviation were among them.

We will analyze how lower interest rates could benefit the aviation industry.

Summary
  • Varying interest rate exposure for airlines and lessors.
  • Level of access to capital markets among airlines.
  • Hurdles to capitalize on low interest rates.
  • Unlikely beneficiaries if low rates persist in the near future.
  • Boosting new widebody order prospects.

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Airbus 1H2019 results: The A320neo gives Airbus a solid first half

By Bjorn Fehrm

July 31, 2019, ©. Leeham News: Airbus announced its 1H2019 results today, presenting a solid first half with progress in A320neo and A350 deliveries. The A220, brought over from Bombardier, is also making progress.

Yesterday, Airbus could announce an MOU with Air France for 60 A220-300. When converted to order it brings the orders for the type above 600. The A220 is gradually becoming a good deal for Airbus, and the type an important part of its lineup.

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Paris Air Show: notable orders other than A321XLR and 737MAX

By Vincent Valery

June 24, 2019, © Leeham News: The A321XLR launch and IAG’s 737MAX order gathered most of the attention during the 2019 Paris Air Show. Nevertheless, other significant orders were placed by airlines and lessors.

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How Mitsubishi Aircraft morphed the MRJ70 into the M100 SpaceJet

By Bjorn Fehrm

June 13, 2019, © Leeham News.: Mitsubishi Aircraft Corp (MITAC) has done more than a rebranding and new livery in creating the SpaceJet out of the MRJ70.

It’s changing the design, its materials and several parts of the interior to accommodate more passengers than the MRJ70.

Here is a technical analysis of the aircraft, based on information released today and our own Aircraft Performance Model.

We describe the changes MITAC made to the MRJ70 to end up with the M100 SpaceJet and what these mean for passengers and operators.

Figure 1. The Mitsubishi M100 SpaceJet replacing the MRJ70. Source: Mitsubishi.

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Mitsubishi in negotiations with Bombardier to acquire the CRJ program (Updated)

By Bjorn Fehrm

June 5, 2019, © Leeham News.: The Air Current broke the news earlier today Mitsubishi Heavy Industries (MHI) is negotiating with Bombardier to buy the CRJ program.

BBC has got comments from both companies confirming the discussions, with cautions nothing is settled and it can still result in a no deal. Should it happen it would make a lot of sense for both parties.

UPDATE: Bombardier has issued a statement confirming the discussions, see below.

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Boeing expects another banner year for customers

By Dan Catchpole

Danieljcatchpole[at]gmail[dot]com

Feb. 13, 2019, © Leeham News: Boeing Commercial Airplanes expects another banner year in 2019, Randy Tinseth, BCA vice president of marketing, said Tuesday at the PNAA conference.

The airplane maker expects its customers to make about $36 billion in profit this year, he said. That would make five consecutive years of BCA customers recording more than $30 billion in profits.

Tinseth declined to comment on the company’s decision to delay possibly launching the New Midmarket Airplane (NMA) to 2020. However, as Boeing CEO Dennis Muilenburg noted during the Jan. 30 earnings call, Boeing likely will seek authority to offer this year from its board of directors.

He did say he was surprised to hear so many people already referring to it as the 797.

“I can tell you one thing—that has not been discussed,” Tinseth said.

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Indonesian authorities release preliminary Lion Air crash report

By Bjorn Fehrm

November 28, 2018, © Leeham News.: The Indonesian National Transportation Safety Committee (KNKT) has released the preliminary report about the fatal flight Lion Air LNI610.

The report is 78 pages and gives added information in several areas. Rather than repeat what has been reported before, the article is focused on what new facts are revealed and we make some observations around these facts.

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Boeing’s automatic trim for the 737 MAX was not disclosed to the Pilots

By Bjorn Fehrm

November 14, 2018, © Leeham News.: The automatic trim Boeing introduced on the 737 MAX, called MCAS, was news to us last week. Graver, it was news to the Pilots flying the MAX since 18 months as well.

Boeing and its oversight, the FAA, decided the Airlines and their Pilots had no need to know. The Lion Air accident can prove otherwise.

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