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Hospitality Ireland Presents Round-Up Of Latest Airline, Aviation And Travel News

Published on Aug 27 2021 8:53 AM in General Industry tagged: Etihad Airways / Boeing / british airways / Qantas / Etihad / American Airlines / Qantas Airways Ltd. / Qantas Airways / Southwest Airlines / 737 Max / Boeing 737 MAX / Virgin Australia / Air Seychelles / Airborne Capital / Mercuria / Mercuria Airborne Capital / Booking.com. SpiceJet

Hospitality Ireland Presents Round-Up Of Latest Airline, Aviation And Travel News

Hospitality Ireland presents a round-up of the latest airline, aviation and travel news from around the world.

American Airlines August Revenue Trending Below Forecast

American Airlines has said that its August revenue is trending below the US carrier's internal forecast as a recent uptick in COVID-19 cases led to some softness in bookings.

American's chief revenue officer, Vasu Raja, speaking at the Raymond James industrials conference, said that the airline is also experiencing a rise in cancellations.

COVID-19 cases, driven by the highly infectious Delta variant, have surged in parts of the United States with lower vaccination levels.

However, Raja added that the company's booked business for the holidays remained "incredibly strong".

The carrier expects business demand to likely come back in the transatlantic and Latin American regions, given their proximity to the United States.

American shares have risen 26.6% so far this year.

The US could get COVID-19 under control by early next year if vaccinations ramp up, the nation's top infectious disease expert, Doctor Anthony Fauci, said on Tuesday August 24, as Pfizer won full FDA approval for its shot, with more potential approvals coming in the weeks ahead.

Qantas Preparing For International Travel From December As Loss Narrows

Qantas Airways Ltd has said that it is preparing for international travel with countries with high vaccine rates to resume in December, sending shares higher, as it recorded a narrower annual loss of A$1.73 billion ($1.26 billion).

The airline, which grounded its international fleet in March of 2020 due to closed borders, said it planned to bring back five of its 12 Airbus SE A380 super-jumbos from mid-2022 to fly to the United States and Britain, a year earlier than previously forecast.

It is a hopeful sign for travel in the Asia-Pacific region, where borders are largely closed and international travel is 95% below pre-COVID-19 levels, though the Qantas plan is dependent on government decisions and could be delayed. Shares rose as much as 3.7% to the highest levels since April.

Australia set a target last month for 80% of adults to be fully vaccinated for a calibrated reopening of its international borders.

At present, more than half the population is locked down due to COVID-19 outbreaks and just over 30% are fully vaccinated, though forecasts say the country could reach 80% by the end of the year as more doses of imported vaccines arrive.

Pending government decisions, Qantas said it expected flights to countries with high vaccine rates like Singapore, Japan, the United States, Britain and hopefully New Zealand to resume from mid-December.

Flights to places with lower vaccination rates like Indonesia, the Philippines, Thailand and South Africa would restart from April 2022 at the earliest, it added.

"One of the biggest unknowns is the quarantine requirements for fully vaccinated travellers entering Australia," Qantas Chief Executive Alan Joyce said. "If it's 14 days in a hotel, demand levels will be very low. A shorter period with additional testing and the option to isolate at home will see a lot more people travel."

The airline forecasts international capacity will reach 30% to 40% of pre-COVID levels in the third quarter and 50% to 70% in the fourth quarter.

It will not revisit an order for up to 12 Airbus SE A350 planes capable of non-stop Sydney to London flights until borders reopen, Joyce told analysts, adding the earliest the flights could start would be 2024 or 2025.

The company will also retire two A380s and has pushed back delivery of three Boeing Co 787-9s and two A321neos by a year.

Qantas reported underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of A$410 million for the 12 months ended June 30, in line with the average figure expected by 11 analysts polled by Refinitiv.

"Overall, with vaccination rates continuing to increase, the outlook beyond FY22 remains positive for Qantas, which remains a key COVID recovery stock," Jefferies analyst Anthony Moulder told clients.

The statutory loss of A$1.73 billion, including impairments and restructuring charges, was better than last year's A$1.96 billion loss.

The airline reported A$3.8 billion of liquidity as of June 30, down A$200 million from April 30.

The domestic market had performed strongly in the fourth quarter when state borders, often closed at times of small COVID-19 outbreaks, had been largely open.

But the country's most populous city, Sydney, has been in lockdown since the end of June and the airline this month said it was temporarily idling about 2,500 employees without pay for at least two months as it cut capacity due to lower demand.

Qantas said that recent outbreaks and the suspension of a travel bubble with New Zealand were expected to lower the company's underlying EBITDA by around A$1.4 billion in the first half.

Domestic capacity is expected to rise to 53% of pre-COVID-19 levels in the second quarter and then to approximately 110% of pre-COVID-19 levels in the second half.

Creditors File Winding Up Petition For Air Seychelles

Holders of approximately $70 million in troubled bonds issued on behalf of state-owned Air Seychelles have filed a petition to wind up the African airline, they have said in a statement, after a standoff over the unpaid debt.

The move is the latest effort by creditors to recover $1.2 billion owed by Abu Dhabi's Etihad Airways and airlines it partly owned when the debt was issued in 2015 and 2016, such as Air Seychelles.

At the time, Etihad owned 40% of Air Seychelles and it was in a consortium along with the Gulf airline and other carriers that borrowed the money through special purpose vehicle EA Partners.

"The Noteholder Committee (acting on behalf of the EA Partners bondholders)...filed a petition dated 19 August 2021 for the winding-up of Air Seychelles, and on 24 August 2021, such petition was served on, and acknowledged by, Air Seychelles," the creditors said in a statement.

When the COVID-19 pandemic struck last year, Air Seychelles said it was struggling to honour its $71.5 million portion of the EA Partners debt and started restructuring talks with a steering committee of creditors in July.

A Seychelles government official told Reuters in May that Air Seychelles wound not pay more than $20 million to settle the debt.

The creditors said on Wednesday that they were still open to work with the government, the airline's sole shareholders, to reach a resolution to the debt challenges.

But they said that there had been no "substantive engagement, nor any sense of urgency" from either Air Seychelles or the government, leaving no choice but to file a petition for the winding up of the airline to recover the money due.

Air Seychelles declined to comment.

Etihad is not legally obliged to back the bonds as the original $1.2 billion deals envisaged each carrier paying off its own portion of the debt, according to the debt documentation reviewed by Reuters.

British Airways Mulls Options For Short-Haul Ops At London's Gatwick Airport

British Airways is working on options for its short-haul operations at London's Gatwick Airport, seeking to curb costs in the face of stiff competition and tight restrictions in its home market.

The company, owned by London-listed International Airlines Group (IAG), did not specify what the proposals were, but the Wall Street Journal had earlier that the airline was considering folding the operations into a new unit.

"We are working with our unions on proposals for a short-haul operation at Gatwick. We are not prepared to comment further while this process continues," the airline said in an e-mailed statement on Thursday.

The pandemic recovery at British Airways, usually IAG's most profitable airline, has fallen behind the group's Spanish units Iberia and Vueling as Britain steered through tougher and longer restrictions than Europe.

IAG itself has adopted a more cautious tone on recovery than its competitors. In July, the company forecast summer capacity would rise to just 45% of pre-pandemic levels versus outlooks of 60% to 70% from Air France-KLM, EasyJet and Ryanair.

India Clears Boeing 737 MAX Aircraft To Fly

India's air safety regulator has said on that it has cleared Boeing Co's 737 MAX aircraft to fly with immediate effect, ending its nearly two-and-a-half-years of regulatory grounding in a key travel market for the plane maker.

The Directorate General of Civil Aviation (DGCA) said in its order that it has closely monitored the 737 MAX's global un-grounding trend, and has found "no untoward reporting" with 34 airlines across the world currently operating 345 MAX planes.

The 737 MAX was grounded worldwide in March 2019 after two fatal crashes in five months killed 346 people, plunging Boeing into a financial crisis, since compounded by the pandemic.

"The DGCA's decision is an important milestone toward safely returning the 737 MAX to service in India," Boeing said in a statement, adding that it continues to work with regulators and customers to return the airplane to service worldwide.

Approximately 175 countries have allowed the 737 MAX to return to service following the ban, leaving China as the only major market where regulators are yet to give the MAX a go-ahead. Boeing, earlier this month, conducted a test flight of the MAX plane in China.

The clearance will give Boeing the ability to make a stronger sales pitch for its narrowbody planes in India where rival Airbus dominates the skies with its family of A320 aircraft.

While Boeing still dominates India's widebody market, its share of narrowbody planes fell sharply after the demise of one of its biggest customers, Jet Airways. Jet was recently rescued from bankruptcy and is expected to fly again.

India's SpiceJet Ltd is Boeing's biggest and only customer for the MAX planes in the country. It has more than 100 of the planes on order.

However, Indian billionaire Rakesh Jhunjhunwala's plans to launch a new ultra low-cost airline could give Boeing an opportunity to regain lost ground. One industry source said the new venture, Akasa, was already moving towards 737s.

SpiceJet did not immediately respond to a request for comment after the regulator's clearance.

SpiceJet Expects To Restart Boeing 737 MAX Service By Next Month

SpiceJet  has said that it expects Boeing Co's grounded 737 MAX jets in its fleet to return to service at the end of September following a settlement struck with lessor Avolon on leases of the aircraft.

The resumption of MAX aircraft services would be subject to regulatory approvals, SpiceJet, India's second-largest airline by market share and the only one in the country to fly the aircraft, said. Avolon declined to comment.

SpiceJet, which said earlier this month it was in discussions with lessors of MAX aircraft to restructure present leases, did not provide any further details on the settlement.

With easing of the travel restrictions and increasing pace of vaccinations, there might be some pick-up in air traffic and SpiceJet's settlement to restart MAX aircraft could help it get back on track, said Likhita Chepa, senior research analyst at CapitalVia Global Research.

"However, higher ATF (Air Turbine Fuel) prices might hurt margins and operability," Chepa added.

With 13 of its 737 MAX planes grounded, SpiceJet had said it was in talks with Boeing for compensation towards costs and losses it has suffered.

Boeing continues to work with global regulators to safely return the 737-8 and 737-9 to service, the US plane maker said in a statement to Reuters, while declining to comment on the compensation.

SpiceJet shares had fallen 25.1% this year as of Thursday August 26 close compared to a 1.3% rise in shares of rival Indigo's owner InterGlobe Aviation.

Russia Fines Booking.com $17.5m For Violating Competition Law

Russia's federal anti-monopoly service (FAS) has slapped a 1.3 billion rouble ($17.52 million) fine on hotel reservation website Booking.com for violating anti-monopoly law, the regulator has said.

The fine from the FAS comes nine months after it accused the company of violating Russia's competition law, saying that Booking.com "abused its dominant position on the market."

According to Russian anti-monopoly law, a company could face a fine of between 1% and 15% of its annual revenue generated in Russia.

Booking.com said that it is plannning to appeal the FAS decision, TASS news agency reported.

Virgin Australia To Add Nine Planes To Its Fleet Ahead Of Expected Travel Rebound

Virgin Australia has said that it will add nine Boeing Co 737-800 planes to its fleet from October in preparation for an expected increase in domestic travel as vaccination rates rise and state borders reopen.

The airline said that the increased capacity would bring its fleet to 77 planes and help it meet its target of gaining a one-third share of the domestic market, where it competes against Qantas Airways Ltd and Regional Express Holdings Ltd.

"These extra aircraft are an important part of our planning and ensure we're ready to ramp up flying and meet the pent-up demand for domestic travel as soon as the opportunity presents itself," Virgin Chief Executive Jayne Hrdlicka said in a statement.

Under the ownership of US private equity group Bain Capital, Virgin has been rebuilding its fleet of 737s after emerging from voluntary administration last year and handing back many of its planes to lessors.

Virgin had 85 737s as of June 30, 2020, according to a report from administrator Deloitte that included four at its now-closed budget airline Tigerair Australia, so its fleet will still be smaller than pre-COVID levels.

The recovery in the Australian domestic aviation market has been hindered by recent lockdowns affecting more than half of the country's population, which have led airlines to cut capacity and idle thousands of workers without pay.

Southwest Airlines Cuts Flights To Fix Operational Challenges

Southwest Airlines will run fewer flights through the end of the year in a bid to fix issues that disrupted operations this summer and led to flight delays and cancellations.

The low-cost carrier has said that it will reduce an average of 27 flights a day from September 7 through Oct. 6 and cut 162 flights a day from October 7 through November 5.

It plans to adjust flight schedules in November and December as well, but said it would protect holiday bookings.

"We're confident these adjustments will create a more reliable travel experience," Southwest Airlines CEO Gary Kelly said in a statement.

The cuts are on top of its recent reductions in response to slower bookings and increased cancellations due to the spread of the Delta variant of the coronavirus.

Southwest had added more flights to its schedule to capitalize on a recovery in air travel and gain market share. However, like most in the sector, it has struggled to keep up, grappling with staff shortages.

Both American Airlines and Southwest had to cancel summer flights due to the crunch, bad weather and less network flexibility. Now they are recalling crews and resuming hiring.

The Dallas-based airline said it was "aggressively" hiring.

To deal with staff crunch, Southwest is recalling employees, who are on voluntary leave. The company expects to have all of those employees back by the end of the year.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

Ireland-Based Airborne Capital Joins Force With Asia's Mercuria For New Business

Ireland-based aviation financier Airborne Capital, which specialises in leasing and managing aircraft and has assets of approximately $1 billion (€850 million), is joining forces with Asian investment manager Mercuria on a Japanese venture to cash in on likely increased institutional demand for aircraft leasing opportunities.

As reported by The Irish Times, the Irish company, which was founded in 2017, said that it and its partner are founding a new business called Mercuria Airborne Capital that will cater for Japanese investors that are seeking to get involved in aviation.

Airborne Capital reportedly noted that despite the adverse impact that the COVID-19 pandemic has had on travel, aircraft investments are continuing to provide good returns, and reportedly added that it and its partner are founding the joint venture because they believe that institutional investors will play an increased role in aviation leasing.

Airbourne Capital chief executive Ramki Sundaram reportedly said that Mercuria Airborne Capital will "offer institutional investors in Japan access to a growing range of attractive investment opportunities in the global aviation finance sector", while Mercuria chief executive Toshihiro Toyoshima reportedly said that the partnership with Airborne Capital is an "exciting step".

Mercuria reportedly manages approximately $2 billion in assets from offices in Tokyo, Beijing, Hong Kong and Bangkok.

Article by Dave Simpson. Click subscribe to sign up for the Hospitality Ireland print edition.

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