The world's airlines are expected to report a $39.4 billion collective net profit in 2016 according to the latest IATA forecast. The profit is expected to be generated on revenues of $709 billion for an aggregate net profit margin of 5.6%. On average, airlines will make $10.42 for each passenger carried. And for the second year in a row and only the second time in the airline industry's history, the return on invested capital (9.8%) will exceed the cost of capital (estimated to be 6.8%).
"Lower oil prices are certainly helping—though tempered by hedging and exchange rates," said Tony Tyler, IATA's Director General and CEO. "In fact, we are probably nearing the peak of the positive stimulus from lower prices. Performance, however, is being bolstered by the hard work of airlines. Load factors are at record levels. New value streams are increasing ancillary revenues. And joint ventures and other forms of cooperation are improving efficiency and increasing consumer choice while fostering robust competition. The result: consumers are getting a great deal and investors are finally beginning to see the rewards they deserve."
North American carriers are expected to report a net profit of $22.9 billion. Passenger capacity is expected to expand by 4.3% in 2016, marginally outpacing an anticipated 4.0% increase in demand. European airlines are expected to post a $7.5 billion profit in 2016. Passenger capacity is forecast to grow by 5.8%, ahead of expected demand growth of 4.9%. Airlines in Asia-Pacific are expected to post a $7.8 billion profit in 2016. Capacity is forecast to expand by 9.1% in 2016, ahead of demand which is likely to grow by 8.5%. Middle East carriers are expected to post a $1.6 billion profit. Capacity is forecast to grow at 12.2%, outpacing an expected 11.2% expansion of demand. Airlines in Latin America are expected to see a $100 million profit in 2016. Demand is expected to grow by 4.2% while carriers are forecast to add 3.7% to capacity. African airlines are expected to post a $500 million loss in 2016. Capacity growth (5.3%) is anticipated to outpace demand growth of 4.5%.
Posted by: just4airlines.com at 0105h UTC Jul 25, 2016
Honiara, Solomon Islands - The Chairman of the Board of Solomon Airlines Limited, Austin Holmes has today announced the termination of Solomon Airlines CEO, Ron Sumsum with immediate effect.
Announcing the news to the executive management team at the airline's Henderson Airport head offices, Mr Holmes advised the board of directors has appointed General Manager Operations and Commercial, Gus Kraus to the acting CEO role in the interim period it will take to seek and appoint a new full time CEO.
Mr Holmes advised this process will require approval by the Solomon Islands Civil Aviation, Authority (CAASI) following a thorough review of nominated persons to the "substantive position involved."
"The implications will have far reaching effects," Mr Holmes said.
"And this is being worked through by the airline's executive team with notifications and change processes already underway to ensure the airline complies with all relevant regulations and authorities within the country and with countries that we have approvals to operate to."
Ratifying the temporary appointment to the CEO role, CAASI Director, George Satu stated that Mr Kraus had for several years held approval as stand-in for the CEO role as the occasion required.
"Gus is a very fit and proper person to step into the CEO role," Mr Satu said.
"I believe his 48 years of airline service and experience will see Solomon Airlines successfully through its next phase of transition as we await the appointment of a new CEO."
Source: Solomon Airlines
Posted by: just4airlines.com at 0103h UTC Jul 25, 2016
Flybe, Europe's largest regional airline, has today started its brand new peak summer route to Rennes from London City with a service to North-Western France that flies six times a week. Flights operate through to September 4th 2016 with one way fares from £39.99 including taxes and charges, available for booking at www.flybe.com
London travellers can be in Brittany's capital city, Rennes, in just an hour and twenty five minutes, in comparison to a lengthy six and a half hour journey if taking the Eurostar from London St Pancras. Rennes has a thriving automotive industry and is one of France's largest digital and IT centres, making it a key destination for business as well as for leisure travellers.
Vincent Hodder, Flybe Chief Revenue Officer, said: "We are delighted at the positive response to our new route from London City to Rennes. Londoners can take advantage of this convenient connection that saves them time and money by operating from the very heart of the city."
Matthew Hall, Chief Commercial Officer, at London City Airport added: "Flybe's new service to Rennes offers the only direct flight from a London airport to the charming capital of Brittany, and is a great addition to London City Airport's offering of French destinations. Our passengers can expect a warm welcome in Rennes, a city full of both culture and business opportunities, including a thriving university and growing hi-tech sector. It's now possible to reach all of this within a couple of hours of central London, including a check-in time of 20 minutes or less."
Posted by: just4airlines.com at 0101h UTC Jul 25, 2016
DALLAS, /PRNewswire/ -- Southwest Airlines Co. (NYSE:LUV) (the "Company") today reported its second quarter 2016 results:
Record quarterly GAAP net income of $820 million, or $1.28 per diluted share, compared with second quarter 2015 GAAP net income of $608 million, or $.90 per diluted share.
Excluding special items, record quarterly net income of $757 million, or $1.19 per diluted share, compared with second quarter 2015 net income of $691 million, or $1.03 per diluted share. This compared to First Call second quarter 2016 consensus estimate of $1.21 per diluted share.
Record quarterly GAAP operating income of $1.3 billion, resulting in a strong second quarter operating margin3 of 23.7 percent. Excluding special items, second quarter 2016 operating income was also a quarterly record $1.3 billion, resulting in an operating margin of 23.5 percent.
Strong second quarter free cash flow of $649 million; returned $763 million to Shareholders through a combination of dividends and share repurchases.
Return on invested capital, before taxes and excluding special items (ROIC), for the 12 months ended June 30, 2016, of 33.5 percent, compared with 28.2 percent for the 12 months ended June 30, 2015.
Gary C. Kelly, Chairman of the Board, President, and Chief Executive Officer, stated, "We are pleased to report another quarter of record profits, strong margins, and healthy cash flows. The investments we have made in our business and our network are generating significant returns. As with first quarter 2016, record operating revenues and low fuel prices were the primary drivers of our record second quarter performance. Year-over-year, our second quarter 2016 operating revenue growth outpaced our available seat mile (ASM) growth, producing positive second quarter 2016 operating unit revenue (RASM) growth, despite a very competitive fare environment. Demand for our low fares was strong throughout the quarter with record load factors each month. While solid traffic demand has continued into July, thus far, the fare environment remains challenging, and close-in yields have softened in recent weeks. In addition, year-over-year RASM comparisons in third quarter are more difficult as the amended co-branded credit card agreement with Chase Bank USA, N.A. went into effect in third quarter 2015.
"We continue to make prudent investment decisions and remain steadfast in controlling our total operating costs. Our balance sheet, cash flow, and liquidity are strong, allowing for meaningful returns and rewards for our Employees and Shareholders.
"My congratulations go to our magnificent Employees for this tremendous second quarter performance, which resulted in a record $206 million profitsharing accrual. While year-over-year profit comparisons are more challenging in third quarter, our current revenue and cost outlook suggest another strong operating margin in excess of 18 percent4, excluding special items."
Revenue Results and Outlook
The Company's total operating revenues were a quarterly record $5.4 billion, driven largely by second quarter 2016 passenger revenues of $4.9 billion. Year-over-year, second quarter 2016 operating revenues grew 5.3 percent, and increased 0.6 percent on a unit basis.
Second quarter 2016 total operating revenues included approximately $135 million associated with the July 2015 amendment of the Company's co-branded credit card agreement with Chase Bank USA, N.A. (Chase) and a resulting required change in accounting methodology. This improved year-over-year RASM performance by 2.6 points. The $135 million net benefit reflects an approximate $200 million increase to other revenues offset by an approximate $65 million reduction to passenger revenues. While the Company expects a similar revenue benefit in third quarter 2016, it will be comparable to the benefit realized in third quarter 2015 due to the July 2015 effective date of the Chase amendment and therefore will not result in the two to three point year-over-year RASM improvement the Company has realized for the past four quarters.
Based on current bookings and yields, the Company expects third quarter 2016 RASM to decline in the three to four percent range, compared with third quarter 2015 RASM (excluding the one-time special revenue adjustment of $172 million recorded in third quarter 2015 as a result of the Chase amendment and a resulting required change in accounting methodology).
Cost Performance and Outlook
Second quarter 2016 total operating expenses of $4.1 billion increased 2.0 percent, and decreased 2.6 percent on a unit basis, as compared with second quarter 2015. During second quarter 2016, the Company recorded a $21 million impairment charge (before profitsharing and taxes) for the intangible assets associated with its Newark Liberty International Airport slots5 as a result of the Federal Aviation Administration (FAA) announcement in April 2016 that Newark will be designated as a Level 2 schedule-facilitated airport under the International Air Transport Association Worldwide Slot Guidelines effective October 30, 2016. Second quarter 2015 operating expenses included $55 million (before profitsharing and taxes) in expense related to proposed and paid ratification bonuses associated with certain workgroups. Excluding special items, total operating expenses increased 3.9 percent to $4.1 billion, and decreased 0.8 percent on a unit basis, both as compared with second quarter 2015.
Second quarter operating costs benefited from a 10.1 percent decline in fuel and oil expenses. Second quarter 2016 economic fuel costs were $1.81 per gallon, including $0.42 per gallon in unfavorable cash settlements from fuel derivative contracts, compared with $2.02 per gallon in second quarter 2015, including $0.08 per gallon in unfavorable cash settlements from fuel derivative contracts. Based on the Company's existing fuel derivative contracts and market prices as of July 18, 2016, third quarter 2016 economic fuel costs are estimated to be approximately $2.05 per gallon. As of July 18, 2016, the fair market value of the Company's fuel derivative contracts for the second half of 2016 was a net liability of approximately $545 million, and was a net liability of approximately $510 million for the hedge portfolio in 2017 and 2018, combined. Additional information regarding the Company's fuel derivative contracts is included in the accompanying tables.
Excluding fuel and oil expense and special items in both periods, second quarter 2016 operating expenses increased 7.5 percent compared with second quarter 2015. Second quarter 2016 profitsharing expense was $206 million, compared with $182 million in second quarter 2015. Excluding fuel and oil expense, special items, and profitsharing expense, second quarter 2016 operating costs increased 7.1 percent, and increased 2.1 percent on a unit basis, both as compared with second quarter 2015.
Based on current trends and excluding fuel and oil expense, special items, and profitsharing expense, the Company expects its third quarter 2016 and annual 2016 unit costs to increase approximately two percent, and approximately one percent, respectively, as compared with the same year-ago periods, largely due to additional depreciation expense associated with the accelerated retirement of the Company's Classic fleet (Boeing 737-300/-500 aircraft) to no later than third quarter 2017.
Second Quarter Results
Including and excluding special items, second quarter 2016 operating income was a quarterly record $1.3 billion, compared with $1.1 billion in second quarter 2015.
Other income in second quarter 2016 was $28 million, compared with other expenses of $108 million in second quarter 2015. The $136 million increase primarily resulted from $43 million in other gains recognized in second quarter 2016, compared with $88 million in other losses in second quarter 2015. In both periods, these gains and losses included ineffectiveness and unrealized mark-to-market amounts associated with a portion of the Company's fuel hedge portfolio, which are special items. Excluding these special items, other losses were $48 million in second quarter 2016, compared with $19 million in second quarter 2015, primarily attributable to the premium costs associated with the Company's fuel derivative contracts. Third quarter 2016 premium costs related to fuel derivative contracts are currently estimated to be in the $30 million to $35 million range, compared with $33 million in third quarter 2015. Net interest expense in second quarter 2016 was $15 million, compared with $20 million in second quarter 2015.
Second quarter 2016 net income was a quarterly record $820 million, or $1.28 per diluted share, compared with second quarter 2015 net income of $608 million, or $.90 per diluted share. Excluding special items, second quarter net income was a quarterly record $757 million, or $1.19 per diluted share, compared with second quarter 2015 net income of $691 million, or $1.03 per diluted share.
Balance Sheet and Cash Flows
As of June 30, 2016, the Company had approximately $3.4 billion in cash and short-term investments, and a fully available unsecured revolving credit line of $1 billion. Net cash provided by operations during second quarter 2016 was $1.1 billion, capital expenditures were $462 million, and assets constructed for others, net of reimbursements, were $1 million, resulting in free cash flow of $649 million. The Company repaid $48 million in debt and capital lease obligations during second quarter 2016, and expects to repay approximately $500 million in debt and capital lease obligations during the remainder of 2016. The Company funded a $620 million ProfitSharing contribution as a result of its 2015 results to its ProfitSharing Plan in second quarter 2016.
During second quarter 2016, the Company returned $763 million to its Shareholders through the payment of $63 million in dividends and the repurchase of $700 million in common stock. The Company completed its previous $1.5 billion share repurchase program with the repurchase of $200 million in common stock, or 4.5 million shares, pursuant to an accelerated share repurchase (ASR) program launched and completed during second quarter 2016. On May 18, 2016, the Company's Board of Directors authorized a new $2.0 billion share repurchase program, along with a 33 percent increase in the Company's quarterly dividend. Under this new authorization, the Company repurchased $500 million in common stock, or 12.3 million shares, pursuant to another ASR program launched and completed during second quarter 2016, bringing total shares repurchased during second quarter 2016 to approximately 16.7 million. In addition, during second quarter 2016, the Company received the remaining 2.3 million shares pursuant to its first quarter 2016 $500 million ASR program. The Company intends to repurchase an additional $250 million of Southwest common stock under an ASR program expected to be launched soon (third quarter 2016 ASR program). Subsequent to the launch of the third quarter 2016 ASR program, the Company will have $1.25 billion remaining under its existing $2.0 billion share repurchase program.
For the six months ended June 30, 2016, net cash provided by operations was $2.7 billion, capital expenditures were $900 million, and assets constructed for others, net of reimbursements, were $2 million, resulting in free cash flow of $1.8 billion. This enabled the Company to return approximately $1.4 billion to Shareholders through the payment of $160 million in dividends and the repurchase of $1.2 billion in common stock.
Fleet and Capacity
The Company ended second quarter 2016 with 719 aircraft in its fleet. This reflects the second quarter delivery of 7 new Boeing 737-800s and 6 pre-owned Boeing 737-700s, as well as the retirement of 8 Boeing 737 Classic aircraft. The Company continues to plan to end this year with 723 aircraft. To adjust future deliveries for the accelerated retirement of the Classic fleet, the Company announced a restructured Boeing delivery schedule in June. With the previously announced decision to accelerate the retirement of its Classic fleet to no later than third quarter 2017, the Company no longer anticipates significant retirements between 2018 and 2023. With that in mind, firm deliveries previously scheduled between 2019 and 2022 were deferred to 2023 through 2025 in the restructured order book. This resulted in a meaningful $1.9 billion deferral of capital spending. In addition, the restructured delivery schedule provides significant fleet flexibility to manage long-term growth opportunities. The Company continues to manage to average annual net fleet growth for the three-year period ending 2018 of no more than two percent. Annual ASM growth (capacity) over that time period is expected to peak at this year's five to six percent range. In light of the current revenue environment, the Company continues to evaluate future capacity growth with a focus on growing prudently and profitably. Additional information regarding the Company's aircraft delivery schedule is included in the accompanying tables.
The Southwest network continues to perform well, including the second quarter 2016 inaugural service from its 98th city, Long Beach, California. The Company recently reached some exciting international milestones with the U.S. Department of Transportation (DOT) authorizing the Company to serve two destinations in Cuba, Varadero and Santa Clara, and issuing a tentative decision granting authority for the Company to serve Havana, Cuba from Ft. Lauderdale and Tampa, Florida. The Company has also received DOT authority to provide its first ever international service from Oakland International Airport with daily flights to San Jose del Cabo and Puerto Vallarta, Mexico starting in February 2017. In addition, the Company has requested authority to serve three Mexican beach destinations from Los Angeles International Airport consistent with the pending liberalized bilateral agreement between the two countries which has not yet become effective. The Company eagerly awaits implementation of this agreement which will provide numerous additional opportunities for the Company to add low-fare service and competition in U.S.- Mexico markets.
Awards and Recognitions
Named as one of Corporate Responsibility Magazine's 100 Best Corporate Citizens 2016.
Named to BetterInvesting's Top 100 Company list.
Recognized for 2016 Airline Program of the Year by InsideFlyer for our Rapid Rewards® program.
Among the top airline scores for overall customer satisfaction and for Airline Loyalty/Reward Program Satisfaction in the J.D. Power 2016 North America Airline Satisfaction Study.
Recognized by Newsweek as one of America's Greenest Companies.
Designated a 2016 Most Valuable Employer for Military by CivilianJobs.com.
Tied for #1 on American Customer Satisfaction Index (ACSI) Travel Report 2016.
Named Air Forwarder's Association Domestic Carrier of the Year.
Received the 2015 Express Cargo Standard of Excellence award from Express Delivery and Logistics Association.
Source: Southwest Airlines
Posted by: just4airlines.com at 0059h UTC Jul 25, 2016