Aviation Industry (incl Maintenance) 01 (Dec 08 - May 20)

[winston]

Chinese Airlines

Not vested.

In the investment order of the air stock selection, we recommend Air China first, and then China Eastern Airlines, paying close attention to the China Southern Airlines.

As a leading company with a strong control of the market, Air China is the first to benefit from the rebound in international aviation demand. It remains our first choice. After merger of Shenzhen Airlines, its network layout becomes more optimized. Its shares of Cathay Pacific also helped strengthening its global network.

Synergistic effect become increasingly clear after China Eastern Airline's merger of Shanghai Airlines. If successfully introduce a strategic investor, China Eastern Airline's development would be further widened.

With a huge domestic route net, the prosperous domestic aviation market is real good to China Southern Airlines for long term.

[winston]

Chinese Airlines.

Not vested yet as I'm watching the price of oil. However, if they lose money, there's always somebody to bail them out. So it's probably a no lose proposition ..

Airline profits soaring as more mainlanders fly

China's aviation industry profits jumped threefold to 43.7 billion yuan (HK$51.3 billion) in 2010, a senior industry regulator said yesterday.

That was thanks to robust air travel in the world's fastest-growing major economy.

Air China (0753) and other carriers booked combined profits of 35.1 billion yuan last year, Wang Changshun, deputy chief of the Civil Aviation Administration of China, said at an industry meeting. And total earnings of airport operators exceeded 5 billion yuan.

Industry revenues were 411.5 billion yuan - up 37.2 percent from 12 months earlier.

The number of air passengers in China is expected to top 300 million this year after rising 15.8 percent to 267 million in 2010, he added.

The top carriers - China Eastern Air (0670) and China Southern Air (1055) along with Air China - have yet to release annual earnings.

But China Eastern expects net profit to be 10 times that of 2009 on brisk air travel as well as its merger with rival Shanghai Airlines.

Source: REUTERS

[winston]

Analyst Interviews: Airline Industry Outlook By Zacks Investment Research

The economic downturn in 2009 and the oil price hike in 2008 had hit the airline industry hard. Now, with a revival in the economy, demand for air travel is improving.

Revenue and profits of U.S. carriers are increasing with a surge in ticket demand, higher fares as well as improved revenues collected from extra fees. Further, airlines are benefiting from industry consolidation, substantial improvement in yields, an upturn in the market and better capacity management resulting in enhanced supply-demand conditions.

The airline industry lost $16 billion in 2008 and $9.9 billion in 2009. Following a turnaround, airline industry would gain $15.1 billion in profits in 2010 as expected by the International Air Transport Association (IATA).

However, the month of December affected most of the U.S. carriers yet again with travelers being snowed in across the U.S. and Western Europe. Canceled flights during the month are bound to hurt fourth-quarter revenues and profits of most of the airlines companies. The impact of loses from flight cancellations are expected to continue throughout 2011.

The IATA expects full-year 2011 to be tough and profits to soften to the level of $9.1 billion. Tougher conditions are likely to stem from rising fuel costs, stable yields, weak traffic volumes, slower global GDP growth and increased taxation, particularly in Europe, which are expected to suppress demand for air travel.

Worldwide air freight volumes rebounded in 2010 to the 2008 peak level. This rebound was particularly apparent in Asia, where volumes were well above previous peak levels established in 2007. Air freight in 2011 is expected to be stressed due to excess capacity and yield pressures as demand softens.

Air freight rates will likely be stable in the first half of 2011 with strong growth in Asian demand. The second half will depend mostly on the general economic recovery and capacity discipline.

Remarkably, Asia outstripped North America consecutively in 2009 and 2010. In 2010, Asia generated half of the airline industry’s overall profit of $7.7 billion, turning out to be the best producing region for the first time.

Higher fuel prices might temporarily stall the ongoing recovery in the airline industry in 2011. Nevertheless, we believe airline carriers will be able to pass on the higher cost to customers in the form of increased fares due to tight capacity.


OPPORTUNITIES

We believe industry consolidation and various ancillary revenues will boost profitability and cost performance of most air carriers going forward. This is an opportune moment for companies to consolidate in order to regain their lost profits post-recession and operate more effectively.

Ancillary Revenue: A number of supplementary revenue streams helped the airline industry gain ground in 2010 after two years of drought. The airline companies are enforcing a number of fees on baggage, reservation change, pet travel, food and beverage to add to their revenue streams. These are expected to enhance revenues in 2011. The IATA projects total revenue of $598 billion for 2011, up slightly from $565 million reported in 2010.

Consolidation: Airline companies are consolidating in order to restore profits.

Technology Upgrades: Air carriers are involved in numerous technology upgrades and system automation for various activities such as airline reservation system, flight operations system, website, maintenance and in-flight entertainment systems. These upgrades enable companies to perform better, lower costs and enhance customer service.


WEAKNESSES

Overall, we expect the industry to post strong growth in the upcoming years. However, near-term risks remain. These include volatile fuel prices, economic weakness, government regulation, unionization, airport infrastructure constraints and safety concerns. Some of the major risks are discussed below:

Oil Price Volatility: Airline operations are geared toward aviation fuel prices, a major variable cost. Fuel prices, though high currently, remain well below the 2008 levels of over $140 per barrel that had ravaged the airlines industry.

Unionization: The airline business is labor intensive. Most of the employees are unionized and depend on various U.S. labor organizations.

Federal Regulations: The airline industry is highly regulated, particularly by the federal government.

Currently, we have a neutral outlook on all major airlines –– Delta Airlines, United Continental Holdings, Southwest Airlines and Jetblue Airways (JBLU: 6.35 -0.14 -2.16%). If U.S. carriers are able to combat the rising fuel price in 2011, we think most of the airline stocks will see an upside and the industry on the whole will continue to recover.

http://www.dailymarkets.com/stock/2011/ ... outlook-2/

[winston]

Laser targets passenger planes in Australia

Three passenger planes headed for Sydney airport were targeted by a high-powered laser, with one pilot hit in the eye, police said Thursday.

The first strike happened Wednesday evening on the plane's approach, while a laser beam flashed at a second aircraft soon after. In the third incident a pilot was hit in the eye.

All three planes landed safely.

"It's a serious offence," said a local police spokesman, adding that it was thought the incidents were linked.

Laser strikes at flying aircraft has become an international problem, with a flight targeted in New Zealand this week.

New Zealand Air Line Pilots' Association vice-president Glen Kenny said the dangerous scourge was becoming common with 16 cases in the country this year.

The gadgets are prohibited weapons in Australia and a permit is needed to own one, but there are no restrictions on their sale or distribution in New Zealand.

Source: AFP Asian Edition

[winston]

Airfares likely to shoot up by 20% as fuel prices, demand soar

MUMBAI: Soaring fuel prices and rising passenger demand will make summer travel to international destinations costlier by 15%-20% from a year earlier, said aviation and travel trade experts.

http://economictimes.indiatimes.com/new ... 075528.cms

[winston]

The last time, the "Parrots of CNBC" were even predicting famine and were asking people to buy fertilizers, seeds etc...

UK Warns of Likely Flight Disruption From Ash Cloud

LONDON (Reuters) - Britain’s Civil Aviation Authority (CAA) said it was likely that flights from parts of the country would be disrupted Tuesday by an ash cloud billowing from a volcano in Iceland.

Reuters, REUTERS US ONLINE REPORT WORLD NEWS

[winston]

Airline revenue from add-ons to ticket sales jumped to almost $22 billion last year and continues to soar as more carriers chase extra sources of income, according to a study to be released Tuesday.


Source: Wall Street Journal

[winston]

Airline profits to tumble in 2011 on fuel, global turmoil-IATA

* Airlines cut 2011 profit forecast to $4 bln from $8.6 bln
* 2010 profit raised to $18 bln from $16 bln
* EU carbon plan called unfair and illegal tax

By Alison Leung and Harry Suhartono

SINGAPORE, June 6 (Reuters) - Global airlines cut their 2011 profit forecast by more than half on Monday as high oil prices and turmoil in Japan, North Africa and the Middle East weigh on the industry's recovery.

The International Air Transport Association (IATA), which represents most global carriers, said it expected industry profits of $4 billion in 2011, down from a previous forecast of $8.6 billion. That would down more than three-quarters from the industry's estimated 2010 profit, which was raised to $18 billion from $16 billion.

"The efficiency gains of the last decade and the strengthening global economic environment are balancing the high price of fuel," the IATA's director general, Giovanni Bisignani, told the group's annual general meeting in Singapore.

http://www.reuters.com/article/2011/06/ ... 5H20110606

[winston]

Recently, some South Korean soldiers were shooting at a passenger plane. Luckily, they were lousy shooters ..

And the following was in the news today ...

=================================

Cathay flight forced to avoid military aircraft

An almost full Cathay flight was ordered to steepen its ascent, apparently to avoid unreported military traffic, as it left Shanghai for Hong Kong at the weekend.

Source: SCMP

[winston]

Stats of the week: 39%

Gain in fuel costs at major airline Delta in the second quarter.

The increase contributed to a 58% drop in Delta's profit from last year.

Source: Daily Wealth