Merrill Lynch Analyst Michael Linenberg predicts consolidation of the Canadian airline industry will lead to higher returns as the new Air Canada controls 80% market share, and stocks likely will command a premium multiple compared to U.S. carriers once integration is completed. The combination of Air Canada and Canadian at Toronto Pearson creates a hub that could rival some of the largest U.S. hubs, and enable Air Canada to use the combined traffic base of both carriers to support long-haul thin markets such as Toronto-Munich and year-round service to Milan, he said.
British Airways is planning to consolidate some of its leisure units into a more unified division, in order to further integrate products and reduce costs. Reporting to Tiffany Hall, head of U.K. and Ireland sales, the new division will be led by current General Manager Leisure Sales Robin Hayes and will include leisure sales and BA Holidays. Hayes will be responsible for BA leisure products sold through all distribution channels. The leisure businesses currently are profitable. The new organization takes effect July 3.
Galileo International received a letter of intent from the Arab Air Carriers Organization (AACO) yesterday confirming that Palestinian Airlines has chosen Galileo as its preferred system provider for the territories of the West Bank and Gaza. Galileo recently announced that AACO had agreed to renew its distribution contract with Galileo on behalf of eight carriers in the region including Emirates, Saudi Arabian Airlines, Kuwait Airways, Egyptair, Royal Jordanian, Syrian Arab Airlines, Yemenia and Middle East Airlines.
Boeing completed the first flight of a 777-200ER powered by two new General Electric GE90-94B engines. An Air France aircraft is being used as the testbed for the new engine, rated at 94,000 pounds thrust.
Without commenting specifically on the proposed United-US Airways merger, a Justice Department official told the House Judiciary Committee yesterday that "hub economics are powerful" in determining whether mergers or acquisitions in the airline industry should be challenged on competitive grounds.
Airlines can expect to see a substantial rise in premiums in the next two years as underwriters attempt to turn ongoing losses into profits, according to Gary Cooke, senior VP and aviation underwriter at ACE Bermuda Insurance. Speaking at the Fourth Aviation Insurance conference in Singapore recently, Cooke said underwriters have suffered losses amounting to US$2 billion over the last 11 years. "I trust the airline industry would not think it is unreasonable when we attempt to put things straight to make a profit," Cooke said.
Corporate travelers are weary of what the proposed United-US Airways merger will mean to business fares, and concern is growing that a merged airline could wield the financial and political clout to attack low-fare competitor Southwest, said Business Travel Coalition Chairman Kevin Mitchell in remarks prepared to deliver today to the House Transportation Committee. In a survey of 172 corporate buyers of air tickets, only 17% support the proposed merger, said Mitchell, whose organization represents corporate travel buyers and independent business travelers.
LanPeru has objected to the Peruvian Civil Aviation Agency authorizing TACAPeru to operate former Aeroperu routes from Lima to Buenos Aires and Mexico City, according to DAILY affiliate AvNews Latin America&Caribbean. LanPeru objected because "legally they were supposed to be awarded through public bidding and not directly."
Varig will fly daily between Lima and Sao Paulo/Rio de Janeiro instead of four times a week as of July 1 to handle growing tourist traffic between the two countries. Varig has been active in Peru for the last four decades.
AeroMexico and its flight attendants union, the Asociacion Sindical de Sobrecargos de Aviacion (ASSA), reached an agreement yesterday in their contract dispute, ending a strike called by the union on June 1. Union representatives agreed to accept the 12% pay raise originally offered by the airline, and AeroMexico said it will "enhance" the flight attendant retirement plan and build a day care center for the workers' children.
The Senate is expected to vote today on the fiscal 2001 transportation appropriations bill, which includes $12.4 billion for FAA, Senate sources said yesterday. Approval would send it to conference with the House, which cleared its FAA money bill last month. The bill was approved by the Senate Appropriations Committee late Tuesday after adding an amendment that would allow the FAA to use $120 million from airport grant funds for air traffic control funding. The amendment was offered by Sen.
United's block hour cost to operate the A320 is 49% higher than Northwest's, according to DOT data (see Page 7). Both carriers have large A320 fleets. Northwest even has an A320 cost advantage over low-cost America West. Northwest's A320 block hour rate of $2,153 is 13% lower than America West's $2,486.
DOT granted SATA International authority through Oct. 30 to wet-lease a portion of its aircraft to TAP Air Portugal for Boston-Ponta Delgada, Portugal, service, and to carry TAP's scheduled traffic in the market on SATA's charter flights. (Docket OST-00-7445)
Continental today will launch service to two new Latin American destinations -- Puerto Plata, Dominican Republic, and Aguascalientes, Mexico. The airline will increase to daily its service between Newark and Santiago, Chile, with a stop in Lima from its current four weekly flights.
A federal jury in Miami yesterday found Jeppesen Sanderson 17% at fault and Honeywell Air Transport Systems 8% at fault in the 1995 crash of an American 757 in Cali, Colombia, that killed 159 persons. American, which brought the suit against the two, said it concurs with the jury's verdict.
Spanish holding firm SEPI yesterday released its three-year plan to revive financially crippled Aerolineas Argentinas which called for spending $650 million by all stockholders, including the Argentine state, employees, American Airlines, Iberia, international investment funds and others. Aerolineas' liabilities at the end of 1999 totaled over $900 million, although the company was debt-free when privatized in 1990.
U.S. negotiators reported that the first day of U.S.-U.K. aviation talks in London "went positively," according to a State Department spokesman. The two sides will continue meeting today and tomorrow.
Atlas Air wants broad U.S.-Colombia rights, seeking to expand operations to include intermediate and beyond points. The carrier has authority to serve Barranquilla, Bogota and Cali, Colombia, from the U.S. and to operate beyond Colombia to Argentina, Chile, Paraguay and Peru. It initially wants to serve Medellin. The U.S.-Colombia bilateral includes a memorandum of consultations that opens skies for cargo. (Docket OST-00-7477)
Northwest will launch its new luggage service recovery program tomorrow, claiming to be the first carrier to compensate passengers for lost bags. Under the new program, the airline will provide customers with a "recovery packet" when a lost bag is returned. The packet contains a dollars-off voucher for future travel of at least $25, along with a comment card and a letter of apology.
A new no-frills domestic airline in Kenya is in the process of being formed under the flag carrier Kenya Airways. Kenya Flamingo Airways (KFA) will be based at Jomo Kenyatta International Airport in Nairobi and will take over domestic operations in the country from private carrier Eagle Aviation. Eagle, which currently operates for Kenya Airways, would withdraw its operating license when it ceases operations on June 30. It would be allowed to operate as a charter airline. KFA would lease six Saab 340Bs to start.
FAA plans to establish a new requirement for fire protection of powerplant installations on aircraft. The agency will require that components within a designated fire zone be fireproof if, when exposed to or damaged by fire, they could pose a hazard to the airplane. FAA said the change will eliminate regulatory differences between U.S. and European aviation authorities "without affecting current industry design practices."
Reciprocal cabotage between the U.S. and Canada, an idea floated by Canadian Transport Minister David Collenette to mitigate the lack of competition in Canada, could be taken under consideration by the U.S. According to Canadian press reports, DOT Secretary Rodney Slater said the U.S. would consider such a proposal were it to be put forth by Collenette. Collenette said he would present a plan to the U.S. if Canada cannot add aviation competition. Slater indicated that market forces likely would draw competition to the industry.
Continental and Emirates filed for reciprocal U.S.-Emirates code-share rights, planning to implement the requested authority Sept. 1 on flights between Newark and Houston and Dubai via London Gatwick. Continental seeks rights to display Emirates' code on flights between the cities and points served by Continental and between points served by both carriers. Emirates wants to display Continental's code on flights between Gatwick and other points served by Emirates.
LOT Polish Airlines is converting six ERJ 145 options and purchasing another three of the 50-seat regional jetliners. LOT now has placed 15 firm orders for the aircraft, up from six firm and six options announced in February 1999.
