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Friday, November 6th, 2020

Bombardier eyes layoffs as it misses quarterly targets

The Canadian plane and train maker has announced that it has missed its quarterly operating profit forecast and, as a consequence, is now eyeing staff layoffs to reduce running costs.

Like so many aviation-related businesses, Bombardier has been heavily hit by the widespread effects of the COVID-19 pandemic. Currently Bombardier is streamlining its business with the sell-off of its rail division to France’s Alstom and in future will be concentrating solely on the manufacture of luxury business and private jets such as its Global and Challenger series.

“In the weeks to come we will decide all the initiatives we need to do to reduce our cost base,” Bombardier CEO Éric Martel told reporters, adding that “It’s sure there will be layoffs that will come with this.”

Having delivered eight of its Global 7500 jets in the last quarter, the company anticipates this number will rise to 12 for the final quarter of the year, which it hopes will see it operating at break-even level for the second half of the year. Corporate jet deliveries dropped to 24 units compared to 31 for the same period in 2019, but business revenue rose 10%, mainly thanks to the Global 7500 making up one third of aircraft deliveries.

Bombardier’s margins and earnings before interest, taxes, depreciation and amortization (EBITDA) took a hit on higher initial production costs for the Global 7500 jets and lower deliveries. Bombardier reported adjusted EBITDA of US$176 million for the third quarter as opposed to US$255 for Q3 2019.

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IATA: passenger demand in September remained highly depressed

The International Air Transport Association (IATA) announced that passenger demand in September remained highly depressed.

Total demand (measured in revenue passenger kilometers or RPKs) was 72.8% below September 2019 levels (only slightly improved over the 75.2% year-to-year decline recorded in August). Capacity was down 63% compared to a year ago and load factor fell 21.8 percentage points to 60.1%.

International passenger demand in September plunged 88.8% compared to September 2019, basically unchanged from the 88.5% decline recorded in August. Capacity plummeted 78.9%, and load factor withered 38.2 percentage points to 43.5%.

Domestic demand in September was down 43.3% compared to the previous year, improved from a 50.7% decline in August. Compared to 2019, capacity fell 33.3% and the load factor dropped 12.4 percentage points to 69.9%.

European carriers’ September demand collapsed 82.5% versus a year ago, which was a setback compared to an 80.5% decline in August. Europe was the only region to see a deterioration in traffic compared to August, owing to renewed infections that led to a wave of border closings. Capacity contracted 70.7% and load factor fell by 35.1 percentage points to 51.8%.

Asia-Pacific airlines’ September traffic sank 95.8% compared to the year-ago period, virtually unchanged from a 96.2% drop in August. The region continued to suffer from the steepest fall in traffic as flight restrictions have remained stringent with little re-opening of borders. Capacity plummeted 89.6% and load factor shrank 46.8 percentage points to 31.7%, the lowest among regions.

Middle Eastern airlines posted a 90.2% traffic decline for September, improved from a 92.3% demand drop in August. Capacity tumbled 78.5%, and load factor sank 40.9 percentage points to 34.4%.

North American carriers saw a 91.3% traffic decline in September, a slight improvement from a 92.0% decline in August. Capacity toppled 78.3%, and load factor dropped 49.8 percentage points to 33.4%.

Latin American airlines faced a 92.2% demand drop in September, compared to the same month last year, versus a 93.4% decline in August versus August 2019. Capacity dived 87.9% and load factor dropped 29.3 percentage points to 53.3%, highest among the regions.

African airlines’ traffic sank 88.5% in September, barely budged from an 88.7% drop in August. Capacity contracted 74.7%, and load factor fell 39.4 percentage points to 32.6%, which was the second lowest among regions.

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COVID-19 pandemic impact clearly visible in Finnair's October traffic figures

In October, Finnair carried 100,800 passengers, which is 92.0% less than in the corresponding period of 2019 and 12.8% less than in September 2020. The COVID-19 impact, including the exceptionally strict travel restrictions imposed by Finland, still affected all passenger traffic figures. It was visible especially in the North Atlantic figures (no scheduled flights in October).

The overall capacity (ASK) decreased in October by 88.5% year-on-year. Finnair operated 76 daily flights (cargo-only included) on average which was 21.1% compared to October 2019. The differences between capacity figures are explained by the shorter operated flights on average and by smaller operated aircraft compared to October 2019. Finnair's traffic (RPKs) decreased by 95.6%. The Passenger Load Factor (PLF) decreased by 50.7% points to 31.6%.

The ASK decline in Asian traffic was 86.6%. The North Atlantic capacity decreased by 100.0%. In European traffic, the ASKs were down by 90.2%. The ASKs in domestic traffic decreased by 66.3%. RPKs decreased in Asian traffic by 96.9%, in North Atlantic traffic by 100.0%, in European traffic by 94.7% and in domestic traffic by 71.4%.

Atlas Air Worldwide posts third-quarter 2020 net income of US$74.1 million

Atlas Air Worldwide Holdings has posted third-quarter 2020 net income of US$74.1 million compared with net income of US$60.0 million in the third quarter of 2019.

On an adjusted basis, EBITDA totaled US$196.3 million in the third quarter this year compared with US$95.6 million in the third quarter of 2019. Adjusted net income in the third quarter of 2020 totaled US$82.7 million, compared with US$9.5 million in the third quarter of 2019.

“The positive momentum of our business continued in the third quarter, despite a more complex, costly and challenging operating environment caused by the COVID-19 pandemic.” said Chief Executive Officer John W. Dietrich. “Our performance is the result of our entire team pulling together to increase utilization of our aircraft and execute on strong market demand and higher yields."

Mr. Dietrich continued: “Looking to the fourth quarter, and subject to any material COVID-19 developments, we anticipate solid volumes and yields driven by continued e-commerce growth and end-of-the-year airfreight demand, coupled with the reduction of available cargo capacity in the market. To meet customer demand, we are reactivating our fourth 747 freighter that had been previously parked. This will add to the three 747 freighters and the 777 freighter we placed back into service during the second quarter of 2020."

"As a result, we anticipate fourth-quarter revenue of about US$850 million and adjusted EBITDA of approximately US$215 million. We also expect fourth-quarter 2020 adjusted net income to grow approximately 25% compared with adjusted net income of US$82.7 million in the third quarter of this year.

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Lufthansa Group reports adjusted EBIT of minus €1.3 billion in third quarter 2020

The global CORONA pandemic continued to have a considerable impact on the Lufthansa Group's earnings development in the third quarter of 2020. However, compared to the second quarter, losses were reduced due to substantial cost savings and an expansion of the flight schedule in the summer months of July and August. Adjusted earnings (Adjusted EBIT) amounted to minus €1.3 billion (previous year: plus €1.3 billion). The average monthly operating cash drain, before changes in working capital and investments, was €200 million. In the same period, sales fell to €2.7 billion (previous year: €10.1 billion). Net income was minus €2 billion (previous year: plus €1.2 billion). Operating expenses were cut by 43% in the third quarter compared to the previous year, partly as a result of significantly lower fuel costs, fees and a reduction in other costs that vary based on the extent of flight operations. Using short-time work for a large portion of the personnel in combination with other measures resulted in a reduction of fixed costs by more than a third. In addition, strict liquidity management limited the cash outflows.

"Strict cost savings and the expansion of our flight program enabled us to significantly reduce the operating cash drain in the third quarter, compared to the previous quarter. Lufthansa Cargo also contributed to this with a strong performance and a positive result of €169 million. We are determined to keep following this path. We want to return to a positive operating cash flow in the course of the coming year. In order to achieve this, we are advancing restructuring programs throughout the Group with the aim to make the Lufthansa Group sustainably more efficient in all areas," said Carsten Spohr, CEO of Deutsche Lufthansa AG.

In the first nine months of this year, the Lufthansa Group generated revenues of EUR 11 billion (previous year: €28 billion). Adjusted EBIT in this period was minus €4.1 billion (previous year: plus €1.7 billion). Net profit was minus €5.6 billion (previous year: plus €1 billion). The result was impacted by non-cash special items. This included, among other things, impairment losses of €1.4 billion on 110 aircraft or rights of use, which are not expected to resume operations.

At the end of September, the Lufthansa Group had €10.1 billion of cash at its disposal. This figure includes stabilization measures in Germany, Switzerland, Austria and Belgium totaling €6.3 billion, which have not yet been utilized.

Free cash flow adjusted for the IFRS 16 effect was minus €2.1 billion in the third quarter (previous year: €416 million), mainly due to customer reimbursements of ticket costs for corona-related flight cancellations amounting to €2 billion.

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Iberia converts first A330 into freighter to adopt to market

The first A330 airliner that Iberia has converted into a freighter has arrived in Los Angeles from Madrid after four weekly cargo flights between the two cities have been scheduled for this month.

In the early months of the COVID-19 pandemic, Iberia’s flight operations were almost exclusively confined to repatriation flights and flights carrying emergency medical supplies. This experience prepared Iberia to adapt to the new market situation and seize this opportunity.

IAG Cargo, the cargo division of International Airlines Group (IAG), will service these flights. At the start of the pandemic IAG Cargo were quick to develop tailored solutions for its customers cargo needs, including cargo-only flying on passenger aircraft and establishing a new charter team. With a wide network, IAG Cargo offers its services on more than 500 aircraft, to more than 350 destinations.

This first Airbus A330/300 converted into freighter was already undergoing an inspection in Iberia’s Madrid maintenance hangar in La Muñoza, where all Economy, Premium Economy seats and crew rest were removed along with separation panels. Carpeting was reinstalled with lights indicating the 33 cargo positions. Cargo will be held in place with netting fastened to floor rails where the seats were anchored. This configuration yields additional carrying capacity of up to 105 m³ or 18,000 kg of cargo. This conversion of the cabin has been carried out by Iberia MRO, which boasts long experience in aircraft retrofit operations and altering cabin configurations. The cabin conversion has been approved by Spanish Air Safety Agency, AESA.
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