lp av market review november 2008. lp av – market intelligence – jp grand/david li2 december 2,...

LP AV

Market Review

November 2008

LP AV – Market Intelligence – JP Grand/David Li 2December 2, 2008

Key topics• Indicators: Downtrend confirmed for Oil and Natural rubber

• OE

– IAM strike in Boeing is over after 8 weeks but will affect deliveries and will affect first flight of 787 … not planned yet (will be based on strike recovery assessment)

– AIRBUS & BOEING are ready to increase financing to help the airlines to confirm orders in their backlog … to avoid to park as many as 200 new aircraft in the desert in 2009

• Client info: Consolidation continues– RYANAIR made another offer to acquire remaining 70% stake in AER LINGUS

… which declines the offer– Potential merger between BRITISH AIRWAYS and QANTAS ?

Information sources:• Speednews – Main source used when no reference mentioned• Bulletin hebdomadaire d’informations Michelin and Bibznews - Collection of articles published in different newspapers/magazines – Information will be reported with accurate reference (mainly in french)• Weekly reports from Zones – Quoted as “Internal info”

Periodicity• LP AV Market review will be issued 1st week every month


Indicators

Source: Banque de France

Source: SGA

Source: IATA

Source: Pricing Dept

Natural rubberMoyenne RSS3 & TSR20

180205

230255

280305

330

janv-

07

mar

s-07

mai-

07

juil-0

7

sept

-07

nov-0

7

janv-

08

mar

s-08

mai-

08

juil-0

8

sept

-08

US

D c

ents

/kg

Monthly Evolution EMA & NAM CPI

0,00%2,00%4,00%6,00%8,00%

10,00%12,00%

07 Ju

ne

07 A

ugust

07 O

ctobe

r

07 D

ecember

08 F

ebru

ary

08 A

pr

08 Ju

n

08 A

ug

08 O

ct

EMA CPI

NAM-FEO CPI

Parité Euro-USD

1,21,251,3

1,351,4

1,451,5

1,551,6

1,65

03/0

5/20

07

03/0

7/20

07

03/0

9/20

07

03/1

1/20

07

03/0

1/20

08

03/0

3/20

08

03/0

5/20

08

03/0

7/20

08

03/0

9/20

08

03/1

1/20

08


IATA – Key Points

KEY POINTS • Passenger traffic in October was not quite as bad as September’s 2.9% decline but, with international RPKs 1.3% lower than a year ago, the

downward trend continues. • With international RPKs now up only 2.8% in the year to October, the outcome for 2008 as a whole is unlikely to exceed much more than 2%. When

IATA surveyed the industry in the middle of the year airline expectations were for international growth this year of around 5%. • Africa remained the weakest region and deteriorated further in October with a 12.9% decline in passenger traffic. Airlines in the Asia-Pacific region

also suffered a further steep decline of 6.1% with traffic. This once booming region is only up 0.3% in the year to October and looks set to produce a decline for the year as a whole. Europe and North American airlines are in little better shape on international markets with growth of just 1.8% and a decline of -0.8% respectively. Even the strongest growth regions of Latin America and the Middle East have now been hit hard with growth of just 4.5% and 3.5% in October.

• Recession is driving declines in both passenger and air freight volumes. The fact that air freight volumes were even worse in October, down 7.9%, than September suggests the recession is deepening following the recent near collapse of the banking system.

• Airlines are responding with sharp reductions in planned capacity. International passenger capacity is now growing by only 0.9% and falls are shown in the schedules for coming months. However, the recession-induced collapse in air traffic has exceeded the ability of airlines to adjust capacity. Load factors are still falling sharply as a result. At 75% the average load factor in October was around 2% points lower than the same month last year, adding to the downward pressure on profitability.


OEM infoBOEING • BOEING INTEGRATED DEFENSE SYSTEMS plans by mid-2009 to reduce its workforce in Wichita by about 27% to

compensate for end of some programs and the delay in USAF tanker-replacement program.• BOEING delivered, due to strike, only five aircraft (three 737s; two 777s) in Oct vs 42 (30 737s; 747; 767; 10 777s) in

Oct '07.• BOEING confirmed that due to the length of the IAM strike, first flight of 787 will not happen until 2009, and new date

for first flight has not been established and will be based on strike recovery assessment; it is working to determine a new program schedule.

• BOEING delayed first 747-8F delivery from late 2009 to 3Q10 (first 747-8I to mid-2011) to provide additional time for addressing issues, such as supply chain delays and IAM strike, that have slowed the program. It has orders for 78 747-8Fs and 29 747-8Is

• BOEING broke ground on $21m, 60% expansion of BOEING TIANJIN COMPOSITES (formerly BHA Aero Composites Parts) in China for completion in 2010. Boeing acquired Hexcel’s stake in BHA for $22.3m in July and is running business as JV with AVIC I.

• BOEING sees orders dipping this year and next. ( Reuters)

AIRBUS• AIRBUS delivered 42 aircraft (31 A320 Family; six A330s; four A340s; A380) in Oct vs 44 (38 A320s; five A330s; A380)

in Oct '07. • EADS had €679m net profit on €9.7b revenues in 3Q08 vs €776m loss on €9.2b in 3Q07;AIRBUS earned €789m on

€5.86b vs €696m loss on €5.97b. EADS order book stood at €400.7b (€341.6b Airbus) on September 30 vs €304.7b (€248.5b) a year ago.

• AIRBUS received authorization to offer A320 with 78-tonne MTOW (an increase of one tonne over current A320) as option via wing-load-alleviation system. IAE-powered aircraft are to be certified in November 2008, with CFM-powered aircraft in March '09.

• AIRBUS chief sees “ Leeway ” to boost plan financing. ( Bloomberg) airbus

747-8

boeing

boeing


OEM info (cont’d)

OTHERS• ATR is studying new 90-pax turboprop optimized for 300 nm sector; it would require new engine technology, expected

around 2015.

• CESSNA AIRCRAFT says it plans to deliver 105 Caravans in 2008 and 120 in 2009. It delivered 79 in 2007.

• HAWKER BEECHCRAFT earned $15.3m on $783.3m sales in 3Q08, down from $62.1m on $871m in 3Q07 due to 4-week strike by IAM; it delivered 86 aircraft (34 jets, 33 turboprops and 19 pistons) vs 106 (35 jets, 40 turboprops and 31 pistons) a year ago.

• EMBRAER responded to media reports of a potential partnership with EADS/Airbus, and publicly clarified that at the present time its not seeking to associate with any other aircraft manufacturer in the world and does not have project for developing large aircraft.

• EMBRAER had US$57.7m net income on US$1.55b sales in 3Q08 vs $194.9m on $1.43b in 3Q07; backlog rose 26% to $21.6b.

• IAI had US$16m net income on US$877m sales in 3Q08 vs $40m on $797m in 3Q07; it has backlog of $7.4b vs $7.7b

on Jan 1.

• BOMBARDIER AEROSPACE says it plans to discontinue Q200 and Q300 production in 2009; it had 13 total on order on July 31.


ForecastINDUSTRY• GAMA says world's aircraft manufacturers delivered 2,977 general aviation aircraft (1,646 pistons; 341 turboprops; 990

business jets) worth $18.2b in January-Sept 2008 vs 2,918 (1,857; 300; 761) worth $13.2b a year • AIR TRANSPORT ASSOCIATION OF AMERICA (ATA) expects a 10% year-over-year decrease in pax traffic for US airlines

during 2008 Thanksgiving holiday

OEM• BOEING forecasts annual cargo growth of 5.8% over next 20 years, and projects need for 3,360 freighter aircraft (860 new,

including 640 large freighters, and 2,500 conversions) to increase global freighter fl eet to 3,890 in 2027 from current 1,950. • EMBRAER forecasts 20-year market in China for 875 regional aircraft: 120 30-60 seaters; 295 61-90 seaters; 460 91-120

seaters.• EMBRAER forecasts delivery in 2009-2028 of 6,750 30-to-120-seat commercial jets (650 30-60; 2,450 61-90; 3,650 91-120)

worth US$220b, including 2,950 in 2009-2018/3,800 in 2010-2028, on 5% annual traffic growth; it previously forecast 7,450 for 2008-2027 EMBRAER forecasts delivery in 2009-2018 of 11,880 business jets worth US$204b: 270 Ultra Large (vs 263), 940 Ultra-Long Range (vs 920), 1,320 Large (vs 1,447), 1,430 Super Midsize (vs 1,445), 1,070 Midsize (vs 1,578), 1,770 Mid-Light (vs 1,185), 2,430 Light (vs 2,893), and 2,650 Entry Level/VLJ (vs 3,419); this compares with 10-year forecast for 13,150 made in late 2007.

• BOMBARDIER predicts 12,900 new aircraft deliveries (20-149 seats), including 6,300 100-149 seaters, over the next 20 years.

EMB

Bom


Industry slowdown

FEO

• QANTAS plans 1H09 to reduce capacity 4% year-over-year (equivalent to grounding 10 aircraft) by not taking up leases of two A330s (lessor not disclosed), changing flying patterns to free up six 747s, three 767s and an A320 through mid-2010, and halting all domestic growth for Qantas and Jetstar. It reduced FY08/09 profit outlook 64% from A$1.4b to about A$500m.

• Air New Zealand cut jobs. ( The Wall street Journal)

• China Eastern Airlines grounds 10% of aircrafts as travel demand declines. ( Bloomberg).

NAM

• ATLAS AIR retired three 747-200Fs in 2008, and now has 22 747-400Fs and 14 747-200F; one was retired rather than paying for D-Check, which airline said costs $5m-$6m. It is currently monitoring whether to pay for heavy maintenance or ground aircraft.

• DELTA AIR LINES says 4Q08 domestic capacity will be down 12% year-over-year (intl. up 9%), and it expects further reductions in 2009 to better align supply with demand. It says domestic advanced bookings are running two points higher, reflecting capacity cuts.

• GOL, Brazil is cutting 4Q08 capacity by 2% (+1% domestic/-16% intl.) from 3Q08; consolidated load factors are expected to be 63%.

airNZ

CES

qantas


Industry slowdown (cont’d)EMA• AIR FRANCE-KLM had €28m net income on €6.7b revenues in second quarter ended Sept 30, down from €736m on €6.5b

a year ago. It says it is curtailing capacity growth for winter 2008, doubling current savings plan to €520m, and reducing investments.

• BRITISH AIRWAYS says it plans to reduce year-over-year capacity by 1% for summer 2009 schedule; it is dropping Heathrow-Dhaka/-Kolkata and Gatwick-Dublin/-Zurich.

• BRITISH AIRWAYS and QANTAS confirmed that they are exploring a potential merger via a dual-listed company structure; BA says its discussions with Iberia are continuing.

• AIR BERLIN plans November 30 to shut down DBA and retire its three 737-300s. It acquired the airline in August 2006.• LUFTHANSA CITYLINE plans by 2010 to reduce workforce by 20% (500 jobs) and remove 14 of its 72 CRJ200s from

service.• RYANAIR is parking 15 737s at Stansted and four at Dublin this winter following what it calls further unjustified increases in

pax charges at these airports. Despite reductions, it expects its traffic will still grow 9% this winter and 14% to 58m pax for full year.

• EASYJET Internal Management disagreements about the rate of fleet growth in 2009 – should they postpone the delivery of 30 aircraft to 2010. Share values have dropped 20%. (EMA weekly report )

INDUSTRY• A number of order backlogs seem vulnerable. ( ACAS bulletin )

GENERAL AVIATION• Business-jet makers to cut production levels. ( financial times)

• Piston: Cessna Prop, Mooney, Cirrus, Hawker Beechcraft and IAI announced to reduce their 2009 product plan in the last few months. Eclipse and Adam closed the business and are selling assets.

BJ maker

ORDER


Clients info – Strategic EMA

• AIR FRANCE-KLM says its maintenance business earned €37m on €467m in April-Sept vs €48m on €476m a year ago.

• BRITISH AIRWAYS had £52m pretax income on £4.75b revenues in April-September vs £616m on £4.47b a year ago.

• EASYJET carried 3.96m pax in October 2008, up 18.3% from 3.44m in October 2007; PLF was 83.9% vs 82.5%.

• EASYJET had £110m pretax profit on £2.4m revenues in year ended Sept 30 vs £202m on £1.8b a year ago; total revenue per seat rose 12.6% (7.3% at constant currency). Its fleet rose from 137 to 165 aircraft (included 16 from GB Airways) on Sept 30.

• EMIRATES had Dhs 284m net profit on Dhs 22.1b revenues in April-Sept 2008 vs Dhs 2.36b on Dhs 16.9b a year ago

• FINNAIR had €17.3m net loss on €1.68b revenues in 3Q08 vs €39.6m net profit on €1.61b in 3Q07.

• IBERIA had €30.4m net income on €1.45b revenues in 3Q08 vs €148.2m on €1.46b in 3Q07.

• TURKISH AIRLINES had US$548m net profit on US$3.6b revenues in Jan-Sept vs $197m on $2.7b a year ago; pax rose 14%.

FEO

• ANA GROUP had ¥22b net income on ¥753.3b in six months ended Sept 30 vs ¥105.5b on ¥763.2b a year ago; it revised down its full year outlook due to falling demand "beyond anything it could have imagined at the beginning of the fiscal year.“

• CHINA SOUTHERN GROUP and CHINA EASTERN GROUP are each expecting to receive CNY3b in aid from the Beijing government; if the requests are approved, aid will reduce China Eastern's debt ratio by 3.3%, and China Southern's by 2.5%.

• CHINA SOUTHERN AIRLINES had CNY810m net loss on CNY14.59b in 3Q08 vs CNY1.88b net income on CNY16.5b in 3Q07.

• PHILIPPINE AIRLINES lost P$113.8m on P$848.7m revenues in April-Sept vs $22.7m profit on $728.5m a year ago.

• THAI AIRWAYS had THB426.2m net income on THB43b revenues in 3Q08 vs THB971.1m loss on THB38.7m in 3Q07.


Clients info – Strategic NAM• FRONTIER has US Bankruptcy Court approval to reject collective bargaining agreement with its mechanics (Teamsters) after

sides could not reach agreement on outsourcing maintenance to AEROMAN; judge did say airline could only outsource as "last resort." FRONTIER had $30.4m net loss/$5.8m operating loss in 3Q08; it says CASM (sans fuel) was lowest in its history at $.0568.

• LAN AIRLINES, Chile ordered four 767-300ERS with CF6s for delivery in 1H12 for $636m, and optioned two, as interim solution for delivery delays of 787 (it ordered 26); it has now ordered 22 767-300ERs (13 delivered), plus eight 767-300Fs (all delivered).

• PINNACLE AIRLINES had $7.7m net income on $222m revenues in 3Q08 vs $10.9m on $206m in 3Q07.


Clients info – High PotentialEMA• RYANAIR had €214.6m on €1.8b revenues for six months ended September 30 vs €407.6m on €1.5b a year ago; it says

remainder of this fiscal year (2008/09) is dependant upon fares and fuel prices, and it is confident that it will break even for the full year.

• RYANAIR has made another offer to acquire remaining 70% stake in AER LINGUS; EU had blocked its first attempt.• LUFTHANSA is establishing LUFTHANSA ITALIA in Northern Italy (Milan/Lombardy) for Feb 2009 start up with six A319s; it

will initially serve Barcelona and Paris CDG, later adding Brussels, Budapest, Bucharest, Madrid, London Heathrow and Lisbon.

FEO• Indonesia's LION AIR signed MOU to order 10 ATR 72-500s for delivery starting in 2009, and option 10.• HAINAN AIRLINES had CNY260.8m net loss on CNY3.41b revenues in 3Q08 vs CNY228.9m profit on CNY3.68b in 3Q07.• SINGAPORE AIRLINES GROUP had S$323.8m net income on S$4.4b revenues in July-Sept vs S$507.8m on S$4b a year

ago. It says that although advance bookings for the next quarter are holding up reasonably well, there are signs of weakness beyond that.

NAM

• AIR CANADA lost C$132m on C$3.1b revenues in 3Q08 vs C$273m income on C$3b in 3Q07; it had C$112m operating profit

• SOUTHWEST submitted $7.5m bid to US Bankruptcy Court to acquire ATA Airline's 14 slots at LaGuardia Airport, New York.• WESTJET, Canada had C$54.7m net income on C$718.4m revenues in 3Q08 vs C$76.1m on C$606.2m in 3Q07


Miscellaneous• CHINA completed merger ofAVIC I andAVIC II into single state-owned aircraft manufacturer, CHINA AVIATION INDUSTRY

CORP, with 10 business units. It is projecting 22.3% average annual sales growth to US$146.5b by 2017, and plans IPO in the future.

• Chinese Airlines apply for emergency funds ( Financial times)

• Planemakers may see 200 planes parked in Desert ( Bloomberg )

• India’s air dream break up ( The wall street journal)

• Airlines go for small aircraft to reduce operating cost ( Economic times )

• Small Airlines hurt by Big-Carrier cuts ( The wall street journal )

• US airlines fall on concerns for weakening economy ( Bloomberg)

china

planemaker

India

indiaATR

RENAM

usairlines

lp av market review november 2008. lp av – market intelligence – jp grand/david li2 december 2,...

Documents

international growth

iata source

indicators source

month slide

air traffic

international rpks

sga source

france source