REX buck the Australian trend

Bucking the trend of fellow Australian operators and joining Air New Zealand in announcing a profit was Rex with a full year profit before tax of $10.7m($AUD) with a net profit of $7.725m ($AUD) this was down 44.9% on the FY13 net profit.

Despite posting a profit REX has warned that the Australian Aviation market is in deep crisis pointing to the losses made by Qantas and Virgin and listing the 16 different regional carriers who have collapsed and ceased operations since 9/11

Rex executive chairman Lim Kim Hai said the carbon tax, an increased fuel levy to fund the Civil Aviation Safety Authority and record fuel prices were all negative factors in 2013/14.

There were a few announcements of note in the release, FY14 saw REX take full ownership of its 51 frame SF340B+ fleet purchasing the remaining 18 frames that came off lease at the end of March 2014.

Its subsidiary Pel-Air has secured contract extensions for some of its SA based mining charter operations and has tendered for the dedicated search and reduce service for the Australian Maritime Safety Authority which will be announced later this year.  In FY14 the Pel-Air contract for fast jet support to the Australian Defence Force was also renewed by the Federal Government.  Pel-Air has also launched a number of SF340B+ flights in Queensland in support of resource sector FIFO operations.

Subsidiary Air Link began a Sydney - Cobar charter service in October 2013 and has also re-commenced RPT services this month, with a twice weekly SYD-DBO 1900D service.

REX is awaiting the outcome of its tenders to the Queensland Government to operate regulated regional Queensland routes which will be announced in October.  REX currently services the TSV-WIN-LRE* and TSV-HGD-RCM-JCK-ISA^ routes with a current contract end of 31 December 2014.  REX also launched a 3x daily SYD-ARM service on 28 March 2014 after an expression of interest period from local councils within a 600km radius of SYD, brought about by a network review and the recruitment of 11 former pilots of recently collapse competitor Brindabella Airlines.  

Read the media release, investor briefing and annual report as released to the ASX HERE


* Townsville - Winton - Longreach
^ Townsville - Hughenden - Richmond - Julia Creek - Mt Isa

VA joins in with red ink

Virgin Australia rounds out the Australasian Aviation finical reporting week with a statutory after tax loss of $355.6m ($AUD) however their underlying loss before tax was $211.7m ($AUD)

Virgin attributes this loss across the group as follows;
- Virgin Australia International (including VA NZ) loss of $66.8m
- Virgin Australia Domestic (including Skywest) loss of $59.2m
- Virgin Samoa (49% holding) loss of $2.6m 
- TigerAir (60% holding) loss of $46.1m
With restructuring and balance sheet costs, fuel, taxes etc also heavily contributing.

Virgin Australia has now completed its "Game Change Program Strategy" and has introduced Virgin Vision 2017 as its new focus.

Virgin Vision 2017
We can expect to see some change with this new vision which has wide scope throughout the entirety of the Virgin group.

The first change has seen Affinity Equity Partners buy a 35% stake in the Velocity Frequent Flyer program, giving the program an enterprise value of $960m ($AUD)  This will see the program remain under the control of Virgin Australia but with a separate board of directors.  Virgin Australia will maintain 65% voting rights and will appoint the chairman to the board. 

There will be some change in the fleet with the retirement of the two ex Emirates Airbus A330s an increased utilisation of the Boeing 737-800 fleet and the introduction of the new Boeing 737MAX fleet being brought forward from 2018 to 2017.

Virgin's charter operation, which have been built on the base afforded by the acquisition of Skywest has had a successful first year and Virgin are looking to grow it into a $200m ($AUD) operation by 2017.

Virgin will launch a new freight business in FY15 to leverage off their current RPT and Charter operations.

Virgin are looking to make $1b ($AUD) in cumulative productivity gains, this will be achieved through 3 steps;
1. Enhancing procurement
2. Improved productivity (including the above mentioned fleet changes and utilisation)
3. Streamlining of operations (see below)

As part of the streamlining of operations Virgin will reduce its long-haul international bases to two (SYD & BNE - with the already announced end of MEL-LAX flights)  it will  also  integrate Virgin Australia (NZ) operations back into its international division.

Virgin have announced they will also introduce business class onto all flights across the Tasman and to Fiji, which will be seen through the standardisation of the on board offering through the integration of VA(NZ) back into VA.  Currently VA(NZ) aircraft which operate on these routes do not have  business class seating.  

The biggest list of change/improvement is with the TigerAir LCC brand. 
1. Further improve customer satisfaction - something that has plagued TigerAir
2. Drive incremental revenue growth - through new revenue management and initiatives
3. Deliver cost synergies - via network, operational and finical synergies as well as a new Brisbane base and cooperation with VA on procurement of fuel
4. Development of an efficient operating platform and network footprint - new enhancements to drive operational efficiency including the new Brisbane base, new maintenance provider in BAE Systems and reaching agreement with Sydney Airport about infrastructure constraints at SYD

Read the full whack of documents supplied to the ASX including final report, press release, presentation and Velocity announcement HERE

JQ also have a loss

As mentioned in the Qantas Group loss post, Jetstar also had a full year loss of $116m ($AUD) down from a profit of $138m in FY13

Jetstar's domestic Australian operations were profitable as they have been every year since the launch in 2004.

The losses are attributed to unfavourable fuel costs of $86m, a $113m yield decline across the JQ group and $70m in costs for the rapid acceleration of the Jetstar Japan operation, as well as another $20m in costs for other Jetstar operations in Asia.

- Jetstar Asia is the leading LCC in Singapore
- Jetstar Japan is the fastest growing LCC in Japan
- Jetstar Pacific in Vietnam is growing and will increase its fleet from 7 to 10 by December 2014
- Jetstar Hong Kong is still stuck on the ground awaiting regulatory approval

Fleet
As mentioned in the Qantas post there have been some fleet changes with Jetstar

- JQi has received 4x B787-8 enabling it to return 3x A332 to Qantas
- JQd(AU) has sold 5x A320 on order based on the subdued outlook for domestic growth
- 21x A320 currently on order have been deferred for 4 years and converted into an order for 21x A320neo taking the total A320neo order to 99 frames
- The final 3 B787-8 of the original 14 frame have been deferred (previously announced)

The Jetstar result is buried in the middle of the Qantas group announcement and can be found in the Qantas Group FY14 Financial Results Media Release document HERE

QF group lose big

Day two of Australasian Aviation financial announcements saw Qantas announce a record $2.843 billion ($AUD) full year loss.

Qantas has reported a lower than expected full-year underlying loss before tax of $646 million, but booked a statutory loss of $2.8 billion as a result of hefty restructuring charges and writedowns to its fleet.

One of the most notable hits was the historic write down of the international fleet at $2.6b most notably due to an exchange rate of around $0.68 AUD-USD at time of purchase.

Qantas domestic had an underlying profit of just $30m for FY14 down from $365m in FY13, however Qantas International saw the biggest hit with an underlying loss of $497m compared with $246m in FY13

Jetstar had an underlying loss but I will focus on this in a separate post.

Qantas Freight made an underlying profit of $24m down from $36m in FY13, however Qantas Loyalty had the best result with an underlying profit of $286m up from $260m in FY13.

The Qantas Group expects to return to an underlying profit before tax in the first half of FY15 based on the following expectations:

• A target of $300m of Qantas Transformation benefits to be realised in the first half

• A stabilising operating environment, as market capacity growth subsides

• First half fuel costs in line with the first half of FY14

• The repeal of the carbon tax

• Reduced depreciation costs compared with the first half of FY14 

Fleet Changes

There are some interesting changes to the QF fleet coming out of this announcement.

QFi
- Gradual replacement of B747s with A330s on Australia to Asia routes including all SYD/BNE-SIN by Sept 2014
- Early retirement of 4x B747 with the remainder of the non-reconfigured B747s to leave by early 2016
- Push back the options on 50x B787 from 2016 into 2017
- Defer the delivery of the final 8x A380(previously announced)
- Defer the final 3 B787-8 deliveries for JQ (previously announced)

QFd - including QantasLink, Network Aviation, Jetstar and Jetconnect
- reduce turn time for domestic aircraft to improve utilisation
- refurbishment of B737-800 fleet to be completed by mid 2015, provides a total 3% capacity increase
- Early retirement of B767 fleet, to be gone by end of 2014!
- Retirement of Network Aviations fleet of Embraer Brasillia EMB120 effective immediately
- Retire 2x B738 due to increased utilisation, 1 to come from domestic 1 to come from Jetconnect
- Not renew lease on 2x A330-200s which will leave the fleet in early 2016
- 5x A320s ordered for Jetstar have been sold
- 2x QantasLink Q300 will be sold during FY15
- defer order for 21x A320 for Jetstar by 4 years and convert into order for 21x A320neo


Read all of the announcements to the ASX, including the media release, the CEO's address, the Investor presentation and the Fleet Update HERE

NZ announce strong profit

Its finical reporting season for Australasian aviation, and first out of the blocks was Air New Zealand reporting their third straight year of profit with a net profit of $262M(NZD).  This net profit represents a 45% increase on FY13.

Chairman Tony Carter said that the result represented the third consecutive year of strong earnings growth for the airline.  “This is a result Air New Zealand can be proud of. Our employees, our customers and our shareholders can be confident that Air New Zealand continues to be a world leading airline both in terms of customer experience and financial performance,” Mr Carter said.

Air New Zealand reported an 84.1% Load Factor for FY14 with 13,719,000 passengers carried.  This is mainly thanks to domestic passengers, with domestic capacity up 5.4% on the back of the replacement of the Boeing 737-300 fleet with Airbus A320s, and the introduction of new ATR 72-600s.  Domestic saw 8,920,000 passengers with a load factor of 81.1%.

FY15 will see the biggest increase in fleet numbers with a total of 10 aircraft entering the NZ fleet. 2x Boeing 787-9, 4x Airbus A320, 3x ATR 72-600 & 1x Boeing 777-300.  In the same period the remaining Boeing 747-400 will retire and the Boeing 737-300 fleet will dwindle to just 2 frames.

Read more on the Air New Zealand result via their releases to the New Zealand Stock Exchange 
- each section includes a downloadable pdf document
 - Media Announcement
 - Shareholder Review and Financial Report
 - Annual Results Fact Sheet
 - Results Analyst Presentation

Expansion at NZWB/BHE begins

As reported on this blog (way back in Sept 2013) the $4M (NZD) expansion of the terminal at Marlborough Airport, Blenheim (NZWB/BHE) is underway.

The first stage of the expansion is the construction of the new rental car kiosks out in the car park area, this will release the space that the rental car kiosks currently occupy inside the terminal.

The second half of stage one will see the expansion of the baggage reclaim area, which will also see this area come completely undercover and out of the elements.  (A damn good idea in my opinion, having had some amazing cold and horrible experiences arriving back into BHE from BNE at night)

The Marlborough Express reports building of the new kiosks began last month with the entire project expected to be completed by March 2015.  Which means the terminal can be showcased to travellers arriving for the 2015 Classic Fighters air show at Omaka.

{Dean} Heiford wanted to remind people that during the next five months, the front of the terminal would become congested, he said.  "I would encourage people to get dropped off and picked up or make use of the taxis and shuttles.  "We have a couple of extra guys working at peak times to help with it [congestion] so we can make it as easy as possible for passengers."

Read the latest Marlborough Express article HERE or find out more about the expansion via the Marlborough Airport Website HERE

NZ/SQ alliance approved

Finally 4 months after the Singapore authorities approved the alliance, the New Zealand Government has given its approval to the new alliance between Star Alliance partners Air New Zealand and Singapore Airlines for flights on the AKL-SIN route.

The alliance will see Singapore Airlines hand over its evening flight (SQ281/282) 08:45-22:45AKL/ 23:50-06:40+1SIN which is currently 5x weekly, to NZ who will operate it as a daily 772ER service.  SQ will hold onto their morning flight (SQ285/286) 21:10-10:50+1AKL 12:10-19:00SIN which operates with a 773ER.  This will be up gauged seasonally to operate with SQ's A380.

With the addition of the A380 to the SIN-AKL route, AKL will host 4x A380 on the ground each day with EK already operating 3x A380 to AKL.

Charles Spillane, Auckland Airport's acting general manager aeronautical commercial, says the new alliance will bring substantial capacity growth and improved connectivity.
"This alliance between Air New Zealand and Singapore Airlines demonstrates the commitment that both airlines have to growing connections between Singapore and New Zealand and we congratulate them on this," said Spillane.

Read more on the reaction to the alliance's approval via The New Zealand Herald HERE