There is no escaping from current unfavorable economic conditions even if you’re one of the country’s market leaders of the aviation industry. Air China is one such company that is suffering rapid decreases in earnings and profits because of external economic factors. This is the newest development in a list of profit losses for many large airlines in China.
Air China has confirmed that its profits of the first half have fallen badly and a decrease of about 77% in income has affected them adversely. They are also faced with other problems such as high prices of aviation fuel, increased competition and a rapidly declining economy. Air China is one of about 3 Chinese airlines that are owned by the state. Many other enterprises and banks have also been affected by the current economic situation.
Many companies and other bodies in China are wasting no time in creating a lot of hype around the profit loss situation. Airlines in particular are suffering because of the fall in income levels around the country. Beijing is being pushed to come to a conclusion and deal with the downturn the Chinese economy is facing. China is one of the world’s most prosperous economies.
Air China has made its losses public by stating that its net income has taken a hit and been reduced to $149 million. The share price of the airline has also fallen. The share price was previously 0.33 Yuan and is now 0.08 Yuan. The airline is also claiming that its losses are mounting up due to low demand for air travel and forever increasing operating costs. There is also an unhealthy level of competition in the declining industry at this point in time.
Since an assessment of the losses of the first half has already been made, the company is viewing the months to come with anxiety. Anything can happen and there will be a fair number of challenges for the airline if it is to ever bounce back to profitability. Fuel prices have experienced an unprecedented increase and are now about 10% higher than they were in 2011. Wages have also had to be increased recently and this all spells trouble for one of China’s biggest airlines.
As far as invincible airlines go, it was believed that Qantas was quite the market leader for the aviation industry of Australia. But recently it seems that the dynamics have drastically changed. The battle began when a choice had to be made for Qantas’s new chief executive. The two individuals for the task were John Borghetti and Alan Joyce. Joyce ended up with the position and Borghetti chose to resign.
Borghetti went on to become the chief executive of Virgin Airlines and can be attributed as a contributing factor to its recent rise to power. In any case he had ample experience to rejuvenate the airline’s fallings earnings as he had spent a very long time working for Qantas in a senior capacity. The discount model that Virgin came out with a few years ago proved to be an utter disaster and it took quite some time for the airline to bounce back from its losses.
Borghetti who was well versed in the high profit and high overall revenue techniques that Qantas so frequently uses was just what Virgin needed. The new chief executive started almost immediately to revamp Virgin’s scale of operations and bring them to par with the market leaders in the industry. The benefits of coming up with frequent flier passes, business class flights and other such perks has been a boost for Virgin so far. So much so that Qantas is worried about losing its superior market share.
When Borghetti was under Qantas’s employment he was particularly enthusiastic about one specific deal with UAE airline Etihad. When Joyce took over he did not go through with the deal so Virgin Airlines could think of nothing better than to capitalize on it themselves. Etihad is buyer of Virgin shares but the chances of a takeover are minimal and in no one’s best interest.
Qantas appears to be in something of a tough spot now and is facing heavy competition from Virgin. Borghetti has a vision of Virgin Airlines as being something more than just a budget option. But he is however very keen to keep prices down for economy class seats to boost the company’s competitiveness.
Virgin Airlines has taken a few steps to improve its standing in the industry as far as profits are concerned. The owners of Virgin Holdings made a decision to opt for the more competitive markets that include the government and the corporate world. John Borghetti has called this shot at a crucial time in the industry as it is no secret that revenue has been steadily falling due to the global economic situation. After this move was made, the airline had higher earnings at the end of the year.
Borghetti has been playing all his cards as best as he can. He is the individual behind the creation of a three year plan to rob Qantas Airlines of its hard earned market share. The market of corporate fliers and government fliers has proven very lucrative indeed. All fliers are in general being made to experience endearment to the airline because of the facilities or perks offered to frequent fliers.
According to the records of the airline, profits have incurred an unexpected increase due to the exploitation of the higher market that Borghetti so exclusively opted for. There has been an increase of about 62%. This particular increase is now going to amount to about 20% of all revenue earned internally. One of Virgin’s strongest policies has been to beat Qantas at its own game and secure a larger share. The airline itself has preferred not to consider other smaller competitors in the industry.
Qantas has been struggling somewhat with its international flights and has of late become prey to a large number of troubling issues. Qantas is faced with higher costs of aviation fuel, industrial problems and a fall in the price of its shares. Virgin Airlines has sought to benefit as much as possible from the temporary downturn of Qantas and use this opportunity to establish itself as something of a market leader in the aviation industry. It also seeks to zap a lot of the domestic business that Qantas benefits from.
But it seems that Qantas is going to put up a fight for its rightful share of the domestic aviation market. Alan Joyce the boss of Qantas has made it clear that the airline will not relinquish its market share to Virgin at any cost.
The Russian Aviation industry is going through significant changes so that it can stand on its own feet and emerge as a worthy competitor. The airlines have a lot of backing from the government which includes encouragement and various financial benefits as well. The government has a certain framework in mind which it wants all the major domestic airlines to adopt.
All the Russian airlines have made it part of their business plans to purchase only domestic made aircraft from here on out. This step was strongly suggested by Dmitry Rogozin who is the deputy Prime Minister at the moment. He has his own ideas it seems when it comes to revolutionizing the local aviation industry in Russia. He has put forward a few proposals to bring about notable changes.
His main aim at this point in time with regard to the aircraft industry is to severely discourage and if possible stop the import of foreign airplanes into the country. It is an attempt to revive the domestic manufacturing situation and give it the boost it needs. He is of the opinion that a little unity between aircraft manufacturers and airline operators is all that is needed to make this work.
Rogozin wants targets to be carefully set and wants to make sure that enough government grants are available to step up aircraft production. He thinks that if enough funds are allocated to the cause the industry can quickly rise to the challenge. A compromise has been reached with Arkady Dvorkovich to bring about the union of producers and operators.
The makers of government policy have long searched for a cohesive plan to benefit domestic aircraft operators as well as manufacturers. Progress is underway on the creation of a new aircraft and this has been brought about by Dmitry Medvedev who is the Prime Minister. The United Aircraft Corporation and the Industry and Trade Ministry have been put right on the task.
There is word from the Industry and Trade Ministry that domestic manufacturing is about to receive quite a kick start and it is just a matter of time before it starts making several smaller aircraft which can have up to 40 seats.
The current situation in the airline industry is bound to stir up some unlikely connections. Recently it has been made public that Alitalia and Etihad Airways are to join hands and start flights to and fro from Rome to Abu Dhabi. The great thing is that these will be direct flights. The flights will take place about four times a week and these flights are to be carried out with the help of an Airbus A330 airplane. About 230 passengers will be able to travel at any one time in the given schedule.
This plan is going to prove very beneficial for both the airlines in question and there will be a steady connection to the centre of Etihad operations which is Abu Dhabi. Etihad is going to issue an EY code so it becomes really easy for people to catch direct flights to Rome and vice versa. The Airways are expanding on its earlier set up of daily services in Milan.
Etihad has also agreed to codeshare for several flights in conjunction with Alitalia for a wide range of cities that include Zurich, Venice, Geneva, Munich, Athens, and Frankfurt. Alitalia in return is going to issue its AZ code in accordance with Etihad flights going to Johannesburg, Muscat, Sydney, Melbourne and Bangkok.
James Hogan who is the president of Etihad Airways and a chief executive has made a public statement about the partnership between the Italian and UAE airline. He spoke about how it was going to open up a plethora of opportunities for both the airlines and establish strong consumer loyalty, more than is already the case. Passengers can now avail themselves of a direct flight through the two airlines to Rome and that comes with its own perks.
The first codeshare was agreed upon in 2009 by Etihad and now the two companies are just building upon their successful business relationship further. Flights from Rome to Abu Dhabi were the next thing to pop in mind and it is now coming about as a positive business venture. Passengers can benefit greatly and obtain frequent flier facilities. There is now also room for a lot of extra tourism when these flights start taking place.
In times of economic downfall such as these, even the big players of industry have had to put down their cards and resort to massive cost cutting schemes to make ends meet. One of the biggest airlines in Australia is currently suffering from a huge cut in profits due to various reasons and they are not sure how to bounce back. A yearly profit loss of$257m has so far been made public and it is quite a disastrous situation.
The reasons that have been given for this occurrence have been continuous strikes that have affected their fleet, a hike in the prices of aviation fuel and an international division that just isn’t working out too well. There was a profit of about $250 million in the year that passed and that is now not enough to deal with this new influx of problems in Qantas Airways. Since the airline’s conversion to a private limited company in 1995, profits have been quite steady and any problems could have easily been dealt with. Such a huge profit loss has never really happened before.
Alan Joyce who is currently the CEO of Qantas Airways Ltd has officially stated that certain orders will be withdrawn on behalf of the company so that it can begin to do some much-needed damage control. The order in question was of brand new 35 Boeing 787-9 aircraft. The airline however is going forward with its scheduled purchase of 15 787-8s. The Boeing contract that has been cancelled was of an approximate value of $8.5 billion.
Joyce went on to claim that the 787-9 aircraft was of vital importance but under the present circumstances, it could not be accommodated into the company’s expenditure plan. The order had been placed a long time ago and it seemed feasible at the time. All capital and cash has to be carefully handled now and spent in those areas that need it the most.
The company is chalking up most of its losses to a massive aviation fuel bill that it received this year which was a significant 18% increase from the year before. Qantas International has also suffered due to the recent financial losses of the company.
Even though the airline industry has been having a bit of a tough time lately with all the air fare increases and some fall in demand, it appears that the industry has still managed to find a saving factor. The money the industry is making from sources other than fares has increased significantly to about 66%. Approximately €18.23 billion were made last year alone with prospects looking brighter than ever for this year.
This report and analysis has been made public by a firm called IdeaWorksCompany who had made it its business to know the financial workings of the airline industry and also to find out where the revenue is coming from. Another firm Amadeus which is a processor for the tourism industry and such has also contributed to the compiling of the report. The report has been made with the help of over 108 airlines all over the globe and some 50 of them had agreed to give information about the extra sources of revenue they had discovered.
In 2009 the recorded ancillary earning was about €10.95 billion but that has taken a leap of 66% this year and that is expected to rise. Southwest has managed to earn about €949,900,000 with United Continental earning €4,162,655,000. Several other airlines have also reported an increase in this kind of earning and that is welcome news for all.
An analyst from StrategicAero Research called Saj Ahmad has chalked up quite a few reasons for this current trend that is benefitting many major airlines. He is of the opinion that some creativity and innovation has taken place in the industry and the prices have been carefully considered by the airlines. Recently airlines are really thinking about how to most effectively cut down essential fuel and labor costs.
Airlines are building upon the idea that there should be fuel surcharges on airplane fares and on-board services should be charged to a certain extent. They think that baggage charges should also be slightly increased. Whatever the charges might be depends largely on which airline the passenger is travelling through. In the case of cheaper, budget airlines, it has been noted that they are making extra money off of offering services that are not readily supplied elsewhere and which are considerably unique.
Despite the global economic situation that is prevalent nowadays, it appears that the private airplane industry has found something to be happy about. The demand for private planes seems to be quite on the rise and big businessmen would prefer saving time and getting to their meetings over saving money. It is widely believed by businessmen such as Mark Dowley that commercial planes take more time and getting a private jet is just so much better.
Dowley who is a consultant of marketing and works for an equity firm is of the opinion that commercial flights are alright for a number of destinations but if you are going to one place for a meeting it is better to take a private jet and not go through the hassle of domestic flights.
There are flaws in domestic airlines and they often stopover in odd locations and even if you’re travelling a short distance, you will still have to go through a great deal of unnecessary inconvenience before you reach your destination. Dowley purchases flight time on a private jet every time he is short on time from a company called NetJets. He has divided his commercial flying and private jet flying to an unequal ration of 90 to 10.
The cost of private jet flights is higher naturally but it is more a matter of priorities and ease for certain businessmen than anything else. Like many other aviation-related industries, the private jet company also took a hit due to the recession and there was a lot of skepticism around that it would not make a full recovery. There has also been a lot of speculation on the usage of private planes by certain executives.
When services have experienced a downfall in most commercial airlines, one can spot the next most relevant industry jumping up to take its place. Private jets may be too expensive for everyone but for top-class executives low on time and high on money, it is a much-preferred and infinitely more comfortable alternative.
Some say the industry has already enjoyed its time of prosperity which came in 2008 when there was a massive delivery of 1,139 private jets but sales are expected to go up in comparison to last year and there is a lot of hope for the industry.
Even though there is economic downfall apparent all over Europe and all around the globe, Brazil seems to be enjoying a fully functional and thriving aviation sector. A recent air show held in Brazil opened up a plethora of possibilities and showed the world the advantages Brazil is benefiting from by having such a strong aircraft sector.
General Aviation is a sector that generally does not incorporate military flights, cargo flights, or even passenger flights that are scheduled. It mostly consists of private planes, corporate flying, air ambulance, training in aviation, smaller planes for miscellaneous purposes, firefighting, and air charter. Despite of some of this exclusivity, there is still a lot of money to be made off of these activities and Brazil has certainly capitalized on it.
Sao Paulo was ablaze at the time of the Latin American Business Aviation Conference & Exhibition otherwise known as LABACE and 70 planes were there to look at and comment on at the Congonhas airport. Organizers claimed that this show was big news and second in line as far as aviation shows are concerned.
Eduardo Marson who is the president of ABAG otherwise known as Brazilian Civil Aviation Association was very optimistic about what this uplift of the aviation industry will mean for Brazil. He seemed convinced that the rise was going to last and that the market in the country had experienced considerable expansion. It seems more than plausible that the aviation industry is operating currently on high profits and has every reason to expect more in the coming years if it can provide the same level of service.
The sector has further expanded about 5 % in 2012 and is still going strong. Despite the success of the Brazilian aviation industry it does still keenly feel the effects of the worldwide economic situation. There is no escaping from it, it seems. But in any case, the show was a great success and was attended by a large number of very important aviation companies.
Among the companies that made it there are Hawker Beechcraft, Gulfstream, Bombardier and Airbus. Many other subsidiary companies were also present, some of which deal in maintenance or insurance.
In most cases when an aviation company has suffered severe financial breakdown recently or even a few years ago, they tend to be very careful indeed about what their new move will be. Such is the case with Nok Air which crashed financially not long ago and is now looking to renew its operations afresh and without the significant mistakes of the past. It can be said they are careful but highly motivated now.
Nok Air is looking to continue operations of international flights which the budget carrier itself cancelled due to a financial crisis. The company is optimistic about what this will mean for them in the long run and that profits can be expected to rise. Patee Sarasin who is the chief executive at Nok Air has officially stated that the company is ready to start operating international flights again.
His management team has just closed discussion and planning on the matter and they are ready to give it a go as soon as possible. This revamping of services has been brought about by a recent occurrence at the hands of Thai Airways International who has as it seems refused to have a joint venture with the airline and have instead opted for AirAsia.
Thai Airways held a less than controlling interest in the company at shares amounting to 49% but was still a major party. The joint venture had it happened would have elevated them to a controlling interest at 51%. But as this did not happen, Nok Air was able to consider starting international flights again as Thai Airways was out of the way.
It was indirectly because of Thai Airways that this move to international flights had been unnecessarily delayed. Nok Air delayed for a year in the hopes of the joint venture with Thai Airways which has it happens, did not materialize.
Ampon Kittiampon who is the chairman at Thai Airways explained the situation by claiming that the company was put off by the financial condition of the budget carrier and that the venture no longer seemed profitable to them. Nok Air on the other hand is taking things slow and trying to build a sustainable scale of operation.