Coronavirus: Future of airlines and airports

[westv]

What about Jet2?

Are they at risk?

They weren't but I wonder if they slightly regret buying a lot of Thomas Cooks' slots?

 

[Bald Rick]

One problem for the airlines is their share ownership, and how you could restrict taxpayer support to "British" ones.
BA is part of IAG which has Aer Lingus, Iberia and Vueling in it.
Virgin Atlantic is 49% owned by Delta, Ryanair is Irish.

Indeed. IAG is part owned by the Qataris, who will continue to support it as long as they have gas to sell. A fair chunk is also owned by and also by a philanthropic trust, who are more concerned about long term income than share value, and are also unlikely to let it fail.

Virgin Atlantic is owned by 3 airline groups (Delta, Singapore, and AF/KLM) with only 20% owned by Branson. The health of VS relies on the health of its principal owners.

Interestingly, almost 1/3 of Easyjet is owned by its workforce, which provides a powerful incentive to keep going even when they are down to their last chip.

 

[Mikey C]

Flybe would have been an obvious candidate as a C19 victim, if they had lasted this long...

 

[Bletchleyite]

Interestingly, almost 1/3 of Easyjet is owned by its workforce, which provides a powerful incentive to keep going even when they are down to their last chip.

That I didn't know. Increases my respect for an already-good airline, does that.

 

[Bald Rick]

That I didn't know. Increases my respect for an already-good airline, does that.

I’ve done some further research, and I may have made a rather embarrassing error. Around a third is owned by what is described as ‘insiders’, which I took to mean all those who were involved in the running of the company.

Unfortunately, a very significant proportion of this is people who have the surname Haji-Ioannou.

Apologies!

 

[JohnB57]

I’ve done some further research, and I may have made a rather embarrassing error. Around a third is owned by what is described as ‘insiders’, which I took to mean all those who were involved in the running of the company.

Unfortunately, a very significant proportion of this is people who have the surname Haji-Ioannou.

Apologies!

EasyJet was founded by Stelios Haji-Ioannou.

 

[Bletchleyite]

I’ve done some further research, and I may have made a rather embarrassing error. Around a third is owned by what is described as ‘insiders’, which I took to mean all those who were involved in the running of the company.

Unfortunately, a very significant proportion of this is people who have the surname Haji-Ioannou.

Apologies!

Ah, I sit corrected (and disappointed!) - oh well.

 

[westv]

EasyJet was founded by Stelios Haji-Ioannou.

I remember when he used to be in their ads.

 

[LNW-GW Joint]

EasyJet was founded by Stelios Haji-Ioannou.

I think he is the largest single shareholder, and still tries to interfere behind the scenes.
With dual citizenship he almost single-handedly makes Easyjet qualify as both a British and EU airline.
He also commutes from Monaco.

Jet2 has been surprisingly resilient and has picked up business from Monarch and Thomas Cook.
It is more dependent on the tour operator market than Easy and Ryan.
Having said that, Easy are making a big push on the holiday front too, to increase their margins.

The TV is still full of cruise and travel adverts (notably Turkey recently).
Makes you wonder why they are still screening them.
High street travel agents must be having a hard time too, especially Hays who bought the Thomas Cook shops.

Liverpool airport was down to just 5 flights today (Belfast, IoM, Faro, Jersey, Dublin).

 

[DynamicSpirit]

That depends on your definition of normal. I agree the whole industry will take a hit, but I expect it to be running at something like 90% of pre-virus activity within weeks of travel restrictions being lifted.

I'm somewhat inclined to agree. But I wonder if, with a number of airlines having gone bust, there will be less competition and that will lead to fewer flights and higher prices, as airlines figure that in a less competitive environment their interests are better served by more 'premium' tickets. That and the potential border restrictions that others have mentioned.

 

[Bald Rick]

I think he is the largest single shareholder

He is, just, with 11.7%. His brother and sister each own 11%.

 

[Bald Rick]

I'm somewhat inclined to agree. But I wonder if, with a number of airlines having gone bust, there will be less competition and that will lead to fewer flights and higher prices, as airlines figure that in a less competitive environment their interests are better served by more 'premium' tickets. That and the potential border restrictions that others have mentioned.

Even with airlines going bust, it will still be ultra competitive, at least across Europe. I think there will be fewer flights, but that will just be as a result of the inevitable economic downturn.

 

[PG]

The TV is still full of cruise and travel adverts (notably Turkey recently).
Makes you wonder why they are still screening them.

I'd imagine they've already booked x amount of advertising, once that has run its term it'll be interesting to see who is still advertising...

 

[LNW-GW Joint]

He is, just, with 11.7%. His brother and sister each own 11%.

Yes I guess it would have been better to say the family remains very influential, not just Stelios!

 

[PG]

The Airbus delivery schedule for A32x neos runs to around an 8 year waiting list, and whilst many of those orders will be cancelled, many won’t.

I wonder how Boeing are faring as compared to Airbus?

 

[Mikey C]

I wonder how Boeing are faring as compared to Airbus?

It's certainly taken the pressure off the 737MAX programme, the delays are now a godsend to all the airlines which ordered it!

 

[najaB]

I was shocked at the size of the IAG cash pile, several of their big US competitors just spent their even bigger cash piles on share buy back instead. Oops....

My first stock purchase in a *long* time (outside of employer schemes) was 30 shares in IAG this week. Not going to retire on that any time soon, obviously, but (a) I think it's a good way to provide a tiny bit of support to a British* employer; and (b) I can't think of any many other ways to pretty be sure of turning £50 into £200+ in a year.**

*Yes, I know they're legally based in Spain.
** Returns are not guaranteed, the value of investments may go down as well as up.

 

[hwl]

My first stock purchase in a *long* time (outside of employer schemes) was 30 shares in IAG this week. Not going to retire on that any time soon, obviously, but (a) I think it's a good way to provide a tiny bit of support to a British* employer; and (b) I can't think of any many other ways to pretty be sure of turning £50 into £200+ in a year.**

*Yes, I know they're legally based in Spain.
** Returns are not guaranteed, the value of investments may go down as well as up.

Investment at the moment is much more a case of making sure you aren't holding anything likely to end up worth less on the grounds everything else should recover to an extent in the medium /long term.

 

[krus_aragon]

* Returns are not guaranteed, the value of investments may go down as well as up.

Alternatively, for Boeing:
Planes are not guaranteed, their altitude may go down as well as up.

 

[najaB]

Investment at the moment is much more a case of making sure you aren't holding anything likely to end up worth less on the grounds everything else should recover to an extent in the medium /long term.

That's pretty much the basis on which I was working - IAG was trading at around 680p before the current crisis, and I bought at 205p.

 

[hwl]

Alternatively, for Boeing:
Planes are not guaranteed, their altitude may go down as well as up.

At least this gives them plenty of time to rewrite the software at home

 

[najaB]

At least this gives them plenty of time to rewrite the software at home

I saw a video yesterday that quoted reports that they plan to restart production before the end of April. So hopefully they have found all the bugs.

 

[Kingspanner]

Will be interesting to see if we see regional consolidation of airports.

I imagine this will put the final nail in the coffin for a lot of borderline airports, including the much talked about but seldom used Tees Valley.

The problem for regional airports is the enormous fixed costs of maintaining security, customs, fire service, rates etc which has to be spread over a small number of flights.
Tees Valley Airport is walking distance from my house, and indeed I once walked home from there after a fact finding trip to Amsterdam. Quite a surreal experience really.
However, close the place and build a garden village on it taking development pressure off the rest of the Tees Valley. I'll put my tin hat on now....

 

[LNW-GW Joint]

Virgin Atlantic is owned by 3 airline groups (Delta, Singapore, and AF/KLM) with only 20% owned by Branson. The health of VS relies on the health of its principal owners.

Having checked, it seems the proposed joint venture deal involving Air France/KLM, Delta and Virgin Atlantic did not get implemented.
So Branson still has 51% and Delta 49% (Singapore sold its 49% share to Delta).

Mind you the BBC has just said Virgin Atlantic is to apply for a rescue package from HMG.
Meanwhile TUI Group has secured a €1.8 billion emergency loan from the German government.

 

[Tetchytyke]

Virgin Atlantic is owned by 3 airline groups (Delta, Singapore, and AF/KLM) with only 20% owned by Branson. The health of VS relies on the health of its principal owners.

It isn't, KLM/AirFrance walked away from the purchase, and Singapore sold their whole stake to Delta. Its 49% Delta and 51% Virgin Group.

And as Virgin Group ultimately pay their tax in the BVI, perhaps if multi-billionaire Richard Branson doesn't want to provide some liquidity they should be looking to the BVI for Government assistance.

 

[Tetchytyke]

What about Jet2?

Are they at risk?

If the holiday market doesn't recover later in the year, even if it's for 2021 bookings, they may get itchy. But Jet2 are not heavily leveraged and own a lot of their own planes (which is why their fleet age is so high). I wouldn't expect them to be the first to go. The Fowler-Welch logistics business also give them a little income in the meantime.

I'd be looking at heavily leveraged airlines as at risk- Norwegian, obviously, but also Lufthansa and KLM/AirFrance- as well as perennial basket cases like Alitalia.

 

[najaB]

I'd be looking at heavily leveraged airlines as at risk- Norwegian, obviously, but also Lufthansa and KLM/AirFrance- as well as perennial basket cases like Alitalia.

Norwegian are toast. If they survive this it will be a miracle.

Lufthansa have a high debt/equity ratio but that's because of aggressive expansion - before the current crisis they were (AFAIK) seen as basically sound. They've also paid it down a lot from the highs of half a decade ago.

AF/KLM is unfortunately not KLM/AF - the main problem that they face is their French-ness, with all the financial baggage which that brings. If they were a Dutch company they would be in a lot better condition than they are. I really wish that BA had bought KLM rather than the merger with AF.

Alitalia is another one that's basically toast. They would have failed a decade or more ago if the government hadn't kept propping them up. I doubt they'll be able to continue to do so given the state that the Italian economy is going to be in after a few months.

 

[Peregrine 4903]

If the holiday market doesn't recover later in the year, even if it's for 2021 bookings, they may get itchy. But Jet2 are not heavily leveraged and own a lot of their own planes (which is why their fleet age is so high). I wouldn't expect them to be the first to go. The Fowler-Welch logistics business also give them a little income in the meantime.

I'd be looking at heavily leveraged airlines as at risk- Norwegian, obviously, but also Lufthansa and KLM/AirFrance- as well as perennial basket cases like Alitalia.

Thankyou for this, thats really interesting. I hope Jet2 don't go bust.

Would Norweigan get bailed out by the Norweigan government or are they not the flagship airline?

Also I feel like Lufthansa and KLM/Air France would get bailed out by the government, as apparently Alitalia have already been privatised.

 

[FQTV]

If the holiday market doesn't recover later in the year, even if it's for 2021 bookings, they may get itchy. But Jet2 are not heavily leveraged and own a lot of their own planes (which is why their fleet age is so high). I wouldn't expect them to be the first to go. The Fowler-Welch logistics business also give them a little income in the meantime.

I'd be looking at heavily leveraged airlines as at risk- Norwegian, obviously, but also Lufthansa and KLM/AirFrance- as well as perennial basket cases like Alitalia.

Jet2.com has a few challenges; although their leverage isn’t as high as some, it’s a concern. They’re also massively exposed to the decisions that the hoteliers that they work with take. Hotels stay closed, airline can’t fly passengers for whom they’re the tour operator too. They have no business/corporate traffic, which will be the first to come back (as it was the first to go, weeks and months ago).

Finally, the Fowler-Welch Coolchain business is massively exposed to a no-deal Brexit.

On that basis, Dart Group is not where I’d be putting any money.

 

[Tetchytyke]

Finally, the Fowler-Welch Coolchain business is massively exposed to a no-deal Brexit.

On that basis, Dart Group is not where I’d be putting any money.

I'd agree on both counts, there are a lot of what-ifs hanging over both parts of the business. And Dart aren't in a position to hedge against negative aspects of any of them.

They're cash-rich at this time of year- they've taken payment from punters but not paid the hotels- but obviously a lot of that cash will need to go back out in refunds. I think they'd be OK for now because they're not stuck paying leases on aircraft they can't fly, and the Coolchain business is one that's going to have high demand during this crisis. But if they don't get going by late summer and definitely if next year's demand is low (either due to Coronavirus or Brexit) they're gonna struggle.

They won't be the first to go though.

Would Norweigan get bailed out by the Norweigan government or are they not the flagship airline?

SAS are the flag carrier for Norway, Denmark and Sweden.

I wouldn't expect the Norwegian government to bail them out, given their fraught relationship (primarily due to Norwegian's appalling labour practices and tax dodging).

they face is their French-ness, with all the financial baggage which that brings. If they were a Dutch company they would be in a lot better condition than they are. I really wish that BA had bought KLM rather than the merger with AF.

I think it's the Frenchness that will keep them going though. Macron doesn't have the cajones to let them go to the wall, especially as AF are so politically essential for the far-flung departements.

The Dutch probably would let them fold, just as they let Fokker fail.