Airbus reports nine-month 2017 results

Airbus SE reported nine-month 2017 financial results and confirmed its guidance for the full year.

“The strong backlog and a healthy market environment continue to support our commercial aircraft production ramp-up plans,” said Airbus Chief Executive Officer Tom Enders. “We confirm our outlook even though this year’s delivery schedule is extremely back-loaded, largely due to the well-known engine problems plaguing our A320neo Family.”

Order intake totalled € 50.8 billion (9m 2016: € 73.2 billion) with the order book(1) valued at € 945 billion as of 30 September 2017 (year-end 2016: € 1,060 billion). A total of 271 net commercial aircraft orders were received (9m 2016: 380 aircraft), with the order backlog comprising 6,691 aircraft at the end of September. Net helicopter orders totalled 210 units (9m 2016: 211 units), including 14 H175s in the third quarter. At Defence and Space, the good order momentum continued in Military Aircraft with five A330 MRTTs booked in total for Germany and Norway in the third quarter. The overall order intake at the division was impacted by perimeter changes from portfolio reshaping and the slow telecommunications satellite market.   

Revenues were stable at € 43.0 billion (9m 2016: € 42.7 billion) despite the perimeter changes at Defence and Space and were higher on a comparable basis. Commercial Aircraft revenues rose four percent with deliveries of 454(2) aircraft (9m 2016: 462 aircraft) comprising 350 A320 Family, 50 A350 XWBs, 45 A330s and nine A380s. Helicopters’ revenues were slightly higher with deliveries of 266 units (9m 2016: 258 units). Revenues at Defence and Space reflected the negative impact of around € 1.4 billion from the perimeter changes.

EBIT Adjusted – an alternative performance measure and key indicator capturing the underlying business margin by excluding material charges or profits caused by movements in provisions related to programmes, restructuring or foreign exchange impacts as well as capital gains/losses from the disposal and acquisition of businesses – totalled  € 1,796 million (9m 2016: € 2,408 million).

Commercial Aircraft’s EBIT Adjusted of € 1,545 million (9m 2016: € 1,836 million) reflected the aircraft delivery mix and phasing as well as transition pricing. 

The industrial ramp up on the A350 continues to make good progress, with the programme well on track to meet the monthly production target rate of 10 aircraft by the end of 2018. Progress was also made on A350 recurring cost convergence. An agreement was signed with Qatar Airways following the cancellation of four A350 delivery slots to continue to take delivery of four associated finished aircraft by year-end. On the A320neo programme, 90 aircraft were delivered to 19 customers.

 The A320neo ramp-up remains challenging with the delivery profile very much loaded into the fourth quarter. Priority is being given to engine deliveries to customers to be used for spares, as agreed with the engine manufacturers. At the beginning of 2017, around 200 A320neo deliveries were targeted for the full year. Due to engine availability issues and allocation between the OEM and spare pools, A320neo deliveries are now expected to be slightly below that target. The A330neo programme reached an important milestone in October with the successful maiden flight.

Helicopters’ EBIT Adjusted declined to € 165 million (9m 2016: € 200 million), reflecting the unfavourable mix mainly from lower commercial flight hours in services and the impact associated with the past grounding of the H225. This was partially mitigated by the division’s transformation efforts. Airbus continues to work with its customers on bringing the civil H225 fleet back into full operation.

Defence and Space’s EBIT Adjusted was € 357 million (9m 2016: € 436 million), reflecting the perimeter change and was broadly stable on a comparable basis.

Twelve A400Ms were delivered compared to 11 aircraft in the first nine months of 2016. The operational and commercial assumptions that were retained in 2016 remain the management’s best current assessment. However, in the meantime, production levels were adjusted to absorb inventory with delivery schedules still in discussion with customers. Development activities continued toward achieving the revised capability roadmap. However, achievement of the contractual technical capabilities and associated costs remain highly challenging. There are also challenges remaining on securing sufficient export orders in time, on cost reductions, industrial efficiency and commercial exposure, which could all impact the programme significantly. Discussions to de-risk the A400M programme are ongoing with the Nations and OCCAR.

Group self-financed R&D expenses declined to € 1,918 million (9m 2016: € 2,015 million).

EBIT (reported) of € 2,312 million (9m 2016: € 2,356 million) included Adjustments totalling a net € +516 million compared to net Adjustments of € -52 million in the first nine months of 2016. The 9m 2017 Adjustments comprised:

·         A charge of € 150 million on the A400M programme, including € 80 million in the third quarter reflecting the production adjustment and liquidated damages incurred;

·         A positive impact of € 43 million related to the dollar pre-delivery payment mismatch and balance sheet revaluation;

·         An updated net capital gain of € 604 million from the divestment of the Defence Electronics business;

·         A net positive impact of € 19 million related to other portfolio changes at Defence and Space.

Net income amounted to € 1,851 million (9m 2016: € 1,811 million) after the EBIT Adjustments with earnings per share of € 2.39 (9m 2016: € 2.34). EPS and net income included a positive impact mainly from the revaluation of financial instruments and balance sheet items. The finance result was € 92 million (9m 2016: € -342 million).

Free cash flow before M&A and customer financing improved to € -3,344 million           (9m 2016: € -4,184 million), although its development was impacted by inventory build-up related to the ramp-up and NEO engine delays. Free cash flow of € -3,208 million (9m 2016: € -2,649 million) included net proceeds of around € 600 million from the Defence Electronics disposal. Cash flow for aircraft financing improved year-on-year by approximately       € 100 million to around € -440 million. The overall aircraft financing environment remains healthy with a high level of liquidity available in the market. Airbus continues to work constructively with the Export Credit Agencies (ECAs) to return to some ECA backed financing.

The net cash position on 30 September 2017 was € 6.7 billion (year-end 2016: € 11.1 billion) after the 2016 dividend payment of € 1.0 billion in the second quarter with a gross cash position of € 18.0 billion (year-end 2016: € 21.6 billion).

Concrete foundations

Johannesburg-based South African regional operator, CemAir, is poised to be the host carrier for the Airlines Association of Southern Africa (AASA) annual general assembly. But what is CemAir and where is its niche? Victoria Moores has been finding out.
CemAir CEO Miles van der Molen cringes when quizzed on why his airline is called CemAir. “It’s amazing how often people ask,” he commented before being forced to reveal that CemAir stems from the words ‘Cement Air’.

Unsurprisingly, the story has odd roots. Van der Molen started CemAir with 50:50 partner Brian Bendall, whose other business was cement walling and floor finishes. It was called Cemcrete, from the words cement and concrete.

“When we started in aviation, CemAir was the logical name. You don’t want to be called Cement Air, but that’s where the name came from and we’re certainly not going to change it now,” explained van der Molen. The name is pronounced SemAir, not KemAir.

CemAir started life in 2001 as a lessor, placing a single Cessna Caravan on wet lease with Precision Air in Tanzania. “We grew from there and got involved in other stuff,” he said. 

Around 2005, CemAir bought three Beech 1900s from a company that was being liquidated. These aircraft did contract work across the continent and as far afield as Afghanistan, performing missions for the US Agency for International Development (USAID). The Caravan left the fleet and another six Beech 1900s joined, taking the total to nine.

“In 2008, we had a bit of a wobble when my business partner (Bendall) passed away in an accident, so we needed to decide where to go next,” van der Molen explained. Those decisions were implemented in 2010. Against the backdrop of a saturated narrow-body market, CemAir picked regional flying as its niche.
“The [Bombardier] CRJ was the direction we wanted to go in, so we started collecting those between 2010 and 2016,” he said. “They mostly came from Delta [Air Lines]. We became a fairly significant CRJ100/200 operator and started developing in aircraft, crew, maintenance and insurance (ACMI) leases.”

By 2011, the US campaign in Afghanistan was beginning to wind down, releasing the Beech 1900s. There was a glut of small aircraft in the market, so CemAir used the Beech 1900s to serve obscure routes within South Africa. These included mining towns and a site where a power station was being built. This kept things ticking over.

“We were flying to a lot of places that weren’t served by other airlines. We built the business hand-by-hand. We found opportunities here and there and built capacity,” he said. This also marked CemAir’s scheduled flight debut.

Van der Molen said this was where the “alphabet soup” of certifications began, referring industry acronyms like IATA and IOSA. “It’s a long path for a small organisation. We learned a number of lessons about the difference between contract and scheduled flying and we collected approvals and routes one by one as we went,” he said. 

Once a year, the airline would add a scheduled route, which would require additional infrastructure. That infrastructure demanded more routes to spread costs, and so that pattern continued.
By 2014, CemAir had run out of Beech 1900 capacity, but some of its destinations were not suitable for CRJ operations. “We traded the last two Beech 1900s to get a Bombardier Q100 and, a little later, we got two Q300s,” van der Molen said. \

Two-and-a-half years ago CemAir listed on the global distribution services (GDSs) and, in February 2017, it secured IOSA certification and joined IATA. 

“The scheduled side tends to attract contract work. We get enquiries from mainstream airlines that require IOSA certification. We wouldn’t have access to that if we hadn’t done scheduled services. We continue to grow the scheduled side on a managed basis.”

Today, CemAir operates 21 aircraft, which will be joined by a used Q400 by year-end, as well as a CRJ900 and two new Q400s scheduled for delivery in 2019. Beyond this, it has five ex-Delta CRJs in storage in the US, which it will either bring online or part out. “The CRJ 700/900 and the Q400 seat class is where we see ourselves over the next five years.” Meanwhile, the Beech-1900 fleet will remain stable at around 10 aircraft.

CemAir’s revenue is now evenly split between lower-yield but dependable domestic scheduled flying and less consistent, but higher-yield, contract work with greater geographical spread. “We’ve done contract work in some dodgy places, but exposure to both markets creates a nice balance, which tends to work quite well for us.”

This is a necessity in the South African market, which has a chequered history of government-backed goliaths and stagnant demand. This results in market cannibalisation between carriers, rather than market stimulation. 

“Growth in passenger numbers normally tracks economic growth. Since we don’t have much on the second, we’re not going to get much on the first. I don’t see our numbers growing much. The political situation in the country isn’t great and there are a lot of reasons why the market is stagnating. We are due a big correction at some point, it’s not sustainable in its current form.”

Van der Molen said the South African market is “very skewed” because government-owned South African Express (SAX) and South African Airways (SAA) can accrue on-going losses. “The driver is largely politics, not economics,” he said. 

This makes survival extremely tough for independent airlines like CemAir and British Airways franchise carrier Comair, which van der Molen said is doing a “brilliant job”.

“There have been a lot of failures. I think 15 airlines have started over the last 20 years and there are only two left – us and Safair. It is a confidence battle when you are a new name to passengers. We’ve been around a long time, but we’re not high-profile, so we need to build confidence and capitalise on it. If you enter a market and then withdraw [from the route], it sends a negative signal. You have to be very cautious and fight it out to the bitter end, even if it’s expensive,” he said. 

Contract work allows CemAir take on these battles, flexing the combined muscle of its two business areas. Using this strategy, CemAir has encroached on some of SAX’s routes and hired some of its rival’s employees. “To me, a company is nothing but a collection of people. People are the business. If you have good people, you will have a good company.”

Van der Molen said he “wouldn’t close the door” to the idea of acquiring SAX, but he thinks it is unlikely. However, he recognises the value of partnerships with other airlines. Capacity agreements, codeshares and interlines are all more likely now CemAir is IATA and IOSA registered.

“We have been an IATA member for six months, so we are at an early stage, but this is a direction we’d like to take,” he said. “We believe interlines could give us around a 20% increase in passenger numbers.”

CemAir carries around 130,000 scheduled passengers a year, rising to around 600,000 including its ACMI work. More importantly, the airline is seeing consistent growth in turnover and profits, and has had a “strong financial performance the whole way through.”

So would 100% shareholder van der Molen consider selling the business? “Quitting isn’t in my nature,” he said. “I could never close the door to any conversation that made sense, but I’m not sure I’d play well with others if you put me in a board room. You can’t corporatise me and I’m happy going it alone.”
Instead, he is looking at regional expansion and is seeking permission to fly between South Africa and Botswana, where CemAir has historically flown for Air Botswana. “We are looking to dip our toes in the market. We would probably be operating as ourselves, as CemAir. I see us operating under our own name in the next six months.”

Beyond this, CemAir plans to stick with what it knows. “We are not going into the narrow-body market, even in the long term. In terms of long-haul, we don’t have delusions of grandeur. We want to go with what we know and build depth, rather than jump into long-haul, which is a romanticised market that you enter more based on ego than economics. I see us as a bit more grounded than that. Jumping into a market that we know nothing about would be commercial suicide.”

That said, CemAir is looking to expand its regional work by seeking a Maltese air operator’s certificate (AOC) to broaden its geographical spread. It hopes to secure the AOC by February next year.
“We have a member of our team that moved there a month ago, so it is actively being pursued. We will use it to pursue ACMI work in Europe and North Africa. In time, a scheduled regional operation will be considered, but not for now,” he said.

Running a South African airline is not an easy career path, so why do it? For van der Molen, genetics were partly to blame. 

“I grew up in aviation. My parents were involved in leisure aviation, so I used to bounce around small airports. Instead of getting a real job, I went into aviation. I started as a pilot on piston-engined charters, but I found the business side more exciting. At one point, I thought I’d go and do something else, but I got sucked back in. It’s my choice somehow, even if it adds to my grey hair collection.” 

A tech aircraft tested van der Molen’s stress levels when planning this interview. “Problems come in bunches, like bananas,” he joked. “Obviously, it’s pretty stressful, but I have to put my best foot forward every day. Once it’s in your blood, it’s very difficult to leave.”

KOT roast IEBC chairman Wafula Chebukati over ‘Shakalaka’

If you watched the IEBC Chairman Wafula Chebukati pronounce presidential candidate Cyrus Shakhalaga Jirongo after the August 8th elections – then I bet you know that it was not easy for him. In fact he left many gasping for air as they laughed off the way he pronounced “Shakalaka Chirongo”.

Therefore this time around they Kenyans keeping up with the October 26th elections made sure to tune in as the IEBC chairman announced the results, hoping that Chebukati would again crack their ribs like last time.

However, this time around Chebukati opted to leave out Jirongo’s middle name (probably to save himself from the internet trolls) leaving most Kenyans on Twitter disappointed as they had been waiting the whole day to hear him pronounce the ‘Shakalaka’ bit for just fun and giggles!

ExecuJet Nigeria becomes authorised Rockwell Collins avionics dealership

ExecuJet, part of the Luxaviation Group, has expanded the maintenance offering at its Nigeria facility with the announcement that it is now an authorised Rockwell Collins avionics dealership for Nigeria and the West Africa region.

A significant move for the company, the news is part of an ongoing trajectory for ExecuJet’s MRO in Lagos, which has seen a run of developments and investments over the past year. Expanding the availability of both OEM and avionics maintenance services is a key goal of ExecuJet in Africa, as it aims to be able to support every client at their own home base.

Graeme Duckworth, Vice President Africa and Executive Vice President MRO Services, Luxaviation Group, said: “ExecuJet Nigeria is privileged to be representing Rockwell Collins, as more manufacturers recognise the quality, performance and efficiency that ExecuJet demonstrates on a local and a global scale. As we have seen, business aviation movements in Lagos this year experienced a year-on-year growth rate of 12%; we consider it of the utmost importance that our MRO in Nigeria has the services on-site to help maintain this encouraging trend.

“With the support of Rockwell Collins, we can now serve our customers with more competitive pricing and warranty benefits. By collaborating with established, first-class MRO operators, we can also provide cost-effective upgrades to current avionics systems such as the ADS-B Out products, which will improve flight safety, situational awareness and reliability.”

Ethiopian gets Africa's first Boeing 787-9

The carrier’s newest Dreamliner touched down in Addis Ababa following a non-stop 8,354 mile (13,444 km) delivery flight from Boeing's Everett, facility. Ethiopian becomes the first carrier in Africa to operate the 787-9 and extends a tradition of setting aviation milestones. 

Ethiopian became Africa's first carrier to fly the 787-8 in 2012, and similarly introduced the 777-200LR (Longer Range), 777-300ER (Extended Range) and 777 Freighter.

"We are proud to celebrate yet another first with the introduction of the cutting-edge 787-9 into our young and fast growing fleet," said CEO Tewolde GebreMariam, "Today, the 787 is the core of our fleet with 20 aircraft in service. Our investment in the latest technology airplanes is part of our Vision 2025 strategy and our commitment to our esteemed customers to offer complete on-board comfort. We will continue to invest in the most advanced aircraft to give our customers the best possible travel experience.

""Ethiopian Airlines conducted its 32nd Humanitarian Delivery Flight as part of the 787-9 delivery. In conjunction with the non-profit Seattle Alliance Outreach, Ethiopian transported goods donated by medical organizations in the U.S. to Black Lion Hospital and St. Paul Hospital in Ethiopia.
"We are very happy to continue our longstanding partnership with Boeing to deliver medical equipment and supplies to public hospitals in Ethiopia, which benefit the society at-large," said GebreMariam.

 "This is our 32nd humanitarian flight over the course of the last few years. No airline has provided such sustained support to the delivery of humanitarian supplies to the African continent. It is a testament to our commitment to serve the community as a responsible corporate organization."

The  aircraft is fitted with Rolls-Royce engines.  Dominic Horwood, Rolls-Royce, chief customer officer – Civil Large Engines, said: “This is a significant selection by a valued customer that continues the Trent 1000 success story. We have real momentum in the marketplace - in the last five years the Trent 1000 has been selected in more than 60 per cent of engine competitions.”

Rolls-Royce powered the very first Boeing 787 test flight in December 2009, the first 787-8 to enter service in October 2011, and the first 787-9 to enter service, in 2014.

Ethiopian has ordered Trent XWB engines to power 12 Airbus A350 XWB aircraft and has three RB211-powered Boeing 757 aircraft in service.

EgyptAir resumes flights to Japan

EgyptAir has resumed its flights to Tokyo after almost four years of suspension.

The airline will offer one flight aweek to Japan’s capital, unless more flights are required.

Uhuru Kenyatta plays safe after his victory,

- Uhuru Kenyatta has released a fresh condition that will provide a platform for talks between himself and NASA leader Raila Odinga 
- During his acceptance speech at the Bomas of Kenya, Uhuru said he would only engage with Raila after all the constitutional processes which could take place after the victory were addressed 
- The President elect seemed wary of a possibility of NASA moving to court yet again as provided by the constitution - He therefore said he would engage with NASA after all processes were done President elect Uhuru Kenyatta has outlined the one condition which must be fulfilled for him to engage with NASA leader Raila Odinga in talks over the country’s political future. Read