Latest News
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Alaska Air: Demand and fares may support cash flow in the second half despite fuel price shock
Alaska Air Group hopes to reinstate its financial guidance during its second-quarter earnings conference call, if fuel prices stabilize, said Chief Financial Officer Shane Tackett on Saturday. Volatility in jet fuel costs had forced the carrier's?full year outlook. Alaska is unwilling to restore guidance until they have more confidence about the outlook. Tackett, speaking at the annual meeting of the International Air Transport Association in Rio de Janeiro, said: "We would like to see more stability." Tackett says that the carrier is expecting a more difficult second quarter than they had expected before the recent fuel shock. However, he said that higher fares and resilient customer demand should help to offset the majority of the impact in the second half. He predicted that operating cash burn would fall to zero or even turn positive in the second part of the year. Alaska recently borrowed $1 billion, divided between secured and unsecured debt. But?Tackett stated that the company did not plan to make another liquidity move, or reduce capital spending. He said that corporate bookings for the next 90-day period are up 20-30% from a similar time last year, across most industries and geographies. Tackett stated that Alaska also works with energy companies to obtain more jet fuel from Singapore for the West Coast, as refining margins are high in its core geographies. He stated that the airline has no plans to retire Hawaiian Airlines' Airbus A330s and A321s, and they expect to remain an Airbus operator for "a long time." (Reporting and editing by Manuela Andréoni in Rio de Janeiro)
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Southwest Airlines sticks with Boeing after MAX 7 delays push service back to 2027
Southwest Airlines' Chief Operating Officer Andrew Watterson said on Saturday that the airline expects Boeing's long delayed 737 MAX 7 to enter revenue service by 2027. The company is also focused on adding more aircraft types in order to reduce risks, rather than focusing on another type of aircraft. Watterson responded that Southwest Airlines was not interested in Airbus's A220. Watterson stated in an interview at the International Air Transport Association annual meeting in Rio de Janeiro that diversification does not come from a second type of fleet. "A second fleet type can increase risk." It doesn't make any sense to ignore that," he said. The?MAX 7 still awaits certification by the U.S. Federal Aviation Administration. Watterson stated that Southwest will spend about six months on?internal projects after certification. This includes adding the aircraft to their operating specifications and manuals. He said that the clock begins when they certify it. Watterson stated that the MAX 7 delays had not forced Southwest Airlines to delay specific routes but limited its ability better match aircraft sizes with demand. He said the penalty is too many large aircraft and not enough small jets in markets or periods of lower demand. STARLINK ROLLOUT Southwest also?moves ahead with Starlink-powered Wi-Fi. However, Tony Roach said that the carrier hasn't ruled out Amazon’s Leo satellite -network. Southwest Airlines' chief customer and brand officer, Tony Roach, said the airline expects to be able to service an aircraft with Starlink by the end of this month. Executives said that the airline has set a goal of equipping 300 aircraft by the end of the year with Starlink. However, the speed depends on the ability of Starlink to supply the equipment. Watterson said, "Our 'tech ops' can retrofit as quickly as Starlink can supply," Watterson added. Watterson said that activist investor Elliott Investment Management was correct to say Southwest had been slow to change despite the fact that many changes were already underway. Elliott Investment Management was unambiguously?correct in that we were too late," he said. Watterson said that investors underestimated Southwest's customers' willingness and ability to pay for new services, and revenue per available seat-mile would be the "litmus" test for whether or not the changes were working. (Reporting by Rajesh Kumar Singh in Rio de Janeiro)
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Breeze Airways, a US low-cost carrier, sets its sights on the 2027 IPO
?U.S. Breeze Airways, a low-cost domestic carrier, is planning an initial public offering in 2027. Its Chief Executive David Neeleman announced this on Saturday. He said that the carrier had considered an IPO earlier but decided to delay it due to the market 'conditions'. This was revealed during an interview on the eve of the annual summit of the International Air -Transport Association (IATA) in Rio de Janeiro. He said that "to have an IPO the market must cooperate and the industry must cooperate." Neeleman added that the low-cost carrier has steadily built up its financial stability since it launched in '2021. The company does not have to raise capital now and can wait for the right equity market environment before launching publicly. Breeze was founded by Neeleman who, as the founder of JetBlue and Azul before, aimed to connect underserved American cities via a?affordable point-to-point flight service.
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Rio Summit: Airline executives grapple with fuel crisis, fare tests
The Iran War is driving up fuel prices and disrupting airspace, while airlines try to cushion the impact with higher fares. The International Air Transport Association's (IATA) annual meeting, which takes place from June 6-8, coincides with the fuel crisis and another issue that airlines are unable to quickly solve: a lack of new aircraft. Boeing and Airbus delays in delivering jets have forced some carriers to continue using older, less-fuel-efficient aircraft for longer. This has increased maintenance costs and fuel costs, just as oil prices are rising. IATA, the trade association for more than 370 airlines that account for 85% of the global air traffic, predicted a record-breaking $41 billion net profit for the industry this year before the war. Analysts and industry executives expect the outlook to be revised downward at the meeting. Deloitte's survey of 21 airline CEOs in the world published this week revealed that fuel price volatility, inflation and other risks are at the top of their risk agenda. This is driving carriers to place a greater emphasis on financial health and cost control. The survey stated that "together, they have turned what was meant to be a record-breaking year into a 'fight for margins. According to CEO John Rodgerson, the Brazilian airline Azul plans to reduce more flights in order to meet demand because of higher jet fuel prices. Air New Zealand CEO Nikhil Ravishankar said that airlines could only increase ticket prices to a certain extent in order to offset rising fuel costs. In an interview, he stated that the market would respond by reducing demand and lowering ticket prices. Fuel and labor are the two main costs for airlines. Fuel increases are difficult to absorb when tickets are purchased weeks or even months in advance. The longer routes are also more fuel-intensive and less efficient for aircraft and crew. It is a challenge to determine how much of this latest fuel cost can be passed onto travelers before the increased fares begin to dampen demand. FARE POWER Travel demand is holding up well in many large markets. This includes premium and corporate travelers. Carriers have more room to increase fares. According to Raymond James, the domestic fares published in the United States as of 25 May showed a robust demand, and a successful pass-through for higher fuel costs. The fares were up 35.8% on an annual basis, while fares four weeks out were up 39.4%. Alexandre Lefevre is Air Canada's vice-president of global sales and network planning. He said, "the willingness to pay from the premium side over the last few years has been very strong. We see that strength continuing." There are still limits. The higher fares may help the airlines recover some of their fuel costs, but they can also push out those with smaller budgets. This risk is higher in regions with weak currencies, where consumer spending is under stress or where airlines lack the pricing power of major network carriers. Some carriers are still planning growth. Singapore Airlines has been in discussions for at least fifty large wide-body planes. Qantas, meanwhile, is considering an order of about 20 Airbus and Boeing wide-body aircraft. Reporting by Rajesh Kumar Singh in Rio de Janeiro and Allison Lampert. Gabriel Araujo contributed additional reporting from Rio de Janeiro. David Gaffen, Louise Heavens and David Gaffen edited the story.
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Bloomberg News reports that Airbus is closing in on a widebody order by a Scandinavian airline
Bloomberg reported that Airbus was 'closing in' on a large-scale order from Scandinavian Airlines, SAS AB. The order includes a mixture of Airbus A330neos and more advanced A350s, with 15 to 20 aircraft being considered, according to the report. The airline is expected to 'finalise' the deal within the next few weeks, and it will receive the aircraft in the first decade of the new century. According to the report, "people familiar with the matter" were quoted. Airbus and 'SAS AB' did not respond immediately to a comment request. The report could not be verified. Reports said that the carrier was also in talks?with Boeing regarding a large order for widebody jets, but chose to go with the European planemaker instead to maintain "fleet uniformity" and keep costs down. SAS AB, one of the first airlines to reduce flights in March due to the "sharp" and "sudden" increase in fuel prices triggered by U.S. - Israel's war against Iran.
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Brazilian airline Azul is planning further frequency reductions as the fuel shock bites
Brazilian airline Azul will increase 'capacity reductions' amid increased jet fuel prices related to the Iran War. The carrier will also continue reducing flying in order to save money and protect cash flow, according to CEO John Rodgerson. Rodgerson said that the largest companies in the industry were cutting capacity to better match demand and higher costs, and Azul was following suit. The company would go beyond the earlier cuts, as the conflict continues. "When we first made our?cuts, I thought that the war would have been over by now," said he in an interview Friday in preparation for a global airline chiefs meeting in Rio de Janeiro. "But the problem is continuing. We'll continue to cut frequencies opportunistically, to make sure that we only fly things that are sensible." Rodgerson stated that the majority of Azul's reductions in the second quarter were on international routes. Further adjustments would focus on domestic frequencies, rather than pulling out entire cities. "Do you fly from Curitiba to Rio six times per day?" With these fuel prices it might be better to fly four times a day. He added that the airline prioritized its hubs at Campinas and Belo Horizonte. "We haven't yet pulled cities, but it's always an option." You must first reduce frequencies and?utilization. You don't want an aircraft operating 13 or 14 hours per day at a time when fuel costs double. Rodgerson stated that Azul's strong balance sheet following a major restructuring of debt put it in a better position to adapt than its peers. In February, it exited Chapter 11 proceedings with the backing of United Airlines and American Airlines. Azul expects that pricing will remain under pressure in the second quarter, which is traditionally weaker, but he believes there's room for higher fares as demand increases into the third and forth quarters. (Reporting and editing by Andrew Heavens; Additional reporting and editing by Luciana magalhaes).
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Rio Summit: Airline executives grapple with fuel crisis, fare tests
The Iran 'war' is driving up fuel prices and disrupting?airspace?, while carriers are trying to cushion the impact with higher fares. The International Air Transport Association's (IATA) annual meeting, which takes place from June 6-8, coincides with the fuel crisis and another issue that airlines are unable to quickly solve: a lack of new aircraft. Boeing and Airbus delays forced many carriers into keeping older, less fuel efficient jets in service longer. This increased maintenance and fuel costs at a time when oil prices were rising. IATA, the trade association for more than 370 carriers that account for 85% of the global air traffic, predicted a record-breaking $41 billion in net profit for the industry this year before the war. Analysts and industry executives expect the outlook to be revised downward at the meeting. The 'Deloitte Survey of 21 Global Airlines CEOs, published this week, found that fuel prices volatility and inflation are the two biggest risks facing the industry. This has led to the carriers focusing more on financial health and cost control. The survey stated that "together, they have turned what was meant to be a?record year? into a battle for margin." Fuel and labor are the two main costs of an airline. Fuel increases are difficult to absorb when tickets are purchased weeks or even months in advance. The longer routes are also more fuel-intensive and less efficient for aircraft and crews. It's a question of how much fuel cost can be passed onto travelers before the increased fares begin to dampen demand. FARE POWER Travel demand is holding up in several large markets, particularly among corporate and premium travelers. This gives carriers more room to increase fares. According to Raymond James, the domestic published fares in the United States as of 25 May showed a robust demand for air travel and a successful pass-through?of higher fuel prices. One-week out fares were up 35.8% on an annual basis, and four-week out fares were up 39.4%. Alexandre Lefevre is Air Canada's vice president for network planning and global sale. He said, "The willingness to pay premium prices has been very strong in recent years, whether there was a crisis or not." There are still limits. The higher fares may help airlines recover some of their fuel costs, but at the same time they risk driving out those with smaller budgets. This risk is higher in regions with weak currencies, where consumer spending is under stress or where airlines lack the pricing power that large network carriers have. Some carriers are still planning growth. Singapore Airlines has been reported to be in discussions for at least fifty large wide-body planes. Qantas may also order 20 Airbus and Boeing wide-body planes. (Reporting from Rajesh Kumar Singh in Rio de Janeiro and Allison Lampert; editing by David Gaffen).
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Texas grid warns of risks when data centers and crypto sites fail voltage testing
According to the Texas grid operator, several large data centers and crypto-facilities planning to connect to the Texas power grid ahead of summer peak demand failed to pass 'key reliability tests. This increases the risk of power failures just as electricity usage reaches its seasonal high. Data centers are causing power grids to be stressed across the United States. Data centers, unlike traditional industrial customers who tend to draw electricity steadily, are designed to disconnect from the grid as soon as there is a problem to protect equipment and maintain services. This makes them a potentially unstable and unpredictable force on grids that are already under pressure due to rising demand. The Electric Reliability Council of Texas, in a report dated 21 May, said that four groups of large electricity consumers, including data centers, were abruptly disconnected during a test of their ability to handle voltage disturbances. It can cause wider outages when large customers suddenly reduce their electricity use. ERCOT, which manages electricity in most of Texas said that it had reviewed approximately 20 gigawatts from large customers who wanted to connect to its system. This included eight projects, totaling about 3.9 gigawatts, which were aiming to begin before July 1. The company said that it had identified four large groups of power users who could trigger a demand trip of more than 5,000 Megawatts under certain fault conditions. These abrupt drops in demand were equal to the electricity consumed by a large city like Boston. ERCOT is currently reviewing test failures to develop plans for protecting the grid against?disruptions. ERCOT has made voltage ride-through failures a priority, as they are a growing risk with more data centers and crypto miners connected to the grid. ERCOT has recorded at least 26 instances since 2023 where data centers and crypto mining facilities were abruptly disconnected from the grid due to their inability to handle disruptions in electricity flow. A failed transformer in a west Texas substation caused 400 crypto-miners, oil and gas production and data centers to be unplugged without warning. According to ERCOT, the mass disconnection caused a surplus of nearly 1,700 megawatts, or 5% of total grid demand. It also forced 112 Megawatts to be shut down. ERCOT has tightened interconnection requirements and performance standards, and new rules have been introduced to ensure that such facilities are able to ride through voltage and frequencies disturbances without being disconnected. (Tim McLaughlin in Boston; Editing by Sanjeev Miglani)
Boeing executive: China can get aftermarket support for its 200-jet aircraft order.
Boeing's top executive for services?said that Boeing can support China with aftermarket parts to back up a 200-planes order announced by the planemaker in response to a visit made by U.S. President Donald Trump to Beijing this year.
Chris Raymond, Chief executive of Boeing Global Services said that China would have no problems obtaining parts for the deal, "if they are parts that we can sell globally." He also added that the planemaker had a warehouse in China. Kelly Ortberg, CEO of Boeing Global Services, said that China's 200-jet deal would be finalized later this year. It is only the "initial tranche" of what could become a much bigger deal. China's commerce ministry said the U.S. would have to give the country supply guarantees on?aircraft engines and components as part of the Boeing deal.
Raymond stated that despite the war in Iran, there was still a demand for aircraft modifications in most regions.
Raymond added that supply chain issues continue to be a problem for parts such as flight deck windows and engine components distributed by?Boeing.
The executive said that his 'division' is looking to'slash costs by using analytics and not through layoffs. (Reporting by Allison Lampert in Rio de Janeiro)
(source: Reuters)