Business

Airlines struggle with planes shortage as summer travel set to hit record levels

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1 month ago

April 9, 2024

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Airlines struggle with planes shortage as summer travel set to hit record levels

The global airline industry is facing a summer squeeze, with travel demand expected to surpass pre-pandemic levels while aircraft deliveries drop sharply due to production problems at Boeing and Airbus.

Air carriers are spending billions on repairs to keep flying older, less fuel-efficient jets, and paying a premium to secure aircraft from lessors. But some carriers are still being forced to trim their schedules to cope with the lack of available planes.

At the same time, the number of travelers globally is set to hit historic levels, with 4.7 billion people expected to travel in 2024 compared with 4.5 billion in 2019.

“We can expect a strong performance from airlines throughout the summer with some particularly high airfare,” said John Grant, senior analyst at travel data firm OAG.

Last December, the International Air Transport Association (IATA) had predicted a 9 per cent annual growth in global airline capacity this year. That estimate looks optimistic following Boeing’s safety crisis.

Passenger carriers will receive 19pc fewer aircraft this year than they expected because of production issues at Boeing and Airbus, said Martha Neubauer, senior associate at AeroDynamic Advisory.

US carriers will receive 32pc fewer aircraft than planned a year ago because several airlines depend on Boeing’s 737 MAX planes, Neubauer said. Boeing’s production has been curbed after a January mid-air panel blowout.

Boeing is reeling from a sprawling crisis that erupted after the Jan 5 Alaska Airlines blowout. Regulators have put a cap on production of the 737 MAX, but the company is not hitting even that level.

As many as 650 Airbus A320neo jets could be grounded in the first half of 2024 for inspections to deal with a flaw with RTX Corp’s Pratt & Whitney engines, RTX said last year.

In Europe, low-cost airline Ryanair has cut some routes. In the United States, United and Southwest have cut back flying and adjusted hiring and staffing plans.

LEASING MARKET BOOMS

Analysts expect capacity at most US carriers in the second quarter to grow at a slower pace than a year ago. Airlines will update their growth plans and explain how they will offset capacity constraints when they report quarterly results, starting on Wednesday with Delta Air Lines.

Due to the shortage of new planes, the aircraft leasing market is booming. Data from Cirium Ascend Consultancy shows that lease rates for new Airbus A320-200neo and Boeing 737-8 MAX aircraft have hit $400,000 per month, the highest since mid-2008.

Airlines are spending 30pc more on aircraft leases than before the pandemic, said John Heimlich, chief economist at Airlines for America (A4A) that represents major US carriers.

They are also holding on to jets that are past their useful economic lives and require heavy maintenance that now takes several months, Heimlich said. Repair costs at United, Delta and American were up 40pc last year from 2019.

Increased leasing, repair and labour costs will bite in to profit despite the high demand, Heimlich said. US passenger airlines posted a pre-tax margin of 4.5pc last year, with the bulk of contribution coming from Delta and United.

Fewer Americans are planning to travel on a plane this summer compared with a year ago due to high inflation, a survey by travel website the Vacationer showed. Airline fares are down year-on-year, but have been rising month-on-month.

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Business

Star Entertainment says Hard Rock-led group weighs bid, shares surge

Published

5 hours ago

May 20, 2024

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Star Entertainment says Hard Rock-led group weighs bid, shares surge

Star Entertainment (SGR.AX), opens new tab said on Monday a consortium led by Florida-based Hard Rock Hotels & Casinos is considering a bid for the cash-strapped Australian firm, sending its shares 20% higher.

A potential takeover by entertainment giant Hard Rock would provide a much-needed financial lifeline to Star, which has been plagued by a regulatory inquiry into its flagship Sydney casino operation and an executive exodus.

Star, which had a market value of A$1.29 billion ($863.66 million) as of Monday’s close, said it has been approached by a consortium of investors which includes Hard Rock Hotels & Resorts (Pacific).

The company said it understands Hard Rock Hotels is a local partner of Hard Rock.

Earlier in the day, Star said it had received “inbound interest from a number of external parties” but flagged none of them had yet resulted in “substantive discussions”.

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Business

Red Lobster seeks bankruptcy protection with $100 mln in financing commitments

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5 hours ago

May 20, 2024

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Red Lobster seeks bankruptcy protection with $100 mln in financing commitments

U.S.-based restaurant chain Red Lobster has filed for Chapter 11 bankruptcy protection in a Florida court after securing $100 million in financing commitments from its existing lenders, the company said on Sunday.

The company listed its assets and liabilities to be between $1 billion and $10 billion, according to a court filing.

Red Lobster said its restaurants will be open and operate as usual during the bankruptcy proceedings, and plans to reduce its locations as well as pursue a sale of substantially all its assets.

The restaurant chain also said it has entered into a “stalking horse” purchase agreement to sell its business to an entity formed and controlled by its existing term lenders.

“This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth,” said Jonathan Tibus, CEO of Red Lobster.

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Business

BMW imported 8,000 vehicles into US with parts from banned Chinese supplier, Senate report says

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5 hours ago

May 20, 2024

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BMW imported 8,000 vehicles into US with parts from banned Chinese supplier, Senate report says

German automaker BMW (BMWG.DE), opens new tab imported at least 8,000 Mini Cooper vehicles into the United States with electronic components from a banned Chinese supplier, a U.S. Senate report released on Monday said.

A report by Senate Finance Committee Chairman Ron Wyden’s staff said BMW imported 8,000 Mini Coopers with parts from a Chinese supplier banned under a 2021 law and that BMW continued to import products with the banned parts until at least April.

BMW Group said in an email it had “taken steps to halt the importation of affected products.”

The company will be conducting a service action to replace the specific parts, adding it “has strict standards and policies regarding employment practices, human rights, and working conditions, which all our direct suppliers must follow.”

Congress in 2021 passed the Uyghur Forced Labor Prevention Act (UFLPA) law to strengthen enforcement of laws to prevent the import of goods from China’s Xinjiang region believed to have been produced with forced labor by members of the country’s Uyghur minority group. China denies the allegations.

“Automakers’ self-policing is clearly not doing the job,” Wyden said, urging the Customs and Border Protection agency to “take a number of specific steps to supercharge enforcement and crack down on companies that fuel the shameful use of forced labor in China.” Customs and Border Protection did not immediately comment.

The report found that Bourns Inc, a California-based auto supplier, had sourced components from Sichuan Jingweida Technology Group (JWD). That Chinese company was added to the UFLPA Entity List in December, which means its products are presumed to be made with forced labor.

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