Air France-KLM Beats Estimates; Sees Demand Holding Up This Year - BLOOMBERG
(Bloomberg) -- Air France-KLM reported second-quarter earnings that beat expectations amid strong demand for air travel that the airline group said shows no sign of abating.
Operating income rose 90% to €733 million ($806 million), exceeding analyst expectations of €649 million, as the number of passengers carried increased alongside higher load factors and strong yields, the group said on Friday. Sales rose 14% to €7.6 billion, also ahead of estimates.
The Franco-Dutch group said the booking environment remains robust, even for budget subsidiary Transavia, which in recent months was hurt by French air-traffic controller strikes and a fleet shortage in the Netherlands.
“For us it’s still going strong,” Chief Financial Officer Steven Zaat said in an interview with Bloomberg Television. “We see more premium traffic. As long as unemployment is not there, this demand will stay,” with a continued mismatch between supply and demand particularly on long-haul travel, he said.
Air France-KLM is not the only group still benefiting from robust demand for air travel that helped boost balance sheets after a prolonged period of restrictions during the pandemic. EasyJet Plc said a week ago that it continues to see strong booking momentum into the winter, and British Airways parent IAG SA on Friday reported better-than-expected profit in the second quarter on a surging demand.
Still, concerns are mounting about the longer-term sustainability of demand as consumers struggle amid spiraling inflation and mortgage costs. Ryanair Holdings Plc on Monday lowered its full-year traffic prediction and said it would consider cutting ticket prices to fill seats this winter as passengers become more cost-sensitive.
The airline group expects to be at 95% capacity this year versus 2019 levels, and return to pre-pandemic levels as of 2024. At the Dutch KLM subsidiary, operations have “stabilized” in spite of supply chain snags, a tight labor market and fleet issues, the company said.
Meanwhile, the group continues studying a possible bid Portuguese flag carrier TAP SA as the government in Lisbon seeks an industry backer for an airline it was forced to rescue during the pandemic.
“We are watching that very carefully,” Zaat said in the interview. “We are preparing for it, we are hiring advisers, we are waiting” for the process to start and “it will probably start after the summer.”
The company also said it entered exclusive talks with Apollo Global Management over a potential €1.5 billion financing for its loyalty program.
--With assistance from Lizzy Burden.
Air Connectivity Worsens On Northern Routes As Fares Skyrocket - DAILY TRUST
Flight connectivity in and around the northern part of the country has worsened in recent times as prices skyrocket by almost 100 per cent…
Flight connectivity in and around the northern part of the country has worsened in recent times as prices skyrocket by almost 100 per cent on the routes currently served, findings by Daily Trust have shown.
The situation became worse after the temporary suspension of Max Air, one of the airlines with a massive presence in the North.
However, there was relief yesterday as Max Air resumed operations starting with Kano-Abuja, Abuja-Lagos and Abuja-Lagos.
Daily Trust reports that the Nigeria Civil Aviation Authority (NCAA) had on Thursday, July 13 suspended the operation of Max Air’s Boeing 737 aircraft type with immediate effect, thereby halting the airline’s domestic operations as those were the only planes it used for used on the operation.
The NCAA immediately commenced an audit of the airline to redress the identified safety-related issues which include the discovery of a huge volume of water in the fuel tank of one of the aircraft.
Max Air covers more northern states than other domestic carriers. It operates to Kano, Bauchi, Birnin Kebbi, Jos, Katsina, Maiduguri, Sokoto and Yola.
With Azman Air, another airline based in the North presently out of the radar as its aircraft had gone for maintenance, connectivity was further impaired for most travelers on the northern routes.
The implication was in the skyrocketing of fares on the routes served by the existing airlines on the major routes.
Before yesterday’s resumption of operations by Max Air, only Air Peace, Rano and Aero Contractors were operating Lagos-Kano, the busiest route in the North, as well as Abuja-Kano with the airfare increased by almost 100 per cent.
As of yesterday, checks by Daily Trust indicated that Lagos-Kano on Air Peace costs between N94,300 (being the cheapest) and N143,000 for a trip on Monday (today). For Rano Air, the Lagos-Kano flight was N100,000 while it costs N101,805 on Aero Contractors.
In June, the same Lagos-Kano flight was N43,000 on Air Peace; N50,000 on Azman Air; and N55,000 on Max Air if a passenger was booking ahead.
But as of today, the tickets have skyrocketed even as the Abuja-Kano flight cost almost N100,000 on Rano Air as of yesterday.
“Last week, I was ready to pay N90,000 to Kano from Abuja but it was fully booked. I couldn’t get a seat on Rano Air,” a passenger said yesterday.
Currently, several states in the North, including Maiduguri, Yola, Gombe, Bauchi, Kaduna, Sokoto, Katsina and Jos, hitherto connected by flights, are seriously underserved.
There is also no domestic flight on the Kaduna route at the moment while states like Taraba, Yobe, Jigawa, Zamfara and Niger are not served by any airline despite having an airport.
Speaking with our correspondent, a Kano resident, Malam Abdullahi Musa, said the resumption of Max Air is a relief for travellers but connectivity remains an issue in northern states.
“We hope with the resumption of flights by Max Air, we will have some relief and the prices will reduce. We also learnt Azman may start operation soon. This I believe will provide more options,” he said.
Max Air resumes flights
About 17 days after suspension, Max Air yesterday resumed its domestic flights starting with the Abuja-Kano, Abuja-Katsina, and Lagos-Abuja routes.
The executive director of the airline, Barr. Shehu Wada, in a chat with our correspondent, also confirmed the resumption, saying the airline cooperated fully with the NCAA in the course of the audit after its domestic operation was suspended.
Why northern routes are underserved – Expert
Aviation analyst, Alhaji Bello Salihu, blamed the hike in airfares on the northern routes currently served by airlines on the principle of demand and supply. He said the airfares would be expensive because only a few airlines are on the routes.
Salihu, who is the managing director of Butake Resources Limited, a ground handling company, said it was wrong to conclude that northerners don’t fly and most airlines concentrate their flights on Lagos and Abuja.
“You find that all flights are concentrated to Lagos. All of them see Lagos as the only point of arrival or take-off. Anybody who tells you the routes in the North are not viable, maybe they are not viable for their idiosyncrasy that Northerners don’t fly but if you look at the history of flight operations, Abuja-Yola; Abuja-Maiduguri; Abuja-Gombe and Bauchi, they have a minimum 70 per cent load factor.
“And based on my knowledge of calculating the profitability of a flight, the direct and indirect cost of operating a 737 which is an average of one hour flight, the load factor of 55 to 60 per cent will give you a profitable flight.”
He however stated that some airlines avoid northern routes because of inadequacy of infrastructure and called on the federal and state governments with airports in the North to work out incentives to encourage airlines to operate the routes.
Australia’s House-Price Momentum Eases as Property Listings Jump - BLOOMBERG
BY Bloomberg News,
, Source: CoreLogic
(Bloomberg) -- Australia’s house price growth decelerated in July following an increase in property listings that suggest sellers are taking advantage of current market strength, including those struggling to meet their obligations after rapid interest-rate increases.
Prices across Australia’s capital cities advanced 0.8%, a fifth straight monthly gain, albeit slower than June’s 1.2% pace, data from property consultancy CoreLogic Inc. showed Tuesday. Market bellwether Sydney rose 0.9% while Melbourne grew at a more subdued 0.3%.
July’s cooling was driven by the upper quartile of the market, which tends to lead the cycle and could be “a sign of a broader easing in the pace of growth over the coming months,” said Tim Lawless, research director at CoreLogic.
The figures come as the the Reserve Bank has raised its key rate to 4.1% — the highest since April 2012 — hitting consumer sentiment. At the same time, Australia’s job market remains strong, with unemployment at an ultra-low 3.5%.
The cooling in property price momentum will be welcomed by the RBA ahead of its rate decision later Tuesday. Financial markets are betting the cash rate will remain unchanged while economists see a 25 basis-point hike to 4.35%.
The central bank has lifted borrowing costs by 4 percentage points since May 2022 and signaled a higher hurdle to raise further as it tries to bring down inflation and engineer a soft landing.
Tuesday’s data showed the flow of new home listings in capital city markets rose almost 4% over July, bucking a seasonal trend in which vendors traditionally put off sales during winter months.
“It may be the case that more home owners are picking current market conditions as a good time to sell,” said Lawless. “Another possibility is that we are seeing the first signs of motivated selling as the rapid rate hiking cycle catches up with household balance sheets.”
What Bloomberg Economics Says...
“Surprise rate hikes from the RBA in May and June, and a further 25-basis-point hike we expect in August, will further erode borrowing potential, which — along with the cumulative effect of tightening through 2022 and 2023 - will weigh on the market”
— James McIntyre, economist.
Even so, the data indicate the housing rebound that began earlier this year persists — over the three months to July, prices in Sydney surged 4.5% for a median home value of A$1.08 million ($720,000).
Strong population growth in Australia and a supply shortage has fueled price gains despite higher borrowing costs.
“Overall, the housing market remains resilient to a double dip downturn, with housing values continuing to trend higher across most regions of the country,” Lawless said. “The trend in advertised stock levels will be a key factor determining housing market outcomes.”