What I trying to achieve is how this chart might look like for FY17 amd what AIRs unique capabilities will have achieved
Printable View
What I trying to achieve is how this chart might look like for FY17 amd what AIRs unique capabilities will have achieved
Transit through Kuala Lumpur airport recently and noticed several MAS A380s parked on the tarmac, side by side.
A quick google search reveals MAS had been trying to sell them and with zero success since 2015, decided to defer selling or leasing them until '2018' when airliners more suited to their needs become available.
SIA also decided not to renew the lease on its first A380 this year which speaks volume.
Seems there's a glut of them on the market?
If no one wants to buy them then what should they do? Aircraft deteriorate with not being used, especially in a humid climate. To operate the Haj would normally mean taking aircraft out of service so why not use the 380's which are surplus. What they should do is park them in the Nevada desert to at least preserve them in hope of finding a customer. Google "Victorville" and select "map" and count the aircraft there.
First half of last year fuel was fairly expensive, (by today's standards), average price was $60 IIRC and average exchange rate was 65 cents U.S.
Benefits of cheaper fuel didn't really start flowing until 2H FY16 and even then some of the hedges they'd previously made meant they didn't fully realise the very low spot prices, circa $30 prevailing in the early part of this year.
This year the currency is stronger and they executed some very good hedging earlier this year which would have had a very strong effect in Q1 FY17, basically they went to maximum allowable hedge within their hedge framework earlier this year.
No they don't appear to disclose like QAN do. Consumption will be up a little bit due to the annualisation of route expansion started part way through FY16 but not nearly as much consumption growth as FY16, RPK growth is much lower and arrival of extra fuel efficient dreamliners and pending retirement of 767's will help with efficiency.
I haven't really modelled it up because fuel costs are inextricably related to yield, (witness some of the extremely cheap airfares a few months back when oil was really cheap) but my instinct is fuel is probably going to be about $100-125m cheaper than last year.
More importantly as mentioned yesterday, yields seem to be tracking where management expected them to be but their profit forecast was predicated upon an average price of $55 barrel. Its been well under that YTD, (especially when AIR was using super cheap forward cover they bought earlier this year in the low $30 range in Q1 FY17 and forward cover for the rest of the year is also well under $55. I think the actual fuel cost has the potential to be some $50 -75m less than what management expected when they made their profit forecast of $400 - $600m just over three months ago.
Is the much quoted $55/bbl price based on Brent (or similar) or Platts jet fuel? Av Gas trades about $10 higher than crudes. It's a significant difference, and should be clarified in any commentary.
Anywhoo, they DID do well to hedge aggressively near the lows - good on you Paul K
When the May fuel hedging announcement came out I had a go at modelling the whole fuel cost thing.
My estimate for FY2016 came out about NZ$30M higher than in the subsequent FY accounts.
At that time, using AIR volume estimates, assuming $44 a barrel (of Brent) and an US$ to NZ$ exchange rate of 0.7 my FY2017 estimate was approx NZ$30M less than my FY2016 attempt.
So on the assumption that the model reads a little high that would be a corrected value of $816M. I currently have no idea to what extent AIR currency hedging should be included in the model so it still needs a little latitude.
Much can happen between now and FY years end but in six months time I may try the exercise again and see how close I get to reality.
Best Wishes
Paper Tiger