Viasat remains cautious as IFC revenues stumble

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Viasat has released its First Quarter Fiscal Year 2020 results.

According to CEO Mark Dankberg, “IFC revenue declined precipitously YoY with about 45% of our installed 1,390 aircraft base inactive at quarter end. Overall passenger activity declined even further. While aircraft in service and passenger counts improved towards the end of the quarter, the outlook remains uncertain. We believe aircraft retirements with our IFC service have been disproportionately low because we are on relatively newer aircraft, and we expect this will lead to market share gains. We still anticipate about 750 additional aircraft to activate IFC services under our existing customer agreements – as well as seeing more of the existing installed fleet being re-activated. New order negotiations are very robust, driven by our reputation for service quality, our new satellites under construction and a stressful environment for our competitors.”

According to Dankberg, the company’s IFC business was “probably a little worse than what we had expected in that first quarter,” however new contract awards are giving the company confidence for the rest of the year.

Speaking to analysts, Dankberg said that airlines were paying significant attention to IFC as being connected while flying has become even more important to passengers.

He also stated his belief that Viasat has been more immune to the effects of aircraft retirements than other IFC providers, as its systems fly on newer planes. The majority of the contracts it had pre-pandemic are still intact, he said adding “we still expect to deploy them once the market picks up again.”

Gogo HQ - external skysline

Gogo mulling sale of commercial aviation division as revenues bottom out

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Gogo HQ - external skysline

Gogo has announced its financial results for the quarter ended 30 June 2020 with contrasting fortunes for its commercial and business aviation segments.

Speaking to analysts, Oakleigh Thorne, Gogo’s President and CEO said that green shoots were starting to emerge. “We’re seeing a really solid bounce back in our business aviation division, and a slower recovery, but a recovery nonetheless in our commercial aviation business.”

Overall, the company reported a net loss of US$86.0 million, with consolidated revenues down 55% from the same time last year, as air travel demand collapsed around the world.
In pre-COVID times, Gogo was averaging 37 million passengers a month on Gogo equipped aircraft. That fell to 1.9 million (95% reduction) in April. It has since climbed to 7.1 million in June.

Its North American Commercial Aviation market is showing signs of a recovery. Pre-COVID, Gogo was averaging 125,000 sessions a day, which then collapsed 91% to 11,000 sessions a day in April. It started coming back with 15,000 a day in May and is now all the way up to 40,000 a day for 32% of pre-COVID levels in August. Pre-COVID, North American sales averaged just under $1 million per day. So far for August this is now returning more than $300,000 a day.

The quarter ended with 2,455 aircraft online, generating 1,800 active sales per day (73% of its North American fleet). Thorne believes that North American airlines will retire about 230 older Gogo installed fleet over the coming year.

Pre-COVID, its Rest of World (RoW)fleet was running at 11 million passengers per month before collapsing to 480,000 or 95% in the month of April. RoW aircraft online actually grew in the quarter, [up 9] to 842, and up 151 from prior year. Due to retirements and bankruptcies, Gogo expects roughly 100 of its current RoW fleet to be installed over the next year, with 105 of its backlog at risk due to bankruptcies.

Thorne reaffirmed that Gogo was still actively discussing the sale of its Commercial Aviation business, with several parties expressing interest during the quarter. “We are really proud of the commercial aviation team and the tremendous capabilities they’ve built, and think it will have a bright future as part of a larger, more fully integrated entity.”

SES ground satellites

Solid first half performance for SES

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SES ground satellites

SES has announced financial results for the six months ended 30 June 2020, with CEO Steve Collar calling the performance ‘solid’ in challenging trading times.

In its mobility segment, underlying revenue grew by 22.6% (year-on-year) to €115.1 million with double-digit growth in both Aeronautical and Maritime. Strong growth (year-on-year) in Aeronautical reflected the full year impact of the important new business signed during 2019 and notably utilising SES-15, SES-14 and SES’ Ka-based aero network, as well as connectivity services delivered to the business aviation segment.

As the vast majority of SES’ commercial contracts, including in Mobility, are fixed, the H1 2020 performance was largely unaffected by the impact of COVID-19 on customers and end markets served by SES in the Cruise and Commercial Aviation segments. Nevertheless, it is expected that the development of both existing revenue and pace of new business will be impacted during the second half of the 2020.

The company also announced an investment in four additional O3b mPOWER satellites, expanding the constellation to 11 satellites. The total cost of the additional investment is €480 million including €250 million over the period 2020-2024 and the remaining expenditure thereafter. The investment further de-risks the overall project and will enhance the constellation efficiency, increase total throughput by 90% and expand geographic coverage.

SES-17 is scheduled to launch in Q3 2021and will serve mobility markets in the Americas. The first three satellites of the global O3b mPOWER constellation are due to launch in Q3 2021, with a further three in Q1 2022, and satellites 7-9 in H2 2022. Satellites 10-11 launch in H2 2024.

Lufthansa suffers from collapse in air travel

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Lufthansa Group has reported an 80% drop in revenue for the second quarter of 2020.

The Group recorded revenues of €1.9 billion compared to €9.6 billion at the same time last year. Most of the revenue (€1.5 billion) was generated by Lufthansa Cargo and Lufthansa Technik.

For the first half of 2020, Lufthansa Group revenue fell by 52% to €9.6 8 billion euros (previous year: 17.4 billion euros). During this time, he Lufthansa Group airlines carried a total of 23.5 million passengers, two thirds fewer than in the same period last year (66% reduction). Capacity decreased by 61%.

In the second quarter of 2020, the Lufthansa Group airlines carried 1.7 million passengers, 96% fewer than in the previous year. Capacity fell by 95%.

The Group currently expects demand for air travel to return to pre-crisis levels in 2024 at the earliest. In response, it is to embark on a comprehensive restructuring programme entitled “ReNew”, which also includes the restructuring program already underway at the airlines and service companies.

The aim remains to maintain the global competitiveness and future viability of the Lufthansa Group. The Group’s fleet is to be permanently reduced by at least 100 aircraft. Nevertheless, the capacity offered in 2024 is to correspond to that of 2019.

Carsten Spohr, Chairman of the Executive Board and CEO of Deutsche Lufthansa AG said: “We are experiencing a caesura in global air traffic. We do not expect demand to return to pre-crisis levels before 2024. Especially for long-haul routes there will be no quick recovery.”

The Group plans to return to 95% of the short- and medium-haul and 70% of the long-haul destinations by the end of the year.

Eithad 777-900 midflight

Etihad sees strong start affected by COVID-19

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Eithad 777-900 midflight

Etihad Airways has released details of its half-year 2020 performance, which has seen a strong start largely wiped out by the effects of COVID-19.

The airline carried 3.5 million passengers in H1 (H1 2019: 8.2 million), a reduction of 58% from the same period the previous year. Average seat load factor was 71%. Core operating loss for this period increased by US$172 million to $758 million (H1 2019: $586 million), driven by a 38% drop in revenues, which stood at $ 1.7 billion (H1 2019: $2.7 billion).

However, the airline saw a significant decrease in Q2 operating revenues following COVID-19 flight suspensions, with 70% of its fleet grounded. This period registered a 99% drop in passenger numbers and a 95% drop in ASK compared to Q2 2019. Seat load factor for this period was 16%, mainly driven by the operation of special (repatriation) flights, and the resumption of a limited network of transfer services via Abu Dhabi in early June.

Tony Douglas, Group Chief Executive Officer, Etihad Aviation Group, said: “While we have revised our outlook for the rest of 2020 based on current realities, we remain optimistic that as international borders re-open, we will increase our flying and carry more guests securely and with greater peace of mind, supported by the Etihad Wellness programme and our new Wellness Ambassadors. By September, we aim to increase our worldwide flights to half our pre-COVID-19 capacity.”

Etihad operated up to 40 of its fleet of 97 passenger aircraft in Q2, including Boeing 787 Dreamliners, 777-300ERs, and Airbus A320 family aircraft as belly-hold cargo freighters to complement Etihad Cargo’s operational fleet of six 777-200F freighters. Between 25 March and 15 June, over 640 special passenger flights were operated to 45 online and offline destinations, using the passenger cabins of these aircraft to fly foreign nationals out of the UAE, and to bring UAE nationals back home.

“The clear focus moving forward is on adapting our transformation plan to reflect new market conditions, but without changing our overall objectives or sustainability goals and commitments. We anticipate some continued volatility for a while to come, as the world strives to put an end to COVID-19, and as testing methodologies and protocols evolve to become the new norm.

“We know that markets are certain to rebound and the world will rediscover the wonder of flying once more. When it does, our guests will value the Etihad Wellness proposition more than ever, and we are best positioned to deliver the security, assurance, and best-in-class experience they have come to expect from Etihad as a true full-service airline,” concludes Douglas.

Astronics product portfolio for seat back IFE

Astronics sees light despite dark financials

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Astronics product portfolio for seat back IFE

Astronics has reported its lowest quarter revenue since 2013, as the COVID-19 pandemic continues to impact the aviation supply chain.

Revenue for the second quarter was US$123.7 million, down 35% year-over-year and down 22% sequentially from the first quarter.

Peter J. Gundermann, Astronics’ President and CEO, said, “The second quarter saw the full force of the COVID-19 pandemic’s effect on the commercial aircraft industry, which is the market in which we typically generate two-thirds of our revenue.  We adjusted by implementing comprehensive cost controls across the business and rightsizing our operation for the path forward.  We are positioning the Company to endure the pandemic and emerge on the other side as a better, stronger company.”

According to Gundermann, the airline aftermarket has weakened, but not as much as first expected.

An estimated 55% of sales in 2019, or about $425 million, was driven by the production of new airplanes in the commercial transport and business jet markets.

As Gundermann notes, major manufacturers in both markets have revised their production plans downward given the pandemic, typically on the order of 35% to 45%, and compounded by the continued grounding of the 737 MAX, which was one of the Company’s largest production programs in 2019.

Another 25% of sales in 2019, or $195 million, was to the aftermarket for commercial transport aircraft, and primarily for in-flight entertainment/connectivity and passenger power systems that were sold to airlines and aircraft leasing companies. “This market is holding up better than initially anticipated,” said Gundermann. The current run rate has been about 50% of last year’s demand level.

In an earnings call with analysts, Gundermann revealed the company was active in Near Field Communication, high-speed data transfer and sanitation – sanitisation and cleanliness initiatives with outside companies, which he expects will add a significant revenue stream going forward.

Boeing HQ logo at night

Boeing releases Q2 results: revises production rates

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Boeing HQ logo at night

Boeing has reported second quarter 2020 revenues of US$1.6 billion for its commercial aircraft segment, as COVID-19 and the 737 MAX grounding continue to significantly impact the health of the manufacturer.

Commercial Airplanes second-quarter revenue fell by 65% and operating margin decreased reflecting lower delivery volume – 20 airplanes were delivered compared to 90 the same time last year. The backlog included over 4,500 airplanes valued at $326 billion.

The 737 program resumed early stages of production in May and expects to continue to produce at low rates for the remainder of 2020. Production is expected to gradually increase to a rate of 31 per month by the beginning of 2022, with further gradual increases to correspond with market demand.  There are currently approximately 450 737 MAX aircraft built and stored in inventory.

According to Greg Smith – EVP, Enterprise Operations and Communications, interim, CFO, “We’ve assumed that the timing of regulatory approvals will enable the 737 MAX deliveries to resume during the fourth quarter of 2020. We have also assumed that the majority of the 737 MAX aircraft in storage will be delivered during the first year after resumption of deliveries.”

In the wide-body segment, Boeing previously planned to reduce the 787 production rate to 10 per month in 2020 and gradually reduce to seven per month by 2022. However, the rate will now be reduced to six per month in 2021. The 777/777X combined production rate will be gradually reduced to two per month in 2021, with 777X first delivery targeted for 2022. At this time, production rate assumptions have not changed on the 767 and 747 programs.

Boeing is adjusting the timing of the first 777-9 deliveries in 2022 versus its prior forecast of 2021, and expects to deliver 777s at an average rate of approximately 2.5 per month in 2020

Due to market uncertainties driven primarily by the impacts of COVID-19 and moving the 777X delivery to 2022, Boeing plans to reduce the combined 777-777X production rate to two per month in 2021 versus the previous plan of three per month in 2021.

Boeing President and Chief Executive Officer Dave Calhoun commented: “We’re working closely with our customers, suppliers and global partners to manage the challenges to our industry, bridge to recovery and rebuild to be stronger on the other side.”

“The diversity of our balanced portfolio and our government services, defense and space programs provide some critical stability for us in the near-term as we take tough but necessary steps to adapt for new market realities,” Calhoun added. “We are taking the right action to ensure we’re well positioned for the future by strengthening our culture, improving transparency, rebuilding trust and transforming our business to become a better, more sustainable Boeing. Air travel has always proven to be resilient – and so has Boeing.”

Global Eagle logo

Global Eagle secures liquidity lifeline dependent upon Chapter 11 proceedings

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Global Eagle logo

Global Eagle Entertainment has agreed to a US$675 million acquisition which will reduce its total debt by approximately $475 million and obtain significant additional liquidity.

The stalking horse transaction, led by a group of the company’s leading investors, will furnish an $80 million in debtor-in-possession (DIP) financing, as well as an additional investment in the business in the form of a $125 million exit facility, which would include assumption or refinancing of the DIP financing.

The proposed transaction will be implemented under the terms of a Restructuring Support Agreement reached by Global Eagle and the Investor Group.

Jeffrey Rosen, Managing Director with the Credit business segment of Apollo Global Management said: “Global Eagle is a market leader in delivering in-flight and at-sea passenger experiences with entertainment, content and connectivity. While the Company reports that it has been impacted in recent months by COVID-19, we believe it benefits from a blue-chip customer base, industry-leading partnerships and an innovative platform built through years of strategic investments in technology. We believe Global Eagle’s services will continue to be core to the passenger experience over the long term and see significant opportunities ahead for the Company to continue driving growth and innovation.”

Global Eagle logo

Global Eagle issues bankruptcy warning

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Global Eagle logo

Global Eagle has warned that there is the “the substantial risk that it may be necessary for us to seek protection under Chapter 11 of the United States Bankruptcy Code,” amidst concerns surrounding liquidity and ability to access new funding.

One major concern is its cash reserves. According to its latest quarterly results, as of 31 March, the company had US$54.2 million in cash and cash equivalents. As of 30 June, this had been depleted to $30.7 million.

Coupled with rising debts, Global Eagle has applied for a US Treasury Loan under the CARES Act and has announced additional job losses and further consolidation of offices.

According to a statement, “The COVID-19 pandemic is having, and will likely continue to have, a significant negative impact on several important aspects of our business.”

The company commented that: “The pandemic is ongoing and dynamic in nature and, to date, our customers have experienced temporary closures in key regions globally. Growth in our overall business is principally dependent upon the number of customers that purchase our services, our ability to negotiate favourable economic terms with our customers and partners and the number of travellers who use our services. In addition, certain of our customers have ceased or delayed payment or filed for insolvency protection, and we are unable to predict the speed of recovery of the travel sector necessary to mitigate these ongoing risks.

“To date, customer purchasing activity has been significantly impacted and we expect this to continue to negatively affect us. We have a large concentration of customers that operate in the Asian, European, Pacific, and Middle Eastern market regions which experienced shutdowns from the COVID-19 pandemic well before domestic airline customers. As such we saw a decline by percentage in the number of contracts with our customers in the first quarter of 2020 which was greater than that seen by the general airline industry in the US. The extent and duration of the pandemic remains uncertain and is expected to continue to impact consumer purchasing activity if disruptions continue throughout the year, which could continue to negatively impact us. Additionally, payments to certain vendors have not been made in accordance with payment terms.”

Aeromexico files for Chapter 11 bankruptcy

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Aeromexico has filed for voluntary Chapter 11 bankruptcy in the US as it seeks a financial restructure.

The Company intends to use the process to strengthen its financial position and implement necessary operational changes to address the impact of the ongoing COVID-19 pandemic and create a sustainable platform for the future.

“Our industry faces unprecedented challenges due to significant declines in demand for air transportation,” said Andrés Conesa, Chief Executive Officer of Aeromexico. “We are committed to taking the necessary measures so that we can operate effectively in this new landscape and be well prepared for a successful future when the COVID-19 pandemic is behind us.”

During this process, Aeromexico’s operations will continue, with the airline expecting to double the number of its domestic flights and quadruple the number of international flights as compared to June. It states it is also committed to continuing to safely expand flight service in the coming months, in line with local regulations and customer demand, and therefore to continue ordering goods and services from its suppliers.