Skymark Airlines has already lost $260m in deposit payments to Airbus for the now cancelled A380 orders, Airbus could, if it wished, go after Skymark for a further $680m in reparation payments for the two A380s built and sitting on the apron in France. So the question turns to whether or not Airbus will take this option that could seriously damage Skymark. Shares in the airline have gone through the floor over recent days as it has become clear that Airbus has the mandate to destroy cashflow if it so chooses, and on top of that the airline reported a quarterly loss and stated that it may need to borrow money and cut routes just to survive.
To be fair to Airbus, it has tried to help Skymark by coming up with a series of required measures, which we have seen here over the past few weeks, but Skymark did not wish to give-up its sovereignty over its own affairs. The future of this airline really does rest with Airbus and what it chooses to do next. Can Airbus really be seen to be letting one airline off the hook now only to turn on another maybe in the future? When dealing with setting precedents one always has to be careful, especially with so many other aircraft orders out there that could go the same way as this Skymark one. This is a very difficult matter for the guys at Airbus as the Skymark business plan and cashflow leaves them with very little room for manoeuvre.
Meanwhile Willie Walsh keeps his 100% record of superior management in the airline business today as IAG’s results for the quarter suggest the group is doing very well indeed through very strong capacity management across the board, helped by strong North Atlantic revenue growth.
IAG reported a Q2 EBIT of €380 on revenue of €5,086 million and net income of €280 million, which beat most estimates. Guidance for FY14 is unchanged, implying EBIT of at least €1,270 million.
IAG is trimming 1% from planned Q3 capacity, and up to 3% from planned Q4 levels. British Airways showed year on year EBIT improvement for Q2, with EBIT of €332m, up from €247m in Q213. BA’s cash on balance sheet was €3.1bn at the end of June down from €4bn at Q1. Adjusted net leverage for the group overall is 2.0x at 30-Jun, vs. 2.3x at Q1.
Yesterday, Iberia announced the settlement of a derivative transaction over its stake in Amadeus IT Holding, for €578 million in cash over 100 trading days, starting August 7th. Proceeds will be used to strengthen Iberia’s liquidity position and help fund its transformation plan. The transaction is expected to generate a one-off gain on sale of €84 million for IAG.