The news from local Japanese news outlets over the past 24 hours that AirAsia was interested in Skymark rang alarm bells. How would this fit into the AirAsia Japan strategy? AirAsia Japan is already going to benefit from Skymark cutting back on routes as we reported the other week. But look at the facts – “Un-named sources” are quoted as saying that AirAsia owners are interested in Skymark, right away the Skymark share price leaps benefitting some no doubt. Tony Fernandes has rubbished the story, but if there is any truth to it then it may be that AirAsia Japan is after some of the Skymark assets, slots etc for a start, as reported here some weeks ago.
This story comes on the back of reports from Chinese sources that AVIC and CIC were going to pay some €12bn for Avolon. That was a bit of fun of course as if that were the case then RBS Aviation should have gone for about €30bn a few years ago. But all the same this story helps the Avolon cause and keeps it in the mainstream press in many countries and helps the eventual sale close off.
Meanwhile, following on from yesterday’s editorial lead, we can confirm that Kenya Airways has this morning just agreed to suspend all its commercial flights to Liberia and Sierra Leone starting at midnight tonight following an application for an injunction by COFEK, Kenya’s largest Consumer Federation yesterday, which it must be noted included Nigeria in its list of countries that should see flights suspended. The lead was taken by Kenya's Ministry of Health in the end which sought to deflect flak away from the airline over the matter. Of course Kenya Airways keeps its lucrative Nigerian routes open in all this and notwithstanding the injunction attempts Kenyan might have found a middle ground in all this for now. It is a good commercial move.
But in all of this there is cheer to be had across the global airline market and we all have Libya to thank as oil prices continue to slide and as they do airline stocks start to rise. West Texas Intermediate crude oil slipped a full $1 to $96.50 a barrel yesterday, while Brent crude fell $1.85 to near 14-month low of $101.68 a barrel on news that Libya had boosted production by about 30%.
On the back of the news United Continental Holdings was up 4% to $47.84, while American was up 3.7% to $40.66, Delta was up 2.5% to $39.51 and Southwest and JetBlue climbed a similar 3% a piece to $30.82 and $12.28 respectively. As mentioned last month, US airline stocks seem undervalued, especially given the record Latin American travel figures just about to be released. Oil falling makes US airline shares a sure thing in the short term but will it assist Virgin America’s ambitions of an IPO? The current stats from all sectors (US output, domestic travel figures, intra Americas travel stats and oil price outlook) support the thesis that the stock will fly if an IPO goes through before year end – “Preferably before Thanksgiving” according to one large investment house.
Some lucky breaks for many this past week!
