Insights

November Market Recap

The month of November saw big orders for new planes for Airbus and several European countries adding to their gold reserves. Click below to read our recap of the airline sector and gold market from November 2019.

Strengths
  • In the quarter ended September 30, Singapore Airlines Ltd. saw a 68 percent rise in profit year-over-year. The carrier reported that net income was around $70 million and that sales climbed 3.9 percent. Singapore Air has added more fuel-efficient A350s and 787-10s to its fleet to help mitigate uncertainty related to fuel costs.
  • IAG SA, parent company to British Airways, is set to buy Spanish carrier Air Europa for $1.1 billion in a push to strengthen Madrid as a rival to European hubs. Daniel Roeska, analyst at Berstein, wrote in a note to clients that the deal is “strategically sensible” and will give IAG 26 percent market share of the Europe-Latin America routes, up from 19 percent.
  • Air Arabia ordered a whopping 120 single-aisle A320 aircraft worth approximately $14 billion at the Dubai Air Show, reports Bloomberg News. Air Arabia says the deal is a “game-changer for Air Arabia’s business” as the new planes will allow the discount carrier to expand into Southeast Asia and Africa. This is a big victory for Airbus as rival Boeing continues to see orders cancelled due to its two high profile crashes in the last 18 months.
Weaknesses
  • Although Airbus scored big deals, the biennial Dubai Air Show, known as one of the largest air shows in the world, had a lackluster year overall. The three-day show in mid-November said on site orders totaled $54.5 billion this year, down significantly from $113.8 billion in 2017. Airbus landed orders and non-firm commitments for 232 commercial planes versus Boeing’s 95. Although Boeing saw a big drop in sales due to its ongoing issues with the737 MAX jets, the fact that it secured orders for more of the jet is a positive sign.

Orders and Commitments Booked at Dubai Air Show 2019

  • The Boeing 737 MAX 8 jet that was involved in two deadly crashes remains grounded with an unknown return to service date. Many expect the jet to be in the air again in 2020, but airlines that fly the plane have it removed from flight schedules until at least March. On November 25, Boeing quietly unveiled a new version of the jet, the Max 10, which can hold 30 more passengers than the Max 8. The Max 10 is Boeing’s competition to the Airbus A321 XLR, which was a star of the Dubai Air Show.
  • One of the world’s fastest growing carriers, IndiGo, has been forced to ground some of its Airbus SE A320neo planes for engine upgrades, which could impede its expansion, reports Bloomberg News. India’s Directorate General of Civil Aviation said that a series of problems involving the carrier’s jets, including in-flight shutdowns, must be addressed by upgrading engines. For every jet that IndiGo adds to its fleet, it must ground another jet, essentially preventing it from adding new routes or increasing frequencies until all engine problems are resolved.
Opportunities
  • According to Boeing, the Latin America aviation market will more than double in 20 years and drive a need for 2,960 new planes due to Brazil’s recovering economy and discount carriers boosting demand. Brazil makes up 40 percent of the region’s market and will grow 4 percent to 5 percent in the next year as economic growth slowly resumes and capacity returns, reports Bloomberg News. International Air Transport Association (IATA) data shows that the number of passengers carried by Latin America airlines have more than doubled in the last decade.
  • The first blockchain-based airline tickets were issued this week. German airline Hahn Air flew passengers with blockchain-powered tickets on a routine flight between Dusseldorf and Luxemburg, reports Reuters. The airline partnered with Winding Tree, an open-source travel distribution platform, to issue the tickets. Hahn Air head of corporate strategy and government and industry affairs Jorg Troester said “it is important to look into the future to understand how can we make distribution faster.”
  • As airlines are under growing pressure to reduce carbon emissions, especially in Europe, some carriers are taking initial steps. EasyJet announced that it will spend 25 million pounds ($32.3 million) on planting trees and protecting deforestation with the objective of removing as much carbon dioxide from the atmosphere as its fleet emits, reports Bloomberg News. EasyJet CEO Johan Lundgren said “it’s not to say that this is the perfect solution, we know it’s an interim step before new technologies come into play.” Aircraft are becoming increasingly fuel efficient, but hybrid and fully electric jetliners are not expected until the 2030s.
Threats
  • The U.S. Federal Aviation Administration (FAA) downgraded Malaysia to a category 2 nation, banning the nation’s carriers from setting up new flights to America. The FAA said that Malaysia does not currently meet International Civil Aviation Organization safety standards. It was awarded a category 1 status in 2003. Bloomberg reports that the only other category 2 countries are Bangladesh, Thailand, Costa Rica, Curacao and Ghana.
  • The airline operating the first Boeing MAX 737 crash has largely escaped criticism over its role in causing the disaster. Lion Air, a low-cost Indonesian carrier, has a long track record of overworking pilots, faking training certifications and forcing pilots to fly planes they worried were unsafe, according to an investigation by the New York Times. Lion Air Flight 610 crashed shortly after takeoff in part due to a flawed anti-stall system, but new details about the crash show that other factors contributed including improper maintenance, overworked pilots and improper recordkeeping of the planes issues. The airline, which is the world’s fastest growing and benefits from strong political connections, has not fully acknowledged the concerns regarding its safety practices.
  • Allen Onyema, a Nigerian businessman who is owner and CEO of Air Peace, was indicted by U.S. authorities on charges of fraud and money laundering, reports Bloomberg News. A statement by the U.S. Department of Justice says that Onyema moved more than $20 million from Nigeria to the U.S. involving fake documents based on the purchase of airlines.

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