Airline finances improved in Q4

Early reports from some airlines suggest that the industry's financial performance continued to improve in the fourth quarter of last year, the industry association IATA said on Wednesday. A strong upturn in air travel and freight demand at the end of the year, as capacity cuts remain in place, is offsetting the rise in fuel prices which markets now expect to moderate, the International Air Transport Association said. But revenues in both business and economy classes are still sharply lower than in early 2008, it said. "There is still some way to go -- perhaps several years -- before the revenue environment can be described as having 'recovered'," IATA said. IATA, which groups 230 airlines including Lufthansa, American Airlines and Cathay Pacific has forecast that airlines will lose $5.6 billion this year after $11 billion in 2009.
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Iberia Sets British Airways Merger Date

Spanish airline Iberia has slated February 12 and February 25 as possible dates to sign the memorandum of understanding for its merger with British Airways, financial daily Cinco Dias reported on Wednesday. Iberia hosted a summit with 90 top executives last week in Madrid, during which it set the date for the planned tie-up and a target to grow its long-haul operation by 10 percent in two years, Cinco Dias cited sources familiar with the summit saying. Iberia and BA announced a memorandum of understanding in November for a merger to create the world's third largest airline by revenue. The main stumbling block to the merger will be an agreement on how to address the British carrier's multi-billion pound pension fund deficit. BA posts third-quarter to end-December results on Friday, with analysts expecting an operating loss of between GBP90 million and GBP100 million. Iberia reports its full-year to December results on February 24.
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Moody's affirms Textron's ratings, ups outlook

Moody's Investors Service on Tuesday affirmed the ratings of Textron Inc. and its finance subsidiary Textron Financial Corp., and upgraded the rating outlook. The conglomerate, parent of Cessna Aircraft Co., Bell Helicopter and other companies that produce items ranging from golf carts to tools to unmanned aircraft systems for the Army, kept its Baa3 rating for its senior unsecured debt. Its short-term rating was kept at Prime-3. Moody's upgraded the rating outlook to stable from negative, citing improved liquidity at the parent organization and better-than-expected progress in the liquidation of certain assets held by the financial unit. "We estimate cash on hand will be sufficient to cover the substantial portion of the scheduled debt maturities of Textron and TFC through 2011," Moody's said. The company faces $3 billion of bank credit facilities maturing in April 2012, so continued progress in liquidation and stability in its manufacturing units is important, said Bob Jankowitz of Moody's. Bell and Textron Systems are expected to be steady performers in the next few years, supported by continued defense spending, Moody's said. Bell can also count on revenue from helicopter servicing and commercial sales. Nevertheless, the company has a lot of debt and Cessna, which is historically its largest profit producer, faces challenges even as the economy recovers, Moody's said. Its profit has been hit harder than expected, even during a downturn. It is critical for the unit to improve profit and operating margin to maintain the rating. The rating could be lowered if Textron's free cash flow falls below $300 million for any 12-month forward period, if Cessna doesn't improve its operating margin, cash on hand falls below $1 billion or enough to at least cover the next two quarters of debt payments. The rating could also be threatened if the financial unit has to book heavy write-downs or if it has difficulty collecting payments. "A positive rating action is unlikely for some time," Moody's said. In afternoon trading, Textron shares added 12 cents to $20.76.
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B/E Aerospace Swings To Q4 Profit

"As airline traffic improves and the need to refurbish seats continues... volumes get better," -- Howard Rubel, Jefferies & Co. B/E Aerospace, the world's biggest supplier of aircraft interior products, posted better-than-expected quarterly results on higher bookings at its commercial aircraft segment. For the fourth quarter ended December 31, the company reported net income of USD33.3 million, compared with a loss of USD253.6 million a year ago. Revenue fell 9 percent to USD479.4 million. Sales at the commercial aircraft segment increased to USD239 million from USD233.2 million. The company said bookings improved during the fourth quarter to about USD480 million, which represented a book-to-bill ratio of 1 to 1. Book-to-bill ratio compares orders on the books with those filled. B/E Aerospace's free cash flow of USD53.2 million for the quarter represented a free cash flow conversion rate of 160 percent of net earnings, the company said. The company forecast first-quarter earnings below estimates on continued weak demand, but said it expects revenue in the remaining three quarters of the fiscal to be "very much better" as heavy aircraft maintenance will be required due to a projected increase in 2010 air traffic. Global airlines continue to suffer from weak demand for passenger travel, especially in the premium segment, despite nascent signs of a recovery, chief executive Amin Khoury said. "As airline traffic improves and the need to refurbish seats continues... volumes get better. They also have added to their backlog, so they have more visibility," Jefferies & Co analyst Howard Rubel said. Weakness in air travel had led the global airline industry to cut flights and ground aircraft, hurting maintenance revenue for parts suppliers including Goodrich and Rockwell Collins. B/E Aerospace, whose customers include leading plane makers Airbus and Boeing, also said it expects a "significant" increase in revenue, earnings and cash flows beginning 2011.
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Defense Industry Feels Pressure As Scrutiny of Spending Grows

After a record run during the Bush administration, defense contractors are starting to play defense. The latest quarter's earnings foreshadow the pressures that lie ahead for some of them. While Raytheon Co. did well, with profit up 20%, Rockwell Collins Inc.'s profit slid 20%. Lockheed Martin Corp.'s earnings just inched ahead. Rockwell Collins noted its government markets are "more challenged" by the budgetary pressures, and it has built that into its projections. The company believes that represents the low point, and expects defense sales will rise 12% for the year. "Maybe more than anything else we recognized that we and our customers are facing a new reality," Lockheed Martin CEO Robert Stevens said Thursday, "as they confront expanding mission requirements and greater fiscal pressure that's simply not going to go away in the near term." Lockheed Martin ended a year that brought the high-profile cancellations of the F-22 fighter jet and presidential helicopter programs. Mr. Stevens noted that Lockheed faced "some sizable near-term operational and financial challenges" in mid-2009 as the new administration shifted priorities and several of the company's programs "were terminated or canceled or capped, some with immediate effect." To be sure, how well the contractors are faring depends on which programs they are involved in. General Dynamics Corp., for instance, said the federal defense budget for 2010 "fully supported our core programs." Raytheon executives, however, don't sound particularly concerned about any dark clouds on the horizon. Chief Executive William Swanson said performance is key to maintaining U.S. government business, and "if your program isn't running right, then you ought to expect some bad things to happen to it." There is increased scrutiny from Washington "starting to take place," he said. "The government has an obligation and will put added pressure" on contractors to perform well. Mr. Swanson said, "We are seeing strong demand in important areas to Raytheon," including missile defense. "The administration has identified our Standard Missile-3 and X-Band Radars as critical elements in the missile defense systems for the U.S. and our allies around the world." Raytheon has navigated the shoals well so far, which helps explain some of its swagger. The Waltham, Mass., company ended 2009 with a $37 billion backlog, "including the highest year-end funded backlog in the company's history," Mr. Swanson said. Raytheon added 2,000 employees last year, taking its work force to 75,000. It also helps that the company operates in 80 countries, and Mr. Swanson said 30% of total bookings and 21% of total sales in 2009 came from international customers. And "we believe that our international business will continue to be a key driver in Raytheon's growth," he added.More details on defense-budget pressures are coming Monday, when the White House releases its fiscal 2011 proposal. The Pentagon is expected to continue to try to cut Boeing Co.'s C-17 transport plane and an alternate-engine design used in F-35 Lightning II, known as the Joint Strike Fighter. Unlike last year, analysts and executives don't expect a head-on assault on the Pentagon's costliest weapons programs. The year was bumpy, but Lockheed isn't about to go begging. Backlog at year end was about $78 billion, up $1.6 billion versus the third quarter, Lockheed Chief Financial Officer Bruce Tanner said. Its CEO, Mr. Stevens, said longer-term business prospects "have been strongly reinforced" with commitments to tactical aircraft, missile defense, space systems, intelligence and reconnaissance systems.
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PASSUR Aerospace Reports Revenue Increase of 18% for Fiscal Year 2009

PASSUR Aerospace, Inc., a business intelligence and predictive analytics company, announced a revenue increase of 18% to $8,960,000 for the year ended October 31, 2009, compared to $7,572,000 in FY2008. Operating profit for FY2009 was up approximately 16% to $1,271,000 compared to $1,094,000 in FY2008. Net profit was $154,000 or $.03 per diluted share compared to $495,000 or $.09 per diluted share in FY2008. "Even with the challenging economic environment for our customers, PASSUR's sales growth reflects strong customer demand because of the Company's focus on providing measurable and actionable solutions which save our customers money, and improve the safety and security of the airspace," said Jim Barry, PASSUR Aerospace's President & CEO. "This is our fourth consecutive year of profitable growth, we continue to grow our sales, and we're optimistic about achieving our objectives," said G.S. Beckwith Gilbert, PASSUR Aerospace's Chairman of the Board.
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Business air travel seems to be taking off again

After hitting a stiff economic head wind in 2009, business air travel appears to be reviving. The heads of major airlines, including United, American and Delta, said they're seeing the early indications of a resurgence as corporations get reacquainted with the idea of spending money on travel. "We are seeing signs that business travelers, who cut way back in 2009, may be ready to take to the skies again," American Airlines chief executive Gerard Arpey said this week as the company reported its quarterly earnings. For most airlines, overall passenger demand has been down, but airlines have been particularly grieving the loss of business travel, which is the industry's most lucrative sector. So the return of "road warriors" — even if it is a tentative increase since the economy tanked in the fall of 2008 — is most welcome. Delta and United officials report business bookings are up about 10 percent this month over January 2009. "Business travelers are returning," Delta CEO Ed Bastian declared Tuesday during a call to discuss the carrier's fourth-quarter earnings. For United, Denver's largest airline, it means closing the gap on profitability, said United chief financial officer Kathryn Mikells. The National Business Travel Association also sees "green shoots" beginning to spring up. "With air-travel and car-rental costs expected to remain nearly flat and hotel rates expected to decline, businesses expect to travel more," the NBTA said. Travel volumes should grow this year, according to about 70 percent of travel managers surveyed late last year, said NBTA spokesman Caleb Tiller. Survey respondents were managers at mid-size and large companies who oversee about $300 billion in business travel. Two-thirds of them predicted total spending will rise, Tiller said, while the other third said they envision more trips for the same amount of dollars. In downturns, low-cost airlines such as Southwest gain. "Bookings have risen, but they are not where we would like them to be," said Southwest spokesman Chris Mainz. Some companies such as Ball Corp. of Broomfield continue to keep a tight rein on travel. Spokesman Scott McCarty said travel isn't restricted but an explanation is required when the lowest-possible fare isn't booked. "Companies are thoughtful about spending travel dollars," said Andrea Shpall, president of Polk Majestic Travel Group in Denver. Some have asked for help in managing travel budgets. To keep the momentum going, airlines will be pitching to corporate America, one expert predicted. "As we go into February, March and April, you're going to see a lot of juice out there to swing business travelers to a particular airline," said Tom Parsons, CEO of BestFares.com.
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Korean Air Q4 op profit jumps on cargo recovery

Korean Air Co, South Korea's top airliner, reported on Friday a nearly seven-fold jump in quarterly operating profit, as a cargo sector recovery picked up pace and the stronger won KRW= lowered costs. Korean Air posted a 154 billion won ($134.7 million) operating profit in the October-December quarter, above a consensus forecast of a 120 billion won profit from Thomson Reuters I/B/E/S. The result improved from a 22.6 billion won operating profit a year earlier and 100.1 billion won earned in July-September. Korean Air, also the largest cargo carrier among commercial airlines, is expected to enjoy a full recovery this year as the strengthening won boosts outbound travel demand and export growth in the South Korean technology sector supports high-yield cargo shipments. Shares in Korean Air climbed 14.4 percent in the fourth quarter, outperforming the broader market's 0.6 percent gain.
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