Qatar Airways boss accuses Delta of flying 'crap' planes

The chief of Qatar Airways on Monday denied his company receives subsidies and accused rivals Delta Air Lines of flying "crap" older planes, escalating hostilities between Gulf and American carriers.

Speaking at an arts conference in Doha, Akbar al-Baker said any money his airline receives from the state is in the form of "legitimate" equity and added his company's fleet of aircraft were much cleaner for the environment in comparison to Delta.

"I think Mr Anderson (CEO of Delta, Richard Anderson) doesn't know the difference between equity and subsidy. We never receive any subsidy," Baker said.

He was responding to claims made earlier this month by three US airlines - Delta, American and United - that Qatar, along with carriers in the United Arab Emirates have received US$42 billion in unfair subsidies to wrest business away from competitors.

Baker also accused Delta of flying "crap airplanes that are 35 years old", when talking about pollution by the aviation industry.

In contrast, Baker said Qatar Airways had an "ultra-modern fleet" and was the lowest CO2 contributor in the aviation industry.

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Delta to honour cheap flights sold in systems glitch

Delta Airlines said on Friday it would honour tickets sold at a fraction of their normal price because of computer glitch that afflicted the airline's website the prior day.

"For a portion of the morning yesterday, some prices on delta.com and other booking channels were incorrectly displayed, resulting in lower than usual fares for customers," said Delta spokesman Trebor Banstetter.

"The situation has been resolved and the correct prices are being displayed."

Banstetter said Delta "will honour any fares purchased at the incorrect price."

Press reports chronicled almost comically low fares, such as a round-trip ticket between New York and Los Angeles for US$25 and a round-trip voyage between Baltimore and Honolulu for less than US$100.

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Delta CEO objects to air security rule change

 The top executive of a major US airline has voiced opposition to a change in security regulations that will allow small pocket knives, baseball bats and other previously banned sporting equipment aboard airplanes.

"These items have been banned for more than 11 years and will add little value to the customer security process flow in relation to the additional risk for our cabin staff and customers," Delta Air Lines CEO Richard Anderson wrote to the head of the Transportation Security Administration on Thursday.

The missive followed a decision by the TSA to allow pocket knives and other sporting equipment -- banned on US flights since the September 11, 2001 attacks -- back in aircraft cabins.

Passengers will be able to carry knives with folding blades 2.36 inches (6 centimetres) or shorter, as well as sporting goods such as golf clubs, hockey clubs, and novelty-sized baseball bats, the federal agency said.

TSA chief John Pistole said the new guidelines, which come into effect on April 25, would bring US security regulations into line with international standards.

But Anderson said his airline's flight attendants "share legitimate concerns" about the decision.

"If the purpose is to increase security checkpoint flow, there are much more effective steps we can take together to streamline the security checkpoints with risk-based screening mechanisms," Anderson said in the letter to Pistole.

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Hopefully this new ruling will not backfire. Crew and passenger alike will feel endangered with such items now being allowed onto the planes. But I'm pretty sure that if there is a sudden rise in incidents onboard with regards to such items in the next few months, TSA will revert this ruling.

Singapore Airlines targets Asia after Virgin exit

Singapore Airlines' sale of its 49 per cent stake in Virgin Atlantic will allow the cash-rich Asian carrier to focus resources on its fast-growing regional market, analysts said Wednesday.

The Singapore carrier's tie-up with British billionaire Richard Branson's Virgin Atlantic never really took off since the alliance began 12 years ago when the stake was bought for US$966.5 million.

Singapore Airlines (SIA) on Tuesday said it will sell the stake to Delta Air Lines of the United States for US$360 million in cash in a deal to be completed next year.

SIA said it "had been evaluating strategic options for the stake for some time, as the investment has not performed to expectations and the synergies the parties originally hoped for have not materialised."

Analysts said SIA, consistently one of the world's most profitable airlines, had little say in how Virgin Atlantic was run by the flamboyant Branson, and the sale allows it to exit an underperforming investment in the troubled European market.

"SIA can now focus on investments in the Asia Pacific region," Brendan Sobie, a Singapore-based analyst with industry consultancy Centre for Aviation, told AFP.

Sobie said it made more sense for Delta to have a strategic stake in Virgin Atlantic as there are more synergies in their trans-Atlantic network.

Jason Hughes, an analyst with IG Markets Singapore, said that despite the higher acquisition price paid by SIA, the US$360 million "will go down as a profit, as losses had already been accounted for in previous years".

SIA shares closed 1.12 per cent higher at S$10.87 as investors cheered the divestment.

Malaysian bank CIMB said in a note that the sale would give SIA a "short-term boost" but urged investors to focus on the long-term challenges posed by Middle Eastern carriers and budget airlines.

Shukor Yusof, an aviation analyst with Standard & Poor's Equity Research, said SIA can use the extra cash to "redefine its business strategy on top of beefing up its regional subsidiaries".

"It's also good to exit out of Europe because the market conditions there are quite atrocious," he told AFP.

Shukor said conflicting management styles with Branson was one of the chief reasons why the alliance failed to prosper beyond a code-sharing agreement.

"Branson remained the controlling shareholder and he called the shots," he said.

Virgin Atlantic also did not have enough slots at London's high-traffic Heathrow airport for SIA to latch on in its bid to gain a share of the lucrative trans-Atlantic route to New York, Shukor added.

Analysts said SIA's decision to buy the stake in Virgin Atlantic in March 2000 was a good move at the time because Asia was just emerging from the 1997-1998 financial crisis.

But the centre of global economic power has since shifted to Asia, sparking a travel boom in the region.

Passenger traffic in the Asia Pacific is forecast to account for 33 per cent of the global market in 2016, up from 29 per cent in 2011, according to trade body International Air Transport Association (IATA).

"This makes the region the largest regional market for air transport, ahead of North America and Europe which each represent 21 per cent," IATA said in a statement on their latest industry forecast.

SIA has been investing both in the premium travel segment, where it faces competition from Middle East carriers, and in the low-cost market where it is challenged by budget airlines.

SIA in June launched a long-haul budget wing called Scoot while maintaining a substantial stake in low-fare carrier Tiger Airways. It also operates a regional wing, SilkAir.

SIA and Scoot in October announced orders for 45 Airbus and Boeing aircraft. The orders came after SilkAir in August said it would buy 54 new Boeing planes with an option to buy a further 14 aircraft.

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Bought for US$966.5 million in 2000 but sold for US$360 million today. What a huge loss in investment.

With this new found liquidity, let's see how SIA is going to make use of it and do magic, if any.

Delta buys 49% stake in Virgin Atlantic

Delta Air Lines is buying Singapore Airlines' 49 percent stake in Virgin Atlantic Airways, forging a joint venture to expand the carriers' trans-Atlantic network, the companies announced Tuesday.

Under the agreement, Delta will invest US$360m and British mogul Richard Branson's Virgin Atlantic will keep the 51 percent controlling stake.

Virgin Atlantic Airways will retain its brand and operating certificate.

"Our new partnership with Virgin Atlantic will strengthen both airlines and provide a more effective competitor between North America and the UK, particularly on the New York-London route, which is the largest airline route between the US and Europe," said Delta chief executive Richard Anderson.

The alliance gives the Atlanta, Georgia-based Delta greater presence at the congested London Heathrow airport.

The two carriers will operate as many as 31 round-trip flights between Britain and North America, 23 of which operate out of London-Heathrow.

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As widely rumoured, Delta swallowed everything SIA spitted out after the less than impressive invesment in the British owned airline. Will Delta be able to turn it around and make it profitable in the long term? I'm skeptical about this.

Singapore Air May Seek Asia Deals After Virgin Stake Sale

Singapore Airlines Ltd. (SIA) could revisit plans for China or India investments after adding to aviation’s biggest cash pile through the possible sale of a stake in Virgin Atlantic.

The carrier has $3.4 billion of net cash, according to data compiled by Bloomberg, enough to buy eight Airbus SAS A380s at list prices. That means it could use funds from a Virgin stake sale for investments in the world’s two most populous nations or to pay a special dividend, said Paul Yong, director of research at Singapore-based DBS Vickers Securities.

“They’d be looking at mergers and acquisitions with or without this deal,” he said. “But if it does go through, their war chest will be beefed up significantly.”

Singapore Air said this week it’s in talks to sell its 49 percent share of Virgin Atlantic as competition from Middle East carriers and slower growth in Europe and the U.S. hit long-haul travel. The carrier is instead focusing on growth in the Asia- Pacific region, buying a stake in Virgin Australia Holdings Ltd. (VAH) and adding new planes for regional routes.

The Virgin sale “seems to point to some further corporate activity,” said Andrew Orchard, an analyst with CIMB Securities Hong Kong Ltd. “They don’t need the cash.”

China Eastern

The airline could look to raise its stake in Virgin Australia or try to revive plans for an investment in China Eastern Airlines Cop., he said. Singapore Air tried to buy a stake in the carrier with parent Temasek Holdings Pte. about five years ago. The offer was ultimately vetoed by the Shanghai- based airline’s minority shareholders.

Singapore Air, the world’s second-biggest by market value, can’t comment on potential investments while the Virgin stake sale is being discussed, said Germaine Shen, a spokeswoman. The airline is “very open” to investment opportunities in growth areas, including India, China and Southeast Asia, Chief Executive Officer Goh Choon Phong told investors last month.

Delta Air Lines Inc. is interested in buying the Virgin Atlantic stake, possibly with partner Air France-KLM Group, two people familiar with the matter said this week. The U.K. carrier’s billionaire founder Richard Branson will probably retain a majority share, Virgin Atlantic Chief Executive Officer Steve Ridgway said Dec. 3.

Singapore Air may look again at China Eastern or possibly China Southern Airlines Co. because of the country’s travel growth, DBS Vickers’s Yong said. The carrier already has a stake in China Eastern-controlled China Cargo Airlines. China Eastern Chairman Liu Shaoyong has repeatedly said that the carrier is still open to selling a stake to a strategic investor.
India Investments

Singapore Air could also look for a deal in India following a recent loosening of foreign-investment rules, Yong said. The country’s passenger numbers could triple to 452 million a year by 2020, according to a March study by CAPA Centre for Aviation and SITA.

Still, Indian carriers have struggled to turn rising demand into profit because of price wars, high fuel taxes and competition from state-owned Air India. Kingfisher Airlines Ltd., which has said it’s seeking overseas investors, halted flights in October because of a cash shortage.

“You wouldn’t need much cash to be buying your way into India, but you’d probably be buying more trouble than it was worth,” said Peter Harbison, executive chairman of CAPA Centre for Aviation, which advises airlines.

Jet Airways (India) Ltd., the nation’s biggest carrier, is close to selling a 24 percent stake to Abu Dhabi-based Etihad, raising about 16 billion rupees ($290 million), an Indian government official said this week. He declined to be identified, citing rules. Etihad is assessing possible investments in one or two Indian carriers as well as looking at China, CEO James Hogan said in a Dec. 3 interview.

Singapore Air in 2000 made a joint bid with Tata Group for a 40 percent stake in Air India. It abandoned the effort about 10 months later, partly because of political opposition.

Virgin Australia

The Singaporean carrier is more likely to boost its stake in Virgin Australia than investing in India, Harbison said. The airline bought 10 percent of Virgin Australia, the nation’s second-biggest carrier, for A$105 million ($110 million) last month to help provide traffic for its hub.

“I’d be surprised if they didn’t go to 20 percent,” Harbison said. Branson’s Virgin Group holds 24 percent of Brisbane-based Virgin Australia, Air New Zealand Ltd. owns 19 percent and Etihad holds 9 percent, according to data compiled by Bloomberg.

Overseas Failures

Singapore Air’s previous overseas investments have failed to pay off. The airline bought the Virgin stake for 600 million pounds in 1999, or about $970 million at the time. It subsequently wrote off goodwill amounting to about 96 percent of the purchase price, according to spokeswoman Shen.

The carrier bought a 25 percent of Air NZ in 2000. That investment was written down after the New Zealand carrier sought a government bailout following the collapse of Australian unit Ansett Holdings Ltd. The stake was later sold.

Singapore Air has traditionally maintained a net cash position, with more cash in hand than debt. It’s only failed to achieve this in its year-end accounts three times since 1990, according to data compiled by Bloomberg. The last time was in the year ended March 2004. Japan Airlines Co. (9201) has the second- biggest net cash position among carriers worldwide with $775 million, about a quarter of Singapore Air’s tally, the data show.

The size of the cash holding has depressed Singapore Air’s return on equity, a measure of profitability. It had the fourth- lowest among the 27 carriers worth more than $1 billion that made a profit last year, according to data compiled by Bloomberg.

Special Dividend

The airline may use some of its cash for a special dividend. It gave shareholders an 80 Singaporean cents extra payout last year, and one of 54 cents in 2007, according to data compiled by Bloomberg. It also span off its ground-handling unit by giving stock to investors in 2009.

“If they have excess cash flow it should go back to the shareholders,” said Kelvin Lau, an analyst at Daiwa Capital Markets HK Ltd. “They are not really running out.”

Singapore Air may also decide to use its money to help fund existing growth plans rather than for overseas deals, said CIMB’s Orchard. It provisionally ordered five A380s and 20 A350-900s, worth $7.5 billion at list prices in October. Regional arm SilkAir agreed to order 54 Boeing Co. 737 planes in August to more than double the size of its fleet.

Long-haul budget arm Scoot Pte., which began flights this year, is also holding orders for 20 Boeing 787s. The unit joined regional low-cost affiliate Tiger Airways Holdings Ltd., SilkAir and the main Singapore Air business in the company’s portfolio.

“They’ve got four carriers as it is, so their hands are pretty full,” Orchard said. “Do they really want another transaction at this time?”

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The big headache here for SIA is to decide how to use that extra cash after selling their stake in Virgin Atlantic. Reinvest in India and China, or mind its own business, literally, and focus on its own portfolio in Scoot, SilkAir and Tiger Airways?

SIA in talks to sell off Virgin Atlantic stake

Singapore Airlines said Monday it was in talks with "interested parties" on a possible sale of its 49 percent stake in Virgin Atlantic as media reports listed US carrier Delta as a possible buyer.

"Singapore Airlines wishes to announce that it is in discussions with interested parties concerning the possible divestment of its 49 percent shareholding in Virgin Atlantic Limited," the carrier said in a statement.

"These discussions may or may not result in a transaction," it added without naming any of the parties involved in the talks.

Virgin Atlantic was founded by British transport mogul Richard Branson in 1984, with the flamboyant entrepreneur owning a majority 51 percent stake in the airline.

Britain's Sunday Times newspaper identified Delta as one of the interested parties and reported that it had approached SIA directly over the stake, which SIA bought for 600 million pounds (US$962 million) in 1999.

If the sale goes through, Delta's European partner, Air France-KLM, may also buy part of Branson's 51 percent stake which would see him losing control for the airline he founded for the first time, the report added.

Delta was not immediately available for comment.

Virgin Atlantic has over the years offered fewer benefits to SIA, said Timothy Ross, the head of Asia-Pacific transport research at Credit Suisse.

"Virgin contributes very little to Singapore Airlines, they have been unable to generate any real synergies and there's essentially been no marriage of the brands, no leverage of network opportunities," he told AFP.

"The contributions to (SIA's) earnings or to cash flows... has been negligible," he added.

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After more than a decade, SIA calls it quits with Virgin Atlantic. They're probably pulling out of this misadventure in investment considering how negligible it has contributed to SIA's profits over the years. However how much are they able to get out of this sale is a big question mark.

Back in 1999, the sterling pound was much stronger than what it is now and with Virgin Atlantic's lack of cutting edge in the market, the price it is able to fetch may not be desirable. Nevertheless, this sale might be able to draw out from cash for SIA to bring it to better use.