US$5.6 billion global airlines loss in 2010 - Low yields and rising costs keep industry in the red

The International Air Transport Association (IATA) revised its financial outlook for airlines in 2010 to an expected US$5.6 billion global net loss, larger than the previously forecast loss of US$3.8 billion. For 2009, IATA maintained its forecast of a US$11 billion net loss.

“The world’s airlines will lose US$11.0 billion in 2009. We are ending an Annus Horribilis that brings to a close the 10 challenging years of an aviation Decennis Horribilis. Between 2000 and 2009, airlines lost US$49.1 billion, which is an average of US$5.0 billion per year,”said Giovanni Bisignani, IATA’s Director General and CEO.

“The worst is likely behind us. For 2010, some key statistics are moving in the right direction. Demand will likely continue to improve and airlines are expected to drive down non-fuel unit costs by 1.3%. But fuel costs are rising and yields are a continuing disaster. Airlines will remain firmly in the red in 2010 with US$5.6 billion in losses,” said Bisignani.

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British Airways crew voted for strike action over the Christmas holiday period on Monday. "We hope, both for customers and our members, that this strike will be called off because this does have the potential to be very damaging for the airline and our members too," Francis Tuke from ABTA said on Tuesday:

Fleming Construction

ACCBank today began a Supreme Court challenge to a ten-year survival plan for the Bandon, Co. Cork-based Fleming Construction Group. The bank is owed €21.5m by one of the companies in the group which has overall debts of €1 billion.

ACC's legal team said the plan approved by the High Court last month was not within the terms of the legislation governing the examinership process.

Senior Counsel Paul Sreenan said critical to the whole purpose of the legislation was the prospect of securing the survival of the company. He said the hiving off of profitable parts of the group could not ensure its survival.

In November, the High Court approved a scheme which it described as capable of turning around the fortunes of three companies within the group - -  John J Fleming Construction, JJ Fleming Holdings and Tivway - -  a company which is building an office development in Sandyford, Co. Dublin.

The scheme provides for the sale of the group's contracting unit and other assets to a new company. The banks would have control of the property development side which is focused on operations in Sandyford.

ACC lawyers said the main debtor was Tivway and the asset over which it had a fixed charge, the Sentinel building in Sandyford, was now worth between €500,000 and €1m for a debt worth €21m. It was claimed the company could not even afford €3,500 a week to secure the Sentinel building and that money had to come from another of the companies.

Paul Sreenan for ACC said there were no plans to finance Tivway and was and will remain insolvent. He said it was inherently incredible that the banks would be interested in financing a company when its profitable side had been taken out.

He said the arrangements between the company and the the other banks, Anglo, AIB and Bank of Scotland, were like a "personalised NAMA."

Sreenan said there was no evidence that any bank was willing to advance any money to 'build out' a building over which ACC had a fixed charge. He said the High Court judge made a leap looking at all three schemes as if they were one, when each company should be able to stand on its own feet.

Tullow Oil

Tullow Oil plc today announced that it has finalised arrangements for a US$250 million new revolving credit facility.

On Monday 14 December, documentation for a US$250 million secured debt facility was executed by Bank of Scotland Plc, BNP Paribas, Calyon, ING Bank N.V., Société Générale, Standard Bank Plc, Standard Chartered Bank, and The Royal Bank of Scotland plc.

The new debt facility will supplement Tullow’s existing reserve based lend debt arrangements, providing additional funding capacity and flexibility for the Group’s future capital programmes.

US

The US Federal Reserve reported today that industrial production increased 0.8% in November after having been unchanged in October - - the biggest rise in three months. Manufacturing production advanced 1.1%, with broad-based gains among both durables and nondurables.

The output of mines climbed 2.1%, but the index for utilities fell 1.8%, primarily as a result of lower output of gas utilities --temperatures in November were unseasonably mild and reduced the need for heating. At 99.4% of its 2002 average, total industrial production was 5.1% below its level of a year earlier.

Capacity utilization for total industry moved up 0.7% to 71.3%, a rate 9.6% below its average for the period from 1972 through 2008.

The Labor Department separately reported that producers rose 1.8% last month. Excluding fuel and food, prices increased 0.5%.

The Dow is down 17 points or 0.15% to 10,484.

The Nasdaq is down 0.14% and the S&P 500 is off 0.11%.