International air travel continues to be extremely weak. In particular, business class traffic appears to be collapsing:
"Passengers travelling on premium tickets in May were down 23.6 per cent, after a 22 per cent decline in April and a 19.2 per cent fall in the first quarter. This means that premium travel numbers have been in decline now for 12 consecutive months. Economy travel numbers were also down in May - by 7.6 per cent. And total passenger numbers in international markets was down 9.2 per cent, after a 2 per cent fall in April and an 8.2 per cent fall in Q1. Premium passengers account for almost 30 per cent of airline revenue but only about 10 per cent of numbers, so total travel is shaped mainly by movements in economy ticket numbers ... In the Far East, premium travel was down 31.6 per cent in May; across the Pacific, it was down 30.7 per cent; and from Europe to the Far East, down 26.3 per cent - all following smaller declines in Q1. Intra-Asia economy class travel fell 15.9 per cent in May, after a 10.4 per cent decline in the January-March quarter. Fear of H1N1 flu may account for a large part of the May deterioration, with the region sensitive to such issues following Sars in 2003, Iata said. The impact of H1N1 on air travel was shown in the 62.4 per cent fall in total passenger numbers within central America during May."
(Source: Singapore Business Times, July 17; no link, because links to their articles tend to break down within a few hours)
Note that this is about international air travel only, i.e. domestic trips are not included in the data. In particular, domestic plane traffic in China appears to be growing at a 10-15 % pace based on official data.
Posts mit dem Label transport werden angezeigt. Alle Posts anzeigen
Posts mit dem Label transport werden angezeigt. Alle Posts anzeigen
Freitag, 17. Juli 2009
Freitag, 10. Juli 2009
German Shipyards
I've been criticising China for pouring so much money into its shipyards even though very few new ships will be needed over the next few years.
Turns out that Germany is doing the same thing, albeit on a much smaller scale:
The Wadan shipyards in East Germany are Germany's third biggest yard. After receiving 167 m € in aid from state and federal government a few months ago, the Russian and Korean owners refused to inject more money, and the company went into insolvency proceedings. Now, the government is apparently in the process of approving an insolvency credit line ("Massekredit") of 190 m €, so that the shipyards can finish their ongoing projects.
Inconvenient detail: Apparently, the buyers of the ships have no financing, so it's highly doubtful that they'll pay. And when they're done building those ships, there are no new orders waiting. But hey, the 190 m € will help maintain the 2,500 jobs for a few more months. What's a mere 80,000 € per job, if it means that those 2,500 people will be able postpone their unemployment by a few more months...
Turns out that Germany is doing the same thing, albeit on a much smaller scale:
The Wadan shipyards in East Germany are Germany's third biggest yard. After receiving 167 m € in aid from state and federal government a few months ago, the Russian and Korean owners refused to inject more money, and the company went into insolvency proceedings. Now, the government is apparently in the process of approving an insolvency credit line ("Massekredit") of 190 m €, so that the shipyards can finish their ongoing projects.
Inconvenient detail: Apparently, the buyers of the ships have no financing, so it's highly doubtful that they'll pay. And when they're done building those ships, there are no new orders waiting. But hey, the 190 m € will help maintain the 2,500 jobs for a few more months. What's a mere 80,000 € per job, if it means that those 2,500 people will be able postpone their unemployment by a few more months...
Montag, 29. Juni 2009
Asian Air Traffic
Amazingly, Air China is reporting a 14 % rise in passenger numbers for the year to May (i.e. five months, year-on-year).
At the same time (according to Bloomberg), non-PRC Asia Pacific air traffic is still showing record declines (-14 % yoy in May), and revenues are dropping much more than that due to evaporating demand for business class tickets.
So maybe the PRC's domestic economy is indeed doing quite ok, as opposed to all the rest of East Asia...?
At the same time (according to Bloomberg), non-PRC Asia Pacific air traffic is still showing record declines (-14 % yoy in May), and revenues are dropping much more than that due to evaporating demand for business class tickets.
So maybe the PRC's domestic economy is indeed doing quite ok, as opposed to all the rest of East Asia...?
Commercial Shipping
I guess that's what you call anti-cyclical behavior:
"Shanghai - already the world's busiest port by total cargo volume - is charging ahead with plans initiated during boom times to more than double its capacity...Shanghai also plans to build the world's biggest shipbuilding yard on its northern Changxing island ... Bank of Communications, China's fifth-largest bank, announced last month plans to create a ship financing division... but there will be stiff competition because Hong Kong, Singapore, Japan and Korea are not going to let Shanghai stand alone"
(Source: AFP)
By the way, this snippet explains how Shanghai managed to become the world's "busiest port": It now offers free container storage:
"The programme enables shipping companies to safely store their containers, which have been idled as the global economic downturn has battered demand for exports. It also allows the company to inflate its throughput volume - which measures container volume handled not cargo loaded and unloaded"
Meanwhile, China Merchants Bank has just extended a 20 bn RMB (2.2 bn €) credit line to state-owned China Shipping Group, the country's biggest operator of container vessels.
Why did they extend the credit line? Well, if you must know: "as part of the bank's effort to support the nation's shipping industry." And just in case the money is not enough, no problem: The companies also agreed "to cooperate in the field of short-term liquidity loans".
(Source: Alibaba)
In other news, three state-owned companies inaugurated Southern China's biggest shipyard near Guangzhou a few days ago:
"This has fully demonstrated the confidence of Baosteel and China Shipping in the Chinese shipbuilding industry's long-term development... target products include various kinds of civilian ships such as very large crude carriers (VLCC), Suezmax tankers, Aframax tankers, very large ore carriers (VLOC), bulk carriers and large container ships."
It's good that they have confidence in the "long-term development". They surely won't earn any money in the short- and medium-term building those kinds of ships. Unless of course China Shipping Group uses its new credit line to place lots of orders...?
(Source: People's Daily
But maybe I'm being too pessimistic, because here's another potential customer: Nanjing Tanker aims to quadruple its oil tanker fleet by 2011, and has secured a 2 bn RMB credit line from Agricultural Bank of China for that purpose.
(Source: Lloydslist)
This will not end well...
"Shanghai - already the world's busiest port by total cargo volume - is charging ahead with plans initiated during boom times to more than double its capacity...Shanghai also plans to build the world's biggest shipbuilding yard on its northern Changxing island ... Bank of Communications, China's fifth-largest bank, announced last month plans to create a ship financing division... but there will be stiff competition because Hong Kong, Singapore, Japan and Korea are not going to let Shanghai stand alone"
(Source: AFP)
By the way, this snippet explains how Shanghai managed to become the world's "busiest port": It now offers free container storage:
"The programme enables shipping companies to safely store their containers, which have been idled as the global economic downturn has battered demand for exports. It also allows the company to inflate its throughput volume - which measures container volume handled not cargo loaded and unloaded"
Meanwhile, China Merchants Bank has just extended a 20 bn RMB (2.2 bn €) credit line to state-owned China Shipping Group, the country's biggest operator of container vessels.
Why did they extend the credit line? Well, if you must know: "as part of the bank's effort to support the nation's shipping industry." And just in case the money is not enough, no problem: The companies also agreed "to cooperate in the field of short-term liquidity loans".
(Source: Alibaba)
In other news, three state-owned companies inaugurated Southern China's biggest shipyard near Guangzhou a few days ago:
"This has fully demonstrated the confidence of Baosteel and China Shipping in the Chinese shipbuilding industry's long-term development... target products include various kinds of civilian ships such as very large crude carriers (VLCC), Suezmax tankers, Aframax tankers, very large ore carriers (VLOC), bulk carriers and large container ships."
It's good that they have confidence in the "long-term development". They surely won't earn any money in the short- and medium-term building those kinds of ships. Unless of course China Shipping Group uses its new credit line to place lots of orders...?
(Source: People's Daily
But maybe I'm being too pessimistic, because here's another potential customer: Nanjing Tanker aims to quadruple its oil tanker fleet by 2011, and has secured a 2 bn RMB credit line from Agricultural Bank of China for that purpose.
(Source: Lloydslist)
This will not end well...
Sonntag, 28. Juni 2009
Munich Airport
According to an interview in yesterday's SZ, Lufthansa CEO Mayrhuber firmly believes that Munich's airport needs a third runway "aus wirtschaftlichen und ökologischen Gründen" ("for business and for ecological reasons"). He didn't elaborate.
Maybe I'm stupid, but why would it be necessary for - of all things - ecological reasons to build an additional airport runway?
Maybe I'm stupid, but why would it be necessary for - of all things - ecological reasons to build an additional airport runway?
Dienstag, 16. Juni 2009
Willing to work for free to save your job?
It's not unusual that troubled companies ask their staff to take unpaid leave or to work shorter hours. But according to the BBC, British Airways has come up with a new idea:
British Airways is asking thousands of staff to work for nothing, for up to one month, to help the airline survive.
In other words: Hey, we can't afford to pay you. So if you want to keep your job, please volunteer to work for free.
The appeal was sent to 30,000 workers per e-mail. Apart from unpaid work, it also offered unpaid leave. According to BA, roughly 1,000 workers have applied. But we are not told how many wanted the unpaid leave, and how many were workaholics.
British Airways is asking thousands of staff to work for nothing, for up to one month, to help the airline survive.
In other words: Hey, we can't afford to pay you. So if you want to keep your job, please volunteer to work for free.
The appeal was sent to 30,000 workers per e-mail. Apart from unpaid work, it also offered unpaid leave. According to BA, roughly 1,000 workers have applied. But we are not told how many wanted the unpaid leave, and how many were workaholics.
Donnerstag, 11. Juni 2009
Hong Kong's Economy
Hong Kong is China's window to the world.
So as long as China's economy is doing reasonably well, Hong Kong should be able to cope, right?
Wrong.
Latest projections by Fitch now foresee Hong Kong's GDP to drop 9.1 % yoy in 2009. That's far worse than even the worst case projections for Germany and Japan, and among the worst outlooks worldwide (though the HK government continues to remain a bit more upbeat and "only" projects a 6.5 % drop; in Q1, the yoy drop was 7.8 %).
Part of the reason is the declining number of visitors: May visitor arrivals were down 13.5 % yoy. Business travelers are cutting down on trips to save costs and - potentially even worse - mainland Chinese are staying home due to the swine flu scare.
It doesn't help that HK authorities announced today that all of HK's kindergartens and primary schools will remain closed for at least two weeks to avoid the spread of the illness. Rationally, visitors needn't worry, as there are few cases in HK, and surely everybody has realized by now that swine flu in its current form is not exactly a horrible killer disease. But Chinese travelers are rarely rational when it comes to illnesses.
Meanwhile, HK's exports are also down more or less in line with the rest of the region, dropping around 20 % yoy during the first four months of the year.
So as long as China's economy is doing reasonably well, Hong Kong should be able to cope, right?
Wrong.
Latest projections by Fitch now foresee Hong Kong's GDP to drop 9.1 % yoy in 2009. That's far worse than even the worst case projections for Germany and Japan, and among the worst outlooks worldwide (though the HK government continues to remain a bit more upbeat and "only" projects a 6.5 % drop; in Q1, the yoy drop was 7.8 %).
Part of the reason is the declining number of visitors: May visitor arrivals were down 13.5 % yoy. Business travelers are cutting down on trips to save costs and - potentially even worse - mainland Chinese are staying home due to the swine flu scare.
It doesn't help that HK authorities announced today that all of HK's kindergartens and primary schools will remain closed for at least two weeks to avoid the spread of the illness. Rationally, visitors needn't worry, as there are few cases in HK, and surely everybody has realized by now that swine flu in its current form is not exactly a horrible killer disease. But Chinese travelers are rarely rational when it comes to illnesses.
Meanwhile, HK's exports are also down more or less in line with the rest of the region, dropping around 20 % yoy during the first four months of the year.
Mittwoch, 10. Juni 2009
Dubai Airport
According to the Handelsblatt, Dubai's brand new airport will open for business in June 2010. It will boast five runways and a passenger capacity of 160 m passengers.
For comparison: The world's biggest airport is currently Atlanta with roughly 90 m passengers. Dubai's old airport handled 37.4 m passengers in 2008.
Oh, and they don't want to shut the old airport down. No, they are expanding that one as well to a capacity of 80 m passengers by 2013. So Dubai's two airports will then be able to handle 240 m passengers.
I don't doubt that the Middle East has growth potential. The demographics support it, and the oil reserves also support it. And even now, in spite of Dubai's current crisis, passenger throughput doesn't decline: It rose 2 % yoy in Q1 2009.
But come on: Growth from 37 m passengers in 2008 to 240 m passengers in 5-10 years?
For once, China's plans seem downright modest in comparison.
IMHO, it's madness, pure and simple.
By the way, the investment volumes are quoted as 32 bn US$ for the new airport, and 4.2 bn US$ for expansion of the old airport.
For comparison: The world's biggest airport is currently Atlanta with roughly 90 m passengers. Dubai's old airport handled 37.4 m passengers in 2008.
Oh, and they don't want to shut the old airport down. No, they are expanding that one as well to a capacity of 80 m passengers by 2013. So Dubai's two airports will then be able to handle 240 m passengers.
I don't doubt that the Middle East has growth potential. The demographics support it, and the oil reserves also support it. And even now, in spite of Dubai's current crisis, passenger throughput doesn't decline: It rose 2 % yoy in Q1 2009.
But come on: Growth from 37 m passengers in 2008 to 240 m passengers in 5-10 years?
For once, China's plans seem downright modest in comparison.
IMHO, it's madness, pure and simple.
By the way, the investment volumes are quoted as 32 bn US$ for the new airport, and 4.2 bn US$ for expansion of the old airport.
Donnerstag, 4. Juni 2009
The European Airline Industry
The airline industry is in big trouble: Passenger numbers are falling, losses are piling up, and companies are fighting for survival.
All of them?
No, there is one exception:
Ryanair just announced the results of the year ending 3/09. Passenger numbers were up strongly, and according to its investors presentation, Ryanair is now Europe's biggest airline both by passenger numbers and by market value of its equity (though I am not sure if they included the various subsidiaries of Air France and Lufthansa when calculating their total passenger numbers). Ryanair did post a moderate loss, but that was mostly due to oil hedging contracts, which were hard to get right with the oil price fluctuating all over the place.
What's their secret?
The traditional players rely heavily on their business class passengers. Unfortunately, their numbers have been declining rapidly, whereas leisure trips have held up reasonably well. But traditional airlines cannot compete with budget airlines on the price of economy class tickets if their business class seats are half empty. Their business model does not work that way.
Another part of the reason is Ryanair's aggressive use of low-cost secondary airports. These airports struggle to cover their costs, and are willing to accept cut-throat pricing for their landing fees.
Anyway: For the moment, leisure trips are very affordable - even for penny-pinching consumers - due to the low oil price.
However, if (or rather: when) the oil price goes beyond 100$/barrel again, ticket prices will have to rise, and the low end of the market will also suffer.
All of them?
No, there is one exception:
Ryanair just announced the results of the year ending 3/09. Passenger numbers were up strongly, and according to its investors presentation, Ryanair is now Europe's biggest airline both by passenger numbers and by market value of its equity (though I am not sure if they included the various subsidiaries of Air France and Lufthansa when calculating their total passenger numbers). Ryanair did post a moderate loss, but that was mostly due to oil hedging contracts, which were hard to get right with the oil price fluctuating all over the place.
What's their secret?
The traditional players rely heavily on their business class passengers. Unfortunately, their numbers have been declining rapidly, whereas leisure trips have held up reasonably well. But traditional airlines cannot compete with budget airlines on the price of economy class tickets if their business class seats are half empty. Their business model does not work that way.
Another part of the reason is Ryanair's aggressive use of low-cost secondary airports. These airports struggle to cover their costs, and are willing to accept cut-throat pricing for their landing fees.
Anyway: For the moment, leisure trips are very affordable - even for penny-pinching consumers - due to the low oil price.
However, if (or rather: when) the oil price goes beyond 100$/barrel again, ticket prices will have to rise, and the low end of the market will also suffer.
Dienstag, 19. Mai 2009
More on Airports: Too much of a good thing...?
I recently wrote about the - in my view - unnecessary expansion of Frankfurt Airport. Here's some international perspective:
According to this BBC news report, Korea hast lots of "ghost airports", i.e. shiny new international airports that see hardly any passengers. Two examples:
- Yangyang International Airport was built 7 years ago at a cost of 400 m $ and can handle 3 million passengers per year. In 2008, only 9,500 passengers actually used the airport. From November 2008, commercial flights have been stopped altogether.
- Muan International Airport opened 2 years ago, and now operates at 3 % of capacity, handling 2 outgoing flights per day.
(According to the article, Korea has 14 major airports, 11 of which are losing money. Construction of a 15th was recently suspended shortly before completion due to lack of immediate demand. And a 16th airport is in the planning stage.)
I also recently wrote about China's increasing demand for planes.
Well, not only planes, apparently: According to this news report, China is going on an airport construction frenzy. Two examples:
- Chongqing wants to expand airport capacity from the current 10 million passengers to 60 million. (To achieve this, they want to spend 20 bn RMB, and build three additional runways. I assume the airport has one runway right now)
For comparison: China's biggest airport (Beijing Capital Airport) handled only 56 million passengers last year.
- Talking about Beijing: Next year, construction will start on a second Beijing International Airport. Why? Well, Beijing Capital Airport only has a capacity of 78 million passengers, and the second airport will add another 60 million. That's a total passenger capacity of 138 million. For Beijing alone.
For comparison: New York's airports (JFK, La Guardia and Newark) handled 109 million passengers in 2007. New York's metro population is larger than Beijing's. Hmmmm.
According to this BBC news report, Korea hast lots of "ghost airports", i.e. shiny new international airports that see hardly any passengers. Two examples:
- Yangyang International Airport was built 7 years ago at a cost of 400 m $ and can handle 3 million passengers per year. In 2008, only 9,500 passengers actually used the airport. From November 2008, commercial flights have been stopped altogether.
- Muan International Airport opened 2 years ago, and now operates at 3 % of capacity, handling 2 outgoing flights per day.
(According to the article, Korea has 14 major airports, 11 of which are losing money. Construction of a 15th was recently suspended shortly before completion due to lack of immediate demand. And a 16th airport is in the planning stage.)
I also recently wrote about China's increasing demand for planes.
Well, not only planes, apparently: According to this news report, China is going on an airport construction frenzy. Two examples:
- Chongqing wants to expand airport capacity from the current 10 million passengers to 60 million. (To achieve this, they want to spend 20 bn RMB, and build three additional runways. I assume the airport has one runway right now)
For comparison: China's biggest airport (Beijing Capital Airport) handled only 56 million passengers last year.
- Talking about Beijing: Next year, construction will start on a second Beijing International Airport. Why? Well, Beijing Capital Airport only has a capacity of 78 million passengers, and the second airport will add another 60 million. That's a total passenger capacity of 138 million. For Beijing alone.
For comparison: New York's airports (JFK, La Guardia and Newark) handled 109 million passengers in 2007. New York's metro population is larger than Beijing's. Hmmmm.
Montag, 18. Mai 2009
China's Skies
According to a Boeing executive, China will need to buy 3,700 new jet airliners over the next 20 years.
Current stock is 1,330, and it is projected to increase to 4,560 by 2027. In other words, an increase of 240 % over 18 years, or close to 8 % annual growth.
(For comparison: Lufthansa, one of the world's biggest airlines, currently operates 500 aircraft. That includes its subsidiary Swissair, as well as the small regional jets of its regional arms.)
Personally, I think this is not a realistic projection. China's air traffic will not keep growing at 8 % for the next 18 years. But of course it will grow, and quite substantially so.
Which once again leads to an inevitable conclusion: With all these additional planes and cars in China (and India, and Vietnam, and Indonesia, and...), where is all the oil going to come from? Much higher prices and crowding out of saturated markets (i.e. Europe, but also US) are sure to follow. The only question is: When?
Current stock is 1,330, and it is projected to increase to 4,560 by 2027. In other words, an increase of 240 % over 18 years, or close to 8 % annual growth.
(For comparison: Lufthansa, one of the world's biggest airlines, currently operates 500 aircraft. That includes its subsidiary Swissair, as well as the small regional jets of its regional arms.)
Personally, I think this is not a realistic projection. China's air traffic will not keep growing at 8 % for the next 18 years. But of course it will grow, and quite substantially so.
Which once again leads to an inevitable conclusion: With all these additional planes and cars in China (and India, and Vietnam, and Indonesia, and...), where is all the oil going to come from? Much higher prices and crowding out of saturated markets (i.e. Europe, but also US) are sure to follow. The only question is: When?
Samstag, 16. Mai 2009
Chinese Tourists
According to China Daily, the Chinese are so scared of contracting swine flu that they refuse to travel abroad. For the first two weeks of May, tourist agencies are reporting a collapse of all outbound tourism, i.e. not just to the US and Mexico, but to any destination worldwide. For instance, tours bound for (decidedly low-risk) Hong Kong have seen bookings drop by 80 %, and even domestic tourism (i.e. within PRC) has been hurt.
Also, it can be quite risky for foreigners to travel to China right now: If any person on the same plane with you has a fever when passing through immigration, all passengers will be quarantined for a minimum of seven days in a hotel or hospital. And according to Shanghai Daily, all Shanghai hotels have now also been ordered to take every guest's temperature at check-in.
A Chinese ph.d. student who returned from the US and fell sick on the plane received extreme abuse on Chinese webforums, where posters called him a "traitor", "demonic" and "immoral", and recommended that his fiancee should call off the wedding, because he was responsible for bringing the illness into China.
So in light of all this, maybe the Chinese are just being rational when they decide to stay home (Quote China Daily):
Beijing resident Gao Jingying, 68, who changed her plan to visit Taiwan with her husband this month, said: "No one likes being isolated in a hotel for a week after returning from a trip that is supposed to be a happy experience."
Anyway, if things don't normalize soon, this will be very bad news for China's travel industry, as well as for non-PRC destinations receiving lots of Chinese tourists (Hong Kong and Singapore come to mind).
Also, it can be quite risky for foreigners to travel to China right now: If any person on the same plane with you has a fever when passing through immigration, all passengers will be quarantined for a minimum of seven days in a hotel or hospital. And according to Shanghai Daily, all Shanghai hotels have now also been ordered to take every guest's temperature at check-in.
A Chinese ph.d. student who returned from the US and fell sick on the plane received extreme abuse on Chinese webforums, where posters called him a "traitor", "demonic" and "immoral", and recommended that his fiancee should call off the wedding, because he was responsible for bringing the illness into China.
So in light of all this, maybe the Chinese are just being rational when they decide to stay home (Quote China Daily):
Beijing resident Gao Jingying, 68, who changed her plan to visit Taiwan with her husband this month, said: "No one likes being isolated in a hotel for a week after returning from a trip that is supposed to be a happy experience."
Anyway, if things don't normalize soon, this will be very bad news for China's travel industry, as well as for non-PRC destinations receiving lots of Chinese tourists (Hong Kong and Singapore come to mind).
Mittwoch, 13. Mai 2009
Frankfurt Airport
While we're on the subject of air travel:
Fraport, the listed operator of Frankfurt Airport, is eager to start the construction of a new runway. The legal battle isn't over yet, but they are already in the process of clearing the forest ahead of schedule.
According to their Q1 financial report, they will invest 7 bn € into the new runway and a new terminal building.
No idea why they are in such a hurry:
Passenger throughput is down sharply: -9.2 % yoy in the year to April. Long-haul routes are down even more, with North American routes losing 14 % and Far Eastern routes losing 13 %.
However, the FTD reports that Fraport is worried about competition in the Gulf (I suppose that means Dubai), and needs to provide more capacity once travel volumes start booming again (expected from mid-2010 onwards). Going forward, Fraport expects travel volumes to increase at 4 % annually, in line with long-term historic averages.
Roland Koch called the beginning of construction activity a "historic day", and was happy that the "next generation" will get "a chance to compete internationally".
I cannot understand why so much money is being spent on infrastructure that will not be needed. It is absolutely impossible that German air traffic will see high growth-rates during the next few decades. Not enough people, not enough economic growth, and not enough kerosene.
Fraport, the listed operator of Frankfurt Airport, is eager to start the construction of a new runway. The legal battle isn't over yet, but they are already in the process of clearing the forest ahead of schedule.
According to their Q1 financial report, they will invest 7 bn € into the new runway and a new terminal building.
No idea why they are in such a hurry:
Passenger throughput is down sharply: -9.2 % yoy in the year to April. Long-haul routes are down even more, with North American routes losing 14 % and Far Eastern routes losing 13 %.
However, the FTD reports that Fraport is worried about competition in the Gulf (I suppose that means Dubai), and needs to provide more capacity once travel volumes start booming again (expected from mid-2010 onwards). Going forward, Fraport expects travel volumes to increase at 4 % annually, in line with long-term historic averages.
Roland Koch called the beginning of construction activity a "historic day", and was happy that the "next generation" will get "a chance to compete internationally".
I cannot understand why so much money is being spent on infrastructure that will not be needed. It is absolutely impossible that German air traffic will see high growth-rates during the next few decades. Not enough people, not enough economic growth, and not enough kerosene.
EADS / Airbus
Airlines worldwide have been recording rapidly falling passenger numbers, and even steeper drops in air cargo volumes.
So it's no surprise that airplane orders have plummeted. Still, the extent of the decline is enormous:
In 2007, Airbus received 1,458 orders.
In 2008, it received roughly 900 (420 of which in Q1).
And in Q1 2009, it received 22.
Oh, and the 22 are gross of cancellations. After deducting those, net new orders in Q1 2009 amounted to... 8 planes.
For the full year, Airbus still expects "up to 300 gross orders". Hmmmm. Am I being overly finicky, or does "up to" imply they might well be receiving hardly any order at all in Q2-Q4? After all, 22 also falls under "up to 300".
(Figures quoted from FT print edition)
But at least Airbus is doing better than Boeing. According to this article, Boeing has received -1 orders net of cancellations in the year to April. Airbus managed to get another three net orders in April, bringing its total net orders until April to 11 (gross orders rose to 30).
Of course the existing order book is still full enough to allow normal production volumes for several years. However, all those new planes will increase the supply of unneeded planes even further, so it's hard to see why demand should pick up anytime soon.
A look at the EADS Q1 financials is far from reassuring:
- EADS posted a small profit of 170 m € (after 293 m € in Q1 2008). However, "comprehensive net income" including "changes in fair value of cash flow hedges" showed a loss of 702 m €.
- Equity is a healthy-sounding 10.3 bn €. However, 11.2 bn € are intangibles (nearly all of it is goodwill, i.e. justified by expected future profits from operations), and 3.2 bn € are deferred tax assets (also useless if there are no profits). So if those future profits don't materialize, equity is far below zero.
- Then there's inventories: They are up 2.5 bn € in just 3 months, to 22.1 bn €. These are mainly unfinished planes, and if customers pay for what they ordered, it's no problem. However, the present state of the airline industry makes you wonder if all the customers will remain solvent.
- And finally, there appears to be a major problem with the "A400M airlifter program", a large military program. Worst-case, the order could be cancelled, and EADS would have to refund 5.9 bn €. It's not clear what the p+l effect of such a cash-refund would be, but my guess is, it would be enormous. But even if it doesn't come to that, possible penalty payments of 1.4 bn € are mentioned, and in any case "significant negative income impacts may still have to be accounted for in future periods".
In short, I wouldn't want to be an EADS shareholder.
(Oh, and if you think I'm being too negative, you might want to consider that China is committing 20 bn € of capital to compete head-on with Airbus and Boeing from 2016 onwards.)
So it's no surprise that airplane orders have plummeted. Still, the extent of the decline is enormous:
In 2007, Airbus received 1,458 orders.
In 2008, it received roughly 900 (420 of which in Q1).
And in Q1 2009, it received 22.
Oh, and the 22 are gross of cancellations. After deducting those, net new orders in Q1 2009 amounted to... 8 planes.
For the full year, Airbus still expects "up to 300 gross orders". Hmmmm. Am I being overly finicky, or does "up to" imply they might well be receiving hardly any order at all in Q2-Q4? After all, 22 also falls under "up to 300".
(Figures quoted from FT print edition)
But at least Airbus is doing better than Boeing. According to this article, Boeing has received -1 orders net of cancellations in the year to April. Airbus managed to get another three net orders in April, bringing its total net orders until April to 11 (gross orders rose to 30).
Of course the existing order book is still full enough to allow normal production volumes for several years. However, all those new planes will increase the supply of unneeded planes even further, so it's hard to see why demand should pick up anytime soon.
A look at the EADS Q1 financials is far from reassuring:
- EADS posted a small profit of 170 m € (after 293 m € in Q1 2008). However, "comprehensive net income" including "changes in fair value of cash flow hedges" showed a loss of 702 m €.
- Equity is a healthy-sounding 10.3 bn €. However, 11.2 bn € are intangibles (nearly all of it is goodwill, i.e. justified by expected future profits from operations), and 3.2 bn € are deferred tax assets (also useless if there are no profits). So if those future profits don't materialize, equity is far below zero.
- Then there's inventories: They are up 2.5 bn € in just 3 months, to 22.1 bn €. These are mainly unfinished planes, and if customers pay for what they ordered, it's no problem. However, the present state of the airline industry makes you wonder if all the customers will remain solvent.
- And finally, there appears to be a major problem with the "A400M airlifter program", a large military program. Worst-case, the order could be cancelled, and EADS would have to refund 5.9 bn €. It's not clear what the p+l effect of such a cash-refund would be, but my guess is, it would be enormous. But even if it doesn't come to that, possible penalty payments of 1.4 bn € are mentioned, and in any case "significant negative income impacts may still have to be accounted for in future periods".
In short, I wouldn't want to be an EADS shareholder.
(Oh, and if you think I'm being too negative, you might want to consider that China is committing 20 bn € of capital to compete head-on with Airbus and Boeing from 2016 onwards.)
Samstag, 9. Mai 2009
Germany's Oil Consumption
How much is Germany's oil consumption affected by the crisis?
To analyze this question, we need to break down Germany's overall oil consumption into its main components. Based on analysis I did a year ago using 2006/07 data, this is a rough outline:
1. 30 % gasoline used by cars
2. 20 % gasoline used by trucks
3. 6 % airplanes
4. 3 % shipping
5. 13 % heating of private residences
6. 15 % petrochemical industry
7. 15 % other industrial use (heating/energy/asphalt/lubrication)
Let's go through it one by one:
ad 1: gasoline used by cars
Roughly 1/3 is commuting to work. The number of jobs has so far hardly decreased, though shorter hours and mandatory holidays have been introduced by some manufacturers. Decline in commuting-related car-use should be moderate (1-2 %)
The rest is private use. As overall private consumption has been stable, I would assume that private car use hasn't declined either. So let's assume no change here.
ad 2: gasoline used by trucks
The volume of transported goods has contracted sharply, though domestic transport was far less affected than international. Let's assume a 5-10 % reduction of total truck use.
ad 3: Airplanes
Airplane passenger traffic is down 10 % yoy, though the number of flights has decreased less (load factors went down instead). Air cargo is down much more, but is comparatively less important. Let's assume 5-10 % total reduction.
ad 4: Shipping
International shipping volumes are down sharply, possibly as much as 20 %. Domestic shipping is less affected, but rather unimportant. Let's assume 15 % reduction.
ad 5: Heating of private residences
Presumably unchanged. Based on anecdotal evidence, it seems that many people are filling up their tanks more than they usually would, to make use of low prices. But not sure if that translates into a significant inventory build-up. Let's assume constant use.
ad 6: Petrochemical industry
Plastics are mainly used for/by packaging (33 %), construction (25 %), car industry (9 %), electronics industry (7 %), furniture/household goods (8 %). A significant part of German production (more than 1/4) is exported. I understand that the big chemical companies (BASF, Bayer, etc.) have significantly cut back production, though consumer-goods packaging and the construction industry aren't affected particularly badly so far. Let's assume an overall reduction of 10-15 %.
ad 7: Other industrial use
Considering the sharp drop in overall manufacturing, a reduction of 10-15 % sounds appropriate.
=> So what does this all add up to?
Quite a large number: A massive 4.8 - 7.8 % reduction in total German oil consumption compared to pre-crisis level.
To analyze this question, we need to break down Germany's overall oil consumption into its main components. Based on analysis I did a year ago using 2006/07 data, this is a rough outline:
1. 30 % gasoline used by cars
2. 20 % gasoline used by trucks
3. 6 % airplanes
4. 3 % shipping
5. 13 % heating of private residences
6. 15 % petrochemical industry
7. 15 % other industrial use (heating/energy/asphalt/lubrication)
Let's go through it one by one:
ad 1: gasoline used by cars
Roughly 1/3 is commuting to work. The number of jobs has so far hardly decreased, though shorter hours and mandatory holidays have been introduced by some manufacturers. Decline in commuting-related car-use should be moderate (1-2 %)
The rest is private use. As overall private consumption has been stable, I would assume that private car use hasn't declined either. So let's assume no change here.
ad 2: gasoline used by trucks
The volume of transported goods has contracted sharply, though domestic transport was far less affected than international. Let's assume a 5-10 % reduction of total truck use.
ad 3: Airplanes
Airplane passenger traffic is down 10 % yoy, though the number of flights has decreased less (load factors went down instead). Air cargo is down much more, but is comparatively less important. Let's assume 5-10 % total reduction.
ad 4: Shipping
International shipping volumes are down sharply, possibly as much as 20 %. Domestic shipping is less affected, but rather unimportant. Let's assume 15 % reduction.
ad 5: Heating of private residences
Presumably unchanged. Based on anecdotal evidence, it seems that many people are filling up their tanks more than they usually would, to make use of low prices. But not sure if that translates into a significant inventory build-up. Let's assume constant use.
ad 6: Petrochemical industry
Plastics are mainly used for/by packaging (33 %), construction (25 %), car industry (9 %), electronics industry (7 %), furniture/household goods (8 %). A significant part of German production (more than 1/4) is exported. I understand that the big chemical companies (BASF, Bayer, etc.) have significantly cut back production, though consumer-goods packaging and the construction industry aren't affected particularly badly so far. Let's assume an overall reduction of 10-15 %.
ad 7: Other industrial use
Considering the sharp drop in overall manufacturing, a reduction of 10-15 % sounds appropriate.
=> So what does this all add up to?
Quite a large number: A massive 4.8 - 7.8 % reduction in total German oil consumption compared to pre-crisis level.
Montag, 4. Mai 2009
Singin' the Trucking Blues
It's not a good time to be a maker of trucks and ship engines when transport volumes decline sharply and financing evaporates.
MAN is the world's third-largest maker of trucks (behind Daimler-Benz and Volvo), and its Q1 results show how the industry is suffering:
Orders have increased a bit from a catastrophic Q4, but compared to Q1 last year, they are still rather sobering:
- Total orders are down 53 % (domestic -46 %, international -55 %)
- Orders for busses (-18 %) and turbines (-18 %) were comparatively "stable"
- Ship engines suffered a 38 % drop
- But the real problem is trucks: Orders were down 66 %
Amazingly, MAN still managed to post a small profit. But as they are still working on old orders, revenues were down "only" 27 %, i.e. the full force of the impact has yet to hit their bottom-line.
MAN's outlook: No improvement expected for the immediate future.
By the way, it's amazing how long it took for the extent of the crisis to sink in: By accident, I stumbled over a press article which quotes the head of MAN's trucking unit as saying: "Right now, we can assume that our orders will increase in 2009". Date of the article? September 21, 2008. Just 7 months ago.
Donnerstag, 23. April 2009
Expanding Germany's Airports
According to the Handelsblatt, German politicians are arguing that Germany's major airports urgently need to be expanded.
The list is long: Frankfurt, München, Berlin, Düsseldorf, Köln/Bonn, Hamburg and Stuttgart apparently all require a substantial expansion. Emphasizing the role of airports for "growth and employment", the transport ministers of the federal government and various state governments think that the "future of German exporters" depends on an adequate expansion of airport capacity. If capacity is not expanded quickly and aggressively, air cargo traffic will move to Holland and France. Due to the sense of urgency, they suggest that cost-benefit-analysis and updated demand projections are unnecessary and should not be carried out.
I see. Has anybody told them that both passenger and air cargo traffic have been plummeting for more than half a year, and any recovery to pre-crisis levels is likely to take a long time?
The list is long: Frankfurt, München, Berlin, Düsseldorf, Köln/Bonn, Hamburg and Stuttgart apparently all require a substantial expansion. Emphasizing the role of airports for "growth and employment", the transport ministers of the federal government and various state governments think that the "future of German exporters" depends on an adequate expansion of airport capacity. If capacity is not expanded quickly and aggressively, air cargo traffic will move to Holland and France. Due to the sense of urgency, they suggest that cost-benefit-analysis and updated demand projections are unnecessary and should not be carried out.
I see. Has anybody told them that both passenger and air cargo traffic have been plummeting for more than half a year, and any recovery to pre-crisis levels is likely to take a long time?
Donnerstag, 9. April 2009
Commercial Shipping: Update
According to Bloomberg, China will bail out its ailing state-owned shipyards by directing state-owned shipping lines to pick up orders cancelled or otherwise abandoned by international buyers.
Apparently, worldwide orders for commercial vessels are down 95 % year-on-year in March, with a total order volume of just 9 ships being placed worldwide.
Meanwhile, Chinese shipyards alone had 110 cancellations in the 5 months from October to February, and it is expected that 60 % of remaining orders will be cancelled this year or next.
China Daily is running a similar article:
New orders placed with Chinese shipyards in Q1 are down 98.3 % year-on-year (orders at all shipyards worldwide are "only" down 97 %).
The China Shipbuilding Research center expects the "global shipbuilding depression" to possibly last "even more than 5 years".
And China Import-Export Bank has extended fresh credit lines of 160 bn RMB (17 bn €) to China's two largest shipyards (both state-owned). Sounds like lots of bad loans in the making...
Last but not least, the FT offers data on worldwide container shipping (from yesterday's print edition, therefore no link):
- According to analysts, the industry (i.e. all container shipping lines worldwide) is estimated to post 2009 losses of 32 bn $ (!)
- Placed orders for new container vessels amount to 49 % of the existing capacity- According to market forcasts, roughly 40 % of orders are expected to be cancelled, the rest is being built.
- Cosco (China) has outstanding orders of 89 % of capacity, Hanjin (Korea) of 72 %, and some smaller lines have >100 %.
The CEO of Neptune Orient Lines is quoted as saying: "I have no idea what in the world they (-> lines with large order books) have in mind. What would you do with that number of ships?"
See also this earlier post on this blog:The container shipping disaster
Apparently, worldwide orders for commercial vessels are down 95 % year-on-year in March, with a total order volume of just 9 ships being placed worldwide.
Meanwhile, Chinese shipyards alone had 110 cancellations in the 5 months from October to February, and it is expected that 60 % of remaining orders will be cancelled this year or next.
China Daily is running a similar article:
New orders placed with Chinese shipyards in Q1 are down 98.3 % year-on-year (orders at all shipyards worldwide are "only" down 97 %).
The China Shipbuilding Research center expects the "global shipbuilding depression" to possibly last "even more than 5 years".
And China Import-Export Bank has extended fresh credit lines of 160 bn RMB (17 bn €) to China's two largest shipyards (both state-owned). Sounds like lots of bad loans in the making...
Last but not least, the FT offers data on worldwide container shipping (from yesterday's print edition, therefore no link):
- According to analysts, the industry (i.e. all container shipping lines worldwide) is estimated to post 2009 losses of 32 bn $ (!)
- Placed orders for new container vessels amount to 49 % of the existing capacity- According to market forcasts, roughly 40 % of orders are expected to be cancelled, the rest is being built.
- Cosco (China) has outstanding orders of 89 % of capacity, Hanjin (Korea) of 72 %, and some smaller lines have >100 %.
The CEO of Neptune Orient Lines is quoted as saying: "I have no idea what in the world they (-> lines with large order books) have in mind. What would you do with that number of ships?"
See also this earlier post on this blog:The container shipping disaster
Dienstag, 7. April 2009
So many ways to lose your money...
Over the last few years, many Germans put money into Schiffsbeteiligungen (closed funds investing in commercial vessels).
Considering the horrible state of the commercial shipping market, most of them are probably regretting it by now.
But hey, good news: According to the FTD, 22.1 % of the invested funds are not exposed to the shipping market at all.
Why? Because 22.1 % is the average proportion of so-called "soft costs" (expenses for distribution, marketing and administration).
Isn't that a relief: Investors only have 78 % of their money to worry about, because the other 22 % are anyway gone...
(For comparison: Closed real estate funds have average soft costs of 18.3 % if they invest abroad, or 15.6 % if they invest domestically)
Considering the horrible state of the commercial shipping market, most of them are probably regretting it by now.
But hey, good news: According to the FTD, 22.1 % of the invested funds are not exposed to the shipping market at all.
Why? Because 22.1 % is the average proportion of so-called "soft costs" (expenses for distribution, marketing and administration).
Isn't that a relief: Investors only have 78 % of their money to worry about, because the other 22 % are anyway gone...
(For comparison: Closed real estate funds have average soft costs of 18.3 % if they invest abroad, or 15.6 % if they invest domestically)
Mittwoch, 1. April 2009
Asia's Travel Industry
Worldwide air travel has been seeing large declines over the last 6 months. Business/first class traffic is down very sharply, but economy is also down.
For some reason, Asia seems to be hit even harder than the rest of the world:
Singaporean hotel revenues in Jan/Feb 2009 are down 29 % yoy. Roughly half of the drop is due to lower visitor arrivals, the other half due to lower prices.
Hong Kong airport and Cathay Pacific Airlines are also seeing sharp declines in Jan/Feb passenger numbers.
Mainland China, on the other hand, is seeing two conflicting trends: International passenger numbers are down 16 % (roughly in line with Singapore's experience), whereas passenger numbers on domestic flights are up 17 % (figures are also Jan/Feb). Extremely aggressive price cutting might have something to do with the growth in domestic air traffic, though.
For some reason, Asia seems to be hit even harder than the rest of the world:
Singaporean hotel revenues in Jan/Feb 2009 are down 29 % yoy. Roughly half of the drop is due to lower visitor arrivals, the other half due to lower prices.
Hong Kong airport and Cathay Pacific Airlines are also seeing sharp declines in Jan/Feb passenger numbers.
Mainland China, on the other hand, is seeing two conflicting trends: International passenger numbers are down 16 % (roughly in line with Singapore's experience), whereas passenger numbers on domestic flights are up 17 % (figures are also Jan/Feb). Extremely aggressive price cutting might have something to do with the growth in domestic air traffic, though.
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