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SUMMARY: Air Armenia becomes the 2nd national airline to go bankrupt this month, the poorly financed airline shuts down after a local bankruptcy filling by HSBC. This follows Estonian Air shutting down on November 8th after the EU Commission ordered Estonia to take back the state aid it had provided the perennial money losing airline. It is very difficult for small airlines to find a niche in the highly competitive market as competition globally intensifies, and more and more small airlines will fail, sadly most due to poor management, it is about financial mismanagement followed by poor or none existing planning, strategy, marketing or revenue management (e.g. Estonian Air according to EU Commission). Finally, since I am looking at Armenia and the Caucasus region, a quick overview of corruption is in order, from small Pacific island nations being paid to recognize some of the 5 Russian backed self declared Republics to using offshore companies to rob 3 Moldovian banks of billions of $US and money laundering out of Russia, seems very fitting.

Air Armenia the national airline of Armenia was declared bankrupt yesterday (November 25, 2015) by a court in Yerevan the capital of Armenia following a claim by HSBC Armenia. This is the second national airline to go bankrupt this month (Estonian Air shut down November 8, 2015), and more will follow as competition in the … Continue reading

UPDATE: Today Bombardier received another $1.5 billion to shore up its liquidity to keep its ‘pet’ projects (CSeries and Global 7000/8000) alive and breathing. Caisse du depot et placement du Quebec (CDPQ) the provinces largest public and private pension manager will take a 30% share in Bombardier Transportation (rail), as Bombardier prepares to burn through $US+1.0 billion next year on the CSeries (entry into service, production, and on every delivered aircraft which should be 20) and another $1.0 billion on the Global 7000/8000 in development and certification costs ($2.6 billion was spent on the failed Lear 85 – how ?). The CSeries is now 49.5% owned by the Province of Quebec, and you know where jobs will be going, as the medium term future of Downsview is now questionable (remember Canadair’s home airport of Cartierville ? sold to make a golf course and a residential area at a good profit to Bombardier) as the Q400 and CRJ lines are in their final 2-3 years of production, as backlogs for both are less than 130 (currently 5 x CRJ’s and 2 x Q400’s are being produced per month), you can do the math right ? They want federal money too as they make plans to send Q400 wing and cockpit work to Mexico as the product life cycle is firmly in the decline phase for both lines, and Quebec wants job guarantees for its stake in the Cseries. At some point in the next 2-3 years look for business jet work (inc. G7000/8000) going to Montreal. Why does the public put in money when the Beaudoin and Bombardier family control 54% of voting rights with 14% of equity ? and they are responsible for the current mess, company needs good corporate governance. The reality is that there are at best only “REALISTIC” 140 CSeries orders after 7 years of sales effort, Airbus was approached, Embraer was approached and no takers were found for the program and now they are stuck with it, slowly writing it down with huge losses. It is not only about the state of finances, but the segment (110 to 149 seats) it is positioned in, but also the huge discounting by Airbus and Boeing which will require +40% discounts by Bombardier to win any large order. Time to change the Board as you cannot solve your problems with the same people that created the problems in the first place, the Lear 85 was written down by $US 2.6 billion and the CSeries was written down by $US 3.2 billion, due to mismagement of both programs.The stock, (TSX:BBD.B) closed at $1.28 today down from $1.36 a week ago and down 70.3% from a year ago, a further drop of 22% and its a penny stock ! The financial markets are NOT impressed, everyone knows that its all a indirect BAILOUT as the company lost $4.9 billion last Quarter ($700 million without write downs) and now you have the Quebec Government in the CSeries program, and that is never good for any business as Canadian Governments have shown that they have NO idea how to run a business, we saw that with Canadair, de Havilland, Air Canada, etc. Lastly, no one discusses it but the BIG problem for the CSeries is that it will NOT make money in an industry discounting 40% off List Price today, and production of narrow body airliners is going to 125 units per month, and Bombardier plans 10 per month and it too will have to discount 40% down, making profitability at best a long term proposition, if ever.

Today Bombardier got another bail out from the Province of Quebec, this time by getting Caisse de depot et placement du Quebec (CDPQ),  Quebec’s long term public and private pension fund, to buy 30% of its Bombardier Transportation (rail business) for $1.5 billion (valuing the division at only $5.0 billion), on top of the recent … Continue reading

UPDATE: The opening of St. Helena Airport in the South Atlantic is delayed by 3 months as ILS calibration flights in September discovered that the DVOR and Localiser have to be moved and a whole new instrument approach into HLE has to be redesigned. A short delay for the very anxious 4,200 inhabitants that are eager to be ‘connected’ by air to the rest of the world, and to say good bye to a 5 day one way voyage to Cape Town, that has been the only regular outside link for many years. Last month was the 200th anniversary of the arrival on St. Helena of exiled (his 2nd exile) Emperor of France, His Majesty Napoleon Bonaparte after his defeat at the Battle of Waterloo, he would die on St. Helena on May 5, 1821, and soon his final resting place at Longwood, will be easily accessible to all, after 200 years of isolation from the rest of the world.

The opening of the world’s most remote airport, St. Helena Airport (IATA-HLE, ICAO-FHSH) in the South Atlantic, will now be delayed from February, 2016 to May, 2016. The September ILS calibration tests, which saw the very first aircraft ever to land on St. Helena, have not gone well. The team from South Africa’s Flight Calibration … Continue reading

UPDATE: What is the future for Porter Airlines without Bombardier CS100 jets out of CYTZ ? and Quebec’s new ownership of the Bombardier CSeries, will Ontario jobs go to Quebec ? Last week the Canadian Federal Government ruled that it will not change the ban on jet operation at Toronto’s Billy Bishop Toronto Island Airport (CYTZ), which leaves Porter Airlines in “limbo” about its future, as it has been in a “holding pattern” for 4 years now with 26 x Q400’s waiting to see what happens around it as Chorus (Air Canada’s CPA partner) and WestJet’s Encore, both Q400 operators grew their fleets and and are expanding their operations network in Eastern Canada. Is their a sustainable business model for Porter Airlines today ? The CSeries order was a ruze to get investors excited about another IPO for Porter Airlines, since the failed attempt in 2010, but it was always a questionable strategic move and now without the jets, and little growth in the past 4 years, an IPO now will NOT generate much interest from investors in an airline that has been stagnate and basically hit a “wall” in growth potential. I am sure the investors who forked out C$ 750 million for the CYTZ passenger terminal this past January in the “hope” the political decision will go in favor of lifting the jet band, are greatly disappointed as “hope” for a bright future at CYTZ is now greatly diminished, like the value of the terminal building and Porter’s debt thanks to the extremely generous price for the terminal (in the 2010 IPO documents it was valued at around $58 million ?). Meanwhile Chorus Aviation (Jazz) has a newly created position of VP for Strategic Investments and Mergers/Acquisitions, most likely looking to duplicate the Voyageur Airways acquisition to have low cost operators around Canada, and maybe Porter Airlines ? or go international though their PLUNA adventure in Uruguay was a disaster a few years back. Will Bombardier pull another Cartierville Airport (CYCV) deal (part of Canadair and then sold for a hefty profit, now a golf course and housing development) and sell Downsview Airport (CYZD) to developers and move everything to Quebec while pocketing $C 1.0+ billion from real estate developers ? with at best 25 months of Q400 and only 15 months of CRJ production in the backlog, be sure that all options are on the table at Bombardier today, as the Q400 and CRJ brands are in their final inning (less then 140 in backlog, and few new orders, in fact so far in 2015 only 7 new CRJ-900’s have been ordered vs 140+ Embraer regional jets), and lots of Q400 and surely CRJ work will soon go to Mexico before they stop the production line.

Porter Airlines, which just celebrated its 9th anniversary on October 22nd, has just receives the bad news from the new Liberal Government in Ottawa, that they will NOT re-open the tri-partite agreements between the City of Toronto, Toronto Port Authority and the Federal Government, which required unanimous consent to lift the current ban on jets … Continue reading

UPDATE: The end of Estonian Air, and airBaltic’s new capital and it’s “undesirable” and contentious new investor and Russia’s SSJ-100 SuperJet desperate and murky measures to sell into the Western European market: As predicted along time ago, Estonian Air will shut down its operation tomorrow November 8, 2015 after today’s EU Commission order to the Estonian Government to recover the Euro 85 million ($US 92 million) in “illegal” state aid given to the state owned airline the past 5 years. This is the 2nd airline this year (Cyprus Airways back in January was forced into liquidation) that had to close down after the EU ruled that the airlines received state aid beyond the “one time, last time” guidelines for restructuring aid. Estonian Air was a cash burning operation since 2010, going through Euro 87.6 million ($US 95 million) in 5 years, with a current fleet of just 3 x CRJ-900’s and 2 x CRJ-700’s, an inept underachiever for 5 years that even according to the EU Commission, did NOT have a credible restructuring plan that ensured it will not be going back to the trough of public taxpayers money to keep flying. The airline had NO sustainable business plan, other than “white label” flying (ACMI operations) for third party airlines, which are not a long term sustainable business. Realistically, Estonia with only 1.3 million people is a small country and aviation market (only 44nm from Helsinki, a big northern hub) and Europe’s 51 independent countries cannot ALL have their own national airlines, it is just not economically viable, and state aid is NOT an option, it distorts competition against private airlines. Malev’s closure in 2012 showed that when the home airline does close down, new airlines and routes are picked very quickly by other airlines. BUT the stubborn Estonians already have Plan B in place for weeks, the same day Estonian Air shuts down, Nordic Aviation starts up and ready to use Euro 40.7 million of taxpayers money and Adria Airways AOC and throw it all away again a few years down the road, as some people will just never learn from their mistakes ! Meanwhile next door in Latvia, the state owned airline, airBaltic is about to get a Euro 80 million ($US 87 million) state cash injection to shore up its negative Euro -75 million ($US -82 million) shareholder equity so it can borrow money to finance $US 1.3 billion for the 12 ordered and 7 optioned Bombardier CS300’s, again the EU Commission will have to investigate as this is state aid to bolster a national airline, and it does affect competition. Also again there is some ‘funny’ stuff going within the airline and government has a dubious new German investor (Ralf-Dieter Montag-Girmes), very close to the Russians and their aircraft industry, buys 20% of airBaltic for Euro 52 million (US$ 57 million) valuing the little airline at a ridiculous $US 285 million, and he has been called the “least bad option” and a “undesirable” investor with “potential security risks” by the recently fired Latvian Transport Minister, Mr. Matiss. The Russians are quietly targeting airlines like airBaltic, VLM, City Jet, Greenland Express, Adria Airways, etc. for the Sukhoi SSJ-100 SuperJets by buying into these airlines through intermediaries, investing in them or management buyouts or going to bed with their existing owners or investors as billions of dollars are going into the SSJ-100 program and its ultimate success lies in breaking into the western commercial aircraft market, and it must open the door for the Irkut MC-21 narrowbody airliner due in 5 years time as well. Russia it is ready to do ALL it can, huge lease and price reductions to bribes or buying “influence” in small European airlines to place its SSJ-100’s, which has had 7 airlines go bankrupt while 8 customers which ordered 77 SSJ-100’s with 29 options have not been heard from in a long time, its all murky with the Russians, just beware !

I have repeatedly said that Estonian Air will become the next European airline forced to shut down its operation because the airline repeatedly benefited from illegal state aid for its existence. (READ BLOG of JUNE 17, 2015) Well today, November 7, 2015 the European Commission ordered Estonia to recover the state aid given to Estonian Air … Continue reading