Founder & Managing Director, AIR Control Tower, AIR Control Tower

Neil Glynn

Founder & Managing Director, AIR Control Tower

AIR Control Tower

AIR Control Tower is an independent research and analysis platform. Its mission is to provide impactful insight and analysis across the global airline industry at a company and market level via detailed financial models to aid decision making for key stake holders at a time when risks have seldom, if ever, been higher and the global sector grapples with the imperative of funding de-carbonisation. Unique analysis forecasting global carrier-level earnings/cash flows, and restructuring/de-leveraging prospects, is designed to dynamically assess the health of the industry, predict surprises and identify potential requirements for third party support.

Insights on the global airline industry

Equity Bottom-Up

Virgin Australia Holdings / Equity Bottom-Up

<ul>
<li>FY23 performance positions VA at the top table relative to global LCC financial performance</li>
<li>Global analysis of #2 positions behind a strong market leaders suggests an efficient VA should be well positioned to sustainably outperform the global airline industry's average financial performance</li>
<li>Forecasting mean reversion for operating performance but aircraft financing savings should sustain superior profitability and cash flow generation than pre-COVID.</li>
</ul>


FY23 performance positions VA at the top table relative to global LCC financial performance
Global analysis of #2 positions behind a strong market leaders suggests an efficient VA should be well positioned to sustainably outperform the global airline industry's average financial performance
Forecasting mean reversion for operating performance but aircraft financing savings should sustain superior profitability and cash flow generation than pre-COVID.


Virgin Australia - Outperforming Most LCCs Globally; Positioned for New Era of Cash Flow Generation

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<a href="https://www.smartkarma.com/entities/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a> has <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02391761-2A1307944?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> a consortium comprising IFM Investors, QSuper, and fund manager Global Infrastructure Management has made an indicative, non-binding Offer by way of a Scheme at $8.25/share,  a 42% premium to last close.  
SYD has commenced an assessment of the proposal but mentions the Offer price is below the Covid-cliff, and that the pandemic effect on operations is expected to be short-term.  
Separately, the Offer is conditional on regulatory approvals such as FIRB and ACCC. As a critical aviation asset, it's not just the opportunistic price that could torpedo this deal.
More below the fold.

Sydney Airport (SYD AU) has announced a consortium comprising IFM Investors, QSuper, and fund manager Global Infrastructure Management has made an indicative, non-binding Offer by way of a Scheme at $8.25/share,  a 42% premium to last close.  
SYD has commenced an assessment of the proposal but mentions the Offer price is below the Covid-cliff, and that the pandemic effect on operations is expected to be short-term.  
Separately, the Offer is conditional on regulatory approvals such as FIRB and ACCC. As a critical aviation asset, it's not just the opportunistic price that could torpedo this deal.
More below the fold.

Sydney Airports (SYD AU): Opportunistic Tilt Amid Cloudy Future

Guangzhou Baiyun International Airport / Equity Bottom-Up

Within the hospitality-affected complex, the airline industry garners the lion's share of the negative news from the Covid fall-out. The <a href="https://www.bloomberg.com/quote/280456Z:CN" target="_blank" rel="noopener">International Air Transport Association</a> said last month it estimates losses in 2021 of US$48bn, up from $38bn previously. And that's on top of an estimated $370bn of losses to the industry in FY20, <a href="https://www.icao.int/Newsroom/Pages/2020-passenger-totals-drop-60-percent-as-COVID19-assault-on-international-mobility-continues.aspx" target="_blank" rel="noopener">according</a> to the International Civil Aviation Organization.
But spare a thought for the airports which facilitate the arrival and departure of these airlines, as this crisis becomes increasingly protracted, and in many ways, deeper than many anticipated 18 months ago.
Amid the doom and gloom, there are parking bays of good news. April's domestic air passenger traffic in China was ~96% of December 2019 levels. <a href="https://www.smartkarma.com/entities/shenzhen-airport-co-ltd" target="_blank" data-smartkarma-citation="entities:15522:1" rel="noopener">Shenzhen Airport Co A (000089 CH)</a> (SZAC) is at level pegging with overall traffic numbers in 2019, and domestic flow into SZAC, <a href="https://www.smartkarma.com/entities/shanghai-international-airport-co-ltd" target="_blank" data-smartkarma-citation="entities:6511:1" rel="noopener">Shanghai International Airport (600009 CH)</a>, and <a href="https://www.smartkarma.com/entities/guangzhou-baiyun-international-airport" target="_blank" data-smartkarma-citation="entities:10819:1" rel="noopener">Guangzhou Baiyun International Airport (600004 CH)</a> all exceed 2019 levels. 
Yet outside of the Chinese airport space, where international passenger throughput has historically commanded &gt;40%+ of total throughput - up to 80% for <a href="https://www.smartkarma.com/entities/airports-of-thailand-pcl" target="_blank" data-smartkarma-citation="entities:239:1" rel="noopener">Airports of Thailand (AOT TB)</a> -  the outlook remains subdued, and largely uncertain.
Just this week, Thailand recorded its highest level of Covid-related fatalities, Taiwan is facing its first serious outbreak, and Australia's state of Victoria entered its fourth lockdown. 
Provided airports have sufficient funds to ride out the tough times to the other side of the valley, all will undergo a major re-rate when international travel restarts. Yet the vaccine rollout - and uptake - and when international borders will reopen, remain indeterminate.
<div class="content-highlight">
What's Original?
This insight presents a comprehensive view of the key Chinese airports (<a href="https://www.smartkarma.com/entities/beijing-capital-international-airport-bcia" target="_blank" data-smartkarma-citation="entities:10626:1" rel="noopener">Beijing Capital International Airport (BCIA) (694 HK)</a>, Shenzhen Airport, <a href="https://www.smartkarma.com/entities/shanghai-international-airport-co-ltd" target="_blank" data-smartkarma-citation="entities:6511:1" rel="noopener">Shanghai International Airport (600009 CH)</a>, and <a href="https://www.smartkarma.com/entities/guangzhou-baiyun-international-airport" target="_blank" data-smartkarma-citation="entities:10819:1" rel="noopener">Guangzhou Baiyun International Airport (600004 CH)</a>, together with <a href="https://www.smartkarma.com/entities/airports-of-thailand-pcl" target="_blank" data-smartkarma-citation="entities:239:1" rel="noopener">Airports of Thailand (AOT TB)</a>, <a href="https://www.smartkarma.com/entities/malaysia-airports-hldgs-bhd" target="_blank" data-smartkarma-citation="entities:117:1" rel="noopener">Malaysia Airports Hldgs (MAHB MK)</a>, <a href="https://www.smartkarma.com/entities/japan-airport-terminal-co" target="_blank" data-smartkarma-citation="entities:18034:1" rel="noopener">Japan Airport Terminal Co (9706 JP)</a>, <a href="https://www.smartkarma.com/entities/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a> and <a href="https://www.smartkarma.com/entities/auckland-intl-airport-ltd" target="_blank" data-smartkarma-citation="entities:597:1" rel="noopener">Auckland Intl Airport (AIA NZ)</a>.
</div>

Within the hospitality-affected complex, the airline industry garners the lion's share of the negative news from the Covid fall-out. The International Air Transport Association said last month it estimates losses in 2021 of US$48bn, up from $38bn previously. And that's on top of an estimated $370bn of losses to the industry in FY20, according to the International Civil Aviation Organization.
But spare a thought for the airports which facilitate the arrival and departure of these airlines, as this crisis becomes increasingly protracted, and in many ways, deeper than many anticipated 18 months ago.
Amid the doom and gloom, there are parking bays of good news. April's domestic air passenger traffic in China was ~96% of December 2019 levels. Shenzhen Airport Co A (000089 CH) (SZAC) is at level pegging with overall traffic numbers in 2019, and domestic flow into SZAC, Shanghai International Airport (600009 CH), and Guangzhou Baiyun International Airport (600004 CH) all exceed 2019 levels. 
Yet outside of the Chinese airport space, where international passenger throughput has historically commanded &gt;40%+ of total throughput - up to 80% for Airports of Thailand (AOT TB) -  the outlook remains subdued, and largely uncertain.
Just this week, Thailand recorded its highest level of Covid-related fatalities, Taiwan is facing its first serious outbreak, and Australia's state of Victoria entered its fourth lockdown. 
Provided airports have sufficient funds to ride out the tough times to the other side of the valley, all will undergo a major re-rate when international travel restarts. Yet the vaccine rollout - and uptake - and when international borders will reopen, remain indeterminate.

What's Original?
This insight presents a comprehensive view of the key Chinese airports (Beijing Capital International Airport (BCIA) (694 HK), Shenzhen Airport, Shanghai International Airport (600009 CH), and Guangzhou Baiyun International Airport (600004 CH), together with Airports of Thailand (AOT TB), Malaysia Airports Hldgs (MAHB MK), Japan Airport Terminal Co (9706 JP), Sydney Airport (SYD AU) and Auckland Intl Airport (AIA NZ).


Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/qantas-airways-ltd" target="_blank" data-smartkarma-citation="entities:677:1" rel="noopener">Qantas Airways (QAN AU)</a> aims to raise around US$933m (A$1.36bn) via an institutional placement and another US$343m (A$500m) via a share purchase plan. The company has also announced a host of other cost savings measures and is now gearing up for an extended slowdown which will last a year or two.In this insight, I'll talk about the deal dynamics and run the deal through our ECM framework.

Qantas Airways (QAN AU) aims to raise around US$933m (A$1.36bn) via an institutional placement and another US$343m (A$500m) via a share purchase plan. The company has also announced a host of other cost savings measures and is now gearing up for an extended slowdown which will last a year or two.In this insight, I'll talk about the deal dynamics and run the deal through our ECM framework.

Qantas Placement - Banking on a Trans-Tasman Travel Bubble

On the 5 June 2020, the Treasury of the Australian Government released a 34-page <a href="https://treasury.gov.au/sites/default/files/2020-06/p2020-87595_0.pdf" target="_blank" rel="noopener">document</a> titled Foreign investment reforms, outlining the "most comprehensive" reform to Australian foreign investment review framework since the Foreign Acquisition and Takeovers Act (FATA) was introduced in 1975.
The new powers afforded the government - a draft legislation for consultation will be released next month -  will primarily address:
<ul>
<li>A new national security test that will require foreign investors (government or private), to inform the Foreign Investment Review Board (FIRB) if they are preparing to acquire a direct interest in a “sensitive national security business.”</li>
<li>
<div>Streamlining the approval processes for certain privately controlled institutional investment funds that hold purely passive foreign government funds, alongside private capital in non-sensitive sectors.</div>
</li>
<li>
Stronger penalties and enforcement powers to ensure greater compliance.</li>
</ul>
<div class="content-highlight">
This new draft legislation makes an important distinction between national security sensitive investments and others, and also makes a clear delineation between foreign government investment (FGI) which is passive and which is active.
It also may alleviate the burden on private equity firms as a result, but this proposed reform is clearly a framework for greater scrutiny on FGI and its strategic implications.
</div>
Further comments below the fold ...
<div style="text-align: left;" class="content-caption">For more on M&amp;A in Australia, please see the <a href="https://www.smartkarma.com/insights/quiddity-australia-m-a-guide-2019" target="_blank" data-smartkarma-citation="insights:30118" rel="noopener">Quiddity Australia M&amp;A Guide 2019</a> which is part of a series including... 2019 insights on <a href="https://www.smartkarma.com/insights/quiddity-japan-m-a-guide-2019" target="_blank" rel="noopener">Japan</a>, <a href="https://www.smartkarma.com/insights/quiddity-taiwan-m-a-guide-2019" target="_blank" rel="noopener">Taiwan</a>, <a href="https://www.smartkarma.com/insights/quiddity-india-m-a-guide-2019" target="_blank" rel="noopener">India</a>, <a href="https://www.smartkarma.com/insights/quiddity-singapore-m-a-guide-2019" target="_blank" rel="noopener">Singapore</a>, <a href="https://www.smartkarma.com/insights/quiddity-hong-kong-m-a-guide-2019" target="_blank" rel="noopener">Hong Kong</a>, <a href="https://www.smartkarma.com/insights/quiddity-indonesia-m-a-guide-2019" target="_blank" rel="noopener">Indonesia</a>, <a href="https://www.smartkarma.com/insights/quiddity-thailand-m-a-guide-2019" target="_blank" rel="noopener">Thailand</a>, <a href="https://www.smartkarma.com/insights/quiddity-korea-m-a-guide-2020" target="_blank" rel="noopener">Korea</a>, and the <a href="https://www.smartkarma.com/insights/quiddity-philippines-m-a-guide-2019" target="_blank" rel="noopener">Philippines</a> designed to be used as references. Updated versions will be made available from time to time, and can be found by searching for "<a href="https://www.smartkarma.com/search?q=Quiddity%20M%26A%20Guide" target="_blank" rel="noopener">Quiddity M&amp;A Guide</a>" (or clicking that link).</div>

On the 5 June 2020, the Treasury of the Australian Government released a 34-page document titled Foreign investment reforms, outlining the "most comprehensive" reform to Australian foreign investment review framework since the Foreign Acquisition and Takeovers Act (FATA) was introduced in 1975.
The new powers afforded the government - a draft legislation for consultation will be released next month -  will primarily address:

A new national security test that will require foreign investors (government or private), to inform the Foreign Investment Review Board (FIRB) if they are preparing to acquire a direct interest in a “sensitive national security business.”

Streamlining the approval processes for certain privately controlled institutional investment funds that hold purely passive foreign government funds, alongside private capital in non-sensitive sectors.


Stronger penalties and enforcement powers to ensure greater compliance.


This new draft legislation makes an important distinction between national security sensitive investments and others, and also makes a clear delineation between foreign government investment (FGI) which is passive and which is active.
It also may alleviate the burden on private equity firms as a result, but this proposed reform is clearly a framework for greater scrutiny on FGI and its strategic implications.

Further comments below the fold ...
For more on M&amp;A in Australia, please see the Quiddity Australia M&amp;A Guide 2019 which is part of a series including... 2019 insights on Japan, Taiwan, India, Singapore, Hong Kong, Indonesia, Thailand, Korea, and the Philippines designed to be used as references. Updated versions will be made available from time to time, and can be found by searching for "Quiddity M&amp;A Guide" (or clicking that link).

Quiddity M&A: Australia Foreign Investment Reforms

Australia

Virgin Australia Holdings Limited is an Australian-based  full service airline providing domestic and international operations.

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Virgin Australia Holdings (VAH AU)

Virgin Australia - Outperforming Most LCCs Globally; Positioned for New Era of Cash Flow Generation

Privately held Virgin Australia is preparing to IPO and our coverage launch is likely to be the only substantive research report, including short...

Neil Glynn

Sydney Airports (SYD AU): Opportunistic Tilt Amid Cloudy Future

A full Offer probably needs to be tabled at $9+, ~9% up from the current proposal, and an additional $2bn outlay from the Consortium. I think DD...

David Blennerhassett

Asia-Pac Airports: Ups, But Mostly Downs

Domestic passenger flow into Shenzhen Airport (000089 CH), Shanghai International Airport (600009 CH), and Guangzhou Baiyun International Airport...

David Blennerhassett

Qantas Placement - Banking on a Trans-Tasman Travel Bubble

Qantas Airways (QAN AU) aims to raise around US$933m (A$1.36bn) via an institutional placement and another US$343m (A$500m) via a share purchase...

Sumeet Singh

Quiddity M&A: Australia Foreign Investment Reforms

On the 5 June 2020, the Treasury of the Australian Government released a 34-page document titled Foreign investment reforms, outlining the "most...

David Blennerhassett

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