BBA Aviation grounded by mixed third quarter update
Aircraft maintenance group BBA Aviation issued a mixed third-quarter report but claimed trading was in line with management's expectations.
Signature Aviation
396.00p
17:15 28/05/21
An encouraging recovery from the business and general aviation (B&GA) market in North America has continued, boosting flight support revenue 8% on an organic basis, though a pall was cast by cost pressures at its ASIG refueling business from new contracts at Heathrow Terminal 2 and Singapore's Changi and the loss of a $36m-a-year ground handling contract at John F Kennedy airport in New York from early 2015.
The ASIG arm also continued to experience pricing pressure in certain markets, the company added.
Furthermore, its aftermarket services arm endured flat revenue, with volumes slightly softer than expected despite a modest improvement and engine repair and overhaul (ERO) experiencing some short-term issues that hit margins as the new engine repair and test facility came up to speed.
B&GA movements in Europe were down 1% year to date and commercial movements remained weak with a decline of 2% in North America and flat in Europe.
The ERO's Dallas Airmotive business is being investigated by the with the US Department of Justice in relation to payments in South America – with an exceptional charge of $15m is expected to be taken in the fourth quarter as a settlement with the DoJ.
This is more than balanced by a positive settlement with the US IRS, with $20.6m booked as an exceptional gain in the period.
Overall the group was trading "broadly in line" with expectations, management insisted, with group revenue 5% higher than the prior year and up 5% on an organic basis, excluding the impact of exchange rates, fuel prices, acquisitions and disposals.
Broker N+1 Singer said the ongoing signs of recovery in US "bizjet" was positive news given the flat growth that has been seen in recent years, but issues at ASIG were mitigating the improvements.
"The investigation in the US is an unwelcome development and we await further updates."