Honeywell Software to Cut Operating Costs of Japan Airlines
Japan Airlines Co., Ltd., Japan’s flagship carrier, recently adopted GoDirect Fuel Efficiency software from industrial property maker Honeywell International Inc. HON to reduce its operating costs. These proactive measures seem to be the call of the hour as global airlines seek to compete on razor thin margins amid a challenging macroeconomic environment.
GoDirect Fuel Efficiency software is an integral part of the Honeywell GoDirect Flight Services family of Connected Aircraft in its fuel management services business. The software analyzes data from multiple sources to provide an integrated and easy-to-use data interface, packed with fuel economy and analytical input recommendations. These recommendations can be easily implemented by airlines to reduce their daily operating costs through lower fuel consumption and optimum fuel savings under EU emissions trading system legislation.
By adopting this software, Japan Airlines aims to benefit by identifying the right tools and data to monitor fuel consumption and thus develop appropriate methods to save fuel from the turbine. Fuel consumption usually accounts for 20-40% of an airline’s total operating costs and small fuel savings can lead to huge profitability. The use of GoDirect Fuel Efficiency software would have led to fuel savings of more than 2% a year for existing customers including Finnair, Etihad Airways and Turkish Airlines. Japan Airlines also hopes to improve its bottom line with the use of this software and thus achieve its fuel efficiency goals.
With state-of-the-art products, Honeywell outperformed the Diversified Operations industry categorized by Zacks in 2016 with an average return of 11.8% compared to 6.7% for the latter. The company has a history of positive gains in the four quarters drifting, while the estimate remained stable. Honeywell’s diversified business portfolio has the potential to deliver above-average returns and mitigate operational risks. The company’s diligent focus on managing working capital, generating free cash flow and a conservative balance sheet remain important positive attributes amid a challenging macroeconomic environment.
However, Honeywell offered a dull orientation for 2017 because of continuing macroeconomic problems. The company expects a lukewarm demand pattern for its executive jets and mobile scanners in 2017 due to slow global growth, volatility in crude oil prices and a moderate Chinese economy. As a result, the company projects 2017 earnings in the range of $ 6.85 to $ 7.10 per share, while revenues are expected to fall 1% to 2% over the previous year. For the fourth quarter of 2016, the company also anticipates earnings of $ 1.74 per share, which is at the bottom of its previously guided range of $ 1.74 – $ 1.78.
Three other industry players, General Electric Company GE, MMM of 3M Company and United Technologies Corporation UTX have already released their results in the fourth quarter. Let’s see what the results of Honeywell’s fourth quarter have in store when it reports on Friday.
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