Markets

Honeywell Software to Cut Operating Costs of Japan Airlines

Japan Airlines Co., Ltd., the flag carrier airline of Japan, has recently adopted the GoDirect Fuel Efficiency software of industrial goods manufacturer Honeywell International Inc.HON to reduce its operating costs. Such proactive steps seem to be the call of the hour as global airline firms seek to compete on razor thin margins amid a challenging macroeconomic environment.

The GoDirect Fuel Efficiency software forms an integral part of the Honeywell GoDirect Flight Services family of Connected Aircraft offerings within its fuel management services business. The software analyzes data from various sources to offer an integrated user-friendly data interface, replete with fuel-saving recommendations and analytic inputs. These recommendations can be easily deployed by airlines to reduce their daily operating costs through lower fuel consumption and optimum fuel savings in accordance with the European Union's 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 thereby devise proper methods to save turbine fuel. Fuel consumption usually accounts for 20-40% of the total operating costs of an airline and minor fuel savings can lead to huge profitability. The use of GoDirect Fuel Efficiency software have reportedly led to fuel savings of over 2% annually for existing customers that include Finnair, Etihad Airways and Turkish Airlines. Japan Airlines also expects to improve its bottom line through utilization of this software and thereby achieve its fuel-efficiency targets.

With state-of-the-art products, Honeywell has outperformed the Zacks categorized Diversified Operations industry in 2016 with an average return of 11.8% compared with 6.7% for the latter. The company has a positive earnings history in the trailing four quarters, while estimate have remained steady. Honeywell's diversified business portfolio has the potential to earn consistent above-average returns and mitigate operating risks. The company's diligent focus on working capital management, free cash flow generation and a conservative balance sheet remain key positive attributes amid a challenging macroeconomic environment.

However, Honeywell has offered a lackluster guidance for 2017 owing to continued macroeconomic woes. The company expects a tepid demand pattern for its business jets and mobile scanners in 2017 due to sluggish global growth, volatility in crude oil prices and a tempered Chinese economy. Consequently, the company projects 2017 earnings in the range of $6.85-$7.10 per share, while revenues are anticipated to be down 1% to up 2% year over year. For fourth-quarter 2016, the company also anticipates earnings of $1.74 per share, which is at the lower end of its previously guided range of $1.74-$1.78.

Three other players in the industry, namely General Electric Company GE , 3M Company MMM and United Technologies Corporation UTX have already reported their fourth-quarter results. Let's see what Honeywell's fourth-quarter results have in store, when it reports on Friday.

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3M Company (MMM): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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