These Airlines are Giving Alcoa a Lift

The designs of two new Airbus and Boeing (NYSE:BA) aircraft are a saving grace for Alcoa Inc. (NYSE:AA), according to the aluminum company’s chief executive Klaus Kleinfeld, who on Friday told shareholders at the company’s annual meeting in Pittsburgh, Pennsylvania, that Alcoa is putting its energy into supplying aluminum products to the promising aerospace and automobile markets. He also said the company’s poor stock performance is due to sagging aluminum prices stemming from concerns about European debt.

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Kleinfeld told the audience of 200 that the company had been “very worried” a few years ago when many aircraft manufacturers stopped using aluminum to build new aircraft in favor of composite materials. But the designs of the new Airbus 320neo and Boeing 737-MAX call for lots of aluminum and more than 1,700 orders for the new airplanes have already been placed, he said. Alcoa has developed a new aluminum and lithium alloy sheet for fuselages, which cuts fuel use in half compared to older aircraft, and by 15 percent compared with current models, according to Kleinfeld.

Last year, Alcoa saw a total profit of $611 million, or 55 cents per share, on sales of $24.95 billion. The company’s share prices have plummeted in the last five years. Shares, which were in the $40 range in 2007 and had fallen to around $18 in early 2011, ended yesterday at $9.37, down 21 cents for the day.

Kleinfeld said that Alcoa experienced a 30-percent drop in aluminum prices in a short time, starting in mid-2011. In January, the company announced a plan to decrease its global smelting capacity by 12 percent.

Addressing questions from global union representatives at the meeting, Kleinfeld said Alcoa must change the way it operates in Brazil because it has seen weak returns on its investment in the country due to high energy prices, and that the company is studying plans for smelting operations in Australia and Greenland. Kleinfeld also noted that a joint venture with Saudi Arabian mining company Ma’aden to build the largest integrated aluminum facility in the Middle East is on time and on budget. The project’s smelter and rolling mill are slated for completion next year with a mine and refinery to follow in 2014.

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