AFM Issue 86 by AFM Magazine

The business and financing of airline operations

Interview: ELFC CEO Interview: CFM CEO MTU on engine maintenance CIT on airline credit

Engine advancements: No turning back Published by

Septemberâ&#x20AC;&#x201C;October 2013 Issue 86 www.afm.aero

Foreword Editor Mary-Anne Baldwin Mary-Anne@afm.aero +44 (0)208 831 7511

Contributors Chris Kjelgaard, Martin Rivers, Martin Roebuck, Lucy Siebert and Daniella Horwitz.

he day of going to print with this special engine edition of was, quite fittingly, a big day for the aircraft engine sector.

Firstly, Lufthansa kick-started programmes for both the 777-9X aircraft and its new engine, the GE9X, by placing their first orders.

Advertising Manager Ellis Owen Ellis@afm.aero +44 (0)208 831 7519 Editorial Director Joe Bates joe@aviationmedia.aero

It might be too early to be excited – the 777X family hasn’t even been launched and its first delivery isn’t due until the end of the decade – but let’s face it, we’re going to anyway.

Design Andrew Montgomery andy@afm.aero Website Jose Cuenca jose@aviationmedia.aero Published on behalf of MRO Network by Aviation Media Sovereign House 26-30 London Road Twickenham, TW1 3RW, UK Managing Director & Publisher Jonathan Lee Jonathan@aviationmedia.aero AFM IS A FULLY AUDITED MAGAZINE Website: www.afm.aero AIRLINE FLEET MANAGEMENT AFM does its best to use recycled products or those from renewable sources. (ISSN 1757-8833) Online: 1757-8841 (USPS 022-324) is published bi-monthly by UBM Aviation Publications Ltd and distributed in the USA by SPP, 95 Aberdeen Road, Emigsville PA. Periodicals postage paid at Emigsville, PA. POSTMASTER: send address changes to AIRLINE FLEET MANAGEMENT, c/o PO Box 437, Emigsville PA 17318.

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The GE9X, which will be in the 100,000lb thrust class, will deliver a 10 per cent improvement in fuel burn over today’s GE90-115B and includes new technology such as a third-generation twin annular pre-swirl combustor and ceramic matrix composites. It’s certainly exciting stuff. But the same day didn’t deliver great news to Pratt & Whitney and Rolls-Royce. The two dropped their proposal, made back in 2011, to form a joint venture because they believe regulators would reject the tie-up on the grounds their combined market share would be anti-competitive. The engine OEMs had planned to work together to design and build Pratt & Whitney’s geared turbofan technology for the single-aisle market. However, both companies said they would press ahead with developing geared turbofan and open rotor technology for the 120-230 seat passenger aircraft that will replace the A320 and 737.

It’s bad news for the two OEMs but perhaps good news for the airlines, which should have a wider engine choice. Either way, it will certainly spark debate. But before you start your discussion, don’t forget to read this issue of , you might gain a few things to pepper your conversation with! Within these pages you’ll learn ELFC’s CEO, Jon Sharp’s thoughts on the engine leasing market and you’ll hear from MTU about engine maintenance. You can also read our interview with CFM International’s CEO, Jean-Paul Ebanga, as he talks about the LEAP engine, which started its ground testing in early September. Don’t say we don’t treat you!

Editor Mary-Anne Baldwin

The views expressed in each edition of Airline Fleet Management (AFM) are not necessarily the views of MRO Network, but of individual authors and contributors and MRO Network shall therefore not be liable for the contents of any articles included in this publication. AFM, part of UBM Aviation, has used its best efforts in collecting and preparing material for inclusion in AFM but can not and does not warrant that the information contained in this product is complete or accurate and does not assume and hereby disclaims, liability to any person for any loss or damage caused by errors or omissions in AFM whether such errors or omissions result from negligence, accident or any other cause.

afm • Issue 86 – September–October • www.afm.aero

The business and financing of airline operations AIRLINE FLEET MANAGEMENT

Interview: ELFC CEO Interview: CFM CEO MTU on engine maintenance CIT on airline credit

Engine advancements: No turning back ISSUE 86 September–October 2013

Published by

September–October 2013 Issue 86 www.afm.aero

Issue 86 September - October

In this issue

03 10 18 22

Foreword

18 22

NEWS ROUND UP

The latest on deals, mergers, appointments and more FOCUS

One to one: Jon Sharp, CEO of ELFC AFM talks to Jon Sharp, CEO of Engine Lease Finance Corporation (ELFC), about the engine lease market.

One to one: Jean-Paul Ebanga, CEO of CFM

Daniella Horwitz speaks to Jean-Paul Ebanga, CFM International’s president and CEO, about the company’s past success and future ambitions.

TRADING, LEGAL AND FINANCE

Raising the stakes: The ASU’s impact on airline credit

Damon D’Agostino, chief commercial officer at CIT Aerospace, discloses how the leasing company assesses airline credit in the wake of the latest Aircraft Sector Understanding.

afm • Issue 86 – September–October • www.afm.aero

CONTENTS

TRADING, LEGAL AND FINANCE

Lease of life: AJW on its leasing venture

40 46

Steve Williams, director of aircraft engine services at AJW Aviation, whose core focus is aircraft spares, tells us why the company is venturing into leasing.

FLEET OPERATIONS

Leading LCCs: Is low-cost enough? Martin Roebuck examines some of the ways that low-cost airlines are revolutionising the business.

Frequent flyers: Building custom

Martin Rivers examines frequent flyer programmes and speaks to United Airlines’ Jeff Foland about how its MileagePlus programme brings repeat custom.

MAINTENANCE OPERATIONS

Turning a profit: MTU on engine maintenance

Leo Koppers, SVP of marketing and sales, and Katia Diebold-Widmer, head of marketing for MTU Maintenance, talk to Chris Kjelgaard about the engine MRO market and the company’s position within it.

DATA

Industry data

Data including: Aircraft deals and orders; aircraft list prices and lease rates; engine market values and lease rates.

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afm • Issue 86 – September–October • www.afm.aero

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Keep it clean In today’s environment, eight flights a day can basically make a mess of your fuel budget. Luckily for you, the unique LEAP debris rejection system can keep your engine operating cleaner and more efficiently. For a lot longer. It’s just one more way CFM works harder to make your job easier. Go to cfmaeroengines.com CFM International is a 50/50 joint company between Snecma (Safran) and GE.

Superior performance | Lower cost of ownership | Greater reliability

MORE TO BELIEVE IN

NEWS

Will AA and US ever merge?

US federal judge has approved American Airlines’ (AA) plan to emerge from Chapter 11 bankruptcy protection should its merger with US Airways go ahead. The federal bankruptcy judge, Sean Lane, said: “There can be no dispute that the plan is feasible if the merger succeeds.” However, the US Department of Justice (DoJ) has challenged the tie-up on grounds of anti-competition. A trial is scheduled for November and if authorities reject the merger, AA would have to submit a new bankruptcy strategy. Shareholders, creditors and the European Union approve of the proposed merger and the airlines have invested much time and money planning the tie-up. According to the DoJ – which approved other large tie-ups between Delta and Northwest; Continental and United; and Air Tran and Southwest – such mergers allow airlines to hike fees including ancillary charges for checked bags and flight changes. “These fees have become huge profit centres for the airlines. In 2012, domestic airlines generated more than $6bn in fees from checked bags and flight changes alone,” the department said in a statement. In the DoJ’s argument against the deal, it highlighted a number of public statements made by the airlines.

At an industry conference in 2012, US Airways’ president, Scott Kirby, said: “Consolidation has...allowed the industry to do things like ancillary revenues.... That is a structural permanent change to the industry and one that’s impossible to overstate the benefit from it.” He was also quoted as saying the carrier had introduced “three successful fare increases... to customers because of consolidation.” Indeed, AA has already said that if it merged it would drop its Advantage Fares scheme on some routes, with the cost to its customers – which last year reached 175,000 on those routes – being higher fares. Bill Baer, assistant attorney general in charge of the DoJ’s antitrust division, said: “If this merger goes forward, even a small increase in the price of airline tickets, checked bags or flight change fees would result in hundreds of millions of dollars of harm to American consumers.” The airlines argue that without the tie-up, passengers would lose out on greater connectivity. Other benefits of the merger include reduced costs through synergies, which would ultimately be passed on to the passenger. AA also argues that the deal would allow it to emerge from its bankruptcy as a solid and stable carrier, although Baer rebuffed: “Both airlines have stated they can succeed on a standalone basis and consumers deserve the benefit of that continuing competitive dynamic.”

NEWS IN BRIEF Ryanair settles over safety scandal Ryanair has reached an out-of-court libel settlement with the Daily Mail. The airline sued the newspaper over an article that reported concerns over the safety of the airline’s fuel use. The article followed Channel 4’s Dispatches documentary entitled ‘Ryanair: Secrets from the Cockpit’ in which John Goss, a Ryanair pilot, claimed the airline’s fuel programme was unsafe. The carrier is also suing Channel 4, the Independent, Irish Independent and John Goss. In a statement, Ryanair’s lawyer said it will “vigorously pursue Channel 4” for its broadcast, which “sought to undermine our client’s internationally acknowledged safety record spanning three decades.”

Bombardier to sell Flexjet Bombardier is to sell its fractional jet operation, Flexjet, to a US buyer, which in turn has placed an order for up to 245 Bombardier business jets. A group led by Directional Aviation Capital, an aviation private investment firm, will buy Flexjet for £185m. In a separate deal, the investor also placed a firm order for 85 biz jets, worth $1.8bn at list prices. However, with an extra 160 options, the deal could be worth as much as $5.2bn at list prices. The order includes: next gen Challenger 350s, Challenger 605s, Learjet 75s and Learjet 85s. Deanna White will continue to lead Flexjet under its new ownership.

Safair to launch low-cost subsidiary Safair has been granted approval to launch a new domestic low-cost airline, FlySafair. The low-cost carrier is set to start flying by 4Q 2013 following approval from the South Africa’s Air Service Licensing Council. FlySafair will offer 10 daily flights between Johannesburg and Cape Town, using two 737400 aircraft. Dave Andrew, CEO of Safair, said: “The launch of FlySafair represents a natural evolution of our business.” He added: “We would like to remind the public that we have been flying commercially for almost half a century already and we have no doubt that FlySafair will only serve to further grow the domestic market.”

afm • Issue 86 – September–October • www.afm.aero

NEWS

Cyprus Airways reveals its plan B

Cyprus Airways’ chairman, Tony Antoniou, has revealed a contingency plan in case the bankrupt airline is wound down. Cyprus’ flag-carrying airline is awaiting approval from the European Union’s Competition Commission regarding its plans for a €54m ($72m) turnaround project. Should it be rejected, Cyprus’ air transport network would suffer significantly. In which case, the plan is for the airline’s subsidiary, Cyprair Tours, a tour operating company, to continue its parent airline’s flights, taking both its slots and staff. Regardless of what form it takes, the carrier will have to battle against the country’s poor economy as well as any impact from the potential military attack on Syria. The carrier has already rescheduled a flight from Larnaca to Beirut due to the tensions. Britain’s government has suggested involving its military bases in Cyprus and has already deployed six RAF Typhoons to Akrotiri, Cyprus, as a defensive measure. The commission is due to give its decision next month. Should the plan go ahead, the airline will need to find the €54m required to bring itself out of bankruptcy. Cyprus’ government, which holds a 70 per cent stake in the carrier, is seeking an investor for at least half that sum. Antoniou told the press that it has received “serious interest” from investors and foreign airlines.

Syria crisis raises concerns over jet fuel prices The cost of Brent crude oil is rising amidst the prospect of US military intervention in Syria, and following chemical weapon attacks thought to be at the hand of Syria’s president, Bashar al-Assad. There is growing fear surrounding the supply of oil from the region, although Syria does not produce that much. The major concern is its location; Syria borders Iraq and Iran, both of which are major oil producers. Fearing either a lack of oil or higher prices, there is further concern that countries will decide to stockpile, which could further impact the supply and demand equilibrium. Added to all this, some long-haul airlines may have to re-route flights to avoid Syrian airspace. This not only has the potential to cause flight delays, disruptions and cancellations, but airlines would also require more fuel. Worldwide airline shares fell six per cent due to concerns over oil supply from the Middle East, says IATA in its Airlines Financial Monitor for August, when jet fuel prices reached $130 per barrel.

Transat secures winter leasing deal Transat is to lease 737-800 narrowbody aircraft from Transavia France during the winter. The five-year deal will supply four aircraft for the winter of 2015; five for 2016; six for 2017; seven for 2018; and eight for 2019. The aircraft will fly to holiday destinations in Mexico and the Caribbean.

ANA to buy stake in Myanmar airline All Nippon Airways (ANA) is to buy a 49 per cent stake in the Myanmar-based airline, Asian Wings Airways (AWA). AWA, which took a revenue of $17.8m in 2013, currently operates domestic routes; however, ANA plans for it to start international operations from October 2013. ANA also plans to grow AWA’s fleet to 10 A320s by 2018 and wants to improve its operational and on-time performance. In addition, on 30 September, ANA will increase the number of flights between Tokyo-Narita and Yangon from three to seven per week and plans to introduce larger aircraft onto the route.

Transat will also operate four 737-800s, which will be on long-term lease from International Lease Finance Corporation (ILFC). Speaking of the Transavia deal, Jean-Marc Eustache, president and CEO of Transat, said: “This deal gives us greater flexibility and a significantly improved cost structure.”

Cathay blocks Jetstar Hong Kong Cathay Pacific Airways has filed a formal objection against the start-up of a new low-cost airline, Jetstar Hong Kong. The new carrier is a joint venture between Qantas and China Eastern Airlines Corp. It would operate out of Hong Kong but be run by Australia-based Qantas. “By its own admission, Jetstar Hong Kong is a franchise of a foreign airline, which is also controlled by that foreign airline. The setting up of Jetstar Hong Kong is an attempt by a foreign carrier to gain access to Hong Kong’s pool of traffic rights,” Cathay said in a statement. Cathay filed its complaint with the Air Transport Licensing Authority, which makes a decision within the coming months.

Air Canada passes 15 E175s to Sky Regional Air Canada has passed all 15 of its E175 aircraft to Sky Regional, which will operate them on behalf of Air Canada under a capacity purchase agreement. The two have partnered since May 2011 on services between Billy Bishop Toronto City Airport and Montreal Trudeau Airport with a fleet of Dash 8 Q400 turboprop aircraft. With this agreement, Sky Regional now operates 20 aircraft on behalf of Air Canada. “This is an important step both in Air Canada’s regional carrier diversification strategy and our on-going cost transformation programme,” commented Calin Rovinescu, president and CEO of Air Canada.

afm • Issue 86 – September–October • www.afm.aero

NEWS

Delta orders 40 Airbus aircraft to boost fleet

Is the ILFC sale about to fold? The sale of American International Group’s (AIG) leasing arm to a Chinese consortium is hanging in the balance after its deadline was extended for the third time. The $4.8bn deal to buy up to 90 per cent of International Lease Finance Corp (ILFC) was due to close in May this year, but New China Trust, which was leading the consortium of investors, reportedly backed out of the deal in the same month. The consortium’s two other investors, P3 Investments and China Aviation Industrial Fund, are said to still be in talks with AIG but there is no word on a replacement third investor. AIG is looking to off-load the vast leasing company to focus on its core business. However, it is likely to be too large for any single investor to acquire. Additionally, despite its value, ILFC had to write down a number of its older aircraft and it now sits on a lot of debt. When AIG first attempted to sell off ILFC four years ago, it valued the company at $8bn – almost double the $4.8bn it agreed with the Chinese consortium. However, now the market has picked up, AIG is likely to make more money by selling ILFC shares through an initial public offering (IPO) – something its CEO, Bob Benmosche, has said the company is willing to do.

LOT delays taking state aid LOT Polish Airlines will delay taking its second tranche of state aid having successfully restructured its business and cut its route network. LOT took the first tranche of government funding in December last year and was due the second instalment in August. It has now said that is likely to delay the second instalment until October. The airline’s financial results for the 1H 2013 were PLN29m (just under $9m) better than expected. LOT predicted a net loss of PLN159m ($49m) during the 1H and forecasts a total annual loss of PLN132m – PLN10m short of the rescue plan it presented to the European Commission.

Delta Air Lines has placed an “opportunistic” order for 40 Airbus aircraft, including 10 A330-300s and 30 A321 jets. The order for 10 A330-300 aircraft will add to Delta’s existing fleet of 32 A330s. The first A330 delivery is scheduled for spring of 2015, with three more planned for later that year. Four will be delivered in 2016 and the final two in 2017. Delta will be the first airline to operate the enhanced 242-metric tonne A330-300, which offers additional payload capacity and range. The aircraft will be powered by General Electric CF6-80E1 engines. The 30 A321s – equipped with CFM56-5B engines – will add to an existing fleet of 126 A320-family aircraft. Delta’s first three A321s are scheduled for delivery in the 1Q 2016, with 12 more due that year. The remaining 15 are scheduled for delivery in 2017. The airline’s CEO, Richard Anderson, said: “These A330s and A321s will provide tremendous flexibility for Delta to optimally manage our capacity over the next five years while further improving the flight experience for our customers and returns for our shareholders.” Paul Jacobson, Delta’s CFO, added: “These Airbus aircraft will generate free cash flow and improve our return on invested capital from the time they enter service.” In its financial and operating performance report for August, Delta revealed an increase in consolidated passenger unit revenue (PRASM) of four per cent on the previous year. However, it added: “The Pacific entity continues to be pressured by yen devaluation, which accounted for 1.5 points of negative system impact for the month.”

Embraer forecasts China biz demand China will require 805 executive jets between 2014 and 2023, Embraer has said in its China Executive Aviation Market Outlook report. According to data released by Hurun Report, which Embraer cites, China’s fleet of executive jets has grown by an annual average of 27 per cent since 2008. This was fuelled by a 26 per cent growth of the wealthiest population. Speaking at the Chinese International Business Aviation Show (CIBAS) 2013, in Beijing, China, Guan Dongyuan, SVP of Embraer, said: “Embraer’s decade-long investment in China’s commercial aviation market has resulted in a fleet of 120 commercial jets in service.”

Carpatair to expand with 737 Carpatair has taken delivery of a 737-300 aircraft, which it says it will open new routes, new markets, and reduce operating costs. The carrier will fly the aircraft, (registration number YR-ABB), on direct round trips from Romania and the Republic of Moldova to: Timisoara, Fiumicino; Craiova, Fiumicino; Chisinau, Fiumicino; Chisinau, Bergamo; and Chisinau, Venice. Carpatair, which is based in Romania, Eastern Europe, said in a statement that it: “marks the successful conclusion... of [its] repositioning in the market.”

afm • Issue 86 – September–October • www.afm.aero

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Members of

Routes News The world air service development magazine and website

Lucy Siebert Routes News magazine lucy.siebert@routes-news.com www.routes-news.com

NEWS: Routes News

Jetstar to move to Melbourne’s Terminal 4 Melbourne Airport has announced Jetstar as the anchor tenant for its new domestic Terminal 4. Chris Woodruff, CEO of Melbourne Airport, says the move reinforces Melbourne’s position as the centre of domestic aviation growth in Australia. He comments: “We are delighted that Jetstar will be moving into our new domestic terminal as our anchor tenant. The new terminal will provide Jetstar with space for their growing operations as well as enhanced facilities, including state-of-the-art technology.”

Terminal 4 and its associated infrastructure, including a new ground transport hub and additional aircraft parking bays, is scheduled to open by the second half of 2015. Woodruff continues: “Victoria is growing and so are we. Our new domestic terminal is part of a larger programme of investment that will transform Melbourne Airport. Over the next 20 years, we’re investing billions of dollars to accommodate more than 60 million passengers we expect to pass through Melbourne Airport by 2030, including upgrading facilities and improving road access, as well as planning a new runway.”

Other Routes News Qantas to market Western Australia

the biggest airline partnerships in Western Australia’s history.

Western Australia will get a marketing boost, both domestically and abroad, under a new $7.65m deal with Qantas. The airline and Western Australian government have signed a $7.65m co-operative marketing agreement to promote the state. The efforts will target visitors from the UK, US, Singapore and Australia. Qantas’ CEO, Alan Joyce, said the agreement would be a boost for inbound tourism to Western Australia. “Tourism is a huge economic driver for Australia,” Joyce said. Western Australia Tourism Minister, Liza Harvey, said the three-year agreement between Tourism WA and Qantas is one of

Bologna Airport and Ryanair partner Bologna Airport and Ryanair have renewed their commercial agreement, signed in 2008, for another five years. The CEO, Michael O’Leary, explained that Ryanair aims to increase its passengers in Bologna by 20 per cent by 2018. The airport’s aviation business and corporate communications director, Antonello Bonolis, commented: “Less than five years ago, Ryanair started its way in Bologna, and the following year in March, the carrier already had three aircraft based at our airport, reaching over one million passengers per year in 2009 and going over two million in 2011.”

New Zealand inks deal with Chinese airline Tourism New Zealand has signed a new three-year promotion agreement with China Southern Airlines, aimed at further boosting Chinese arrivals to the country. Under the deal, Tourism New Zealand and China Southern have committed to exploring opportunities to promote tourism to the country. The multi-million dollar deal will see both the tourism authority and the airline contributing equally to the MoU. China has become one of New Zealand’s most important inbound markets, and the country has already eased visa rules for Chinese tourists. China Southern flies daily direct from Guangzhou to Auckland and will up this to 10 flights per week this summer.

afm • Issue 86 – September–October • www.afm.aero

NEWS: People

On the

move Lufthansa boss to join drug company Lufthansa’s CEO, Christoph Franz, is set to become chairman of the international pharmaceutical company, Roche. The Swiss drug company announced that Franz will succeed Franz Humer next year. Lufthansa confirmed Franz is not available to renew his contract when it expires on 31 May, 2014. Franz commented: “After a total of nearly 15 years in the Lufthansa Group, this was not an easy decision for me to make. I am proud of Lufthansa and its people and it gives me great pleasure to work for this company. “However, for professional reasons, I have decided to call time on my activities for the Lufthansa Group once I have completed my contract in May 2014.”

Slosar to take chairman role at Cathay Cathay Pacific Airlines’ boss is to become its chairman in March 2014; meanwhile chief operating officer, Ivan Chu, will take on a chief executive role. John Slosar has worked since 1980 at the Swire group, Cathay Pacific’s largest shareholder. He is also set to become chairman of John Swire & Sons, Swire Pacific,

Swire Properties and Hong Kong Aircraft Engineering. Christopher Pratt, current chairman of Cathay Pacific and the Swire group in Hong Kong, is retiring after eight years in the roles. Slosar was appointed managing director of Hong Kong Aircraft Engineering in 1996, managing director of Swire Beverages in 1998, and COO of Cathay Pacific Airways in 2007. He has been Cathay Pacific’s chief executive since 2011 and is also chairman of Swire Beverages and Hong Kong Dragon Airlines. Ivan Chu, currently chief operating officer, will take over Slosar’s position as CEO.

Cruz takes on chairman role at Vueling Alex Cruz will be both CEO and chairman at the low-cost carrier as it reconfigures for its new non-listed status. Vueling is replacing its board of directors in the wake of its de-listing from the stock market, part of its takeover by the International Airlines Group (IAG). IAG executives with a more operational focus will form the new board, which is shedding seven independent directors including the chairman, Josep Piqué. Vueling’s CEO, Alex Cruz, will head the new governance structure as chairman.

afm • Issue 86 – September–October • www.afm.aero

But Vueling said the new chairman and IAG will aim to maintain a close relationship with Josep Piqué. “All the growth challenges managed by Vueling – its exemplary evolution towards a profitable growth path – have been achieved thanks to the great contribution and vision of each member of the board, who have wisely guided the company in the right direction over the last four years,” said Cruz.

Flybe picks Simmons as COO Paul Simmons is moving from easyJet to become Flybe’s chief commercial officer on 28 October. Simmons has been easyJet’s director for the UK market since 2009, with responsibility for the commercial programme and revenue delivery across the carrier’s 11 bases and 110 aircraft in the country. He also worked at easyJet from 2006 to 2008 as head of brand marketing, product and distribution, and oversaw the launch of the airline’s business traveller programme. Simmons’ arrival at Flybe coincides with a series of management changes in the wake of Saad Hammad’s appointment as CEO. Andrew Knuckey, CFO since 2007, is to leave the company as soon as a successor can be appointed and a suitable handover period is completed.

FOCUS: ELFC

One to one: Jon Sharp, CEO of ELFC AFM talks to Jon Sharp, CEO of Engine Lease Finance Corporation (ELFC), about the engine lease market. Boeing claim that leasing will rise to cover 50 per cent of the market by the end of this decade. Is this purely due to a lack of finance or are we seeing a longer-term appreciation of the knowledge, planning and advice that lessors can give? There are a number of factors at play. Firstly, the sheer volume of aircraft orders committed to means there is a huge demand for funding of all types. Despite the economic tribulations of recent years, there is still a massive amount of funds looking for a home. But because, rather than in spite of, the same economic troubles, financiers are keen to have their investments backed by

assets that (as is the case with aircraft) prove generally capable of being repossessed and remarketed in the event of a default. Furthermore, the many uncertainties regarding the useful life of aircraft and their appropriate depreciation conventions, mean that more and more airlines are unloading that particular risk on to the leasing companies. Airlines are using the leasing product much more cleverly. In the past it was sometimes used simply as a way of raising cash; now it is used more scientifically as a tool against the uncertainties mentioned and as part of a suite of financing options.

afm • Issue 86 – September–October • www.afm.aero

FOCUS: ELFC More specifically, what is the demand outlook for engine leasing in the year ahead? From ELF’s point of view, the demand for engine financing through leasing remains relatively steady, but as a result of the conflicting pull of a number of factors. There are more aircraft, so more engines, and they are of higher values resulting from increasing size and technical complexity. But OEMs have been cornering a high percentage of the market because they can arrange a spare engine lease at the point of sale with no independent provider getting a look-in. What percentage of the global engine fleet do lessors currently own? Our estimate is that the spare engine fleet covers about 35 per cent of the market. This lags behind the aircraft equivalent but will catch up, and may even exceed it within the decade because of combined MRO packages.

Are airlines renewing their lease contracts? How does the current rate of renewal compare to last year? Renewal rates are running at about 65 per cent, considerably down on the number stated above, but it is trending back upwards. Are airlines requesting any changes to the typical engine lease contract? They are always asking for simplification and better economics, of course. For short-term leases we use a form based on the IATA standard, so just about everybody is familiar with that and that facilitates quick transactions. Price, of course, is a function of supply and demand and as certain engine types have been in oversupply the airlines have been able to play off the various lessors against each other. No problem with that, because as supply tightens, prices will rise!

Airlines are using the leasing product much more cleverly. In the past it was sometimes used simply as a way of raising cash; now it is used more scientifically During the downturn, many airlines managed their capacity by returning aircraft and engines to their lessors. How did this affect ELFC? Also, reduced capacity affected demand for spares. How is this looking at the moment? The downturn indeed affected us, although its effects lagged those elsewhere in the industry. We suffered some airline bankruptcies and while we had no problems with repossessions, it meant we had a significant number of unplanned engine redeliveries. Placing them at a time when airlines were cutting capacity and parking aircraft is difficult! Whereas in 2010 we were running at an 80 per cent lease renewal rate and with only a handful of engines off-lease (always less than two per cent), 2011 saw us with five per cent off-lease, growing to 10 per cent in 2012. This year’s limited recovery is creating some ease, but having that amount of non-performing assets has a negative financial impact. We do, however, have a very strong mixed business model, designed so that as one component of the business slows down, another picks up. Overall therefore, our profit trend has continued upwards without faltering.

What are today’s lease rates like? Low interest rates and significant competition means that rates for long-term operating leases are staying low. Also long-term lease rates for engines are typically lower than their aircraft equivalents. Access to preferential funding is therefore crucial to the companies in this business. As mentioned, the supply-demand equation determines the level of lease rates for short-term engine placements. Rather than being a function of a lessor’s costs (depreciation, interest, and general selling and administrative expenses), it tends to be determined by the market. So, two competing engines of type X will command say $50,000 per month, irrespective of the fact that one has a net book value of $8m and the other a net book value of $4m. What is the current demand for engine sale and leasebacks, and how does the demand for short-term leases compare to that for long-term contracts? These two businesses are somewhat counter-cyclical in that during tough times, airlines need the operating lease product more as a financing tool, but don’t need as much access to short-term leasing because of the fall in flying. As discussed earlier, demand remains fairly steady as far as we are concerned.

afm • Issue 86 – September–October • www.afm.aero

FOCUS: ELFC

How will new aircraft and engine technology affect the demand for existing engines in terms of leasing? This really depends less on the technology than the OEMs’ commercial approach to the aftermarket. As technology improves, the spares-to-installed ratio decreases, but that is offset in dollar terms by the higher price of engines. Some OEMs are apparently not going to sell spares of the new engine types but will control that market themselves. That will, of course, result in reduced competition and may create a challenge for companies like us that would be excluded from such markets. What will demand for next generation engine spares be like in the near-term? In the near-term, not so great. On the one hand, the OEMs will take care to ensure that their new products are adequately supported, and in any event, demand will not grow until the fleets mature and engines start to get cycled through the repair shops in significant quantities. We all had a difficult experience with the CFM56-7B series when everyone continued to plan for a ‘bow wave’ of shop visits demanding spares cover. This never came; it is only starting to happen now, some four or five years after it was originally anticipated. What are the long-term prospects for engine pooling? Do you see this as good thing? Pooling works between a small group of airlines provided they can find a commercial solution to such co-investment and to the inevitable problems of different operating regimes and practices. That will last as long as strategic interests are complementary, but will fall apart if competition or divergence drifts in. Large

scale pooling can only be done with OEM involvement, as is the case with Shannon Engine Support (SES). What is ELFC’s portfolio like and how will this change in the short-term? It is in a constant state of turnover. The average engine age is currently less than five years and we encompass all the modern commercial fan types, apart from the very latest widebody types, where demand or remarketing opportunities are not yet established. The majority are mainstream narrowbody engines from each of the principal OEMs. We have targeted disposals for specific engines (for example, where we have collected a large reserve fund but do not see a business case for investing that in a refurbishment) and for some engine types when we see their useful life reaching a certain threshold. How many airline customers do you have? Have you seen any changes in your demographics? The current list is about 70 airlines, although over the years we have served double that. The demographics have changed slowly as the Middle Eastern and Asia-Pacific airlines have grown their market shares. Europe and the Americas remain major markets for us. What is your market share and how are you working to increase this? It is not easy to pin down accurately but we believe we have about 18 per cent of the world’s population of leased commercial fan engines. We plan to grow this organically and, where opportunities arise, through acquisition; we have already proven we can achieve the latter with the acquisition of the Macquarie Aviation Capital engine portfolio.

afm • Issue 86 – September–October • www.afm.aero

FOCUS: CFM

One to one: Jean-Paul Ebanga, CEO of CFM Daniella Horwitz speaks to Jean-Paul Ebanga, CFM International’s president and CEO, about the company’s past success and future ambitions.

FM International is renowned for its popular and reliable CFM56, but it is the new baby, the LEAP engine, that is hogging the headlines at the moment. The ramp-up in production starts in 2016 and it will be the biggest in commercial aviation history. Today, CFM – a 50/50 joint venture between Snecma (Safran) of France and General Electric (GE) of the US – is in an enviable market position, holding the biggest chunk of the narrowbody engine market. The partnership held 63 per cent of the 100+ passenger aircraft market in terms of orders announced through to 31 July 2013. This is followed by Pratt & Whitney with 14 per cent, GE with

seven per cent and International Aero Engines with four per cent [see chart]. Jean-Paul Ebanga, president and CEO of CFM International, says the industry forecasts a need for 30,000 new aircraft over the next 20 years. Two-thirds of those are in the single-aisle market, which equates to roughly 20,000 aircraft and 40,000 engines. “It is a huge number and of course we need to be flexible,” he says. “During the next 20 years, there will be some ups and downs as there have been in the past. We went through various crises: Financial, health, wars, virus outbursts and terrorism. Even though we experienced some

afm • Issue 86 – September– October • www.afm.aero

FOCUS: CFM downturns, the trend has been the same and very positive. So even if we cannot forecast all the crises, we are pretty sure the story will repeat itself.”

Engine market share

Multiply the forecasted 40,000 engines due over the next 20 years by the catalogue price and it gives an estimated market value of $500bn. “This is a very decent market to be in,” he affirms.

One giant LEAP Launched at the 2008 Farnborough Air Show, LEAP’s big selling point is fuel efficiency – CFM says it delivers 15 per cent better fuel efficiency and lower CO2 emissions compared to the current generation engine. It draws on nearly 40 years of research and development to provide higher bypass and compression ratios, advanced 3-D aerodynamic design and greater use of composite materials. The LEAP family is designed to power commercial aircraft requiring 20,000lbs to 33,000lbs of thrust. There are three versions of the engine: The LEAP-1A, selected by Airbus as one of the two powerplants for the A320 neo; the LEAP-1B, selected as the sole engine for the 737 MAX; and the LEAP-1C, selected by Chinese aircraft manufacturer, COMAC, as the sole Western engine for the C919.

The single-aisle market now...

Ebanga says the industry has received the LEAP engine very well. “Today, it is the best-selling engine in its category so far. In 2012, we had 1,192 LEAP engines ordered. And the end of the 2013 Paris Air Show [PAS], we were roughly at 960. So you see, sales are very strong. To put the whole LEAP story in perspective, we are still three years before entry into service, and we have already sold more than 5,000 engines.” Added to this, at the end of August 2013, WestJet Airlines signed a letter of intent with Boeing and CFM to purchase 65 737 Max aircraft, each powered by the LEAP engine. Due to airframers’ demand for the LEAP engine, the ramp-up will be “very stiff”, climbing from none to 1,700 engines a year between 2016 and 2020 [see graph on page 26].

CFM orders: 922 aircraft Other orders: 522 aircraft

…and forecast for the next 20 years

“There are two dynamics going on,” explains Ebanga. “The first is a continuous increase in the number of engines delivered per year.” According to the forecast for 40,000 engines, annual demand will reach around 2,000. “Today we are producing roughly 1,500 CFM56 engines a year. We are going to increase to 1,700 in the next two to three years and will continue to do so. And when we start ramping up [the] LEAP, it is not just a ramp-up of a new programme, it is also a ramp-up which needs to match the very high level of engines produced per year.”

A $500bn engine market

It is worth noting that the company has delivered just over 25,000 CFM56 engines since the programme launched and it has never delayed an aircraft delivery. The Source: CFM.

afm • Issue 86 – September–October • www.afm.aero

FOCUS: CFM CFM backlog: Equal to seven years of production

As of 31 July

LEAP CFM56

'01

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

'12

'13

Source: CFM.

same expectation exists with the LEAP; there will be no allowances for the fact that it is a new engine.

Longevity is key There is speculation that the high production rate of the LEAP engine will spell the end of the A320 or the 737NG. Ebanga is at pains to state that this is incorrect. CFM56 engines will be built as long as there is a demand – Boeing and Airbus decide when to pull the plug. He insists that it is still a very strong programme and the numbers speak for themselves. There are close to 15,000 CFM56-5B/-7B engines currently in operation; in 2012, the company sold 780 CFM56s and by July 2013, it had sold 886. As a result of the huge CFM fleet, when it starts transitioning between the CFM56 and the LEAP, it will still produce CFM56. “We need to continue to support the fleet with spare engines and spare parts. Of course, after the transition, the quantity will drop, but it won’t mean the suspension of production,” he notes. There will be 100-200 CFM56 engines built per year in addition to LEAP. Ebanga also points out that the peak spare part production for the CFM56 current engine configuration will only be reached in a couple of years. The product life of the -5B, -7B means that the company is going to be making spare parts until 2040. Ebanga believes this longevity is integral to the success of the company. “We strongly believe our mission is not just to sell engines and ship them to the customer. We have a responsibility to make sure that the air transport industry continues to grow in a sustainable way, and that people continue to fly more and more. This can only be

achieved if we continue to increase the cost-effectiveness, safety and efficiency of flying. You can only achieve that if you are set in a long-term perspective. The fact that you are talking about 2030/40/50 is not a big deal, because we are part of the build-up of the future of this industry. We are here to stay.” This long-term view is reflected in the date for the LEAP’s ground testing – September 2013. The engine actually began ground testing on 4 September 2013, two days ahead of the schedule that it set when it launched the programme in 2008 (when LEAP did not even have an application). There are about 60 engine builds involved in the testing programme. Some will be ground-tested, some flight-tested and the testing will be divided between GE (in Peebles, Ohio, US) and Snecma (in Villaroche, France). Ebanga says testing has so far been positive and reinforces his confidence than CFM is going to deliver the engine performance it has promised. Since its formation, CFM has entered has had 21 distinct entries into service (including new engines and new engine upgrades). Each one has been on time and up to specification. CFM plans to match this standard with the LEAP family.

Maintenance The maintenance of the LEAP engine is set to echo the cost-effectiveness and reliability of the CFM56. Ebanga says: “Even though we have new technologies, we managed to design and produce the engine in such a way that the maintenance cost of the LEAP engine will be on par with the CFM56, which is a benchmark in the industry.”

afm • Issue 86 – September–October • www.afm.aero

FOCUS: CFM CFM’s production ramp-up

CFM56

LEAP

+17%

+100% production rate increase in 10 yrs.

rate increase in 8 yrs. 1,700

2,000

1,500

1,264 739

1,000

500

1,419

S22

0 engines

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

'12

'13

'14

'15

'16

'17

'18

'19

'20

Source: CFM.

A lot depends on who operates the aircraft. An engine used by a budget airline to power 1.1 to 1.2 hour flights will require service sooner than an engine used by a tour operator on three to four hour flights. It is worth bearing in mind that in 2012, CFM set a world record with a CFM56-7 that had stayed on-wing on a TUI aircraft for 50,000 hours (13 years). On average, a CFM56 will log 3,000 to 3,500 hours before a shop visit. The expectation is that the LEAP will stay on-wing for eight to nine years. The life-limited parts will be replaced after 20,000 cycles. In the past, CFM limited its scope of business to the development, production and sale of engines. GE or Snecma provided CFM56 maintenance services alongside 40 other third-party MRO providers. Ultimately, CFM decided that this was not an optimal solution for the LEAP family, so GE and Snecma joined forces to provide a joint service offering. As the OEM, CFM has unique knowledge of how the engine works. In addition, they have complementary MRO infrastructure to manage LEAP shop visits at facilities around the world. CFM will provide maintenance packages for the LEAP engine, the most popular being the Rate Per Flight Hour, wherein CFM guarantees maintenance costs on a dollar-per-flight-hour basis. However, the company realises that many customers prefer a choice of where to overhaul their engines. As a result, CFM is evaluating potential third-party LEAP MRO providers, and decisions on this will be made over the next few years. “We have time to make these decisions,” says Ebanga. “The first LEAP engine is not scheduled to enter commercial service until 2016,

and it will be many years after that before they will require a first shop visit.” CFM may hold the largest slice of the market, but it does not go after every engine order. According to Ebanga, CFM operates within a limited parameter to avoid over-stretching the company. It was approached by Bombardier to make an engine for the CSeries and by Irkut to make an engine for the MS21. But, the company did not compete for those applications because it made little business sense. “Not that we thought they were bad airplanes, we just have limited resources and we want to focus them on the best fit,” explains Ebanga. “The C919 was the first application we got in 2009, that was the first head-to-head competition that CFM had with P&W’s GTF [geared turbofan].” It is claimed that CFM competed for Embraer’s Ejet series, but that engine is not within CFM’s thrust range, so a deal could not take place. Ebanga is pleased with the market positioning CFM has achieved and says that if it continues in the same vein, it will be the industry leader for the next 50 years. However, he does stress that it is a significant challenge to deliver such a high number of engines. “All this good news is one thing, but we are keeping ourselves very humble, because there is a lot of homework to do. You know the devil is in the details and we need to stay focused over a very long period of time, because the day you start to be distracted, anything can happen.”

afm • Issue 86 – September–October • www.afm.aero

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TLF: Airline credit

Raising the stakes: The ASU’s impact on airline credit Damon D’Agostino, chief commercial officer at CIT Aerospace, discloses how the leasing company assesses airline credit in the wake of the latest Aircraft Sector Understanding.

ith about $100bn in new aircraft delivered annually and with more carriers turning to commercial lenders to finance those purchases, now is a good time to review how lenders and lessors assess a carrier’s creditworthiness. Of course, access to finance has changed following the updated Aircraft Sector Understanding (ASU) but, as ever, an airline’s creditworthiness is crucial to gaining funds. Changes in airline financing rules, combined with concerns of rising interest rates, are causing airlines worldwide to take a closer look at their capital costs.

One of the biggest drivers is the 2011 ASU. Its rules are elevating fleet financing costs associated with export credit financings for some of the world’s biggest and most creditworthy carriers. The changes make export credit financing less attractive to airlines that are able to tap commercial bank or capital markets solutions. The changes also allow export credit to remain available for lower-tier and emerging airlines that need it most. The new rules raise the upfront fees that carriers must pay to access export credit and tie them to a market-

afm • Issue 86 – September–October • www.afm.aero

TLF: Airline credit the purchase price. In other words, the more creditworthy carrier is likely to get more efficient terms from the commercial sector. So far, the changes seem to be having the intended effect. Overall, export credit financing has fallen this year, while commercial and capital market lending activity has risen.

Improving credit outlook The good news for the world’s airlines is that the industry’s overall creditworthiness has improved substantially in the past decade. Airline bankruptcies in the US have streamlined cost structures for the major carriers, and airlines worldwide have imposed capacity discipline. Consolidation has also improved carriers’ credit outlooks. In the US, the industry emerged from the wave of post-9/11 bankruptcies with fewer yet stronger carriers, such as Delta Air Lines and United Airlines, both products of mega-mergers (with Northwest Airlines and Continental Airlines, respectively). In Europe, the industry has coalesced around several large players, such as Lufthansa and the combined Air France and KLM, plus British Airways and Iberia. In Asia, carriers are following a similar pattern, although they are not as far along as their US and European counterparts in adapting to low-cost entrants. Perhaps the biggest improvement is in Latin America. A decade ago, finance companies found it difficult to lend in the region because of carriers’ poor creditworthiness. The industry has shown marked improvement, and the emergence of several regional powerhouses, such as LATAM (formed from the merger of LAN and TAM), and the new Avianca (which grew from the Colombian carrier’s merger with El Salvador-based TACA).

Rankings and airline credit metrics based risk premium. As risk becomes more expensive, so will export credit. However, the rules ensure that export credit remains attractive to lower-tier borrowers because export financing is tied to the purchase price of the aircraft, rather than to the appraised value. Less creditworthy carriers typically face higher prices from manufacturers. As a result, if, for example, two airlines with disparate credit ratings buy a 737-800, the airline with good credit (typically a large airline or flag carrier) may pay less, while the one with poorer credit (typically a smaller airline or a start-up) pays more. Using export credit financing, the lower-tier buyer receives a percentage of that purchase price. The more creditworthy buyer can expect commercial banks to lend based on the appraised value of the aircraft, which may be more than

Despite this improvement, airline creditworthiness continues to lag behind other industries. Credit rankings, of course, have a profound effect on borrowing costs. With cheap financing no longer available and more airlines seeking capital from traditional banks, operating lessors and other third-party financiers, it is now even more important to understand how lenders rank carriers and what factors influence those decisions. Airline creditworthiness can be more difficult to assess than other businesses and simple financial metrics do not tell the whole story. Evaluating creditworthiness begins, of course, with an airline’s financials. Airlines are difficult to assess using criteria common in other industries, such as profit and loss, or cash flows. Balance sheets only paint an initial picture. Once a carrier enters into a lease

afm • Issue 86 – September–October • www.afm.aero

TLF: Airline credit

agreement or financing arrangement, financial statements are a lagging indicator. In some countries, year-end financial statements are not filed for six to nine months. By then, it may be too late. That is why lenders favour other, more nuanced criteria in ranking carriers. At CIT, we use a variety of measurements that contain both financial and qualitative metrics to assess an airline’s outlook and then determine an effective probability of default (PD). Because commercial aviation is inherently less creditworthy than other industries (such as manufacturing), a typical airline customer has a weighted average PD rating equivalent to a B/B2-B+/B1 on Standard & Poor or Moody’s scales. In determining a carrier’s PD, we start with basic balance sheet metrics such as leverage and the cash available to cover operating expenses. We also examine an airline’s fixed charge coverage, an assessment of EBITDAR’s ability to cover the current portion of its debt, rentals and interest expense. This gives us an understanding of a carrier’s core operating performance. Simply put, it tells us if the carrier can cover its operating expenses, especially its fleet management costs.

Other credit considerations CIT’s long history in airline finance means that we understand that financial metrics are not the be-all and end-all. We adjust a carrier’s PD to account for other factors, such as its business strategy, competitive landscape and ownership structure. Let us consider a flag carrier that is partially owned by a sovereign government. If the country’s currency declines, it can drive up expenses denominated in dollars, such as insurance, fuel and leasing costs. While this can crimp financial performance, the carrier continues to enjoy strong traffic. In addition, because the government may also own one or more of the country’s largest banks, capital remains readily available. These qualitative factors can improve an airline’s PD. We also evaluate a carrier’s business strategy. An airline beginning service in a growing market might allow for a stronger PD compared with a start-up in a mature market. For example, a low-cost carrier in Asia may face tough competition, but with a burgeoning middle class in a market where commercial air travel penetration remains low, the metrics would be favourably adjusted to reflect this growth potential.

afm • Issue 86 – September–October • www.afm.aero

TLF: Airline credit

In addition to the PD, we also evaluate each jurisdiction in which CIT leases aircraft. We must assess our ability to repossess under local laws and compare the lease rate with the market rate. In a default scenario, our costs are likely to go up if we must re-deploy the aircraft. None of these tools are static. Just as the airline business can change rapidly, so can a carrier’s creditworthiness. As an operating lease lessor, we assess our customers’ payment performance daily and watch for signs of possible problems that could lower a carrier’s ranking. We also monitor aircraft maintenance. Delayed maintenance and deteriorating aircraft conditions can be a sign of larger operating issues and/or underlying financial stress. The strength of an airline’s management is also a consideration. If several executives leave in a short period of time, it can indicate potential problems that could affect the carrier’s operations. Finally, we stay abreast of macroeconomic trends, geopolitical issues, and local or regional events that could affect air travel. We closely consider all these factors, watching for any signs of potential deterioration, which could raise or lower an airline’s ranking. Of course, the most powerful tools we have in assessing these issues are the airlines themselves. Maintaining a good dialogue with operators is essential. Our clients are

often the first to tell us when they see issues that could affect their PD, and we work with them to restructure leases and tailor rents accordingly. As the role of export credit financing diminishes, more carriers are re-thinking their capital needs and looking for alternatives. Sale and leaseback transactions are rising, especially with better credit carriers, which have seen the cost of their export credit increase. As a result of changes adopted at the Cape Town Convention, more carriers outside the US are taking advantage of alternative financing such as enhanced equipment trust certificates (EETCs), which allow them to bundle aircraft purchases into tranches and potentially receive a rating in excess of their corporate rating because of the quality of the collateral. Meanwhile, there continues to be a significant amount of both new and used aircraft that require financing. As some lenders exited this space during the financial crisis, new lenders have emerged to fill the financing void, including CIT, which continues to provide active financing for both new and used aircraft. All of this helps us respond more effectively to the industry’s financing requirements. As the global economy recovers and air travel rebounds, the industry’s investment needs will increase. While the new rules for export credit financing are changing the dynamic, carriers in need of fleet funding will enjoy a broader array of options.

afm • Issue 86 – September–October • www.afm.aero

TLF: AJW

Lease of life: AJW on its leasing venture Steve Williams, director of aircraft engine services at AJW Aviation, whose core focus is aircraft spares, tells us why the company is venturing into leasing.

gainst a backdrop of continued growth, both significant challenges and opportunities for engine lease providers and airlines continue to exist.

Traditionally, AJW Aviation provided a range of customised solutions for airlines and MROs in the rotable components business, but in 2011 the company changed its strategic direction by creating a new engine division. It was an opportunity to provide engine leases and engine management services to various global engine MROs, not to mention supplying parts from the engines we tear down.

Market trends To put the decision to expand in context, we have to look back over a couple of decades at various events that impacted the engine lease market. History shows some fairly robust growth trends for the engine leasing business and these provide a background for our on-going predictions. Growth has typically reached five per cent each year for the last twenty years. This is despite four recessions, two Gulf wars, one potential pandemic (SARS), one oil shock and two financial crises. This growth is expected to continue (as shown in the data

afm • Issue 86 – September–October • www.afm.aero

TLF: AJW Shop visits in 2012 Mature technology engines total shop visits Product

SVs in 2012

SV by OEM

CF6-80C2

455

(15%)

385

JT9-7A/7Q

(20%)

315

(25%)

235

SVs in 2012

SV by OEM

% market share

SVs by non OEM’s

PW4000 94”

462

195

(42%)

267

CFM56-5B

630

315

(50%)

315

CFM56-7B

1,225

605

(49%)

620

GE90

203

145

(71%)

V2500

805

585

(73%)

220

Trent 800

250

(100%)

PW2000

% of SVs market by non OEM’s

Newer technology engines Product

Shop visits forecast Airplanes in current service Size

2012

2032

780

910

Medium widebody

1,520

3,610

Small widebody

2,310

5,410

Single-aisle

13,040

29,130

Regional jets

2,660

2,180

20,310

41,240

Large widebody

Total

Care and consideration OEMs will manage new engine variants, such as the PW1100G and CFM’S LEAP–X, under their total care packages. These will reduce the ability for companies like AJW to provide engines and services. Such packages will become more refined with in-flight engine monitoring, and the use of this intelligence will become a further barrier for new service providers and, possibly, leasing companies. The OEMs will only license a small group of providers to share this information. here) and such projections supported AJW’s intention to enter the engine lease arena. Key market indicators show that over the next 20 years the world economy (GDP) is forecast to grow by 3.2 per cent each year. Aircraft fleets are expected to double from around 20,000 aircraft to 41,000 aircraft globally. Passenger numbers will rise by around 4.2 per cent, with airline traffic (RPKs) and cargo traffic both up by five per cent per annum. If we translate this into aircraft demand, we see that there is a significant difference between the traditional aviation markets of Europe and America and emerging regions such as Latin America and Asia Pacific. The latter is growing at almost twice the rate of the US market and three times as fast as Europe.

As the A320 and 737 MAX go head-to-head, OEMs are expecting to control a greater volume of the aftermarket. This is the most keenly contested area of the market due to the volumes of aircraft being built; this sector covers about 70 per cent of all aircraft built. Next generation engines are going to be offered with total support packages under which OEMs will provide a complete programme of managed services, including trend monitoring, engine overhaul, engine leasing and parts supply during shop visits. All of this will be marketed with a view to controlling and lowering airline costs, but the jury is still out on whether it would be cheaper. As OEMs are increasing their control over specific repairs it seems unlikely they will use their dominance

afm • Issue 86 – September–October • www.afm.aero

TLF: AJW Market growth rates

Asia Pacific

North Europe America

Middle East

Latin CIS America

Africa

World

GDP growth rate

4.5

2.5

1.8

3.8

4.0

3.4

4.4

3.2

Traffic growth rate

6.3

2.7

4.2

6.3

6.9

4.5

5.7

5.0

260

170

280

760

Medium widebody

1,470

390

650

670

3,300

Small widebody

1,860

760

850

410

270

130

250

4,530

Single-aisle

8,810

5,000

5,610

1,240

2,420

860

730

24,670

420

1,070

180

170

100

2,020

12,820

7,250

7,460

2,610

2,900

1,170

1,070

35,280

Large widebody

330

120

180

780

Medium widebody

500

290

360

270

1,520

Small widebody

660

710

340

230

120

170

2,310

3,470

3,760

3,160

500

1,050

680

420

13,040

130

1,710

350

200

120

2,660

5,090

6,590

4,390

1,140

1,280

1,130

690

20,310

350

200

250

910

Medium widebody

1,550

500

690

700

3,610

Small widebody

2,080

1,040

990

450

380

190

280

5,410

10,350

6,140

5,930

1,420

3,150

1,100

1,040

29,130

420

1,070

200

210

120

130

2,180

14,750

8,810

8,010

2,850

3,790

1,530

1,500

41,240

Medium widebody

Small widebody

Single-aisle

Regional jets

Forecast new aircraft deliveries Large widebody

Regional jets Total deliveries

Fleet in 2012

Single-aisle Regional jets Fleet size

Fleet in 2032 Large widebody

Single-aisle Regional jets Fleet size

Delivery share by size (%) Large widebody

to provide cost savings to the customer; indeed, price hikes are more common in such situations. Independent engine overhaul providers have noticed the OEMs increasing dominance, and they have reviewed their strategies to develop in the market and are increasingly looking for opportunities to partner with the OEMs. There is significant optimism for the future with the predicted growth in business, aircraft deliveries and profitability in the airline industry. The long-term lease arena is going to be dominated by a couple of companies who have the resources to provide the engines and manage them off the balance sheet for the airlines. The company sees this area growing as airlines look to maximise the return on their investments and use every means possible to lower costs. With respect to future trends, we have to look at where the current engine lease support is provided and how this is going to develop. If we split the fleet by product, the CFM56

engine is dominant with over 16,000 already produced. OEMs have taken a significant look at how this lease market has developed and created strategies to capture increased market share going forward. CFM International formed a partnership with Snecma to create SES engine lessors. Rolls-Royce adopted a similar strategy of support for its product through RR Capital Finance Partners. This type of partnership is destined to continue because it provides airlines with a guarantee that engines will be available when required and will be fully supported by the OEMs’ service.

Part of the plan Fuel has doubled in cost over the past 10 years, driving engine and airframe manufacturers to improve their product development programmes and deliver more fuel-efficient aircraft and engines to the market. These new aircraft will replace the older ones, which AJW has been purchasing in order to harvest the components.

afm • Issue 86 – September–October • www.afm.aero

TLF: AJW

There will be a large number of aircraft retirements, particularly the older generation, less fuel-efficient aircraft. However, we are also seeing a trend for retiring aircraft that need major maintenance investment, such as a D-check. Such retirements are providing AJW with the resources it needs to provide its range of services. Aircraft of various vintages can be purchased with a view to using the available green time on each engine. At the end of the available lease period we have the option of tearing down the engines for parts or over-hauling them for future leases. There is a sustainable business case for lessors to sell the aircraft for part-out and avoid using their reserves to pay for the expensive maintenance check. This creates a supply of suitable engines to be used in the lease environment. This is where AJW has decided to focus and with our consignment partners, we are now able to increase both the breadth and depth of our engine lease services. This is reflected in the current products we offer: CFM56-3, 5As, PW2000s, PW4000s and CF6-80C2. Going forward, the plan is to grow with the introduction of the CFM56-5B and -7s to the lease pool.

of engines and rotables at a competitive price while taking account of re-certification costs, warehousing and marketing. We have also engaged with several partners to manage engine leases on their behalf. This reduces the need to cover the purchase cost of the engines and allows AJW to broaden the product range for its customers. We expect to have around 50 engines by the end of the year. The dominance of the narrowbody, single-aisle aircraft makes it an obvious platform to support. This provides the foundation for our business to develop its lease pool with engines such as the CFM56-3, 5A/B and -7 fleets plus the V2500-A5. There is wide market demand for all of these, plus a growing availability of aircraft, engines and parts from retirements and subsequent part-outs. Widebody platforms present a totally different market dynamic. The fleet is smaller and the flight leg ratios are much longer, thus generating fewer shop visits. AJW’s strategy is to partner with a provider that has consigned larger engine types into our pool, such as the PW4000, PW2000 and CF6-80C2.

Buyer’s market Many buyers chase the same aircraft as they become available. To ensure success, AJW provide inventories

We see this trend continuing, which is why we believe AJW is able to evolve into offering a full service of engine leases.

afm • Issue 86 – September–October • www.afm.aero

The business and financing of airline operations

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FLEET OPS: LCCs

Leading LCCs: Is low-cost enough? Martin Roebuck examines some of the ways that low-cost airlines are revolutionising the business.

surprise announcement came this September when Ryanair issued a profit warning. It blamed steep competition from the likes of easyJet, Norwegian and Vueling and resigned to lay up more aircraft this winter than it had planned. Ryanair’s CEO, Michael O’Leary, promised to “max out” ancillary revenues to offset further cuts in fares and lost capacity, but he accepted that yields would fall in the months ahead. Does this tell us that the traditional low-cost model so successfully exemplified by Ryanair might no longer be enough? While the low-cost model championed by Ryanair is still far from broken, many low-cost carriers (LCCs) have gone beyond its original remit. For example, Ryanair still defines ancillaries as baggage fees, food, car hire, hotel sales and credit card fees (no longer a cash cow following EU intervention) while its rivals are

now building revenue through business class seats and streamed entertainment.

Business as usual Vueling’s CEO, Alex Cruz, was once strongly opposed to premium seats, arguing that complexity adds cost. Yet its passengers now have three fare bands and four seating options to choose from. They can buy a pass giving lounge access, fast-track security, priority boarding and discounts on parking, spa facilities and meeting rooms. So the new ethos seems to be that complexity is fine, so long as it generates a margin. The Middle East’s fast-growing LCCs have contrasting approaches to business class. Air Arabia’s CEO, Adel Abdullah Ali, expresses a traditional view, stating: “In the low-cost

afm • Issue 86 – September–October • www.afm.aero

FLEET OPS: LCCs business, you have to be very focused, and moving away from [all economy] will generate additional cost.” However, local rival flydubai is to offer a business class option on selected routes from October. All of its latest aircraft are being delivered in dual cabin configuration and its existing fleet is being retro-fitted.

Ultra-profitable Ultra-low cost carrier (ULCC), Allegiant Air, which specialises in connecting small US cities with leisure destinations, has recorded 10 straight years of profit. It charges to use a credit card, change a booking, select a seat and, as of last year, carry on baggage.

Despite losing 15 seats on its 737-800s, flydubai expects to significantly boost revenue and boasts that it will still enjoy a capacity advantage over Air Arabia’s A320s.

Allegiant has reconfigured its second-hand MD-80s, which make up most of its fleet, removing the second galley to include an extra 16 non-reclining slim-line seats. Without the galley, Allegiant cannot earn ancillaries from selling hot beverages and snacks, but it seems the trade off is worth it.

A similar philosophy is emerging among North American budget carriers. Canada’s WestJet has introduced Plus fare, which includes two checked bags, fast-track security, advance boarding, flight changes and cancellations, all without fees. WestJet now offers three tiers of fare in line with Air Canada’s low-cost subsidiary, rouge.

Even without these food sales, the airline’s air-related ancillary revenue increased 20 per cent last year, yet base fares and third-party revenue from hotels, car hire and entertainment were down.

Likewise, New York-based JetBlue is to add a premium cabin on its high-volume Los Angeles and San Francisco routes, which will include lie-flat seats. JetBlue forecasts a 15 per cent increase in ancillary revenue this year through features such as Wi-Fi, though it remains reluctant to charge for checked baggage. However, Hong Kong Express, the subsidiary of HNA Group, will revert to its previous traditional LCC operations by re-configuring an initial five A320s, removing business class seats and increasing capacity by 22. The carrier plans to focus on tourist destinations, leaving Hong Kong Airlines to ply lucrative business routes such as Taipei, Beijing and Shanghai.

Allegiant earned $11.22 per passenger, per flight according to Airlines for America (A4A). This compares with Southwest Airlines’ $3.85, itself one of the more profitable US carriers. IT investment has allowed Allegiant to improve its user interface during the booking process, making it easier to market ancillary products, explains its spokeswoman, Jessica Wheeler. The carrier has acquired some of the routes Southwest suspended following its acquisition of AirTran. “There is plenty of opportunity among mid-sized airports not served today,” Wheeler says.

afm • Issue 86 – September–October • www.afm.aero

FLEET OPS: LCCs In a departure from its traditional philosophy, however, Allegiant has begun serving Los Angeles and New York as points of origin. For example, it added a Los Angeles to Honolulu service in October. Allegiant and fellow ULCC, Spirit Airlines, are waiting to see whether the private equity firm, Indigo Partners (which previously invested in Spirit, Tiger Airways and Wizz Air), goes ahead with the rumoured acquisition of Frontier Airlines from Republic Airways and turns it into a third US ultra low-cost operator. Further afield, Virgin Australia, which now owns 60 per cent of Tigerair Australia, posted hefty losses last year despite increasing its revenues. The company claims that business travel is relatively healthy but its leisure segment is ‘fragile’. Meanwhile, its subsidiary, Tigerair, which recently rebranded from its previous moniker of Tiger Airways, must overcome a loss of consumer confidence following its grounding in 2011 for safety breaches. Tigerair Australia will increase its fleet of A320s from 11 to 13 over the next six months and its CEO, Rob Sharp, aims to double the fleet within five years. He insists he will not sacrifice yield simply to fill seats; however, noting rival LCC Jetstar’s promise to “protect its position” in Australia’s domestic market, some analysts fear overcapacity. Sharp intends to better co-ordinate its schedules with Virgin’s arrivals and departures, which he believes could make a “massive difference to yields”. But the carriers are conscious of a potential crossover and the risk of blurring the brands. Indeed, some argue that low-cost subsidiaries attached to legacy airlines just do not work because, sooner or later, their operations and ethos will combine. However, Carly Brear, commercial director of Tigerair Australia, says things are moving in the right direction. “Our load factor

across the network increased by 8.2 points to 92 per cent in July 2013 compared to July 2012. In the year to date we have launched five new routes.” Brear adds: “We have refreshed our website and mobile app and launched a new-look menu with improved quality and a food pre-order service. There are many more product enhancements to come.” In neighbouring Hong Kong, LCCs currently account for just six per cent of capacity compared with 20 per cent across Asia overall. Yet, two new carriers aim to change all of that. Jetstar Hong Kong, a joint venture between Qantas, China Eastern and the shipping and property group Shun Tak, applied for its operating licence in August and aims to fly by the end of the year. Recently however, Cathay Pacific has thrown an obstacle having lodged an objection against the start-up. It alleges that the level of foreign ownership (Australian Qantas would be its parent airline) breaks local laws and would damage both Hong Kong’s aviation and economy. Edward Lau, CEO of Jetstar Hong Kong, says he is “confident of meeting all regulatory requirements” and expects to operate 18 A320s to destinations within a five-hour radius of Hong Kong by 2015. Jetstar Hong Kong’s premise seems to be a traditional one – to deliver the lowest possible price. Lau says its fares will be around half the current market level. “We aim to revolutionise the market in much the same way as LCCs have in Japan. We have seen the transformative effect LCCs have had on that market. New airlines have grown the overall ‘pie’ and Japanese domestic travel has grown for the first time in six years,” he says.

afm • Issue 86 – September–October • www.afm.aero

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FLEET OPS: LCCs Multiple challenges At one time the industry hypothesised that all airlines would become low-cost; that competition would force a natural evolution. However, rather than adopt a low-cost ethos, many legacy carriers have adopted a low-cost subsidiary. For example, IAG has Vueling, Lufthansa has Germanwings and Singapore Airlines has Scoot. Despite this being a common approach, there is no set formula for the development of a parallel low-cost brand – it is simply a matter of trial and error. Most accounts suggest that it is so far, so good.

set to expand by 25 per cent this year and will take most of the new A320s IAG has ordered. It will add capacity between its Barcelona hub and Germany, Scandinavia, the UK and Portugal, leaving its sister airlines, British Airways and Iberia, to focus on long-haul destinations. Like IAG and Vueling, Singapore Airlines operates largely autonomous brands; its full-service subsidiary, SilkAir, serves secondary cities while Scoot provides a long-haul, low-cost option.

Lufthansa has successfully converted all European services (other than those from its Frankfurt and Munich hubs) to its budget brand. Following this, Germanwings has achieved better load factors (and higher ticket prices) than expected. Utilisation is also up; its aircraft fly two more hours each day compared with Lufthansa aircraft on European routes.

Scoot flies from Singapore to Australia’s Gold Coast and Sydney, four destinations in mainland China, plus Seoul, Taipei, Bangkok and Tokyo. It also offers 47 total destinations through interline arrangements with Tigerair, in which Singapore Airlines also has a stake.

While the ties are tight between Lufthansa and Germanwings, Vueling’s website makes no reference to its parent, IAG. Yet, following its acquisition by IAG, Vueling is

Scoot flies its 777-200s almost 15 hours per day – way above the global average – and its high passenger density is another crucial factor. Its secret? Perhaps it is the airline’s

afm • Issue 86 – September–October • www.afm.aero

FLEET OPS: LCCs traditional low-cost approach; Scoot’s fares were 40 per cent cheaper than full-service carriers. Like Allegiant, a less elaborate service model means that Scoot can remove the equivalent of a galley and a half from the 777-200ERs it acquired from its parent airline. This replaced the previous 3-3-3 lay out with 3-4-3 seating and increased capacity by 40 per cent. “You can’t go for a full slim-line seat with a sector length of between five and nine hours, there is a comfort consideration - but it’s less thick than the traditional seat because there’s no seat-back TV,” Scoot’s CEO, Campbell Wilson, says. Instead, entertainment is streamed wirelessly to a passengers’ device, or they can rent an iPad (which, incidentally, saves 1.5 tonnes in wiring). However, Scoot is less traditional in its approach to class seating. It has retained a premium cabin, which delivers extra revenue. “We’ve still got 402 seats. The maximum otherwise

would be 430, but could we fill them all up if they were identical?” Wilson thinks otherwise and posits: “A proportion of people will pay double for more legroom, two bathrooms for their 32-seat cabin, free entertainment, a meal and drink.” Ancillaries now make up 20 per cent of Scoot’s revenue, and “we can roll out a lot more,” says Wilson. The latest idea – following a precedent set by AirAsia X earlier this year – is ‘Scoot In Silence’ whereby passengers can pay a small premium to sit in the front zone of economy, from which under-12s are now excluded. “There was a robust internal debate about it,” Wilson says. “Would we pee people off? My view was that it’s only 10 per cent of the plane, and there are seats in other parts of the aircraft that are exactly the same.” Scoot encourages passengers to pre-book meals and a quickly increasing percentage now do so, which allows the airline to stock food accurately and not carry any excess weight. Additionally, a number of cross-incentives are being trialled; for example, a snack pack is cheaper for those also buying streamed entertainment. These deals are “not as complex as they might look,” Wilson says. “If they don’t pay their way, we will wind them back. But as much as possible is outsourced and we’re paid a commission, so the risk is carried by others.” Scoot’s customers are unaware that it is part of this larger, multioffer empire, but this is not the case for Air Canada. It reinforces its partnership with its new subsidiary, rouge, through co-branding and the online booking experience at rouge very much reinforces the idea of a growing Air Canada family. Few examples of such tightly paired full-service and low-cost operations have thrived. Aviation analysts are tracking rouge’s fortunes keenly, believing that unless parent groups put a genuinely independent structure in place, they run the risk of operations merging to become a homogeneous and ineffective whole. However, Air Canada is confident that rouge will succeed where its previous low-cost ventures have failed. It will not only keep the cost structure down but will also equip its fleet (initially two 767-300ERs transferred from Air Canada and two A319s) with a higher-density configuration. So for rouge, at least, the old ethos still rings true: Stack them high and sell them cheap.

afm • Issue 86 – September–October • www.afm.aero

FLEET OPS: FFPs

Frequent flyers: Building custom Martin Rivers examines frequent flyer programmes and speaks to United Airlines’ Jeff Foland about how its MileagePlus programme brings repeat custom.

recent survey of 2,500 passengers by Deloitte, a financial advisory firm, found that 72 per cent of high-frequency business travellers participate in more than one airline loyalty programme. Few people will be surprised by that statistic, but it underscores how airlines – which already operate the most complex loyalty schemes of any sector – must continue to improve their frequent flyer programmes (FFP) in order to bring repeat custom.

Texas International Airlines launched what is widely regarded as the first modern FFP back in 1979. Two years later, American Airlines followed it with AAdvantage and United Airlines with MileagePlus. “When they [FFPs] were invented in the early 1980s it was about, ‘the more distance you travel, the larger the basket of goodies you get’,” Jeff Foland, executive VP of marketing, technology and strategy at United, tells AFM. “Things have changed a lot since then.”

afm • Issue 86 – September–October • www.afm.aero

FLEET OPS: FFPs at which miles are accrued, for example) as well as in absolute terms. In United’s case, premier status on the MileagePlus programme is split into Silver, Gold, Platinum and 1K status. Silver members must accumulate at least 25,000 miles or 30 segments per year to maintain their status,and must also spend an annual minimum of $2,500. In return, they receive perks such as Economy Plus upgrades and a 25 per cent mileage bonus on the miles they fly. The threshold for Premier 1K membership is four times higher, with corresponding increases in upgrade priorities and airport perks. “Essentially, we need to make sure that those customers that are creating the most value for the airline are in fact receiving the most value back in return,” Foland explains. “A First Class ticket from the US to China four times a year is a very different value creation equation to regular short-haul flying. We need to recognise that and make sure we provide value back to them in return.” For the highest-spending customers, even Premier 1K falls short of the mark. United’s Global Services programme is targeted at travellers who notch up hundreds of thousands of miles per year. The scheme is invitation-only, and United does not officially comment about eligibility criteria or specific benefits. As one would expect, Global Services members are singled out for the most luxurious treatment. This includes limos between connecting flights; concierge-style facilities at the airport; and fawning hospitality during delays. The Wall Street Journal claims that United hires more than 400 people to monitor and engage with Global Services members as they travel through the network. “Naturally, we covet the high-yield, high-volume traveller,” Foland says. “If you create value, you should get much more value.” However, with 90 million members in the MileagePlus programme, he acknowledges that the “vast, vast majority” of members never come close to attaining even Premier Silver status. Enticing their return custom therefore requires a different approach. Noting that hybrid classes like premium economy were not around in the 1980s, Foland says that rewarding different passenger types is becoming ever more complex. “The ability to tailor your experience didn’t exist back then,” he notes. “So the programmes have evolved to make sure they’re best aligned with the needs of the consumer and of the airline.”

Creating value The easiest way to differentiate between customer types is to place thresholds against the number of miles travelled and dollars spent. While passengers are free to spread their business between different carriers, doing so limits the benefits. This applies in relative terms (lowering the pace

Loyalty ecosystem For the majority of travellers, FFPs are less about climbing the ladder and more about opportunistically notching up air miles. Price sensitivity plays a far greater role in this segment of the market, with customers displaying minimal loyalty between brands. Their low per-capita contribution to the business prohibits carriers from splashing out on benefits. Instead, attention is focused on the use of mileage points as currency. Partnerships across the travel chain – typically with hotels and car hire firms – diversify the ways in which customers can accumulate and redeem points. Sceptics say this trend

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FLEET OPS: FFPs

undermines the ethos of a loyalty programme, but Foland insists the aim is to build a broader “ecosystem” that supports the overall health of the airline. “It comes back to consumer choice,” he says. “We want people to engage with our programme. Obviously, we would like them to engage with the airline itself, and to fly with us… The vast majority of customers still utilise and redeem that currency for taking trips. But there are others who, for whatever reason, don’t see that as their highest priority. We want to make sure that they still get rewarded for participating in our ecosystem, whichever way they want to be rewarded.” Customers want flexibility but it comes at a price. Recent research by IdeaWorks, an ancillary consultancy firm, highlighted the wide variation in mileage conversion rates. For flights, it found that while average domestic redemptions were priced at 1.4 cents per mile, the conversion rate skyrockets to five cents for intercontinental premium bookings. This variation is carefully and deliberately extended to non-flight redemptions. Customers gain approximately one cent per mile for affiliate purchases. Promotional offers can significantly improve value, while passengers pay a premium if they opt to cash in

the monetary equivalent of their miles. For example, Air Canada charges 6,500 miles for C$50 vouchers redeemable in its duty-free shops, which is equivalent to less than 0.8 cents per mile. By applying distinct pricing models to distinct services, airlines ensure that high-margin, extravagant purchases appear to be comparatively good value. Customers also value benefits beyond the travel industry. For example, Emirates’ points can be redeemed against football games with which Emirates is partnered.

Printing money Just as air miles need not be spent on flying, nor must they be earned by flying. Air miles are sold in their billions to key partners, who then bundle them into their own services as a way of enticing customers. The popularity of such rewards fosters a lucrative income stream for carriers. United reported mileage sales of more than $2.8bn last year, accounting for 7.6 per cent of its annual revenue. Chase Bank, InterContinental Hotels and Avis were the main buyers. In 2010, American Airlines disclosed sales of 114 billion miles, the majority of which were purchased by Citibank and re-distributed through its co-branded credit cards. With the going bank rate for air miles standing at

afm • Issue 86 – September–October • www.afm.aero

FLEET OPS: FFPs

approximately 1.3 cents, that deal would have been valued at more than $1bn, even after a heavy discount. In this way and more, FFPs have become a vital component of the ancillary revenue spectrum. But distributing what effectively amounts to an IOU can lead to nasty surprises, particularly when the average time between earning and redeeming air miles is about 30 months. In its latest report on airline loyalty marketing, IdeaWorks cites the “reckless abandon” with which carriers exploited mileage sales as a revenue generator throughout the 1990s. “Their methods were akin to a government printing more money to prop up its finances,” writes the report’s author, Jay Sorensen. “Limiting the seats available for reward travel made airline accountants happier, but consumer resentment made headlines and the once-mighty airline mile had become devalued.” Perhaps eager to avoid such excesses, reciprocal FFPs between airlines are now commonplace. Their advent may seem contrary to the underlying principle of a loyalty scheme, but it is in keeping with the broader industry trend of consolidation.

All three major airline alliances – Star, SkyTeam and oneworld – allow customers to earn and redeem air miles across their member carriers’ loyalty programmes, but unaligned operators are also seeking multi-airline solutions. In June, Abu Dhabi’s Etihad Airways incorporated the FFP of its equity partner, Air Seychelles, under its own brand. It seems likely airberlin will make a similar move as Etihad bought 70 per cent of its FFP, Topbonus, last year. As the web of inter-connecting loyalty programmes becomes more complex, it is no surprise that third-party tracking solutions like AwardWallet have grown in popularity. Such apps allow passengers to monitor benefits across various schemes from their mobile or tablet. The industry initially reacted with hostility to this phenomenon. American Airlines filed an injunction against AwardWallet in February 2012, accusing it of illegal screen-scraping. But, in an abrupt turnaround this August, the carrier agreed to share data with the reward-tracking company for a fee. Asked whether United will follow suit, Foland only says that it is exploring “various technologies”. Whatever form they take, it is clear that ‘loyalty’ is becoming a dated concept in the world of FFPs.

afm • Issue 86 – September–October • www.afm.aero

MRO: MTU

Turning a profit: MTU on engine maintenance Leo Koppers, SVP of marketing and sales, and Katia Diebold-Widmer, head of marketing for MTU Maintenance, talk to Chris Kjelgaard about the engine MRO market and the company’s position within it.

TU Maintenance is optimistic about the future of the engine MRO industry. Within the next 10 years, the maintenance market for medium and large commercial turbofan engines will grow from $19bn to about $40bn annually, says the company’s SVP of marketing and sales, Leo Koppers.

marketing. That is an encouraging thought for MTU considering that in the first half of 2013, its commercial engine maintenance business saw year-on-year earnings (before interest and tax) rise three per cent to €55.5m ($46.4m). This increase accompanied an eight per cent increase in revenue to €691.1m ($805m) in 2013.

“Basically, it’s going to double,” confirms Katia Diebold-Widmer, MTU Maintenance’s head of

“Basically, we serve about 50 per cent of that market today,” says Koppers. In the future that should rise to

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MRO: MTU

“There’s a need on the airline side to have an alternative source of MRO, rather than going only to the OEM.” For this reason, the company has built a strong reputation for customised solutions and workscoping, which helps airlines keep down their maintenance costs. According to MTU Maintenance, it is the world’s largest independent engine MRO provider and third-largest provider overall, following only in the footsteps of CFM and Pratt & Whitney. This stands it in good stead for when next generation engines start needing shop visits 10 years from now.

Group offerings Today, MTU Maintenance handles 10 medium and large commercial engine families at its seven wholly-owned and joint venture MRO facilities worldwide. The company’s largest MRO line is the IAE V2500. Not only is MTU a partner in the V2500 production programme, but Diebold-Widmer notes that: “We were the first engine MRO shop to step into the V2500 market, back in 1989, and we have accumulated a lot of experience”. The company now has about 35 per cent of the V2500 market. It also handles the CFM56-3, CFM56-5B and CFM56-7 families, the latter two of which still represent growing MRO markets. Different MTU Maintenance facilities also have MRO lines for the GE Aviation CF6-50, CF6-80 and CF34 family; the Pratt & Whitney PW2000 and PW6000; and Pratt & Whitney Canada’s ubiquitous PT6A turboprop family, along with PWC’s PW200, PW300 and PW500 turbofans for business jets. The company has two other aces up its sleeve. One is MTU Aero Engines’ 20 per cent-plus manufacturing participation in the Engine Alliance GP7000 programme for the A380. This has allowed MTU Maintenance to establish an MRO competence on the engine’s low-pressure turbine module in a market where there is little competition.

two-thirds “because the portfolio we have includes the engines of the future”. For instance, its parent company, MTU Aero Engines, is a risk and revenue sharing partner in the Pratt & Whitney PW1000G programme. As a result, MTU Maintenance will be part of PW’s PureSolutions PW1000G MRO programme.

Even more important is MTU Maintenance’s growing customer base for two of the world’s biggest jet engines, the GE90-110B and -115B. Although MTU Maintenance has considerable MRO presence in the high-production CF6-50 and CF6-80 families, Koppers says it has eschewed the original GE90-94 engine for the 777-200ER because; “We believe that market has enough resources available and there is no real growth in that programme.”

While MTU Aero Engines is not a programme partner on the CFM International LEAP engine, MTU Maintenance still intends to compete for LEAP maintenance.

The same is not true, however, for the GE90-110B, 777-200LR and the GE90-115B, which powers the 777-300ER. “We believe there wasn’t enough MRO capacity in the world and there is more growth as long as Boeing sells the 777-300ER and the 777-200LR,” says Koppers.

Indeed, the company already offers maintenance solutions for engines with which it is not in partnership, says Koppers.

Accordingly, MTU Maintenance invested in a test cell at Hannover that can handle the GE90. Correlated in February,

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MRO: MTU

it now allows testing and certification of the GE90-110B and GE90-115B at the facility. “We are gearing up GE90 production now and our business is growing,” says Koppers. “We are now seeing the first full shop visits coming through.” The company’s investment in a test cell for the GE90-110B and -115B – which MTU Maintenance calls the “GE90 Growth” engine family – should serve it well if its forecasts for market growth are near the mark. The company cites research indicating that shop visits for GE90 Growth engines will grow by 10 per cent a year until 2022. With 777-300ER orders showing no signs of slowing down, the chances are that shop visits for GE90 Growth will climb until well into the 2020s.

Competition However, MTU Maintenance does face strong competition in some of its existing MRO markets and expects competition to stiffen in others. Diebold-Widmer says the market for older engine lines is changing quickly. Traditional MRO shops are finding that a new breed of smaller companies, which specialise in trading engines and parts rather than MRO, are offering “cheaper solutions” such as “workscopes that are not necessarily overhauls”.

For older engines such as the CFM56-3 and the CF6-50 (for which plenty of spares are available), the workscope can simply cover the complete replacement of an engine for one that has life remaining in its life-limited parts. MTU Maintenance has adapted to these market needs and is now offering its CFM56-3 customers a dedicated solution to help them optimise their ageing fleets by “recycling” certain engine parts of phased-out aircraft and using them in other engines. This provides a smooth transition to a new generation of aircraft while keeping the maintenance costs low for the older fleet. Traditional markets for engines such as the CFM56-5B, CFM56-7 and CF6-80 “will remain competitive”, says Koppers. Meanwhile, the “enormous” number of MRO shops covering any version of the CFM56 is creating “a very competitive market”, he notes. The market for this ubiquitous engine family is the most competitive of all, says Koppers. He also expects to see “enormous and growing competition” from GE in the CF34 and GE90 MRO markets. This is as a result of three underlying market trends, which will only intensify in the future as new, more advanced engines enter service. While MTU Maintenance does not expect to see a

afm • Issue 86 – September–October • www.afm.aero

MRO: MTU

vast increase in competition as a result of new MRO shops, it does expect to see more competition from the OEMs. “The spread of engine shops throughout the world is relatively steady, though there is interest in the Middle East to build up capacity,” remarks Koppers. “But what I do see is aggressive growth from OEMs. They definitely want to have a bigger market share for a number of reasons. One is the potentially shorter lifecycle of newer engine types.

Engine trends Koppers believes that engine economic lives are falling because fuel costs have become a much greater proportion of an airline’s total operating cost. Just 10 to 15 years ago, fuel costs represented only 10 to 15 per cent of most airlines’ total costs; today, they represent 30 to 40 per cent. As a result, “airlines tend to switch quicker to newer aircraft models”. Additionally, the availability of new or recent-build aircraft on operating leases helps. Meanwhile, engines are getting more reliable. Not long ago, an OEM would expect to see an engine make five or six scheduled shop visits throughout its life. However, longer on-wing times and shortened overall economic lives make it likely that today’s engine may only make three shop visits in its lifetime. Additionally, because engines of different thrust levels now share hardware, they are often torn down for their parts while still young. According to Koppers, OEMs have traditionally relied on generating long-term sales from spares to recoup their initial design investments. These trends mean the OEM has less

chance to recoup investment over the life of the engine. Accordingly, “It is more important for the OEM to keep control of spare parts sales, because that’s what gives the payback on their initial investment,” says Koppers. Hence OEMs’ growing interest in offering comprehensive engine-support packages, including MRO. Two other trends are growing in importance. Firstly, as engine technology advances, the threshold to enter the MRO market is rising higher, “so there will be a lot less shops”, says Diebold-Widmer. “On LEAP, there won’t be the 30 shops you see on the CFM56.” Their place will largely be taken by the OEMs, which not only want to sell spare parts but also want to protect the intellectual property of their new technologies. Secondly, as engines become more complex and expensive, airlines become less inclined to purchase spares. Increasingly, they expect MRO providers to offer replacement engines on short-term leases while their own engines are in the shop. This trend will continue to develop, says Koppers, who sees OEMs and their networks of affiliated MRO shops playing “a major role” in the growth of MRO-originating engine leasing. With this in mind, Koppers says that the company “will work towards further strengthening that lease function, either alone or with partners.” Such cohorts could be engine leasing companies or financial institutions keen to enter the engine lease segment. Of course, it does help to have friends with deep pockets.

afm • Issue 86 – September–October • www.afm.aero

INDUSTRY DATA: Deals

Industry data

59 64

Aircraft deals Firm orders

65 66

List prices and lease rates Engine data Data supplied by IBA’s JetData. www.ibagroup.com

Aircraft deals 4 July to 9 September MSN Manu- facturer

Model

Event

24474 29171 5732 5650 31178 5734 39885 5755 5751 5761 5764 5639 5737 31176 41305 37908 5695 5726 5727 39202 5729 38735 38959 5743 5753 38960 40044 40953 38072 5708 5719 5757 39061 38734 5714 40149 41261 5745 5628 39727 5749 40698 39023 5699 5720 5747 5723 39113 5733 33904 38951 41790 5709 5741 39156 5736 39623 5716 33231 33489 37782 40104

737-400SF 777-200ER A320-200 A319-100 737-800 A320-200 737-800 A321-200 A321-200 A319-100 A320-200 A320-200 A320-200 737-800 737-800 737-800 A320-200 A320-200 A320-200 737-800 A320-200 737-800 737-800 A321-200 A319-100 737-800 737-800 737-800 737-800 A320-200 A320-200 A320-200 737-800 737-800 A320-200 737-800 737-800 A319-100 A320-200 737-700 A320-200 737-800 737-800 A321-200 A321-200 A321-200 A320-200 737-800 A321-200 737-800 737-800 737-800 A321-200 A320-200 737-800 A321-200 737-800 A320-200 737-800 737-800 737-800 737-800

Converted Destroyed Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service

Boeing Boeing Airbus Airbus Boeing Airbus Boeing Airbus Airbus Airbus Airbus Airbus Airbus Boeing Boeing Boeing Airbus Airbus Airbus Boeing Airbus Boeing Boeing Airbus Airbus Boeing Boeing Boeing Boeing Airbus Airbus Airbus Boeing Boeing Airbus Boeing Boeing Airbus Airbus Boeing Airbus Boeing Boeing Airbus Airbus Airbus Airbus Boeing Airbus Boeing Boeing Boeing Airbus Airbus Boeing Airbus Boeing Airbus Boeing Boeing Boeing Boeing

Current Owner/Operator DHL Express Asiana Airlines Jetstar Japan Sichuan Airlines American Airlines Air Astana Copa Airlines Aeroflot US Airways American airlines LAN Airlines Shenzhen Airlines Juneyao Airlines American Airlines China Eastern Airlines Shanghai Airlines Jetstar Japan China Eastern Airlines IndiGo Hainan Airlines Iberia Express Lion Airlines China Southern Airlines Air China American Airlines China Southern Airlines Shandong Airlines China United Airlines Garuda Indonesia Jetstar Asia Air France easyJet Jet Airways Lion Airlines Etihad Malaysia Airlines SpiceJet American Airlines China Eastern Airlines China Eastern Airlines TAM Linhas Aereas Virgin Australia Norweigan Air shuttle Vietnam Airlines Aeroflot Philippine Airlines Jetblue Airways Shangdong Utair Aviation All Nippon Airways China Southern Airlines Xiamen Airlines Vietnam Airlines Lufthansa Shenzhen Airlines China Southern Airlines GOL Transportes Aereos Nas Air American Airlines American Airlines airberlin Iraqi airways

Date 23/07/2013 07/07/2013 07/09/2013 06/09/2013 06/09/2013 05/09/2013 04/09/2013 04/09/2013 04/09/2013 02/09/2013 31/08/2013 30/08/2013 30/08/2013 30/08/2013 30/08/2013 29/08/2013 29/08/2013 29/08/2013 29/08/2013 29/08/2013 28/08/2013 28/08/2013 28/08/2013 27/08/2013 27/08/2013 27/08/2013 27/08/2013 27/08/2013 26/08/2013 25/08/2013 23/08/2013 23/08/2013 23/08/2013 22/08/2013 22/08/2013 22/08/2013 22/08/2013 21/08/2013 20/08/2013 20/08/2013 19/08/2013 19/08/2013 16/08/2013 16/08/2013 16/08/2013 16/08/2013 16/08/2013 16/08/2013 15/08/2013 15/08/2013 15/08/2013 14/08/2013 14/08/2013 14/08/2013 14/08/2013 13/08/2013 13/08/2013 12/08/2013 12/08/2013 12/08/2013 12/08/2013 12/08/2013

Source: IBA’s JetData.

afm • Issue 86 – September–October • www.afm.aero

INDUSTRY DATA: Deals Data supplied by IBA’s JetData. www.ibagroup.com

Aircraft deals 4 July to 9 September MSN Manu- facturer

Model

Event

5611 39304 5728 38042 39884 40699 40281 5712 5724 5735 36708 39930 5715 39127 5739 39134 5706 5730 39135 39622 5718 5600 5721 40789 42740 5703 5704 5689 38950 5693 5697 41534 39621 5710 5713 31649 31173 37907 5681 5654 38949 40039 5684 5637 5680 5678 5687 36593 5098 5682 36704 5705 5707 38402 5696 5696 33488 37781 40952 5692 31647 38957 38401 38958 39022 41789 39431 39620 5694 33230 5677 5702 5645 39929 39112 39201 39372 39372 5686 5662 5669 5674 5688 42706 37878 1444 41441 41055 41370 126

A320-200 737-800 A321-200 737-800 737-800 737-800 737-800 A320-200 A320-200 A320-200 737-800 737-800 A321-200 737-800 A320-200 737-800 A320-200 A320-200 737-800 737-800 A320-200 A320-200 A320-200 737-800 737-900ER A320-200 A319-100 A320-200 737-800 A320-200 A320-200 737-900ER 737-800 A320-200 A320-200 737-900ER 737-800 737-800 A321-200 A320-200 737-800 737-800 A321-200 A320-200 A320-200 A319-100 A320-200 737-800 A320-200 A320-200 737-800 A321-200 A320-200 737-800 A321-200 A321-200 737-800 737-800 737-800 A320-200 737-900ER 737-800 737-800 737-800 737-800 737-800 737-800 737-800 A320-200 737-800 A320-200 A320-200 A320-200 737-800 737-800 737-700 737-800 737-800 A320-200 A320-200 A320-200 A320-200 A320-200 767-300ER 767-300FER A330-200 777-300ER 777-300ER 777-300ER A380-800

Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service

Airbus Boeing Airbus Boeing Boeing Boeing Boeing Airbus Airbus Airbus Boeing Boeing Airbus Boeing Airbus Boeing Airbus Airbus Boeing Boeing Airbus Airbus Airbus Boeing Boeing Airbus Airbus Airbus Boeing Airbus Airbus Boeing Boeing Airbus Airbus Boeing Boeing Boeing Airbus Airbus Boeing Boeing Airbus Airbus Airbus Airbus Airbus Boeing Airbus Airbus Boeing Airbus Airbus Boeing Airbus Airbus Boeing Boeing Boeing Airbus Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Airbus Boeing Airbus Airbus Airbus Boeing Boeing Boeing Boeing Boeing Airbus Airbus Airbus Airbus Airbus Boeing Boeing Airbus Boeing Boeing Boeing Airbus

Current Owner/Operator China Southern Airlines Shanghai Airlines US Airways GECAS Copa Airlines Virgin Australia flydubai IndiGo Peach China Eastern Airlines Aeromexico Xiamen Airlines Philippine Airlines Shandong Airlines easyJet Shenzhen Airlines Indonesia AirAsia China Southern Airlines Shenzhen Airlines GOL Transportes aereos Air Arabia Air China Tiger Airways Copa Airlines United Airlines Thai AirAsia American Airlines Turkish Airlines China Southern Airlines China Southern Airlines Tiger Airways Ukraine International Airways GOL Transportes Aeros China Eastern Airlines Chongqing Airlines United Airlines American Airlines Shanghai Airlines Utair TAM Linhas Aeras China Southern Airlines Shandong Airlines US Airways South African Airways South African Airways American Airlines CEBU Air Pacific Air Europa Indonesia AirAsia Air New Zealand AeroMexico China Eastern Airlines LAN Airlines Xiamen Airlines US Airways US Airways American Airlines airberlin China Eastern Airlines Iberia United Airlines China Southern Airlines Xiamen Airlines China Southern Airlines Norwegian Okay airways Solaseed air GOL Transportes Aeros Lufthansa American Airlines Jetblue Airways easyJet Chongqing Airlines Garuda Indonesia Shandong Airlines Hainan Airlines Qantas Qantas LAN Airlines Tiger Mandala CEBU Pacific Air Juneyao Airlines easyJet FedEx UPS Air China Air China Saudi Arabian Airlines Emirates Airline Korean Airlines

Date 10/08/2013 10/08/2013 09/08/2013 09/08/2013 09/08/2013 09/08/2013 08/08/2013 07/08/2013 07/08/2013 07/08/2013 07/08/2013 06/08/2013 06/08/2013 06/08/2013 05/08/2013 05/08/2013 03/08/2013 03/08/2013 03/08/2013 03/08/2013 02/08/2013 02/08/2013 02/08/2013 02/08/2013 01/08/2013 01/08/2013 01/08/2013 31/07/2013 30/07/2013 26/07/2013 26/07/2013 26/07/2013 26/07/2013 25/07/2013 25/07/2013 25/07/2013 25/07/2013 25/07/2013 24/07/2013 24/07/2013 24/07/2013 24/07/2013 23/07/2013 23/07/2013 23/07/2013 23/07/2013 22/07/2013 22/07/2013 20/07/2013 20/07/2013 20/07/2013 19/07/2013 19/07/2013 19/07/2013 18/07/2013 18/07/2013 18/07/2013 18/07/2013 18/07/2013 17/07/2013 17/07/2013 17/07/2013 15/07/2013 15/07/2013 15/07/2013 15/07/2013 13/07/2013 13/07/2013 12/07/2013 12/07/2013 11/07/2013 11/07/2013 10/07/2013 10/07/2013 09/07/2013 09/07/2013 08/07/2013 08/07/2013 06/07/2013 05/07/2013 04/07/2013 04/07/2013 04/07/2013 04/09/2013 06/09/2013 05/09/2013 05/09/2013 01/09/2013 31/08/2013 29/08/2013 Source: IBA’s JetData.

afm • Issue 86 – September–October • www.afm.aero

INDUSTRY DATA: Deals Data supplied by IBA’s JetData. www.ibagroup.com

Aircraft deals 4 July to 9 September MSN

Make

Model

Event

132 34938 34833 1442 36285 41526 35305 34926 42246 34512 1443 42142 35306 36424 39240 37835 42219 1441 38325 1438 1440 1434 34830 1431 34743 41666 35939 37946 38323 38991 40199 34844 1430 1436 41525 1432 1412 1435 37870 1433 34939 95 95033 19036 19000631 17000368 17000367 95030 95029 17000369 95027 95021 17000363 17000364 17000365 95023 19000630 1103 4448 4447 4446 1101 1094 1102 1089 1007 768 1098 1099 1097 1096 4444 1091 1093 11496 25052 25736 31176 26302 30714 39061 53024 41261 726 760 666 49948 30403 28493 5716

Airbus Boeing Boeing Airbus Boeing Boeing Boeing Boeing Boeing Boeing Airbus Boeing Boeing Boeing Boeing Boeing Boeing Airbus Boeing Airbus Airbus Airbus Boeing Airbus Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Airbus Airbus Boeing Airbus Airbus Airbus Boeing Airbus Boeing Airbus Sukhoi Bombardier Embraer Embraer Embraer Sukhoi Sukhoi Embraer Sukhoi Sukhoi Embraer Embraer Embraer Sukhoi Embraer ATR Bombardier Bombardier Bombardier ATR ATR ATR ATR ATR ATR ATR ATR ATR Atr Bombardier ATR ATR Fokker Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Airbus Airbus Airbus Boeing Boeing Boeing Airbus

A380-800 787-8 787-8 A330-200 787-8 777-300ER 787-8 787-8 787-8 787-8 A330-300 777-300ER 787-8 787-8 747-800F 747-8 777-300ER A330-200 787-8 A330-300 A330-200 A330-200 787-8 A330-300 787-8 777-300ER 787 767-300FER 787-8 777-300ER 777-200ER 787-8 A330-300 A330-300 777-300ER A330-300 A330-200 A330-300 767-300ERF A330-300 787-8 A380-800 SSJ100 CRJ-1000 E190 E175LR E175LR SSJ100 SSJ100 E175LR SSJ100 SSJ100 E170 E170 E170 SSJ100 E190 72-600 Q400 Q400 Q400 72-600 72-600 72-600 72-600 42-600 72 ASW 72-600 72-600 72-600 72-600 Q400 72-600 72-600 100 737-400SF 737-400 737-800 737-400 737-700 737-800 MD-82 737-800 A320-200 A320-200 A321-200 MD80 737-800 737-400 A320-200

Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Entry into service Finance lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease

Current Owner/Operator Emirates Airline Hainan Airlines Japan Airlines Turkish Airlines Air India Thai Airways International Norwegian Long Haul China Southern Airlines All Nippon Airways All Nippon Airways Cathay Pacific Cathay Pacific Aeromexico Thomson Airways Cathay Pacific Lufthansa Air Canada US Airways Qatar Airways Hainan Airlines China Eastern Airlines Air China United Airlines Malaysia Airlines Ethiopian Airlines American Airlines LOT Polish Airlines UPS Qatar Airways Emirates Airline Asiana Airlines Japan Airlines China Southern Airlines Cathay Pacific Thai Airways International Sichuan Airlines Libyan Airline Asiana Airlines UPS AirAsia X Hainan Airlines British Airways Gazpromavia Garuda Indonesia AZAL - Azerbaijan Airlines Republic Airlines Republic Airlines Lao Central Airlines Aeroflot American Airlines Sky Aviation Moskovia Airlines Republic Airlines Republic Airlines Republic Airlines Interjet Azerbaijan Airlines LIAT Air Baltic WestJet Encore WestJet Encore UNI Airways AZUL - Linhas Aereas Brasilerias AZUL - Linhas Aereas Brasilerias Malindo Air Air Tahiti Turkish Navy Aer Lingus Regional MASwings Aer Arann Regional Aeromar Air Baltic LIAT Firefly Beek Air. Leased from Mass Lease Jet time. Leased from Kahala Aviation. Tajik Air. Leased from ILFC American Airlines. Leased from SMBC Air Onix. Leased from ILFC Regent Airways. Leased from ILFC Jet Airways. Leased from BOC Aeropostal. Leased from Perla Airlines SpiceJet. Leased from GECAS. Yanair. Leased from ILFC Ukraine International Airlines Hermes Airlines. Leased from ILFC Air Caucasus. Leased from Swift Air cargo Comair. Leased from Well fargo. Ethiopian Airlines. Leased from ACG. Nas air. Leased from ACG

Date 29/08/2013 29/08/2013 29/08/2013 28/08/2013 28/08/2013 27/08/2013 26/08/2013 23/08/2013 22/08/2013 21/08/2013 21/08/2013 20/08/2013 16/08/2013 16/08/2013 15/08/2013 14/08/2013 12/08/2013 10/08/2013 10/08/2013 09/08/2013 06/08/2013 02/08/2013 01/08/2013 31/07/2013 31/07/2013 31/07/2013 30/07/2013 30/07/2013 26/07/2013 26/07/2013 26/07/2013 25/07/2013 24/07/2013 21/07/2013 21/07/2013 19/07/2013 16/07/2013 15/07/2013 15/07/2013 12/07/2013 05/07/2013 04/07/2013 29/08/2013 27/08/2013 02/08/2013 22/08/2013 20/08/2013 28/08/2013 28/08/2013 27/08/2013 20/08/2013 09/08/2013 25/07/2013 25/07/2013 25/07/2013 22/07/2013 22/07/2013 31/08/2013 23/08/2013 23/08/2013 04/08/2013 01/08/2013 01/08/2013 30/07/2013 30/07/2013 29/07/2013 29/07/2013 26/07/2013 26/07/2013 25/07/2013 16/07/2013 11/07/2013 06/07/2013 04/07/2013 22/08/2013 04/09/2013 03/09/2013 30/08/2013 30/08/2013 24/08/2013 23/08/2013 22/08/2013 22/08/2013 22/08/2013 22/08/2013 16/08/2013 15/08/2013 15/08/2013 15/08/2013 12/08/2013

Source: IBA’s JetData.

afm • Issue 86 – September–October • www.afm.aero

INDUSTRY DATA: Deals Data supplied by IBA’s JetData. www.ibagroup.com

Aircraft deals 4 July to 9 September MSN Manu- facturer

Model

38042 Boeing 737-800 30040 Boeing 737-800 5542 Airbus A320-200 5592 Airbus A320-200 5691 Airbus A320-200 5702 Airbus A320-200 5710 Airbus A320-200 5713 Airbus A320-200 2475 Airbus A320-200 36086 Boeing 737-900ER 36593 Boeing 737-800 37740 Boeing 737-800 28071 Boeing 737-800 37741 Boeing 737-800 39429 Boeing 737-800 24927 Boeing 737-500 41789 Boeing 737-800 39431 Boeing 737-800 5645 Airbus A320-200 39929 Boeing 737-800 1727 Airbus A319-100 26064 Boeing 767-300ER 1445 Airbus A330-300 290 Airbus A330-200 190 Airbus A340-300 35305 Boeing 787-8 35306 Boeing 787-8 1312 Airbus A330-200 1334 Airbus A330-200 28264 Boeing 767-300ER 28111 Boeing 767-300ER 41525 Boeing 777-300ER 29435 Boeing 767-300ER 17000017 Embraer E175 402 ATR 72-200 468 ATR 72-500 1097 ATR 72-600 87 ATR 72-200F 198 ATR 72-200F 372 ATR ATR72-200F 555 ATR 72-500 536 ATR 72-500 706 Airbus A310-300 24903 Boeing 737-400 29848 Boeing 737-700 48545 Boeing MD-11 38320 Boeing 787-8 10034 Bombardier CRJ-700 10015 Bombardier CRJ-700 10012 Bombardier CRJ-700 25167 Boeing 737-500 27417 Boeing 737-500 192 Airbus A340-200 199 Airbus A340-200 31 Airbus A340-200 220 Airbus A300B4-200 11282 Fokker 100 29920 Boeing 737-800 29916 Boeing 737-800 27416 Boeing 737-500 25235 Boeing 737-500 1605 Airbus A320-200 27152 Boeing 757-200 26346 Boeing 747-400 25864 Boeing 767-300ER 48502 Boeing MD-11F 48503 Boeing MD-11F 48504 Boeing MD-11F 41305 Boeing 737-800 38735 Boeing 737-800 40698 Boeing 737-800 41790 Boeing 737-800 33231 Boeing 737-800 33489 Boeing 737-800 5724 Airbus A320-200 5735 Airbus A320-200 39930 Boeing 737-800 5675 Airbus A320-200 41012 Boeing 737-800 33488 Boeing 737-800 40952 Boeing 737-800 5692 Airbus A320-200 33230 Boeing 737-800 132 Airbus A380-800 40075 Boeing 777-300ER 27096 Boeing 737-400 1066 Airbus A319-100 25229 Boeing 737-500 25228 Boeing 737-500 23886 Boeing 737-400

Event Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Operating lease Parked Parked Parked Parked Parked Parked Parked Parked Retired Retired Retired Retired Retired Retired Retired Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Sale & leaseback Sale & leaseback Sale & leaseback Sale & leaseback Sale & leaseback Sale & leaseback Sale & leaseback Sale & leaseback Sale & leaseback Sale & leaseback Sale & leaseback Sale & leaseback Sale & leaseback Sale & leaseback Sale & leaseback Sale & leaseback Sale & leaseback Scrapped Scrapped Sold off lease Sold off lease Sold off lease

Current Owner/Operator

Date

Okay airways 09/08/2013 Kharkiv Airlines. Leased from ILFC. 01/08/2013 EasyJet. Leased from ORIX Aviation 25/07/2013 EasyJet. Leased from ORIX Aviation 25/07/2013 China Eastern Airlines. Leased from SMBC 25/07/2013 EasyJet. Leased from ORIX Aviation 25/07/2013 China Eastern Airlines 25/07/2013 Chongqing Airlines 25/07/2013 Tianjin Airlines. Leased from QBE Aircraft leasing 24/07/2013 Ukraine International Airways. Leased from ALAFCO 24/07/2013 Air Europa. Leased from Dragon aviation leasing 23/07/2013 Pegasus Airlines Leased from SMBC. 22/07/2013 SunExpress. Leased from BBAM 19/07/2013 Globus Airlines. Leased from SMBC. 19/07/2013 Spring Airlines. Leased frm AWAS 17/07/2013 Blue Panorama Airlines. Leased from BBAM. 16/07/2013 Okay airways. Leased from ILFC 15/07/2013 Solaseed air. Leased from AWAS 13/07/2013 Chongqing Airlines . Leased from ICBC leasing 10/07/2013 Garuda Indonesia. Leased from SMBC 10/07/2013 Belle Air. Leased from CIT. 04/07/2013 Cargo aircraft Management. Leased from Guggenheim. 04/09/2013 CEBU. Leased from CIT 04/09/2013 Aerolineas Argentinas. Leased from ILFC 03/09/2013 Hi Fly. Leased from BBAM. 02/09/2013 Norwegian Long Haul. Leased from ILFC 26/08/2013 Aeromexico 16/08/2013 RAF. Leased from Air Tanker. 15/08/2013 RAF. Leased from Air Tanker. 15/08/2013 Orient Thai. Leased from ALC. 15/08/2013 Nordwind Airlines. Leased from ILFC. 23/07/2013 Thai Airways International. Leased from BOC. 21/07/2013 Nordwind Airlines 17/07/2013 Air Lituancia. Leased from ECC leasing 03/09/2013 United Airways. Leased from Phoenix Aircraft Leasing 19/08/2013 SwiftAir 15/08/2013 Aer Arann Regional. Leased from Aer Lingus 25/07/2013 Air Niugini. Leased from Farnair Switzerland 20/07/2013 Air Niugini. Leased from Farnair Switzerland 20/07/2013 Africa West. Leased from Tatra Leasing 18/07/2013 JAT Airways. Leased from NAC 15/07/2013 JAT Airways. Leased from NAC 14/07/2013 Uzbekistan airways 08/07/2013 Commercial Jet 04/09/2013 Southwest Airlines 22/07/2013 China Cargo Airlines 17/08/2013 Qatar Airways 26/07/2013 Lufthansa City Line 25/07/2013 Lufthansa City Line 25/07/2013 Lufthansa City Line 25/07/2013 Donavia 29/08/2013 Rwandair 28/08/2013 Air China 26/08/2013 Air China 26/08/2013 Conviasa 17/08/2013 Air Contractors 04/07/2013 Air Bagan 25/07/2013 Aircastle 03/09/2013 Aircastle 03/09/2013 GECAS 03/09/2013 GECAS 22/07/2013 Saga Airlines 16/07/2013 Aircastle 15/07/2013 Pullmantur Air 05/09/2013 GECAS 20/08/2013 Boeing Capital Leasing 06/07/2013 Boeing Capital Leasing 06/07/2013 Boeing Capital Leasing 06/07/2013 China Eastern Airlines. Leased from Air Lease Corp 30/08/2013 Lion Airlines. Leased from Avolon 28/08/2013 Virgin Australia 19/08/2013 Xiamen Airlines. Leased from ILFC 13/08/2013 American Airlines.Leased from SMBC 12/08/2013 American Airlines. Leased from Aercap 12/08/2013 Peach 07/08/2013 China Eastern Airlines 07/08/2013 Xiamen Airlines. Leased from SMBC 06/08/2013 GoAir 26/07/2013 Virgin Austrailia. Leased from SMBC Aviation Capital 26/07/2013 American Airlines 18/07/2013 China Eastern Airlines 18/07/2013 Iberia 17/07/2013 American Airlines. 12/07/2013 Emirates. Leased from DNA Alpha Limited 02/09/2013 Garuda Indonesia. Leased from ALAFCO 30/07/2013 Reliance Aircraft 01/08/2013 AJW Aviation 15/07/2013 Aircraft End of life solutions 06/09/2013 Aircraft End of life solutions 06/09/2013 Avior Airlines 03/09/2013 Source: IBA’s JetData.

afm • Issue 86 – September–October • www.afm.aero

INDUSTRY DATA: Deals Data supplied by IBA’s JetData. www.ibagroup.com

Aircraft deals 4 July to 9 September MSN

Make

24679 Boeing 999 Airbus 23486 Boeing 30273 Boeing 49383 Boeing 49605 Boeing 49606 Boeing 49607 Boeing 49609 Boeing 49611 Boeing 49642 Boeing 53010 Boeing 53011 Boeing 53165 Boeing 53337 Boeing 53340 Boeing 24653 Boeing 3632 Airbus 25744 Boeing 24665 Boeing 49707 Boeing 26604 Boeing 41658 Boeing 24438 Boeing 26304 Boeing 25412 Boeing 27232 Boeing 27233 Boeing 23569 Boeing 2916 Airbus 2919 Airbus 2443 Airbus 603 Airbus 244227 Boeing 296 Airbus 348 Airbus 891 Airbus 7442 Bombardier 7113 Bombardier 7019 Bombardier 7015 Bombardier 7009 Bombardier 7007 Bombardier 8010 Bombardier 145010 Embraer 19000372 Embraer 523 ATR 451 ATR 448 ATR 402 ATR 349 ATR 818 ATR 799 ATR 320 ATR 426 ATR 355 ATR 602 ATR 603 ATR 20162 fokker 25130 Boeing 25019 Boeing 24994 Boeing 39445 Boeing 1420 Airbus 41520 Boeing 19000373 Embraer 28573 Boeing 26200 Boeing 11555 Fokker 923 Airbus 246 ATR 617 Airbus 24648 Boeing 25418 Boeing 29 Airbus 49506 Boeing 2210 Airbus 32685 Boeing 26241 Boeing 24332 Boeing 26389 Boeing 668 Airbus 26346 Boeing 255 Airbus 833 Airbus 7338 Bombardier 301 ATR 285 ATR 272 ATR 373 ATR

Model

Event

737-300Sf A320-200 737-300F 737-700 MD80 MD80 MD80 MD80 MD80 MD80 MD80 MD80 MD80 MD80 MD80 MD80 737-300 A319-100 737-300 737-300 MD-83 737-400 737-700 737-400 737-500 737-400 737-400 737-400 737-300 A321-200 A321-200 A320-200 A300-600 747-400 A330-200 A330-200 A330-200 CRJ-200 CRJ-200 CRJ200 CRJ200 CRJ200 CRJ200 CRJ-200 ERJ145 E190 72-200 72-200 72-200 72-200 72-200 72-500 72-500 72-200 72-200 72-200 42-500 42-500 50 757-200 757-200 757-200 737-800 A330-300 777-300ER E190 737-300 767-300ER 70 A330-200 72-200 A320-200 737-500 737-500 A320-200 MD-80 A320-200 737-800 757-200 737-400 767-300ER A340 747-400 A330-200 A330-300 CRJ-100 72-200 72-200 72-200 72-200

Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold with lease Sold with lease Sold with lease Sold with lease Sold with lease Sold with lease Sold with lease Stored Stored Stored Sub leased Sub-leased Wet-leased Wet-leased Wet-leased Wet-leased Wet-leased Wet-leased Wet-leased Wet-leased Wet-leased Wet-leased Wet-leased Wet-leased Wet-leased Wet-leased Wet-leased Wet-leased Wet-leased Wet-leased Wet-leased

Current Owner/Operator Westair Atlantic Group Jetcom Qantas freight GA telesis Allegiant Air Allegiant Air Allegiant Air Allegiant Air Allegiant Air Allegiant Air Allegiant Air Allegiant Air Allegiant Air Allegiant Air Allegiant Air Allegiant Air TAM (bolivia) Tyrolean Jet Service Air Panama Balkanian Airways Africa Charter Airlines City Airways Nanshan Samair AWAS First Air First Air First Air Atlantic Airlines AWAS AWAS Ames Camo Qeshm Air Boeing holding company Wind Rose Aviation TAME Equador Arik Air Georgian Airways Skyward International Regional One Regional One Regional One Regional One SCAT Air Bae Systems Royal Air Maroc MAP Linhas Aereas Magellan Aviation Group Magellan Aviation Group Phoenix Aircraft Leasing Hawaii Island Air Alsie Express Air Alsie Express Rheinland Air Service FedEx FedEx Nordic Aviation (NAC) Nordic Aviation (NAC) Air Panama First Star Aviation First Star Aviation First Star Aviation Qantas Cebu Pacific Intrepid Aviation Royal Air Maroc Precision Air Air Madagascar Austrian Airlines Etihad Airways Intersky Qeshm Air. Leased from Asian Express Solyom Hungarian Airways Chanchangi Airlines Royal Air Maroc Iran Air. Leased from Bukovyna. Syphax Airlines. Leased from Livingston Air WOW Air. Leased from Neos Jet2.com. Leased from Privilege style. Go2sky Conviasa. Leased from Blue panorama Cubana. Leased from Air Tahiti Conviasa Conviasa. Leased from Jordan Aviation. Calima Aviacion. Leased from Orbest Senegal Airlines. Leased from Cemair Höga Kusten Flyg. Leased from DAT Helitt Lineas Aereas. Leased from Darwin airberlin. Leased from Avianti Africa West. Leased from Danube Wings

Date 04/09/2013 29/08/2013 21/08/2013 19/08/2013 15/08/2013 15/08/2013 15/08/2013 15/08/2013 15/08/2013 15/08/2013 15/08/2013 15/08/2013 15/08/2013 15/08/2013 15/08/2013 15/08/2013 12/08/2013 09/08/2013 09/08/2013 27/07/2013 24/07/2013 18/07/2013 17/07/2013 17/07/2013 16/07/2013 15/07/2013 15/07/2013 15/07/2013 12/07/2013 09/07/2013 08/07/2013 05/07/2013 09/09/2013 20/08/2013 26/07/2013 11/07/2013 09/07/2013 04/09/2013 04/09/2013 27/08/2013 27/08/2013 27/08/2013 27/08/2013 20/08/2013 08/08/2013 20/07/2013 05/09/2013 21/08/2013 21/08/2013 19/08/2013 14/08/2013 06/08/2013 06/08/2013 31/07/2013 25/07/2013 25/07/2013 22/07/2013 22/07/2013 11/07/2013 02/09/2013 02/09/2013 02/09/2013 16/07/2013 16/07/2013 08/07/2013 09/08/2013 30/07/2013 05/09/2013 19/08/2013 07/08/2013 22/08/2013 09/09/2013 18/08/2013 12/08/2013 09/08/2013 03/08/2013 25/07/2013 25/07/2013 14/07/2013 11/07/2013 05/09/2013 29/08/2013 17/08/2013 31/07/2013 19/07/2013 24/07/2013 15/08/2013 22/07/2013 19/07/2013 18/07/2013

Source: IBA’s JetData.

afm • Issue 86 – September–October • www.afm.aero

AIRPORTS & INDUSTRY DATA: ROUTES: FirmAirport orders charges Firm orders - 4 July to 11 September

Data supplied by IBA’s JetData. www.ibagroup.com

Firm orders - 4 July to 11 September

Data supplied by IBA’s JetData. www.ibagroup.com

Manufacturer Variant Customer

Airbus A321-200 A330-300 Airbus Airbus A320ceo Airbus A320neo A330-300 Airbus Airbus A320ceo A350-900 Airbus Airbus A321ceo Airbus A319ceo Airbus A321ceo Airbus A320ceo Airbus A320neo Airbus A320ceo Airbus A320neo Boeing 777 Boeing 787-8 Boeing 737 MAX Boeing 737-800 Boeing 777-300ER Boeing 777-300ER Boeing 737 MAX Boeing 747-8 Boeing 737 MAX Boeing 787-8 Embraer E190-E2 Embraer E195-E2 Irkut MC-21 Irkut MC-21 Irkut MC-21 Sukhoi SSJ100

Delta Air Lines Delta Air Lines IAG (Vueling) IAG (Vueling) Turkish Airlines Private customer Srilankan Airlines ILFC CIT CIT EasyJet EasyJet Syphax Air Syphax Air Undisclosed Xiamen Airlines Travel Service United States Navy All Nippon Airways Turkish Airlines TUI Travel PLC Silk Way Airlines Unidentified Unidentified ILFC ILFC IrAero Ilyushin Finance VEB Leasing Ilyushin Finance

Order Date of Aircraft

Source: IBA’s JetData.

Number

Engines

04/09/2013 30 04/09/2013 10 16/08/2013 30 16/08/2013 32 02/08/2013 3 23/07/2013 1 22/07/2013 4 19/07/2013 15 12/07/2013 3 12/07/2013 5 11/07/2013 35 11/07/2013 100 04/07/2013 3 04/07/2013 3 28/08/2013 7 26/08/2013 6 07/08/2013 3 31/07/2013 13 30/07/2013 3 22/07/2013 5 09/07/2013 60 05/07/2013 2 04/07/2013 4 04/07/2013 1 17/07/2013 25 17/07/2013 25 28/08/2013 10 27/08/2013 22 27/08/2013 30 27/08/2013 20

CFM56-5B CF6-80E1 GE CF6 Trent XWB CFM56-7B Leap 1A Leap 1B CFM56-7B GE90 GE90 Leap 1B GEnx-2B Leap 1B Genx-1B PW1900 PW1900 SaM146

Source: IBA’s JetData.

afm afm •• Issue Issue86 86––September–October September–October••www.afm.aero www.afm.aero

AIRPORTS INDUSTRY & ROUTES:DATA: Airport List charges prices List prices and lease rates - September 2013

Data supplied by IBA’s JetData. www.ibagroup.com

Manufacturer Average Type Current Market Value Dry Lease Rate List Price % Oldest Newest Change Oldest Newest Airbus - A300-600R $4.36m $11.00m 0% $0.070m $0.160m Airbus - A310-200 $1.50m $2.00m 0% $0.050m $0.090m Airbus - A310-300 $3.30m $7.70m -4% $0.070m $0.140m Airbus $67.70m A318-100 $11.50m $25.00m 0% $0.120m $0.230m Airbus $80.70m A319-100 $8.30m $34.30m -4% $0.110m $0.270m Airbus $88.30m A320-200 $4.00m $41.00m 1% $0.065m $0.320m Airbus - A321-100 $9.50m $13.70m -11% $0.090m $0.200m Airbus $103.60m A321-200 $16.00m $48.00m 0% $0.165m $0.385m Airbus $208.60m A330-200 $32.00m $87.00m 0% $0.320m $0.850m Airbus $211.50m A330-200F $79.50m $91.00m 0% $0.730m $0.800m Airbus $231.10m A330-300 $17.50m $100.00m 0% $0.180m $0.900m Airbus - A340-200 $7.00m $12.30m -12% $0.140m $0.300m Airbus - A340-300 $7.00m $39.90m 0% $0.140m $0.400m Airbus - A340-500 $35.00m $67.00m -11% $0.350m $0.650m Airbus - A340-600 $35.00m $69.50m -16% $0.400m $0.700m Airbus $389.90m A380-800 $135.00m $210.00m 0% $1.350m $2.000m - B717-200 $6.00m $10.00m 0% $0.075m $0.140m Boeing Boeing - B737-300 $1.30m $5.00m -3% $0.040m $0.080m Boeing - B737-400 $2.50m $6.00m 0% $0.050m $0.090m Boeing - B737-500 $1.50m $4.40m -2% $0.040m $0.060m Boeing - B737-600 $9.00m $15.00m 0% $0.090m $0.160m Boeing $74.80m B737-700 $12.00m $34.50m 0% $0.140m $0.300m Boeing $89.10m B737-800 $15.00m $46.00m 0% $0.190m $0.360m Boeing - B737-900 $15.00m $22.00m -5% $0.150m $0.220m Boeing $94.60m B737-900ER $30.00m $48.50m 0% $0.260m $0.390m Boeing - B747-400 $10.00m $38.00m -8% $0.190m $0.450m Boeing $352.00m B747-8F $162.00m $180.00m 0% $1.300m $1.500m Boeing - B757-200 $5.50m $20.00m 0% $0.080m $0.220m Boeing $160.20m B767-200ER $2.80m $14.40m -11% $0.090m $0.250m Boeing $182.80m B767-300ER $9.50m $61.50m 0% $0.170m $0.460m Boeing $185.40m B767-300F $26.00m $65.00m 0% $0.280m $0.580m - B777-200 $20.50m $48.00m -4% $0.250m $0.400m Boeing Boeing $258.80m B777-200ER $38.00m $115.00m 0% $0.400m $0.900m Boeing $291.20m B777-200LR $78.00m $141.00m -1% $0.750m $1.150m Boeing $295.70m B777F $130.00m $165.00m 0% $1.200m $1.400m Boeing - B777-300 $42.00m $70.00m -4% $0.400m $0.650m Boeing $315.00m B777-300ER $88.00m $165.00m 1% $0.800m $1.550m Boeing $206.80m B787-8 $100.00m $113.00m 0% $0.900m $1.100m Boeing McDonnell Douglas - MD-11 $10.00m $16.00m 0% $0.150m $0.220m Boeing McDonnell Douglas - MD-81 $0.50m $0.50m 0% $0.025m $0.035m Boeing McDonnell Douglas - MD-82 $0.50m $1.40m 0% $0.025m $0.045m - MD-83 $0.68m $1.80m -1% $0.035m $0.060m Boeing McDonnell Douglas Boeing McDonnell Douglas - MD-87 $0.80m $1.10m -30% $0.025m $0.040m Boeing McDonnell Douglas - MD-88 $1.00m $2.00m -6% $0.035m $0.060m Boeing McDonnell Douglas - MD-90 $4.10m $4.40m -14% $0.072m $0.100m Bombardier (Canadair) - CRJ-100/200 $1.40m $5.00m -9% $0.035m $0.070m Bombardier (Canadair) $37.30m CRJ-700/705 $9.00m $22.50m 0% $0.090m $0.200m Bombardier (Canadair) $42.80m CRJ-900 $11.50m $25.00m 0% $0.120m $0.220m Bombardier (Canadair) CRJ-1000 $22.50m $27.50m -1% $0.200m $0.250m Bombardier - Q200 $4.50m $8.50m 0% $0.035m $0.080m Bombardier - Q300 $5.30m $11.50m 0% $0.045m $0.120m Bombardier $30.00m Q400 $9.50m $21.00m 0% $0.090m $0.190m Embraer $21.58m ERJ-135ER $1.70m $4.60m -6% $0.030m $0.050m $28.02m ERJ-145ER $2.80m $8.00m 0% $0.040m $0.080m Embraer Embraer $38.66m E170 LR $14.00m $27.00m 0% $0.145m $0.230m Embraer $41.61m E175 LR $16.60m $29.20m 0% $0.165m $0.250m Embraer $46.08m E190 LR $19.30m $32.50m 0% $0.185m $0.280m Embraer $48.67m E195 LR $21.80m $34.50m 1% $0.200m $0.300m Fokker - Fokker 70 $2.50m $3.00m 0% $0.040m $0.070m Fokker - Fokker 100 $2.30m $3.50m 0% $0.045m $0.090m Sukhoi SSJ 100-95B $22.00m $24.00m 0% $0.177m $0.225m Sukhoi SSJ 100-95LR $22.80m $24.70m 0% $0.182m $0.230m ATR $18.10m ATR 42-500 $4.20m $13.00m 0% $0.060m $0.140m ATR $18.90m ATR 72-500 $6.40m $17.00m 0% $0.080m $0.180m $21.90m ATR 42-600 - $15.50m 0% - $0.150m ATR ATR $22.70m ATR 72-600 - $20.00m 0% - $0.190m

% Change 0% 0% 0% 0% 0% 0% 0% 4% 0% 0% 0% 0% -10% -5% -4% 0% 0% 0% 0% 0% 0% 1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% -3% 0% 0% 1% 1% 1% 0% 0% 0% 0% 0% 0% -4% 0% 0%

Source: IBA’s IBA’s JetData. JetData. Source:

afm • Issue 86 – September–October • www.afm.aero

AIRPORTS & INDUSTRY DATA: ROUTES: Engine Airport datacharges Data supplied by IBA’s JetData. www.ibagroup.com

Engine data - September 2013

B737 B737 B737 A321 A319 A340 B737 B737 B737 B737 CRJ -300 -400 -500 -200 -100 -300 -600 -700 -800 900ER -200

CRJ -700

E170/ E190/ A300 B767 MD-11 A330 B777 A320 MD-82 B747 A310 B757 Fokker A340 A330 B777 A380 ERJ B717 175 195 -600R -300ER -200 -300ER -200 -400 -300 -200 100 -600 -300 -200ER -800 -145ER -200

Source: IBA’s JetData.

Engine data - September 2013

Data supplied by IBA’s JetData. www.ibagroup.com

standfirst

Type Engine Full-life mkt value Current half-life mkt value Mkt lease rate July 2013 July 2013 July 2013 B737-300 CFM56-3B1 $1.30m $0.70m $0.020m B737-400 CFM56-3B2 $1.90m $1.10m $0.022m B737-500 CFM56-3C1 $2.45m $1.40m $0.028m A321-200 CFM56-5B3/P $8.20m $6.00m $0.065m A319-100 CFM56-5B5/P $6.40m $4.40m $0.045m A340-300 CFM56-5C4/P $6.00m $4.30m $0.045m body B737-600 CFM56-7B22 $7.00m $4.80m $0.047m B737-700 CFM56-7B24 $7.60m $5.40m $0.056m B737-800 CFM56-7B26 $8.20m $6.10m $0.065m B737-900ER CFM56-7B27 $8.50m $6.50m $0.066m CRJ-200 CF34-3B1 $2.30m $1.30m $0.018m CRJ-700 CF34-8C5 $4.60m $3.20m $0.045m E170/175 CF34-8E5 $4.70m $3.30m $0.045m E190/195 CF34-10E6 $6.35m $4.95m $0.065m A300-600R CF6-80C2A5 $5.80m $3.00m $0.045m B767-300ER CF6-80C2B6F $7.50m $4.80m $0.055m MD-11 CF6-80C2D1F $5.80m $3.10m $0.045m A330-200 CF6-80E1A3 $14.80m $9.90m $0.120m B777-300ER GE90-115B $30.74m $22.95m $0.250m A320-200 V2527-A5 $7.75m $5.40m $0.060m MD-82 JT8D-217C $0.90m $0.50m $0.018m B747-400 PW4056 $7.20m $4.20m $0.055m A310-300 PW4152 $6.30m $3.40m $0.045m B757-200 RB211-535E4 $5.00m $3.20m $0.040m Fokker 100 Tay 650-15 $2.00m $1.40m $0.025m A340-600 Trent 556-61 $14.48m $8.60m $0.110m A330-300 Trent 772B-60 $14.58m $8.60m $0.120m B777-200ER Trent 895 $21.10m $13.80m $0.170m A380-800 Trent 970 $19.80m $13.80m $0.170m ERJ-145 ER AE3007-A1 $2.35m $1.40m $0.025m B717-200 BR715A $4.00m $2.50m $0.042m Source: IBA’s JetData.

afm afm •• Issue Issue86 86––September–October September–October••www.afm.aero www.afm.aero