AFM Issue 90 by AFM Magazine

The business and financing of airline operations

AIRLINE FLEET MANAGEMENT

One to one: MD of SES The case for an A330 Neo Engine values Global MRO forecast

Knowledge is power: The engine special ISSUE 90 May–June 2014

Published by

May–June 2014 Issue 90 www.afm.aero

Foreword Editor Mary-Anne Baldwin Mary-Anne@afm.aero +44 (0)208 831 7511 Contributors Bernard Fitzsimons, Andrew Williams, Keith Mwanalushi and Justin Burns. Advertising Manager Ellis Owen Ellis@afm.aero +44 (0)208 831 7519 Editorial Director Joe Bates joe@aviationmedia.aero 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 (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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With the success of the Neo and Max engines and the run of new engine offerings, it seems wise to dedicate this issue to engines. From leasing to parts, and from MRO to market values, we give a wide examination of the market. This issue also coincides with industry debate surrounding the possible re-engining of the A330, something we look at on page 24. Should Airbus go ahead with the A330 Neo, it would have considerable impact on the engine manufacturers. But who would be selected? GE Aviation has the GEnx, and Rolls-Royce has the Trent 1000 TEN, both of which are engine options on the 787 programme.

“It seems clear that excessive aftermarket competition leads to depressed asset values and potentially weakens OEM revenue flow. On the other hand, a situation where there is no aftermarket competition… kills off any interest in trading used engines,” he tells on page 34.

Pratt & Whitney could step in with an update of its PW1000G geared turbofan engine, opening it up to the long-haul, twin-aisle market.

Perhaps we’ll hear more from Airbus during the upcoming Farnborough Air Show in July, when members of the engine industry will announce a number of key orders and deals.

The decision could create chasms in the three players’ market share.

Before that, however, we talk to Julie Dickerson, MD of the engine leasing company for CFM, Shannon Engine Support, about the market and the company’s position within it.

But while Jeff Knittel, president of CIT – who argues the case for an A330 Neo in this issue – says a new engine option would not affect current A330 values, Gary Fitzgerald, MD of Stratos, highlights a different concern for engine values in general. He argues that independent engine MROs will have to adapt to a changing market in which aftermarket service solutions are increasingly sold along with the engine.

Airline Fleet Management™ is a licensed trademark of MRO Networks. All trademarks used under licence from MRO Networks Limited.

Editor Mary-Anne Baldwin

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We also discuss engine MRO needs and find out how operators are forecasting their needs for engine spares. So, with all this information, you’ll be well and truly powered up!

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 MRO Network, 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 90 – May–June • www.afm.aero

LEAP year Weâ&#x20AC;&#x2122;re writing to confirm a date we made with our customers in 2008. The first LEAP engine began testing September 4, 2013. Right on schedule. Just like our last 21 engines. 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

TThe business and financing of aairline irline operations AIRLINE FLEET MANAGEMENT

One to one: MD of SES The case for an A330 Neo Engine values Global MRO forecast

Knowledge is power: The engine special ISSUE 90 May–June 2014

Published by

May–June 2014 Issue 90 www.afm.aero

Issue 90 May –June

In this issue

03 8 15

Foreword

15 20

NEWS ROUND UP

The latest on deals, mergers, appointments and more ISTAT

ISTAT America round-up Mary-Anne Baldwin provides a review of the

discussions at this year’s ISTAT conference, in San Diego.

FOCUS

One to one: Julie Dickerson, MD of SES

Julie Dickerson, MD of Shannon Engine Support, talks to Bernard Fitzsimons about the engine leasing market and the company’s pursuits within it.

FLEET OPERATIONS

The future of the A330: The case for a Neo Mary-Anne Baldwin speaks to CIT’s Jeff Knittel, Intrepid’s Bruce McClelland and EADS’ Wolfgang Schmid as she examines the case for an A330 re-engine.

afm • Issue 90 – May–June • www.afm.aero

CONTENTS

FLEET OPERATIONS

Industry insight: Global fleet and MRO needs

TeamSAI provides its insights and forecasts into the global commercial fleet and its MRO needs. Mike McBride, EVP of TeamSAI, and John Smiley, senior industry analyst for TeamSAI’s betterinsight, which provides MRO analysis, report.

TRADING, LEGAL AND FINANCE

Engine values: Are they at risk?

Gary Fitzgerald, MD of Stratos, provides AFM with an extract of the company’s white paper, explaining how dramatic changes in the engine aftermarket are causing major concerns for aircraft investors.

MAINTENANCE OPERATIONS

Engine MRO: Avoiding the pitfalls

Efficient and timely engine MRO is an essential component of any airline’s operations. But what are the common pitfalls? Andrew Williams looks at the most important steps to achieving short engine MRO turnaround times, together with challenges, trends and developments in engine MRO.

Engine parts supply: Forecasting demand

Successful planning for engine spares and forecasting brings clear operational advantages. Keith Mwanalushi speaks to TES, AAR, P&WC and AJW to find their views.

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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NEWS

Airbus returns to euro debt capital markets

he Airbus Group has successfully priced a new 10-year bond offering. The €1bn ($1.4bn) transaction is the first bond issue for the newly re-branded Airbus Group, and marks the return of the manufacturer to the euro debt capital markets after almost five years. Airbus says the offering was well received by the market and generated orders of around €3.8bn, enabling it to benefit from the improved funding conditions currently available in the capital markets. The 2.36 per cent coupon was the lowest ever for any of the group’s bond issuances, and the group says net proceeds from the issue will be used for “general corporate purposes”. The bond placement was made with around 230 qualified investors, mainly based in France, Germany and the UK.

An application has been made for the bonds to be admitted for trading on the Luxembourg Stock Exchange. Airbus Group has also signed a MOU with the Bank of China (BOC), meaning the two parties will co-operate on domestic and international settlement, global cash management and treasury operations, as well as credit-rated activities such as loan and trade financing. Airbus Group and BOC will also work together on aircraft leasing, asset management, hedging and corporate loans. The agreement will provide broader financing options to Airbus Group’s customers, including various currency options, and develop corporate and structured finance opportunities in China and globally. Airbus Group CFO, Harald Wilhelm, says: “As a company that already has a significant industrial and market presence in China, this agreement with Bank of China is a logical step forward”.

NEWS IN BRIEF Oman Air raises its capital Oman Air will increase its capital by OMR200m ($519.48m) to OMR700m ($1.82bn) after reporting a 16 per cent increase in total losses for the 2013 financial year. The airline’s chairman, Darwish bin Ismail Al-Balushi, says the losses of OMR113.34m ($293m) are due to its fleet renewal and expansion programme. Oman Air currently has 20 aircraft on order and Al-Balushi explains that the increase will “further assist the carrier’s progress”. Oman Air will also spin off some of its business units, such as catering, duty free and air charter divisions, into separate companies, but all will remain under the umbrella of the Oman Air Group.

Avianca prices bond Avianca has successfully priced a re-opening of its international bond, due 2020. The firm’s subsidiary companies, Grupo Taca and Avianca Leasing, are co-issuers. The 2020 bond, which was first issued on 10 May, 2013 at an 8.375 per cent coupon rate, has improved by about 80 basis points to date. In accordance with the positive trend, and affirmation of S&P’s and Fitch’s Bond Rating of B+, the company decided to retap the international bond market. Avianca priced a $250m re-opening of its 2020 bonds at a 7.44 per cent yield to maturity in an offering that was oversubscribed by more than three and a half times. afm • Issue 90 – May–June • www.afm.aero

New LCC established in Tanzania A new lost-cost airline, SAX-Tanzania, is to serve Tanzania, east Africa. Kenyan safari and private charter carrier Fly-SAX set up the new carrier and appointed Brown Francis as general manager. Subject to receiving regulatory approvals from Tanzania Civil Aviation Authority, the new airline’s maiden flight is expected to occur in the second half of 2014. Don Smith, CEO and founder of Fly-SAX and Fly540 Kenya, explained: “We are launching a new airline to meet the ever-increasing demand for low-cost, efficient and safe air travel within Tanzania. SAX-Tanzania plans to offer routes to Mwanza, Kilimanjaro, Zanzibar and Mwtara.

NEWS

MB Aerospace acquires Norbert Industries MB Aerospace, the international aerospace engineering group, has acquired the aero-engine component manufacturing business Norbert Industries in a multi-million-dollar deal. MB Aerospace will take over Norbert’s operations in Michigan, US and Rzeszów, Poland, where it employs a collective 900 employees. The acquisition expands MB Aerospace’s coverage to more than 60 aero engines platforms across the commercial, industrial gas turbines and defence markets. It now also has a range of fabrication and machining capabilities. MB Aerospace’s CEO, Craig Gallagher, said: “With its well-invested manufacturing facilities and deep customer relationships in North America, alongside its highly developed engineering resources in Poland, the Norbert business is an opportunity of vast potential to support the growth ambitions for MB Aerospace as a whole.” MB Aerospace has ambitious growth plans, and says it “sees the Polish operation as adding an additional dimension to the group alongside the high skill, engineering and technology-focused manufacturing sites already developed”.

Chinese firm to buy 100 SSJ-100s According to reports, privately owned Chinese general aviation firm, O-Bay Aircraft Co, has signed a $3.5bn deal with Russia’s Sukhoi Civil Aircraft to buy 100 SSJ-100 regional aircraft. As part of the agreement, the manufacturer will jointly establish an assembly line and delivery centre with O-Bay in Zhengzhou, the capital of Henan province. The delivery centre is expected to open in 2016, while the assembly line should be complete in 2018. Two other companies, including a consulting firm and an aviation trading company, also signed the agreement to promote the programme. Sukhoi will increase its production rate from this year’s 43 annually, to 50 aircraft in 2015, and 60 in 2016.

Malaysia Airlines increases security Malaysia Airlines (MAS) has reportedly introduced new rules banning pilots from being alone in the cockpit following the disappearance of flight MH370. The rules require crew to guard the cockpit while food is being delivered to the pilots, and while either pilot is using the toilet. The carrier increased its security a week after flight MH370 went missing, Malaysian paper, The Star, reported. The newspaper quoted an unnamed spokesman for the airline as saying: “For security purposes we are unable to discuss any of these procedures publicly.” Malaysia Airports Holdings Board reportedly also stepped up security on the ground.

GE Aviation and Evergreen form JV GE Aviation and Evergreen Aviation Technologies (EGAT) have formed a new joint venture (JV) specialising in the overhaul of the GEnx engine. The new company, GE Evergreen Engine Services, builds on more than 15 years of close co-operation between the two firms. EVA Air chairman, KW Chang, explains: “EVA and GE launched our EGAT JV in 1998. Working together in this way has been a win-win for both companies. EGAT is recognised as a leader in MRO. “EGAT and GE are now teaming up to establish GE Evergreen Engine Services to service to the new generation of GEnx engines. This is the next step in our partnership to provide outstanding service to our customers.” GE Aviation will begin providing training and tooling for GEnx later this year, and the facility will be able to perform limited work on GEnx beginning in 2015, with full overhaul capability by 2019.

Tigerair signs fleet renewal Tigerair has entered into an agreement with Airbus and Pratt & Whitney for 37 fuelefficient A320 Neos. The purchase agreement includes options for up to 13 additional aircraft, and the ability to convert the A320 Neos into the larger A321 Neo model. Tigerair’s existing order of nine A320 aircraft, scheduled for delivery in 2014 and 2015 (which were part of a larger 2007 order) has been cancelled. CEO, Koay Peng Yen, says: “This deal effectively dissipates some concerns over a potential capacity overhang in the next couple of years. It also allows us to continue building on our leadership position in budget travel at a measured pace.”

Aer Arann changes name Aer Arann will change its name to Stobart Air by the end of this year. The carrier will continue to operate from its base next to Dublin International Airport under the Aer Lingus Regional brand as part of its franchise agreement with Aer Lingus. The next phase of its strategy will focus on additional franchise partnerships, leveraging its connection with London Stansted Airport and advancing growth with other airports, including Dublin, Cork and Shannon. Over the past year, the airline has seen a number of changes to its business, including financial restructuring, a fleet renewal programme and subsequent roll-out of eight new ATR72-600 aircraft.

afm • Issue 90 – May–June • www.afm.aero

NEWS

ANA places record aircraft order ANA is to place firm orders for 70 new aircraft worth ¥1,700bn ($16.5bn) at list prices with Boeing and Airbus. The board of directors has approved the order, which is the biggest in the airline’s history, and will support ANA’s drive to become one of the world’s leading airline groups. ANA has purchased 20 777-9X, as a successor to its existing fleet of 777-300ERs, along with six further 777-300ER aircraft to support expansion of its international services until delivery of the 777-9X. ANA has also placed an order for 14 787-9 aircraft, taking its total fleet of Dreamliners to 80, meaning it is the world’s biggest operator of the fuel-efficient aircraft. The order with Airbus consists of 30 smaller single-aisle aircraft from the A320 family – seven A320 Neos and 23 A321 Neos, which will replace ANA’s existing 737-500 and A320s.

The aircraft will be delivered from 2016 to 2027, and will increase the size of ANA’s fleet to 250 aircraft. New Boeing aircraft will be used predominantly on international routes, while the new Airbus aircraft will be introduced on both domestic routes and international routes. The new aircraft will help it to meet the needs of increasing numbers of passengers expected to arrive in the run-up to the 2020 Tokyo Olympics, and support the Japanese government’s plans to boost the annual total of foreign visitors to Japan to 20 million. Shinichiro Ito, president and CEO of ANA, says: “These new aircraft will give us maximum flexibility and improved fuel efficiency, and will allow us to meet the growth in demand, both internationally and in our domestic Japanese market.”

NEWS IN BRIEF ERA hits out at EU ETS decision The European Regions Airline Association has hit out at the European Parliament’s decision to create an intra-European EU Emissions Trading Scheme (ETS) until 2016. Parliament members decided only flights operated within the European Economic Area would be covered in the calendar years 2013, up to and including 2016. Following the 2016 Assembly of the International Civil Aviation Organization (ICAO), the European Commission says it will consider all options and may put forward a further proposal to revise the aviation ETS. Simon McNamara, director general of ERA, says: “Europe is penalising and damaging European operators flying intra-European flights.”

Air Canada to offer unsecured notes Air Canada is to offer $300m worth of senior unsecured notes in a private offering. Ratings company, Fitch, ranked Air Canada at investment grade B and says it has maintained a positive rating outlook. Fitch has upgraded Air Canada’s second lien senior secured debt from BB-/RR2 to BB/ RR1 and has assigned a rating of B-/RR5 to Air Canada’s proposed $300m unsecured notes. Fitch has said that the company’s operating revenues and credit profile are improving. However, it noted that upcoming aircraft deliveries would put pressure on free cash flows. It said while Air Canada has a strong home market position, it faces strong competition from WestJet. afm • Issue 90 – May–June • www.afm.aero

Delta fights Ex-Im financing Delta Air Lines has backed the Air Line Pilots Association’s (ALPA) call for the end of US ExportImport (Ex-Im) Bank financing of widebodies. Delta urged US Congress to enact reforms that would ensure that the EX-Im bank “provides support to US manufacturers without damaging the ability of US airlines and their employees to compete in the global marketplace”. In an open letter to chairman, Jeb Hensarling, ALPA president, Lee Moak, said: “The Bank’s unnecessary financing of widebody aircraft provides state-sponsored foreign airlines, many of which have ample cash reserves and top tier credit ratings, an annual economic advantage of about $2m per aircraft.”

NEWS: People

On the

move Ex-Im Bank makes key appointments

BATA CEO to retire

The Export-Import Bank of the US (Ex-Im Bank) has announced two high-level appointments. Bob Morin has been named as the bank’s new SVP for business and product development. He joined the bank in December 1992,and was instrumental in the design, development and successful implementation of many of Ex-Im Bank’s most successful product and process innovations. Chairman and president Fred Hochberg, says: “Bob Morin is one of the most knowledgeable, well-known and respected professionals within the aircraft finance industry.” Bob Roy, who joined Ex-Im Bank in 1990, has been promoted from deputy VP of the transportation division, to VP of the same department.

Simon Buck, CEO of the British Air Transport Association (BATA), the trade body for UK airlines, will retire in September 2014, after four years in the role. A replacement has not yet been found. Barry Humphreys, chairman of BATA, expressed his gratitude to Buck. “The role of an airline trade body has become even more important and BATA has had to evolve to meet the growing challenges. Simon has been central to that development and has played a key role in ensuring that BATA’s, and its airline members’, voices have been heard.” Buck said he is looking forward to early retirement and seeing more of his family, many of whom are overseas.

ABX’s Terry Scherz retires Terry Scherz, VP of aircraft maintenance of ABX Air, has retired after 40 years of service. Scherz joined ABX Air, known at the time as Midwest Air Charter in 1974, as an aircraft mechanic and stepped down on 1 April. Phil Flowers, who worked closely with Scherz as acting VP for the past six months, has been promoted to VP of aircraft maintenance. Flowers joined ABX Air in 1992, also as an aircraft mechanic. ABX Air flies express cargo routes for customers in the US and around the world. It is a wholly owned subsidiary of Air Transport Services Group (ATSG).

Etihad appoints SVP sales Etihad Airways has appointed James Mueller to the new position of SVP sales. With more than 20 years’ experience in the aviation industry, Mueller joins from United Airlines, where he worked for five years in various senior roles. He has also worked for Delta Air Lines-Northwest Airlines. Mueller’s appointment follows the recent unveiling of the Etihad Aviation Group, a new structure marking the transition of Etihad Airways from a single airline to a wider global aviation and travel group, which includes the establishment of the Hala Group. Mueller will initially report to Etihad Airways’ COO, Peter Baumgartner, during the group structure’s transition phase.

afm • Issue 90 – May–June • www.afm.aero

After the transition, Baumgartner will assume his new role as COO of the newly formed Hala Group, while Mueller will report to the airline’s COO, a new position that has been created to oversee the day-to-day running of the core airline.

VAS Aero promotes John Brooks VAS Aero Services has appointed John Brooks as SVP of Boeing programmes. He is promoted from VP of the same division. VAS Aero is a global leader in aviation logistics and aftermarket services where Brooks is now responsible for all of the company’s Boeing distribution and supply programmes, overseeing operations in the VAS Seattle, Washington facility. He has spent 19 years in the aviation aftermarket industry, 14 of which was with VAS.

Hawaiian director of strategic initiatives Hawaiian Airlines has appointed Jim Landers as director of strategic initiatives in its Strategy and Transformation division. Landers brings more than 25 years of aviation operations, strategic planning and organisational leadership experience to Hawaiian Airlines from a distinguished career in the US Navy. He holds a Master of Science in national security and resource strategy from the Industrial College of the Armed Forces and a Bachelor of Science degree in computer science from the University of Mississippi.

ISTAT America

ISTAT America round-up MRJ programme to reach milestone Mitsubishi Aircraft Corporation will fuse the wings and body of the first Mitsubishi Regional aircraft (MRJ) in early April, says Gregory Alberts, SVP of global leasing and asset management for Mitsubishi Aircraft Corporation. During a programme update at the International Society of Transport Aircraft Trading (ISTAT) conference in San Diego in mid May, Alberts showed a video of the first MRJ, which had its fuselage assembled in December 2013. Mitsubishi’s first commercial MRJ, which will go to launch customer ANA, is due for delivery in 2017. The first flight is scheduled for 2015. According to Alberts, the MRJ will deliver $0.6m in annual fuel savings and $1.5m in total savings against the E175 and E190. However, he admits that it has been hard to sell and that the market is still getting to know the aircraft. “It’s difficult to sell a paper airplane and tell people it’s wonderful,” he says. He adds: “The barriers of entry are huge today; it’s not for the faint hearted.” Indeed, in a poll of the conference delegates, which included lessors and financiers, 75 per cent believed the programme will only be 30 per cent successful, and only 15 per cent believed it will be a total success. However, this compared well with a similar poll taken on Sukhoi’s Superjet 100 (SSJ100), which entered into service in September 2013 with Mexican launch customer, Interjet. The majority of pollers (40 per cent) believed the SSJ100 programme will only be 25 per cent successful. Sukhoi delivered its sixth SSJ100 to Interjet in early May and recently received certification for a longer range version of the aircraft, which will be able to fly 2,350nm. Both programmes suffer a lack of confidence from potential buyers and a belief that stalwart manufacturers Airbus, Boeing, Embraer, ATR and Bombardier have greater expertise.

Nazario Cauceglia, CEO of Superjet International.

While the MRJ is Mitsubishi’s first aircraft, Alberts is quick to assert the company’s knowledge and experience, warning: “Don’t have any misunderstandings about Mitsubishi’s capabilities.” Indeed, the company was involved in building many other aircraft, including the A380, 737, 757, CRJ and 787. This work included building the wings, fuselage and parts. Despite caution from potential customers, the Mitsubishi programme has so far won 325 orders including options, some of which were helped by its two Japanese export credit agencies. Its deals so far include 100 firm orders and 100 options from Skywest, 50 firm and 50 options from Trans State Holdings and 15 firm and 10 options from ANA. Alberts disclosed that a larger, 100-seat version, currently called the MRJ100X, is a possibility but will only be built if there is enough market demand.

afm • Issue 90 – May–June • www.afm.aero

ISTAT America

NAC’s Moller warns lessors against turboprops Martin Moller, chairman of Nordic Aviation Capital (NAC), says he does not understand other leasing companies’ current interest in turboprop aircraft. Despite NAC being the largest regional aircraft lessor and with 90 per cent of its fleet being turboprops, Moller says he does not understand the “sudden peak of enthusiasm”. According to Moller, 36 per cent of the global fleet is owned by lessors and 24 per cent of regional jets are with leasing companies. He highlighted that many turboprop operators have weak credits and the aircraft have high frequencies, meaning large maintenance costs. For example, engines need a shop visit every 6,000-8,000 hours, he noted. No doubt sensing competition, he warned lessors not to enter a market they do not know well.

Martin Moller, chairman of NAC.

OEMs burst the bubble theory Concern about aircraft over-ordering and the potential for a supply and demand ‘bubble’ was raised again during a recent aviation industry conference. Discussions regarding an order bubble have become a tradition at ISTAT America conferences, and this one was no exception. Industry analyst and SVP of Avitas, Adam Pilarski, yet again raised his concern about what he sees is the overzealous ordering of aircraft. He claimed: “We are in a bubble environment,” and questioned whether aircraft OEM’s order books are “rational”. Addressing the conference in October last year, Pilarski argued that the large number of orders had put the industry in a bubble. Airbus’ chief operating officer of customers, John Leahy, then retorted: “We’re not necessarily in a bubble but a very strong growth cycle.” However, he also admitted that not all orders would be delivered. This year, industry leaders countered Pilarski’s claims by saying that while there has been some over-ordering, these aircraft will be placed elsewhere. Steven Udvar-Hazy, CEO of leasing company Air Lease Corp (ALC), believes the market will “balance itself out”. He highlighted that a “huge” replacement cycle is under way, which will support aircraft demand. “I think some buyers were over-optimistic. There were some buyers in Asia and Europe that were a little over-exuberant,” Udvar-Hazy said. “Some customers have ordered far too many [aircraft] than they can utilise but others got left at the bus stop, or under-ordered.” This means OEMs will be able to balance the supply and demand.

Adam Pilarski, SVP of Avitas.

Mark Lapidus, CEO of Amedeo, believes orders are “pretty reasonable” and that OEMs will manage their books carefully. He added: “I don’t think there will be a downturn, so it will be okay.” Aircraft OEMs currently have a combined backlog of over 10,000 aircraft but Airbus’ SVP of leasing markets, Andrew Shankland, said there are “a number of reasons to be reasonably optimistic” that the majority will be placed. He cited a global gross domestic product (GDP), which has grown 3.2 per cent so far this year, versus 2.3 per cent in 2013. Revenue passenger kilometres has grown 5.4 per cent and freight traffic 4.6 per cent, so far this year. “It’s been very encouraging to see,” said Shankland. In another panel discussion during the conference, aviation financiers discussed the strong supply of financing, which coupled with stable fuel prices, will support aircraft purchasing. Furthermore, the passenger market continues to see growth – and even the cargo market, which had been flat for many years, has shown signs of recovery. “Over the last six to eight months we have seen progress,” said Shankland.

afm • Issue 90 – May–June • www.afm.aero

ISTAT America

Leading lessors warn of consolidation in Asia Foremost aviation lessors have warned of consolidation in Asia as the growing market becomes more streamlined. Speaking at the ISTAT conference in San Diego, Steven Udvar-Hazy, CEO of Air Lease Corp (ALC), warned: “Some airlines will not be able to digest all of their hopes and dreams.” In a press meeting in May, Jeff Knittel, president of CIT Transportation and International Finance, commented: “Every airline in Asia has a business case that makes sense, but in aggregate can they all make sense? Probably not.” In particular, Ray Sissons, CEO of AWAS, questioned whether Asian infrastructure would be able to support the region’s growing demand for air travel. AWAS has 46 per cent of its fleet in Asia, but Sissons said he takes measures to reduce the company’s risk. He advised other companies to spend time on due diligence,

and he also suggested having a ‘plan B’ and learning from previous cycles. However, each lessor was positive about growth in the region. Udvar-Hazy noted that, in particular, China’s second child policy would help to grow the already large population, therefore boosting travel demand. But it’s not just the Asian airline market that’s set to contract. Knittel highlighted that there are currently around 20 Asian leasing companies, some of which are likely to fail or merge. However, Norm Liu, CEO of GE Capital Aviation Services (GECAS), believes those left will raise considerable competition against existing lessors. “Some new Asian lessors will be formidable and it will happen sooner than we think. Let’s see what happens in five years’ time,” he said.

Bombardier bullish on CSeries Bombardier is “comfortable” it will seal 300 orders for the CSeries by the time it enters into service, Rod Sheridan, VP of sales for Bombardier, has said. Speaking in San Diego, he said the goal is for one-third of those orders to come from lessors. The programme currently has 201 firm orders, has 75 per cent of the customer market share and 50 per cent of the firm order market.

Sheridan said there will be demand for more than 2,800 turboprop deliveries over the next 20 years. He argued that fuel costs are the main drive for turboprops, particularly larger types. While Sheridan sees a need to develop a new small turboprop aircraft, he added that Bombardier will currently focus on its larger offerings due to demand.

Aviation financing is in solid health Aviation financiers at the ISTAT conference reflected strong capacity for aircraft financing. Boeing Capital Corporation’s VP of aircraft financial services, Tim Myers, says: “People are coming into the aviation finance market from all over the globe.” Supporting this, Thomas Hollahan, MD of Citi, believes: “The banks are flush with cash across the market... We will continue to see a lot more deals financed, particularly for the airlines.” He notes a drop-off in demand for pre-delivery payment (PDP) financing, which airlines have replaced with unsecured financing as they now have better liquidity.

“It’s [PDP] actually expensive financing and not as popular,” he says. In a poll of ISTAT delegates, the majority (43 per cent) believed commercial banks will fund 25 to 30 per cent of aircraft purchases in 2014. Commercial bank financing covered 28 per cent of orders in 2013, up 21 per cent from 2012. The majority of delegates (37 per cent) believe the US Ex-Im Bank will deliver $7bn to $10bn in aircraft loans this year; 30 per cent thought it will give $5bn to $7bn.

afm • Issue 90 – May–June • www.afm.aero

FOCUS: SES

One to one: Julie Dickerson, MD of SES Julie Dickerson, MD of Shannon Engine Support, talks to Bernard Fitzsimons about the engine leasing market and the company’s pursuits within it.

stablished in 1988 to support the service entry of the CFM56, Shannon Engine Support (SES) has grown to become the biggest lessor of the world’s most popular commercial jet engine. The CFM International subsidiary owns or manages more than 220 engines, with 11 pool locations in seven countries, and has around 100 customers. The SES portfolio comprises the CFM56-3, -5 and -7 models, says its MD, Julie Dickerson. “Obviously the -3 is a market that is contracting, so we are reducing the size of our portfolio on the -3,” she comments. “There is still a market there for a good serviceable -3, but the main market for us is the -5B and -7B.”

But being close to the market does not necessarily demand a local pool, Dickerson says. “You’ve always got to take into account how quickly you can transport an engine to where the customer requires it.” As well as conventional options such as long-term operating leases and engine sale and exchange, SES offers some less-common alternatives. Ad hoc short-term leases enable customers to rent engines for a daily flat rate and return them without a test cell run as long as they have been in regular operation. Volume day leases involve SES working with the operator to calculate the number of lease days required to cover multiple shop visits and build a programme of short- and long-term leases to match the requirement.

The model business While SES manages the fleet, locally contracted housekeepers, such as Lufthansa in Frankfurt, Snecma Services in Paris and Brussels, AMECO in Beijing and ST Aerospace in Singapore, store and inspect pooled engines in various locations on its behalf.

An annual fee, calculated on the basis of the technical details of the supported fleet, guarantees availability of the engines within 24 hours. This covers airlines against the risk of an ‘aircraft on the ground’ (AOG) incident.

Naturally, all the engines in SES’ portfolio are maintained to the OEM’s TRUEngine standards, and all overhauls are handled in CFM-licensed shops.

“We’re flexible,” Dickerson says. “We’re open to exchange engines, or we do short-term leases. We do operating leases if the airline has a few shop visits and they know they’re going to need the engine for a couple of years. So it really depends on what the airline requirements are. And we have a big enough pool of engines that we can come up with different customised

Some locations correspond to customer concentrations. China is a strong market for example, so there are pools in Hong Kong and Guangzhou, as well as Beijing.

afm • Issue 90 – May–June • www.afm.aero

FOCUS: SES options to optimise customer access to spare engines when they need them.” There is now a trend to move away from standalone leases and towards customised long-term programmes, which support the varying levels of demand over the lifetime. SES covers these through a combination of long- and short-term leases backed up by AOG cover for the unforeseen delays in such things as unscheduled removals. SES support programmes are customised to operators’ individual requirements, regardless of the level of demand and the operator’s level of spares. The way the products are structured allows for flexible solutions. The MD says: “An airline might take an operating lease and then they might want access to an engine within a short period of time, through our guaranteed availability service. So we can actually structure various customer solutions that work for them to ensure they have the coverage they need.”

are a lot of new entrants into the market that have small portfolios of CFM engines, sometimes only one or two, and they place them as they can.” Another factor fostering competition is the openness of the CFM market, Dickerson suggests. “The OEM approach has been fairly open. For example, we have speculative orders for new engines, Willis has new engines as well, so they haven’t closed the market. I think if you look at some of the other OEMs, their approach to market is to limit access to it. And because it’s such a large market, there has been a lot of financing required for spare engines and I think that’s made it a lot more open.” Demand for spare engines is driven by shop visits, and they have been lagging predictions, she says. “The product is so good that engines have been staying on the wing a lot longer than originally anticipated. I would characterise the market as being a little soft. There is still a lot of supply and that has put some downward pressure on lease rates. So, we’ve seen some fairly competitive deals in the market.”

Julie Dickerson, SES

There are no other lessors that are entirely dedicated to CFM, but we’re starting to see a lot of additional competition in the market Competitive climate With more than 26,000 delivered so far, the popularity of the CFM56 engine makes it a favourite for other leasing firms; so SES has plenty of competition. “There are no other lessors that are entirely dedicated to CFM,” Dickerson says, “but we’re starting to see a lot of additional competition in the market. It’s a very successful engine, it’s a large market, and I think it’s been very appealing for investors.”

The demand situation is likely to change, says Dickerson. “We see that shop visits are going up, so we would expect that to change over time as supply gets a little tighter. In fact we’re seeing it already.”

Market dynamics

It’s not just the big independent lessors such as Willis Lease and ELFC that are building competition; so too are the smaller lessors such as ST Aerospace’s subsidiary, Total Engine Asset Management. “What they are doing is purchasing engines which are on lease with a plan to tear them down and use them to support their shop visit programme,” she comments.

Both in her current role, and as a former general manager of GECAS Engine Leasing, Dickerson has seen the proportion of leased engines increase over the years. She expects the trend to continue. “I think we’re definitely seeing an increase in the proportion of leased engines,” she elaborates. “A lot of that, I think, was driven by airlines being able to release capital. If you own an engine and you don’t have any shop visits, you’ve got a $10m or $12m dollar asset sitting idle on the ground. It may make more sense to finance it and do a sale and leaseback.”

“So, there’s a piece of the market that’s doing that, there’s a piece that’s doing direct leasing. And then there

The engine leasing market also operates in tandem with growth in the number of leased aircraft: “No one’s going

afm • Issue 90 – May–June • www.afm.aero

FOCUS: SES

CFM 56-5B for the A320 in test cell.

to own spare engines if a lot of their fleet are leased aircraft; they’re more likely to lease spare engines. So I think it will keep pace with what’s happening on the aircraft leasing side. That’s down to airlines and their own strategies. And certainly leasing engines gives you a lot more flexibility.” Fewer airlines are in a position to maintain their own engines these days, and most new engines come with flight hour agreements covering their support requirements. “That’s really where SES comes in,” Dickerson says, “because we can support that market for CFM and we can actually work within the CFM family to support that.” Two years ago, CFM launched Portable Maintenance for Lessors, a programme to enable leasing companies to control maintenance costs throughout the life of an aircraft, regardless of the operator it is leased to. Although well received by the leasing community, it does not really fit the SES business model. “I know GECAS has signed up with it,” Dickerson says, “and we’ve spent a lot of time working with the Snecma and GE teams, but we haven’t managed to make it work very well for short-term leases. By its nature, an engine

that goes out on a lot of short terms has a lot of extra inspections and so on.” SES has not given up on the scheme, however. “We’re still looking to see if there’s a way that we can make it work, because it’s a good product and I think it makes sense for the aircraft lessor,” she says. “And I think it makes sense for longer-term engine leases. It’s just working out how you can make that sort of product work when you have engines going on lease for three or four months at a time and build in all the extra inspections without triggering additional costs.” Two years in the future, meanwhile, will see SES start taking delivery of the 29 LEAP engines it ordered last year. “The first few of them are to support entry into service,” Dickerson says. “It’s exciting for us to be the first out with the new product.” Whether the LEAP engines will ultimately last longer on wing and reduce the need for spare engines remains to be seen: “That’s always the challenge, to reduce maintenance costs and fuel burn and help the airlines with their economics. But the CFM56 product line has been phenomenal with its performance.”

afm • Issue 90 – May–June • www.afm.aero

MTU – Maintaining your power

pair Fu l l r e i t y f o r il c a p a b 0 G r ow t h 9 the GE

At MTU Maintenance, we believe in streamlined, cost-effective results. We are the world’s largest independent engine service provider, combining the beneﬁts of state-of-the-art technologies, decades of expertise, customized maintenance solutions and process excellence. MTU’s extensive MRO portfolio now also includes the GE90 Growth. Dedicated to support you. www.mtu.de

FLEET OPS: A330 Neo

The future of the A330: The case for a Neo Mary-Anne Baldwin speaks to CIT’s Jeff Knittel, Intrepid’s Bruce McClelland and EADS’ Wolfgang Schmid as she examines the case for an A330 re-engine.

he A330’s low capital cost has made it Airbus’ most successful widebody aircraft to date. It had accrued over 1,300 firm orders by the end of last year, at which time Airbus increased its production to 10 aircraft a month.

But according to some, that can’t last. Leasing giant, CIT, argued its case for a re-engined A330 on the sidelines of an aviation conference recently. Its president, Jeff Knittel, claimed that the aircraft is “at a crossroads” and that Airbus must make a decision whether to reduce production or re-engine. Speaking at a media event at the International Society of Transport Aircraft Trading (ISTAT) in San Diego, Knittel forecasted that a re-engining could add 10 to 15 years to the life of the programme but argued that “Airbus must act quickly” to capitalise on the lack of A350s and 787s.

The press meeting coincided with the release of CIT’s paper The Small Twin-Aisle Market: What’s next?, which was written by Steve Mason, VP of aircraft analysis. In it he warned that orders for the A330 would drop without a re-engining.

He explained that the A330 “is not selling as well as Airbus would like. The question now facing both the company and its customers is what options remain for the A330 and, for that matter, the entire [200 to 300] seat market. “If Airbus called back the A330 programme and let it fade gradually, similar to what Boeing is doing with its 767 passenger version, then Airbus would be left competing for market share and, more importantly, production share. With just 12 to 14 twin-aisles per month to Boeing’s 24, Airbus would be making a considerable concession.” Airbus has invested significantly in upgrades to the A330, including a 50 per cent range increase with the introduction of the 242 tonne version (for which CIT is the launch customer), due for entry in 2015. The manufacturer announced last year that it will also introduce a regional version, however orders have been slow to take off. It could offer a further raft of improvements in order to maintain orders, but Mason believes this has limitations. “Airbus seems to have picked the low hanging fruit, and from now on every additional

afm • Issue 90 – May–June • www.afm.aero

FLEET OPS: A330 Neo improvement will tend to be more technically challenging and expensive than the last.” Should the re-engining go ahead, Knittel expects entry into service in 2017; any later and it loses its business case. “The further out you get, the less sense it makes,” he explains. “If they delay it too long they will miss the window and will have to move on.”

Demand for the A330 Neo Despite claiming strong interest, CIT would not commit to ordering the A330 Neo itself. However, Mason believes: “Many airlines would value the ‘out of the box’ reliability of an A330 variation because it lowers the probability of expensive delays, cancellations and down time.”

fewer passengers. With fuel costs high, this makes the A350-800 a poorer choice. The A330, meanwhile, offers advantages to potential A350-800 customers that only need shorter-range capabilities. However, Bruce McClelland, VP of market development at Intrepid Aviation, says: “We don’t think there really is much of a relationship between the two aircraft – they’re each designed for very different mission profiles. The A350-800 will stand or fall on its own merits, no matter what Airbus decides to do with the A330.” Indeed, McClelland is not so sure about the suggestion of re-engining. “It depends on the economic benefit a new A330 product variant can deliver to the entire value chain

Andrew Shankland, SVP of leasing markets, Airbus

There is a lot of discussion on the A330 Neo, but not in Toulouse The lessor foresaw demand from several “big name airlines” within the US, Europe and Asia. Knittel said: “I think there are a lot of people who support an A330 Neo… I think for a lot of airlines who are current operators of the A330, it would be a natural evolution.” Richard Anderson, CEO of Delta, has already voiced his interest in an A330 engine update, and it would likewise suit AirAsia. Indeed, Tony Fernandes, CEO of AirAsia, last year asked Airbus for the A330 Neo, saying that on a 6,000nm trip it would have a five per cent fuel burn reduction over the A350-800. It recently ordered 25 current engine A330s, proving its loyalty to the programme. But Steven Udvar-Hazy, CEO of Air Lease Corp – which has been a major Airbus customer during his time in leasing – claimed that the re-engineering would compete with the A350-800, which he said is a marginal aircraft and should be dropped if an A330 re-engine goes ahead.

– the manufacturer, the operators and the lessors. We think it’s unlikely that a re-engined A330 would be attractive at a significant price premium over the existing aircraft. A typical airline would want to make sure that no more than 50 per cent of the net present value of a 10-year operating cost benefit would be passed on, in terms of incremental capital cost. Airlines are not looking at additional range capability beyond what a 242 tonne MTOW A330 variant can deliver, so it’s all about the economics.”

Key considerations The decision to re-engine rests with Airbus, which has been tight-lipped about the subject, but it appears unconvinced. Indeed, Airbus’ SVP of leasing markets, Andrew Shankland, told delegates at the ISTAT conference: “There is a lot of discussion on the A330 Neo, but not in Toulouse.”

In his report, Mason agrees, saying: “The A350-800 has struggled to find a foothold as a successor in the seat market the A330 occupies, and Airbus is wrestling with options for extending the life of the A330 as an alternative.”

Knittel says the manufacturer is analysing the demand and cost involved. A re-engine would require extensive wing strengthening due to the additional weight from the engines, and possibly new landing gear, cockpit and fuselage materials. However, the OEM has gained valuable experience from the re-engine of the A320, which gives assurance to both Airbus and its potential customers.

CIT notes that the A350-800 programme suffers from the weight of its wings, which are the same size as the A350-900, on which it is based. The A350-800’s wingspan is also the same as the 777-300ER’s, yet the former carries 124

The only way to reduce engine weight is to opt for a composite fan engine, but that would create further design and investment needs and would delay its entry into service. Added complications equate to added costs, but the A330

afm • Issue 90 – May–June • www.afm.aero

FLEET OPS: A330 Neo

Would an A330 Neo affect Airbus’ production line?

Neo must still be price-competitive in order for it to succeed against the 787. Yet Knittel pointed out that Airbus had shown discipline with regard to additional changes, which can significantly increase the cost of re-development. He argued the case for simplicity and highlighted that “you get cost savings in repetition”. He explained that Airbus is “obviously studying this in great detail” but that a re-engine is likely to be harder than most would think. He added that if costs and complications are too great, a clean sheet design might be preferable. He added: “When done with their analysis, you will get an answer. I would suggest they don’t know enough to know. It’s entirely possible they will see something from an engineering perspective that shows it won’t work.” Airbus has a number of crucial decisions to make, not only about the A330, but how to develop the A350 and A380, and how to do so with its reduced R&D fund. Tim Clark, CEO of Emirates, has similarly pushed for a re-engined A380. Airbus will also be wary that the time and money spent on a A330 re-engine could cannibalise the efforts spent on other programmes, particularly the A350-800. In addition, hitting CIT’s suggested launch date of 2017 would mean heavy upfront investment, yet the market for a A330 Neo is already reasonably saturated by the 787 and A350. GE Aviation and Rolls-Royce would both like to offer their engines for the A330 Neo, namely the GEnx and Trent 1000 TEN engines, respectively. Both of these are engine options on the 787 programme. Like Boeing, Airbus may choose to offer its customers both of these engines, or it may choose to stick to one powerplant.

Of course, Pratt & Whitney (P&W) has not been ruled out and its selection would mark its return to the long-haul market. With another all-new widebody unlikely to arrive this decade, the A330 Neo is P&W’s best chance to evolve its PW1000G geared turbofan engine to suit a twin-aisle aircraft. Whatever Airbus’ choice, it would have considerable impact on the engine manufacturers, particularly because the A330 is such a popular aircraft. The decision may also affect the possible A380 re-engine and its engine choice, as the A330 Neo could provide a platform for the A380 re-engine. Offering a choice of engines for the A330 Neo seems unlikely, however, as variety increases costs; design and certification costs would double. Additionally, a common engine for both the A330 and A380 might not be the optimal choice for either. “If Airbus goes ahead with it, we’d prefer that they stick with just one engine type,” says McClelland. “From a lessor’s point of view, it’s not clear that the supposed benefit of lower acquisition cost from a second engine choice outweighs the ease of future placement that comes from having just one engine. Furthermore, it’s not clear that the market for an A330 Neo would be large enough to sustain two or three engine programmes.”

See you in the next life Back in 1Q 2013, EADS EFW, ST Aerospace and Airbus partnered to develop the A330 passenger to freighter (P2F) conversion programme, the first aircraft from which is due to enter service in February 2017. That aircraft will be the A330-300 P2F, and it will be followed by the first A330-200 P2F, which is due for entry into service in June 2018. When fully up and running, the company will be able to convert 20 of the aircraft a year and while there is no shortage of A330s available for conversion, the introduction

afm • Issue 90 – May–June • www.afm.aero

FLEET OPS: A330 Neo

of a Neo version would lower market values of the current engine option, making it cheaper to buy for conversion. The programme is currently in the preliminary design phase, but a first prototype will be produced in October 2016. It will cost $15.5m for an A330-200 P2F, which has a total usable volume of up to 16,435ft2 and a structural payload of up to 60 tonnes. The A330-300 P2F, which has a total usable volume of up to 19,038ft2 and a structural payload of up to 61 tonnes. The programme’s powered cargo-loading systems, which are produced by ANCRA and requested by the Asian market, enable maximum use of the aircraft capability. It may cost $1.4m to be installed on an A330-200 and $1.5m on an A330-300. The company expects 200 conversions across both models, but Wolfgang Schmid, VP of sales, marketing and customer support for EADS EFW, admits that very few people are currently asking for conversion due to the over-supply of freighters. “It’s not easy to find customers without a ready-made product,” Schmid says. “Everyone wants the second one.” Yet, he is still bullish about the programme. “Why are we still optimistic?” He starts. “Even if the market doesn’t grow, we will need a lot of replacements for dedicated freighters. We expect strong demand.” The programme is also buoyed by the fact that it has no direct competitor. It is unmatched by the 777 and, while the 767 is somewhat comparable, it’s generations older.

While lower values on the current engine option are good for those looking to convert the aircraft, what about those who will still hold the A330 as an investment asset? McClelland, the VP at Intrepid Aviation, which currently owns eight A330s, says: “The market for leased and purchased A330s continues to be very healthy. By our count, approximately 160 A330s were ordered over the past two years, and over 170 new and used aircraft were placed on lease. This demand is coming primarily from airlines that already operate the A330, however we have also seen new operators for the aircraft type such as Skymark in Japan, Air Namibia and Cebu Pacific in the Philippines. “By itself, an A330 Neo will probably have minimal effect on values for the current A330 unless there is a significant imbalance between supply and demand. Traditionally, neither Boeing nor Airbus has produced excessive amounts of widebody aircraft, so residual values have been historically stable.” CIT placed a firm order for 10 A330s valued at $2.3bn during the 2012 Farnborough Air Show; this brought its total orders for the aircraft to 41, some of which are due for delivery this year. Yet nor is it concerned about the current aircraft’s residual values should a re-engine go ahead. The A330 has “historically been the star of our fleet,” says Knittel. “Just because we can have optimisation on the A330, it doesn’t mean it’s the end for the rest,” Knittel says. He believes there is “still life” in the A330 and concludes: “We are still very bullish about the airplane but its dynamics are changing.”

afm • Issue 90 – May–June • www.afm.aero

FLEET OPS: Fleet & MRO forecast

Industry insight: Global fleet and MRO needs TeamSAI provides its insights and forecasts into the global commercial fleet and its MRO needs. Mike McBride, EVP of TeamSAI, and John Smiley, senior industry analyst for TeamSAI’s betterinsight, which provides MRO analysis, report.

n 1 January 1914, the first commercial airline flight in history took place between St. Petersburg and Tampa, Florida. The flight covered the 21 miles of shallow bay water separating the two cities in just under 30 minutes, and carried a single paying passenger who sat next to the pilot in the small, piston powered, flying boat. Today – 100 years after the first commercial flight – the global scheduled commercial fleet consists of more than 23,000 aircraft, which carry over eight million passengers each day across vast continents and expansive oceans. How times have changed. At the moment, the industry – infamous for its cyclical boom and bust economy – is financially sound. It is

experiencing year-on-year growth of 5.3 per cent just six years after the world was first rocked by the global financial crisis.

Market growth Over three billion people travelled by air last year – an industry milestone, and airfreight markets transported an estimated 50 million tonnes of cargo, growing one per cent after contracting 1.6 per cent in 2012. This growth in traffic, alongside airlines’ continued discipline regarding capacity, kept passenger load factors high, led the industry to post nearly $13bn in estimated profit during 2013, and set the stage for airlines to establish a new all-time traffic record in 2014.

afm • Issue 90 – May–June • www.afm.aero

FLEET OPS: Fleet & MRO forecast Global jet and turbo fleet by region 2014-2024

2014

2019

2024

10 YR CAGR India

11.4%

Africa

5.1%

Middle East

5.8%

Eastern Europe

5.6%

Latin America & Caribbean

5.1%

China

7.3%

Asia Pacific

4.4%

Western Europe

2.1%

North America

0.8% 0

Source: betterinsight

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

by TeamSAI.

Global deliveries and retirements by region 2014-2024 4,000

3,500

3,000

2,500

2,000

1,500

1,000

North America

Western Europe

Latin America & Caribbean

Middle East

Eastern Europe

Africa

Net Growth

Retirements

Deliveries

Net Growth

Deliveries

Retirements

Net Growth

Retirements

Deliveries

Net Growth

Deliveries

Retirements

Net Growth

Deliveries

China

Retirements

Net Growth

Deliveries

Retirements

Net Growth

Deliveries

Asia Pacific

Retirements

Net Growth

Retirements

Deliveries

Net Growth

Deliveries

Retirements

500

India

Source: betterinsightTM by TeamSAI.

At the beginning of 2014, there were 23,000 commercial aircraft in service with the world’s airlines. This fleet is expected to grow at a healthy 3.6 per cent average annual rate to nearly 33,000 by 2024 (net of aircraft retirements). Regional growth varies considerably, however, with the real growth concentrated in the Middle and Far East. North America and Western Europe – currently the largest markets in the world – will see the lowest growth rates during the period (0.8 per cent and 2.1 cent, respectively). As the world continues to recover from the global financial crisis of 2008, commercial aircraft manufacturers have

never seen a better market. Continued high fuel costs, historically low interest rates, and a drive to reduce costs and increase profits, have led to an unprecedented demand for more efficient and more reliable aircraft. Airbus and Boeing collectively received orders for nearly 2,900 aircraft in 2013, helping to increase the pair’s combined order backlog to more than 10,000 aircraft.

Future deliveries Due to a combination of economic factors and high production rates, OEMs are predicted to deliver nearly 1,700 aircraft each year over the next decade. TeamSAI expects 8,001 aircraft to be delivered in the next five

afm • Issue 90 – May–June • www.afm.aero

FLEET OPS: Fleet & MRO forecast

Global MRO forecast by market segment (USD) 2014-2024

Billions

$100 $90 $80 $70 Line

$60 $50

Component

$40

Engine

$30

Airframe

$20 $10 $2014

2019

2024

Source: betterinsightTM by TeamSAI

years, 61 per cent of which will be narrowbodies, 22 per cent will be widebodies, 10 per cent will be regional jets and six per cent will be turboprops. The second half of the decade is expected to see some 8,554 deliveries, with roughly the same aircraft class mix. With the airline fleet expected to grow by 10,000 aircraft by 2024, and with over 16,500 new deliveries over the same period, over 6,500 aircraft will retire. In other words, 40 per cent of the new deliveries are replacement aircraft, while 60 per cent are for growth. Interestingly, North American airlines have created the highest demand – nearly 3,735 aircraft with 80 per cent of the deliveries as replacements for older aircraft. The fleet growth dynamics in China, however, are just the opposite. There, 2,315 deliveries will mostly support net growth. The systematic elimination and replacement of older, less fuel-efficient aircraft is expected to improve airlines’ bottom line by reducing fuel costs and reducing maintenance costs over the life of the aircraft. The increased aircraft retirements, in addition to aiding the airlines, are also expected to provide new opportunities for the aircraft dismantling and recycling business, which has become a focal point in the aviation industry over the latter part of the past decade.

across the globe this year alone. TeamSAI estimates the total aircraft teardown and dismantling market will be worth $80m in 2014. In addition, the parts they harvest – worth about $3.2bn – will be introduced to the commercial aviation supply chain during the year. The volume of serviceable parts re-introduced to the system for current model aircraft will have a major impact on the supply chain and MRO markets. Growth and changes in the world fleet over the next decade provide the basis for the MRO market forecast over the same period. The MRO industry (for jets and turboprops) is expected to be $57.7bn in 2014. This will rise to $73.2bn in 2019 and to $86.8bn in 2024, representing a solid annual growth rate of just over four per cent for the full forecast period. Regionally, as the fleet distribution changes, MRO spend will follow. North America will remain the largest single region for total MRO value, growing from $17.7bn to $19.0bn over the forecast period. This represents relatively flat growth at 0.7 per cent per year, with very little difference in the first and second halves of the forecast period. China, which represents seven per cent of the total MRO market, is expected to more than double over the same period, growing from $4.0bn to $10.2bn, and increase its share of the market to 12 per cent.

MRO and teardown forecast Driven by the higher retirement rates, aircraft dismantling and part-out has become a fast-growing sector. With 6,659 aircraft forecast to retire over the next 10 years, approximately 500 teardowns are expected

So while older markets in Europe and North America offer less growth, there are still many markets in which we will see significant change. One can only imagine what a similar report will say 100 years from now.

afm • Issue 90 – May–June • www.afm.aero

TLF: Engine values

Engine values: Are they at risk? Gary Fitzgerald, MD of Stratos, provides AFM with an extract of the company’s white paper, explaining how dramatic changes in the engine aftermarket are causing major concerns for aircraft investors.

he era of independent engine servicers having a ‘free for all’ in disassembling and maintaining engines appears to be coming to an abrupt end, and it has profound implications for aircraft investors. Engine OEMs are rapidly gaining market share with their all-inclusive support packages. The complexities of these packages, combined with their tightening grip on all areas of the aftermarket, will, in our view, result in the collapse of those second-tier investors and independent MROs that don’t adequately adapt their business models to meet these challenges.

Market changes Engine values are extremely important for aircraft investors because, for any given aircraft, the relative value of the installed engines increases from about 20 per cent of the total value at new, to 90–100 per cent at age 20–25. The cost of maintaining engines is heavily stacked towards the second decade of an engine’s life, so investors are very sensitive to the cost burden of maintaining mature engines. The forecast of intrinsic maintenance value is a key element in an investor’s evaluation of residual values during the life of the aircraft. If current trends continue, the value of certain engines may be depleted to close to zero at any

point after 12-years-old. This makes the negotiations with lessees regarding compensation payments for usage one of the only avenues to recover some loss on residual value. Traditionally, investors have collected engine maintenance reserves as a collateral against future maintenance cost obligations during the entire life cycle of 20 years or so. This is referred to as ‘life-based’ rates. In this way, investors protect the asset value against the risk of lessee default and eliminate any requirement to subsidise engines transferring from one lessee to another by synthetically keeping the engine at full-life throughout its operating lifetime. This sensible market practice has been receding over the past few years, affected by the shift from traditional ‘time and material’ maintenance contracts to all-inclusive engine service agreements. Concurrently, engine OEMs are moving to control more of the aftermarket and are increasingly winning new engine sales by guaranteeing the lowest flight hour cost. These all-inclusive support packages have grown dramatically in the past decade and are now estimated to cover nearly 50 per cent of all new aircraft delivered. Most OEM packages share a common feature,

afm • Issue 90 – May–June • www.afm.aero

TLF: Engine values which affects investors universally: regular cash collection for continuous support, which in most circumstances forces investors to forfeit valuable engine-related maintenance reserve cashflows. All-inclusive OEM support packages are now routinely pushed with new aircraft campaigns and are being sold in ever-greater volumes at the ‘point of sale’. Airlines believe these packaged offerings to be a superb deal. They are often at exceptionally cheap all-inclusive rates compared with maintenance reserve

The GE90-115B, which is fitted to the 777-300ER, shares a similar issue. GE appears to be in total control of all shop capacity and material repair schemes. However, the 777-300ER fleet is younger than the A330 and 777-200 and the market has not yet witnessed many lessee transitions. Several market participants expect the engine operating costs during the second decade of 777-300ER operations to be a brutal shock to many airlines and investors.

OEMs have also become alert to the erosion of the potential value of their aftermarket caused by third-party MROs rates quoted by investors, or indeed the airlines’ own engine maintenance cost data for their legacy fleets. Crucially, these flight hour contracts are often priced on the first, significantly cheaper, decade of an engine’s life, on what is known as a ‘term-based’ agreement.

If left unchecked over the long-term, we believe there is a strong potential for this aftermarket to become a monopoly, particularly on single engine choice aircraft types. Once an airline chooses engines that are tied to an OEM support package, prices are bound to rise.

Apart from security and cashflow issues, the major concern for investors has shifted to the growing effects such packages are having on residual values. Despite being a truly all-inclusive deal vis-à-vis the operator, many of these packages are term-based, covering the initial 10 or 12 years of an engine’s maintenance life. For many engine types, this period generally consumes 30 per cent or so of total lifetime maintenance costs, so the offered rates can be discounted by up to 40 per cent compared to life-based rates. At the end of this period, the OEM is not fully covered for the second decade of the engine operations and typically needs with charge a substantial ‘buy-in’ fee or similar cost recovery mechanism in order to compensate for the initial discount.

The situation on Trent and CFM56 engines has created a useful case study for comparison and may offer some clues as to how the market is likely to evolve. It seems clear that excessive aftermarket competition leads to depressed asset values and potentially weakens OEM revenue flow. On the other hand, a situation where there is no aftermarket competition, where the OEM controls all aspects (such as spares, replacement materials and repairs), kills off any interest in trading used engines. Both scenarios cause market uncertainty and lead to heavy losses in value.

Market erosion OEMs have also become alert to the erosion of the potential value of their aftermarket caused by third-party MROs. They have made concerted efforts to close this potential revenue leakage – now an essential part of their business plan to recoup new engine development costs. In this respect, Rolls-Royce is in a league of its own, having moved to address this situation 10 years before the other OEMs. By our definition, today there are no truly independent MROs servicing Trent engines, whereas there are 30 or so entities competing in the CFM56 marketplace. The three nominally independent MROs maintaining Trents are fully aligned with the Rolls-Royce manuals and practices, and neither develop independent repairs nor install any used material. In other words, they compete on the very marginal man-hour rate while the bulk of the cost – about 80 per cent for materials and repairs – is fixed.

Rolls-Royce has had almost full control of the Trent market for several years, but when combined with poor aircraft demand, it is only now becoming apparent how painful the implications can be for aircraft residual values. The perceived overproduction of replacement aircraft may be the main culprit. It is difficult to pinpoint exactly how much influence the relative lack of engine re-sale values is having on this used aircraft market, but it is clearly not helping the situation.

Engine values The two primary concerns for all aircraft investors are the stability and predictability of residual values, and security to cover the risk of a lessee default. When all-inclusive packages first appeared, investors’ primary issues related to their coverage of lessee defaults. Such packages are paid for with insurance premiums, whereas reserves create a build-up of collateral for future maintenance obligations. However, these issues have recently been further compounded by the rise in term-based pricing and the increasing uncertainty in the value and maintenance costs of mid-life or end-of-life engines.

afm • Issue 90 – May–June • www.afm.aero

TLF: Engine values Evolution of reserves and condition over 20 years for a typical investor

Year

Year Source: Stratos’ lease simulator.

The first figure shown compiles data from Stratos’ lease simulator and shows the evolution of reserves and condition over 20 years for a typical investor in relatively new widebodies. The parabolic blue line is the base value; the jagged red line is this base value adjusted for intrinsic maintenance value; the dashed orange line shows the effect that an all-inclusive package during the first 10 years has on reserve collection rates; the green ‘full reserves’ line is where investors should ideally be; and the ‘synthetic full life’ line refers to investors’ full coverage in the event of default. The difference between the orange and green lines is shown in the second graph; these are the cash levels ($m) potentially at risk if the lessee defaults: enough to wipe out any investor given the wrong combination of circumstances. When the demand for used aircraft falters, investors rely heavily on a functioning engine aftermarket and fully funded maintenance reserves to recover at least some of their losses. Any market in which a single entity controls the re-sale of parts is potentially catastrophic for aircraft investors as there is no discernable floor for engine re-sale value.

If left unchecked, at some point investors will stop funding these assets. In this scenario, OEMs will probably have no choice but to stabilise their own aftermarket, for example by offering engine buyback commitments. In the meantime, aircraft investors hope that engine OEMs are taking note of the current used aircraft market and that the temptation to control the aftermarket will be tempered by the knowledge that such actions, when combined with poor aircraft demand, can kill residual values. Some OEMs are taking positive steps to address investor concerns on payment and security mechanisms, but investors must continue to ensure their interests are defended, particularly as it relates to aftermarket trading. Hidden terms, heavy discounting and increasing sophistication of the all-inclusive packages make investors’ evaluation of risk all the more difficult. The biggest losers in this situation are most likely to be second-tier aircraft investors; they need to tool up and analyse this risk, or they face extinction.

afm • Issue 90 – May–June • www.afm.aero

MRO: Engines

Engine MRO: Avoiding the pitfalls

Efficient and timely engine MRO is an essential component of any airline’s operations. But what are the common pitfalls? Andrew Williams looks at the most important steps to achieving short engine MRO turnarounds, together with challenges, trends and developments in engine MRO.

ccording to Jim Andrews, general manager of Lockheed Martin Commercial Engine Solutions (LMCES, formerly Kelly Aviation Center), the pitfalls of engine MRO tend to come from the misjudgements of owners and operators. He explains that some cost-conscious owners or operators underestimate requirements and have only a minimal initial workscope. Conversely, some operators or owners overestimate what is needed and allow providers to “gold plate their engine, often at needlessly excessive cost”. He adds: “Underestimating workscope can actually end up costing the operator more, mostly because of inevitable upgrade wait times, and potentially higher material costs due to immediate buys instead of pre-provisioned value purchases.” Amy Gowder, VP Of LMCES, advises that MROs minimise – or even entirely avoid – these pitfalls by openly

communicating with customers regarding their operating conditions and business goals, and that they develop workscopes well in advance of shop visits. “A more accurate and appropriate initial workscope leads to proper planning for the flow lines. It takes advantage of pre-provisioning of material at the right price, and helps minimise workscope creep, while still ensuring the customer’s operational and financial requirements are met,” she says. Katia Diebold-Widmer, marketing manager at MTU Maintenance, Hanover, explains that a number of potential pitfalls arise from the “wrong product, wrong location or wrong price”. These include declining demand or a lack of follow-up products, no regional demand or high regional cost bases, as well as setting prices at the wrong level.

afm • Issue 90 – May–June • www.afm.aero

MRO: Engines “Engine MRO is a very complex process, both from a technical and logistics standpoint, thus potential pitfalls are numerous. [They include] inefficient logistic systems and parts provisioning during the MRO process; lack of in-house repair capabilities; lengthening of turnaround times; [and] improperly trained workforce,” says Diebold-Widmer. She adds that additional issues can arise from insufficient economies of scale, cost miscalculation and the failure to understand customer requirements. For MTU, these pitfalls can be minimised by applying several key principles, including customised and flexible workscoping, close customer involvement, precise cost estimates and on-time delivery of the engine.

Short turnarounds As Gowder explains, once an engine is inducted, there are “two keys to achieving world-class turnaround times”. The first is to accelerate the engine through cycle one, when it is disassembled and inspected to determine the level of work needed, and to have a very clear picture of the overall condition of the engine after detail inspection. The second is to understand the critical path within the supply chain, or cycle two, when new parts are obtained. “A strong knowledge of the components that impact turnaround times in cycle two drives decisions on new material, used serviceable, and internal and outsourced parts repair. The main drivers for cost and turnaround time usually reside within the engine’s turbine section, so it is critical that MROs have the correct supply chain solutions in place,” she says.

management control for all repairs not repaired in-house. Delta TechOps, a division of Delta Airlines, believes the key to achieving short turnaround times revolves around three main points: planning, processes and people. Morgan Durrant, senior manager of corporate communications at Delta Air Lines, explains: “We utilise a series of supplier and proprietary systems to identify opportunities to improve. We take a data-driven mindset to another level – we track several dozen metrics and, through analytics, find the areas where adjustments can move the needle.”

Optimising workscope For Andrews, accurate engine workscopes are essential to developing cost-effective maintenance solutions and providing customers with a reliable and durable product. He reveals that each engine inducted into an LMCES shop undergoes “a detailed and rigorous workscoping exercise in advance of the shop visit, to establish the work to be accomplished”. Some of the factors considered at this stage are the engine’s historical performance on-wing, as well as incoming engine configuration and hardware condition, inbound performance, lease return conditions, service bulletin status, turbine blades, the life remaining on life-limited parts, ETOPs requirement and other customer requirements. Andrews adds that, following preliminary workscopes, LMCES works hand-in-hand with customers to refine and optimise the engine workscope. It develops a predictive material requirements model using projected workscopes, historical analysis of past work performed, repair turnarounds and scrap rates. Using this information, the company factors in current material supply and demand conditions to determine which parts are critical.

Katia Diebold-Widmer, MTU

Engine MRO is a very complex process, both from a technical and logistics standpoint, thus potential pitfalls are numerous Meanwhile, Diebold-Widmer highlights that the window of time between engine disassembly and re-assembly is “particularly critical”, as it is relatively short and subject to external influences, such as the delivery of new parts or re-delivery of repaired parts. MTU also highlights a number of key factors that can help in achieving shorter turnaround times. These include lean and process-optimised organisation; good preparation prior to engine induction; clear agreements between all interested parties; and just-in-time parts provisioning during the engine re-assembly process. It also recommends the storage of parts on-site, repaired parts and vendor

MTU’s Diebold-Widmer agrees that customisation is a vital element of effective workscoping, and she points out that all of its service packages and repair levels are tailor-made to suit customers. The company has also established a ‘core process’ to determine initial workscopes and control the progress of the engine throughout the shop visit. This so-called Workscope Review Board consists of representatives from engineering, quality, customer support, planners and engine mechanics and customises and optimises the workscope prior to induction, after disassembly, and after parts inspection in line with hardware status and findings.

afm • Issue 90 – May–June • www.afm.aero

MRO: Engines

“Parts supply and parts marshalling itself occurs just-in-time as part of our ‘MRO Intakt’ process. An important aspect though, is that we do not wait for engine disassembly and parts inspection to order replacement parts. Our material planning team makes sure that we have all parts in stock, also to cover for potential workscope changes,” says Diebold-Widmer. “Stock levels are determined on our large shop visit experience and our broad customer base. On newer engine programmes, the demand is forecasted on the basis of bills of materials. Further, we have so-called safety stock levels – in case stock for a certain part becomes critical, material planners get a system-generated alert and plan order so they can immediately order the required parts,” she adds.

of this technology consists of elaborate material structures, including more use of composites,” he says. “The general concern we are hearing is the ability to repair these complex materials. At LMCES, we are working with our engineers and scientists from other areas within Lockheed Martin, and in partnership with the engine OEMs, to create repair solutions for when engine shop visits do occur,” he adds. Diebold-Widmer agrees that we are currently “in the middle of a transition period where older equipment is increasingly being replaced by newer aircraft with longer on-wing times and fewer shop visits throughout the lifecycle.

New trends in engine MRO Looking ahead, David Bridges, VP of business development at LMCES, highlights the fact that engine OEMs are becoming “increasingly involved in MRO aftermarket activities to better secure material consumption from engine shop visits”. Meanwhile, Andrews believes that the ability of engine MRO companies to deal with the types of new and complex material structures being developed to improve aircraft will become increasingly critical. “As we look to the next generation of engines, they are utilising technology that helps reduce fuel consumption and improve time on-wing. Some

“In the longer term, OEM market penetration represents the major challenge. Today, we estimate that about 50 per cent of the overall engine fleet is under contract with the OEM, either on an exclusive or non-exclusive basis. This trend will further increase, together with the successful sales of newer aircraft platforms,” adds Diebold-Widmer. In the future, Durrant also reveals that the key opportunities for Delta TechOps include the expansion of its components offerings to new and existing customers. “Delta has 18 different aircraft models and there is a lot of room to potentially expand capability to more fleet types,” he adds.

afm • Issue 90 – May–June • www.afm.aero

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MRO: Engine parts supply

Engine parts supply: Forecasting demand Successful planning for engine spares and forecasting brings clear operational advantages. Keith Mwanalushi speaks to TES, AAR, P&WC and AJW to find their views.

etting the right engine part delivered to the right place at the right time is key to maintaining fleet operability. But the engine aftermarket sector is currently undergoing a lot of changes, especially with the increased take-up of OEM-provided long-term service agreements. The global demand for parts directly correlates with the number of engines in the field. For instance, with over 10,000 companies operating more than 50,000 engines in more than 200 countries (according to Pratt & Whitney Canada, or P&WC), international demand is high. Every year, new engines enter the marketplace on both existing and new applications, which in turn increases demand year-on-year. “As with any industry, it is necessary to know your market,” says Chris Pelly, SVP commercial at TES Aviation. “It’s therefore more critical than ever to have robust forecasts

and understanding of the parts market, not only in terms of parts availability and demand, but also the impact on parts valuation. If you don’t get it right, you can end up with a very expensive issue on your hands: stock on the shelf that you cannot shift.” Carl Glover, VP for sales at AAR Aviation Supply Chain Group, believes spares forecasting is critical to supply-chain efficiencies. “There is a variance in certain whole engine demands as operators and lessors continuously look to displace certain shop visit [SV] events and manage engines according to reserve budgets.” Glover says this impacts on demand for spares, both for parts and for whole engines. “Conversely some engines are beginning their mature phase of the life-cycle, so surplus and spares availability has increased to reduce their maintenance costs,” Glover tells AFM.

afm • Issue 90 – May–June • www.afm.aero

MRO: Engine parts supply

These days, OEMs and their level of participation in the MRO aftermarket almost exclusively drive the global demand for spare parts. Steve Williams, director of aircraft engine services at A J Walter Aviation (AJW), joins the debate by stressing that where the OEM has complete control of the aftermarket, there is no material supply. “If an OEM is very active in the aftermarket, such as Rolls-Royce, the engagement of the surplus material providers is inverse to the OEM’s involvement,” says Williams.

“Typically, they would build a macro-level projection of how many engines are destined for overhaul. Using this information, they would make predictions of the volumes of piece parts required to satisfy this demand,” says AJW’s Williams. In addition, Williams says the engine owner will also be looking at its inventory and potential available engines. “With all of this data, the parts company should be in a position to satisfy a certain population of the shop visits in a certain timeframe,” he states.

Inventory management systems The need for numbers Back in 2011, P&WC commissioned an extensive report on best practices for spares forecasting. The report highlighted the advantage of being able to accurately forecast demand for spares and it put emphasis on having the correct parts, in the correct quantities, in the correct location. “This is no easy undertaking,” admits Anthony Louis Hinton, manager for spare part services at P&WC. “Tactically, we wish to ensure that we are able to return an aircraft to service within 24 hours. This means that spares must be available to accomplish this metric.” From a strategic perspective, Hinton says spare parts availability plays a key role in customer satisfaction metrics. Speed of service and the ease of doing business are two key tenets of customer satisfaction. “We wish to ensure that operators have their requirements met quickly and easily to keep current operators in the P&WC family for years to come.” Clearly, forecasting spares demand involves a great deal of information. Williams from AJW explains that engine parts suppliers use various data points, either historical or proactively, to ensure they have the right level of surplus spares available to satisfy the market’s requirements.

In order to forecast demand, AAR uses its own inventory management systems and models, together with both its programme and traditional trading customers (airlines, MROs, lessors). According to Glover, this also helps the company to shape the purchasing strategy in a proactive manner. TES’ Pelly observes that engines with the highest demand of serviceable used material are those going through their first or second SV before significant fleet retirements kick in. “Different parts suppliers will have different ways of forecasting demand,” says Pelly. “Simplistically, it is important to understand how many SVs are likely to occur over a given period and what material is likely to be required at each shop visit.” With this in mind, P&WC has a complex algorithm that forecasts spares demand on an aggregate basis, as well as on an engine model-by-model basis. The industry has come a long way since the days when there were only a few engine models in the offering. This is particularly the case at P&WC. “We now have 13 distinct engine families with multiple models and varying thrusts and shaft horsepower ratings,” says Hinton.

afm • Issue 90 – May–June • www.afm.aero

MRO: Engine parts supply

“It would simply be overwhelming to expect any one, or any group of individuals, to be able to track and forecast such a large number of engine models in order to optimise inventory levels, meet delivery metrics and, above all, ensure customer satisfaction with our response time. As a result we use proprietary algorithms that are continually updated and tweaked to meet all the competing metrics.” He explains: “Specific inputs are the number of engines operating in the field; the typical number of hours each model operates; the age of the fleet; the forecast of upcoming overhauls; hot section inspection; and unscheduled removals. In addition, line maintenance requirements are taken into consideration.” Hinton says that additional demand may come during the year, should service bulletins (SBs) require part replacement that was not anticipated at the time of the initial forecast. “It is a very dynamic environment. Experienced operators that run large fleets often have their own forecasting tools that help them decide on the specific parts and quantities that they elect to have in stock.” There are already software capabilities that forecast demand for engine parts, but Williams believes there are too many variables to properly manage the wholesale supply. Pelly believes there are some good software tools on the market that allow operators to manage their SVs and associated costs. He highlights the Engine Fleet Planning and Costing (EFPAC) as one such tool. But he notes: “As with all these things, the data you get out is only as good as the information you put in,

so these tools can be less effective if only using a low number of data points.” TES offers SV management services using EFPAC and knowledge gathered over a vast array of SVs. “With this information we can provide a very detailed understanding of shop visit costs and where appropriate materials are likely to be required,” Pelly states. Glover adds that the key for AAR is for its inventory modelling to be dynamic – reflecting stock, future demands, future asset availability and repair schemes on offer.

Information sharing Back in 2011, P&WC reported that industry players must show great collaboration by sharing vital information such as fleet data, engineering change orders, part reliability and SBs. “This data is hugely confidential and each OEM and parts supplier guards this information carefully,” Williams says. “Knowledge is power,” Pelly adds. “So organisations are unlikely to share detailed models and forecasts with the market. That said, suppliers and MROs will often share information under non-disclosure type agreements to develop mutually beneficial supply agreements.” Williams agrees that the biggest opportunity to manage inventory flows is for the airlines and engine owners to share as much information as possible with their suppliers. He concludes: “The earlier they can share the information, the bigger the chance the airline has to support the airline correctly.”

afm • Issue 90 – May–June • www.afm.aero

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INDUSTRY DATA: Deals

Industry data

47 52

Aircraft deals

List prices and lease rates

Firm orders

Engine data

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

Aircraft deals 13 February to 9 April, 2014 MSN

Manufacturer

Model

Event

Owner

Operator

Date

5969 4320 5969 5955 3397 13 26251 901 2695 5974 445 30433 5979 23741 41246 1495 568 27623 4320 5982 29918 1390 2620 28170 808 5996 167 747

Airbus Bombardier Airbus Airbus Airbus ATR Boeing Airbus Airbus Airbus ATR Boeing Airbus Boeing Boeing Airbus ATR Boeing Bombardier Airbus Boeing Airbus Airbus Boeing Airbus Airbus Airbus Airbus

A321 DHC8-400 A321 A321 A321 ATR42 757-200 A330-200 A320 A320 ATR42 767-200 A320 737-300 737-800 A330-300 ATR72 757-200 DHC8-400 A320 737-800 A330-200 A320 757-200 A321 A320 A320 A320

Aviation Capital Group Ethiopian Airlines Aviation Capital Group Aviation Capital Group The CIT Group Inc DOT LT ILFC Unknown MSN 2695 Leasing LLC AWAS DOT LT Wells Fargo Bank NW AWAS Mint Aero GECAS The CIT Group Inc Danske Aviation Group Ltd ILFC Ethiopian Airlines ICBC Aircastle Investment Air Tanker Ltd GECAS ILFC Macquarie Airfinance AWAS Vanilla Air Babcock & Brown Air

Condor Malawian Airlines Condor American Airlines SriLankan Airlines Sky Express Royal Flight Turkish Airlines Frontier Airlines Aeroflot-Russian Airlines Darwin Airline UTAir Aviation THAI Smile Jettime China Southern CEBU Pacific Air Swiftair Air Contractors Malawian Airlines Aeroflot-Russian Airlines Anadolu Jet Royal Air Force Vueling Airlines Air Contractors Atlas Jet Volaris All Nippon Airways Alpha Express Airlines

13/02/2014 21/02/2014 13/02/2014 14/02/2014 15/02/2014 15/02/2014 15/02/2014 16/02/2014 18/02/2014 18/02/2014 18/02/2014 18/02/2014 19/02/2014 19/02/2014 19/02/2014 20/02/2014 20/02/2014 21/02/2014 21/02/2014 24/02/2014 24/02/2014 26/02/2014 26/02/2014 26/02/2014 27/02/2014 27/02/2014 28/02/2014 28/02/2014

Source: IBA’s JetData.

afm • Issue 90 – May–June • www.afm.aero

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

Aircraft deals 13 February to 9 April, 2014

MSN

Manufacturer

Model

Event

Owner

Operator

914 1483 27607 5989 35645 2277 5988 37786 39438 1450568 28595 55193 2587 540 1120 30710 3302 6012 662 28573

Airbus Airbus Boeing Airbus Boeing Airbus Airbus Boeing Boeing Embraer Boeing Boeing Airbus ATR ATR Boeing Airbus Airbus ATR Boeing Embraer Airbus ATR Boeing Boeing Boeing Airbus ATR Boeing Airbus Airbus Sukhoi Boeing Airbus Airbus Boeing Boeing Bombardier Boeing Boeing Boeing Boeing Boeing Airbus Boeing Boeing Airbus Airbus Boeing Boeing

A320 A330-300 777-200 A320 737-800 A319 A320 737-800 737-800 ERJ-145 737-800 717-200 A320 ATR72 ATR72 737-700 A321 A320 ATR72 737-300 190/195 A320 ATR72 737-800 757-200 737-400 A320 ATR72 737-800 A330-200 A319 SSJ 100-95 787-8 A320 A320 737-800 737-400 DHC8-400 747-400 737-700 737-700 737-800 737-800 A319 757-200 737-800 A320 A320 767-300 737-800

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 Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned

AMES CAMO Intrepid Aviation Partners ILFC ICBC GECAS The CIT Group Inc BOC Aviation Air Berlin 9 Leaselux S A R L AWAS Bank of Utah GECAS Boeing Capital Corporation Coronet Aviation Australia NK Aviation Ltd Nordic Aviation Capital ILFC AWAS GECAS Nordic Aviation Capital GECAS The CIT Group Inc AWAS Nordic Aviation Capital BBAM ILFC Falcon Aviation Inc AWAS Nordic Aviation Capital Avolon Aerospace ILFC ILFC VEB-Leasing ILFC GECAS Babcock & Brown Air GECAS KG Aircraft Leasing DR PPJ Aircraft Leasing AerSale Inc Bavaria International Bavaria International Aircraft MSN 29919 Air Berlin 9 Leaselux AerCap NBB Leasing Co Ltd Travel Services ALS Aero USA Inc Bank Of Utah Macquarie Airfinance

Small Planet Airlines Skymark Airlines Austrian Airlines Aeroflot-Russian Airlines China Southern Airlines Air Serbia Volaris Ruili Airlines Sunwing Airlines Unknown (Mexico) Meridiana QantasLink Air Serbia Jettime Jetime Ethiopian Airlines Aegean Airlines Algle Azur Darwin Airline Canadian North Arkia - Israeli Airlines Aeroflot - Russian Airlines Jetime Nok Air Royal Flight Farnair Hungary VietjetAir LIAT China Airlines Air Europa Ural Airlines Center - South Norwegian Atlasjet Ukraine Atlasjet Ukraine Solaseed Air Go2sky North Cariboo Air AerSale Inc Wells Fargo Bank NW Wells Fargo Bank NW Aircastle Investment Air Berlin 9 Leaselux AerCap NBB Leasing Co Ltd Travel Services SmartLynx Aero USA Inc Bank Of Utah Macquarie Airfinance

19000616

6017 1131 39336 26253 28492 6025 1009 40945 992 3834 95012 35310 1213 733 41247 28882 4003 26342 30041 30042 29919 37786 3331 26244 29250 244 203 25000 32361

Date 28/02/2014 01/03/2014 03/03/2014 04/03/2014 04/03/2014 06/03/2014 06/03/2014 06/03/2014 06/03/2014 06/03/2014 08/03/2014 10/03/2014 11/03/2014 12/03/2014 12/03/2014 12/03/2014 13/03/2014 13/03/2014 13/03/2014 13/03/2014 13/03/2014 14/03/2014 14/03/2014 15/03/2014 16/03/2014 18/03/2014 19/03/2014 19/03/2014 20/03/2014 21/03/2014 21/03/2014 22/03/2014 25/03/2014 26/03/2014 27/03/2014 28/03/2014 29/03/2014 29/03/2014 14/02/2014 14/02/2014 14/02/2014 20/02/2014 26/02/2014 28/02/2014 01/03/2014 01/03/2014 02/03/2014 03/03/2014 03/03/2014 05/03/2014

Source: IBA’s JetData.

afm • Issue 90 – May–June • www.afm.aero

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

Aircraft deals 13 February to 9 April, 2014

MSN

Manufacturer

Model

Event

Owner

Operator

15200 28494 29917 33027 4157 25137 35139 6004 39064 39935 39936 40263 41316 37664 37665 37666 37667 38886 38888 38889 31190 37790 40157 24343 192 914 E2047 24596 24978 25000 27630 361 53473 22327 23741 28596 29954 49941 26396 29337 8110 22 119 497 299 299 350 3108 4265 49384

Bombardier Boeing Boeing Boeing Bombardier Boeing Boeing Airbus Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Airbus Airbus BAE/Avro Boeing Boeing Boeing Boeing ATR McDonnell Douglas Boeing Boeing Boeing Boeing McDonnell Douglas Boeing Boeing Bombardier Saab Airbus Airbus ATR ATR ATR Dornier Bombardier McDonnell Douglas

CRJ-705/900 737-400 737-800 737-800 DHC8-400 767-300 737-800 A320 737-800 737-800 737-800 737-800 737-800 777-300 777-300 777-300 777-300 777-300 777-300 777-300 737-800 737-800 737-800 767-300 A340-300 A320 146-200/RJ85 757-200 757-200 767-300 737-400 ATR72 MD-80 767-200 737-300 737-300 757-200 MD-80 747-400 737-300 CRJ-100/200 Saab 2000 A330-300 A320 ATR72 ATR72 ATR72 328JET-300 DHC8-400 MD-80

Returned Returned Returned Returned Returned Returned Returned Sale & lease back 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 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

Delta Air Lines Boullioun Aviation Aircastle Investment Air Lease Corporation GOAL ILFC Sumisho A/c Asset SMBC BOC Aviation SMBC SMBC SMBC Aviation Capital Air Lease Corporation Aircastle Aircastle Aircastle Aircastle Aircastle Aircastle Aircastle SMBC GECAS GECAS Jet Midwest Group LLC Airbus AMES CAMO Calder Ltd Icelandair Universal Asset Management Bank Of Utah Unknown (Peru) Unknown (Germany) Aserca Airlines Jet Midwest Group LLC Mint Aero Kelowna Flightcraft Delta Air Lines Bank of Utah Boeing Unknown Ring-day General Aviation Braathens AS Deucalion Capital Engage Aviation Executive Jet Support 19th Hole Inc Afrijet Unknown (Kazakhstan)

Delta Air Lines Boullioun Aviation Aircastle Investment Air Lease Corporation FlyBe ILFC Thomson Airways Peach Jet Airways Shandong Airlines Shandong Airlines Flydubai China Southern Airlines TAM Linhas Aereas TAM Linhas Aereas TAM Linhas Aereas TAM Linhas Aereas TAM Linhas Aereas TAM Linhas Aereas TAM Linhas Aereas American Airlines Transavia France Malaysia Airlines Jet Midwest Group LLC Airbus AMES CAMO Calder Ltd Icelandair Universal Asset Management AeroTurbine Inc Unknown (Peru) Unknown (Germany) Aserca Airlines Jet Midwest Group LLC Mint Aero Kelowna Flightcraft Delta Air Lines Bank of Utah Boeing Unknown Ring-day General Aviation Braathens AS Deucalion Capital Engage Aviation Executive Jet Support 19th Hole Inc Afrijet Unknown (Kazakhstan)

LGW Luftfahrtgesellschaft Walter

Delta Air Lines

Date

05/03/2014 08/03/2014 13/03/2014 14/03/2014 24/03/2014 25/03/2014 28/03/2014 13/03/2014 17/02/2014 17/02/2014 21/02/2014 21/02/2014 26/02/2014 28/02/2014 28/02/2014 28/02/2014 28/02/2014 28/02/2014 28/02/2014 28/02/2014 05/03/2014 14/03/2014 27/03/2014 13/02/2014 14/02/2014 14/02/2014 14/02/2014 14/02/2014 14/02/2014 14/02/2014 14/02/2014 17/02/2014 18/02/2014 19/02/2014 19/02/2014 19/02/2014 19/02/2014 19/02/2014 20/02/2014 20/02/2014 20/02/2014 20/02/2014 21/02/2014 21/02/2014 21/02/2014 21/02/2014 21/02/2014 21/02/2014 LGW Luftfahrtgesellschaft Walter 23/02/2014 Delta Air Lines 24/02/2014

Source: IBA’s JetData.

afm • Issue 90 – May–June • www.afm.aero

INDUSTRY DATA: Deals

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

Aircraft deals 13 February to 9 April, 2014

MSN

Manufacturer

Model

Event

Owner

Operator

Date

49988 191 1450568 10015 24754 25065 28490 1263 4017 23174 25398 34249 55 579 22323 65 22973 32361 1450113 152 548 1451098 26393 24445 37 24936 25767 25303 25700 27087 27986 13 38855 970 1541 49422 24476 30328

McDonnell Douglas ATR Embraer Bombardier Boeing Boeing Boeing Airbus Bombardier Boeing Boeing Boeing Airbus Airbus Boeing Airbus Boeing Boeing Embraer Airbus ATR Embraer Boeing Boeing Saab Boeing Boeing Boeing Boeing Boeing Boeing Saab Boeing Airbus Airbus McDonnell Douglas Boeing Boeing Embraer Boeing Boeing Boeing Bombardier Airbus Embraer McDonnell Douglas Airbus Boeing

MD-80 ATR42 ERJ-145 CRJ-700 737-500 737-500 737-400 A319 DHC8-400 737-300 757-200 737-800 A320 A320 767-200 A320 767-200 737-800 ERJ-145 A300 ATR72 ERJ-135 747-400 737-400 Saab 2000 737-300 737-500 737-400 747-400 737-400 737-800 Saab 2000 737-700 A321 A319 MD-80 767-300 737-700 190/195 737-400 767-300 757-200 DHC8-400 A320 ERJ-135 MD-80 A321 737-300

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

US Aviation Corp Rheinland Air Service Bank of Utah SkyWest Airlines(USA) Southern Aircraft Consultancy Southern Aircraft Consultancy V51A-737 LLC PrivatAir SAMCO BCI 2001-3 LLC United Airlines T'Way Air US Airways Bank of Utah AMES Material Services US Airways Unknown (Thailand) Macquarie Airfinance Southern Aircraft Consult Southern Aircraft Charters Nordic Aviation Capital Wells Fargo Bank NW Magellan Aviation Group Bank of Utah Eastern Airways Wilmington Trust Co Tag Aviation (Stansted) Ltd G Capital Management Air Atlanta Icelandic Unknown (Thailand) Jet 2 Loganair Art Aviation Germania Wells Fargo Bank NW Delta Air Lines Kuta-Two Aircraft Corp Republic of Mali Unknown (Mexico) RIO Linhas Aereas Star Air Wells Fargo Bank NW Yakutia Airlines Chengdu Airlines RCR Air Aeropostal Turkish Airlines Wells Fargo Bank NW

US Aviation Corp Rheinland Air Service AVI Sales & Leasing SkyWest Airlines(USA) Southern Aircraft Consultancy Southern Aircraft Consultancy V51A-737 LLC PrivatAir SAMCO BCI 2001-3 LLC United Airlines T'Way Air US Airways AeroTurbine Inc AMES Material Services US Airways Unknown (Thailand) Macquarie Airfinance Southern Aircraft Consult Southern Aircraft Charters Jettime Wells Fargo Bank NW Magellan Aviation Group Bank of Utah Eastern Airways Wilmington Trust Co Tag Aviation (Stansted) Ltd G Capital Management Air Atlanta Icelandic Unknown (Thailand) Jet 2 Loganair Art Aviation Germania Wells Fargo Bank NW Delta Air Lines Kuta-Two Aircraft Corp Republic of Mali Unknown (Mexico) RIO Linhas Aereas Star Air Wells Fargo Bank NW Yakutia Airlines Chengdu Airlines RCR Air Aeropostal Turkish Airlines Cloud Holding LLC

24/02/2014 26/02/2014 26/02/2014 27/02/2014 28/02/2014 28/02/2014 28/02/2014 01/03/2014 01/03/2014 03/03/2014 03/03/2014 03/03/2014 04/03/2014 04/03/2014 04/03/2014 05/03/2014 05/03/2014 05/03/2014 05/03/2014 06/03/2014 06/03/2014 06/03/2014 07/03/2014 10/03/2014 11/03/2014 12/03/2014 12/03/2014 13/03/2014 14/03/2014 14/03/2014 14/03/2014 14/03/2014 18/03/2014 19/03/2014 19/03/2014 19/03/2014 20/03/2014 20/03/2014 20/03/2014 21/03/2014 21/03/2014 21/03/2014 21/03/2014 24/03/2014 24/03/2014 24/03/2014 25/03/2014 25/03/2014

19000188

25375 26256 30338 4017 5957 1450467 53206 2916 24021

Source: IBA’s JetData.

afm • Issue 90 – May–June • www.afm.aero

INDUSTRY DATA: Deals

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

Aircraft deals 13 February to 9 April, 2014

MSN

Manufacturer

Model

24075 24080 1098 2553 E2329 24688 1873 1450555 709 4003 257 4044 24799 23899 4075 30617 5976 33602 3921 3956 3976 3978 44444 6002 5999 6014 5042 1131 1120 29916 29918 28170 709 779 1175 E1068 697 5143 752 3663 4400 33925 200 27623 244

Boeing Boeing Airbus Airbus BAE/Avro Boeing Airbus Embraer Airbus Bombardier Airbus Bombardier Boeing Boeing Airbus Boeing Airbus Boeing Airbus Airbus Airbus Airbus Boeing Airbus Airbus Airbus Airbus ATR ATR Boeing Boeing Boeing Airbus Airbus Airbus BAE/Avro Airbus Airbus Airbus Airbus Airbus Boeing Airbus Boeing Airbus

767-300 767-300 A319 A321

Event

Sold off lease Sold off lease Sold off lease Sold off lease 146-200/RJ85 Sold off lease 737-400 Sold off lease A320 Sold off lease ERJ-135 Sold off lease A320 Sold off lease DHC8-400 Sold off lease A340-300 Sold off lease DHC8-400 Sold off lease 757-200 Sold off lease 767-200 Sold with lease A320 Sold with lease 737-700 sold with lease A320 Sold with lease 737-800 Sold with lease A320 Sold with lease A320 Sold with lease A320 Sold with lease A320 Sold with lease 747-8 Sold with lease A321 Sold with lease A320 Sold with lease A320 Sold with lease A320 Sold with lease ATR72 Sub-leased ATR72 Sub-leased 737-800 Sub-leased 737-800 Sub-leased 757-200 Sub-leased A320 Sub-leased A319 Transferred A330-200 Transferred 146-100/RJ70 Transferred A319 Transferred A320 Transferred A319 Transferred A319 Transferred A320 Transferred 737-700 Transferred A320 Transferred 757-200 Wet-leased A320 Wet-leased

Owner

Operator

Date

Delta Air Lines Delta Air Lines Jet Midwest Inc Monarch Airlines Falko Regional Aircraft Southern Aircraft Consult SmartLynx PEED Aviation International Avion Express DR PPJ Aircraft Leasing Aeroturbine Inc US-Bangla Airlines Federal Express Transalpine Leasing Ltd EAF Leasing 2 Aerovias de Mexico CALC Orenair ICIL Munster Co ICIL Munster Co ICIL Munster Co ICIL Munster Co GECAS Wells Fargo Bank NW Wells Fargo Bank NW Wells Fargo Bank NW Wells Fargo Bank NW Nordic Aviation Capital Nordic Aviation Capital Aircastle Investment Aircastle Investment ILFC Avion Express Air Canada BOC Aviation Montex Drilling Air Canada Rouge Air Arabia Maroc Air Canada Rouge Loica Leasing LAN Airlines Southwest Airlines Germanwings ILFC ALS

Delta Air Lines Delta Air Lines Jet Midwest Inc Monarch Airlines Falko Regional Aircraft Southern Aircraft Consult SmartLynx PEED Aviation International Avion Express DR PPJ Aircraft Leasing Aeroturbine Inc US-Bangla Airlines Federal Express Transaero Airlines Alitalia Aeromexico China Southern Airlines Orenair Alitalia Alitalia Alitalia Alitalia Silkway Airlines Avianca Spirt Airlines Volaris Spirit Airlines SAS SAS SunExpress SunExpress Aer Lingus Vueling Air Canada Rouge Hong Kong Airlines Montex Drilling Air Canada Rouge Air Arabia Maroc Air Canada Rouge LAN Ecuador LAN Airlines airTran Airways Germanwings Aer Lingus White Airways

25/03/2014 25/03/2014 26/03/2014 26/03/2014 26/03/2014 27/03/2014 28/03/2014 28/03/2014 29/03/2014 29/03/2014 31/03/2014 01/04/2014 27/02/2014 13/02/2014 18/02/2014 19/02/2014 20/02/2014 20/02/2014 26/02/2014 26/02/2014 26/02/2014 26/02/2014 27/02/2014 06/03/2014 12/03/2014 12/03/2014 26/03/2014 14/03/2014 20/03/2014 18/02/2014 24/02/2014 26/02/2014 29/03/2014 15/02/2014 23/02/2014 25/02/2014 27/02/2014 27/02/2014 10/03/2014 14/03/2014 18/03/2014 18/03/2014 28/03/2014 21/02/2014 02/03/2014

Source: IBA’s JetData.

afm • Issue 90 – May–June • www.afm.aero

INDUSTRY DATA: Firm orders Firm orders – From 13 February to 3 April, 2014

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

Source: IBA’s JetData.

Firm orders – From 13 February to 3 April, 2014 Manufacturer Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Bombardier Bombardier Bombardier Bombardier Bombardier Bombardier

Variant

Customer

A321 Neo A350-900 A320-200 A321 Neo A321 Neo A330-300 A330-300 A330-200 A330-300 A330-200 A330-300 737-800 737-800 737-MAX-8 747-8F 737-800 737-800 737-800 737 MAX 737-800 737 MAX 737-800 737 MAX 737-MAX-8 737-MAX-9 BBJ MAX 8 Q400 CRJ-700 CRJ-900 Q400 Q400 CRJ-900

Kuwait Airways Kuwait Airways SaudiGulf Philippine Airlines Philippine Airlines Air China China Eastern Airlines China Eastern Airlines China Southern Airlines Hainan Airlines Hainan Airlines Undisclosed SunExpress SunExpress Cargolux Airlines United States Navy Undisclosed GECAS Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Air Canada Air Canada Undisclosed WestJet Undisclosed Adria Airways Island Air Nok Air China Express Airlines

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

Order date

No of Aircraft

Engines

19/02/2014 19/02/2014 17/03/2014 18/03/2014 18/03/2014 26/03/2014 26/03/2014 26/03/2014 26/03/2014 26/03/2014 26/03/2014 17/08/2014 19/02/2014 19/02/2014 20/02/2014 27/02/2014 28/02/2014 01/03/2014 14/03/2014 14/03/2014 17/03/2014 17/03/2014 28/03/2014 01/04/2014 01/04/2014 02/04/2014 27/03/2014 27/03/2014 27/03/2014 31/03/2014 31/03/2014 31/03/2014

15 10 4 23 23 4 2 5 9 2 6 9 25 15 1 16 8 5 30 30 10 1 25 33 28 1 5 1 2 2 2 3

Trent XWB CF CF CF Genx CF CF CF CF CF CF CF CF CF CF CF PW150 CF34-8 CF34-8 PW150 PW150 CF34-8

Source: IBA’s JetData.

afm • Issue 90 – May–June • www.afm.aero

AIRPORTS INDUSTRY & ROUTES:DATA: Airport List charges prices Data supplied by IBA’s JetData. www.ibagroup.com

List prices and lease rates – April 2014 Current Market Value Manufacturer Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing McDonnell Douglas Boeing McDonnell Douglas Boeing McDonnell Douglas Boeing McDonnell Douglas Boeing McDonnell Douglas Boeing McDonnell Douglas Boeing McDonnell Douglas Bombardier (Canadair) Bombardier (Canadair) Bombardier (Canadair) Bombardier (Canadair) Bombardier Bombardier Bombardier Embraer Embraer Embraer

Average List Price $67.70m $80.70m $88.30m $103.60m $208.60m $211.50m $231.10m $389.90m $74.80m $89.10m $94.60m $352.00m $160.20m $182.80m $185.40m $258.80m $291.20m $295.70m $315.00m $206.80m $37.30m $42.80m $30.00m $21.58m $28.02m $38.66m

Dry Lease Rate

$9.50m $2.00m $5.50m $18.00m $36.00m $42.50m $13.00m $50.00m $92.50m $91.00m

% Change -4% 0% -6% 0% 1% 1% 0% 1% 1% 0%

$0.050m $0.040m $0.050m $0.100m $0.090m $0.050m $0.080m $0.160m $0.240m $0.700m

$0.170m $0.090m $0.115m $0.185m $0.300m $0.355m $0.170m $0.420m $0.860m $0.800m

% Change -5% -5% -5% -2% 1% 1% -3% 0% 0% 0%

A330-300 $16.00m $104.00m A340-200 $5.00m $9.00m A340-300 $5.00m $28.00m A340-500 $18.00m $32.00m A340-600 $20.00m $45.00m A380-800 $135.00m $225.00m B717-200 $5.80m $10.00m B737-300 $0.70m $4.00m B737-400 $1.00m $5.50m B737-500 $0.90m $3.50m B737-600 $8.00m $13.00m B737-700 $11.00m $35.50m B737-800 $14.00m $47.40m B737-900 $14.00m $19.50m B737-900ER $29.00m $49.00m B747-400 $8.00m $30.00m B747-8F $130.00m $180.00m B757-200 $4.00m $17.00m B767-200ER $2.00m $11.20m B767-300ER $6.00m $65.00m B767-300F $20.00m $60.00m B777-200 $18.00m $41.00m B777-200ER $29.00m $106.00m B777-200LR $66.00m $145.00m B777F $130.00m $165.00m B777-300 $40.00m $69.00m B777-300ER $77.00m $166.00m B787-8 $93.00m $115.50m MD-11 $6.00m $10.00m MD-81 $0.50m $0.50m MD-82 $0.50m $1.20m MD-83 $0.50m $1.60m MD-87 $0.50m $1.00m MD-88 $0.70m $1.50m $4.60m MD-90 $3.60m CRJ-100/200 $1.20m $4.30m CRJ-700/705 $7.50m $20.00m CRJ-900 $10.50m $25.00m CRJ-1000 $19.80m $28.00m Q200 $4.90m $8.00m Q300 $5.60m $11.00m Q400 $7.80m $21.00m ERJ-135 $1.50m $4.00m ERJ-145 $1.90m $6.50m E170 LR $11.60m $26.20m

1% 0% -6% -18% 0% 0% 0% 0% 0% -2% -2% 1% 1% -1% 0% 0% 0% 0% -6% 0% 0% 0% 0% 0% 0% 0% 0% 0% -10% 0% 0% 0% 0% 0% -7% 0% -7% -1% 0% 0% 0% 0% 0% -6% -4%

$0.225m $0.120m $0.130m $0.225m $0.275m $1.150m $0.070m $0.030m $0.045m $0.032m $0.080m $0.120m $0.195m $0.125m $0.255m $0.125m $1.300m $0.050m $0.050m $0.125m $0.265m $0.240m $0.350m $0.700m $1.200m $0.410m $0.700m $0.800m $0.100m $0.020m $0.020m $0.020m $0.020m $0.020m $0.060m $0.035m $0.080m $0.120m $0.180m $0.060m $0.065m $0.090m $0.030m $0.040m $0.105m

$0.910m $0.190m $0.360m $0.380m $0.525m $2.000m $0.125m $0.070m $0.095m $0.065m $0.150m $0.300m $0.397m $0.205m $0.415m $0.410m $1.500m $0.220m $0.200m $0.490m $0.580m $0.405m $0.900m $1.000m $1.400m $0.675m $1.500m $1.100m $0.200m $0.040m $0.045m $0.050m $0.040m $0.050m $0.090m $0.065m $0.200m $0.240m $0.270m $0.080m $0.120m $0.190m $0.065m $0.080m $0.240m

0% -5% -5% -10% 0% 0% -4% -8% 0% -3% -5% 0% 3% -5% 0% -3% 0% -3% -5% -5% 0% 0% 0% 0% 0% 0% 0% 0% -5% -2% -2% -3% -1% -2% -1% -1% -1% 1% 2% 0% 0% 0% 0% 0% -3%

Type A300-600R A310-200 A310-300 A318-100 A319-100 A320-200 A321-100 A321-200 A330-200 A330-200F

Oldest $3.50m $1.00m $2.50m $9.80m $7.50m $3.60m $8.00m $13.00m $19.00m $75.00m

Newest

Oldest

Newest

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

afm afm • Issue • Issue 87 – November–December 90 – May–June • www.afm.aero • www.afm.aero

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

Engine data – April 2014

Source: IBA’s JetData.

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

Engine data – April 2014 Type B737-300 B737-400 B737-500 A321-200 body A319-100 A340-300 B737-600 B737-700 B737-800 B737-900ER CRJ-200 CRJ-700 E170/175 E190/195 A300-600R B767-300ER MD-11 A330-200 B777-300ER A320-200 MD-82 B747-400 A310-300 B757-200 Fokker 100 A340-600 A330-300 B777-200ER A380-800 ERJ-145 ER B717-200

Engine CFM56-3B1 CFM56-3B2 CFM56-3C1 CFM56-5B3/P CFM56-5B5/P CFM56-5C4/P CFM56-7B22 CFM56-7B24 CFM56-7B26 CFM56-7B27 CF34-3B1 CF34-8C5 CF34-8E5 CF34-10E6 CF6-80C2A5 CF6-80C2B6F CF6-80C2D1F CF6-80E1A3 GE90-115B V2527-A5 JT8D-217C PW4056 PW4152 RB211-535E4 Tay 650-15 Trent 556-61 Trent 772B-60 Trent 895 Trent 970 AE3007-A1 BR715A

Full-life market value April 2014

Current half-life market value April 2014

$1.00m $1.40m $2.10m $8.65m $6.75m $5.85m $7.05m $7.85m $8.60m $8.90m $2.20m $4.60m $6.00m $7.00m $5.20m $7.10m $5.60m $14.80m $30.74m $7.80m $0.95m $7.00m $6.30m $4.20m $2.20m $14.48m $14.58m $21.10m $19.80m $2.30m $4.00m

$0.60m $0.75m $1.20m $6.30m $4.35m $4.00m $4.70m $5.50m $6.25m $6.55m $1.15m $3.20m $3.20m $4.90m $2.70m $4.00m $3.00m $9.90m $22.95m $5.35m $0.60m $4.00m $3.40m $2.80m $1.30m $8.60m $8.60m $13.80m $13.80m $1.30m $2.50m

Market lease rate $0.020m $0.022m $0.028m $0.065m $0.045m $0.045m $0.047m $0.056m $0.065m $0.066m $0.017m $0.045m $0.045m $0.065m $0.040m $0.055m $0.045m $0.120m $0.250m $0.060m $0.025m $0.055m $0.045m $0.050m $0.025m $0.110m $0.120m $0.170m $0.170m $0.025m $0.042m Source: IBA’s JetData.

afm • Issue Issue90 90––May–June May–June••www.afm.aero www.afm.aero