AFM 95 by AFM Magazine

The business and financing of airline operations AIRLINE FLEET MANAGEMENT

Interview: Cathay Pacific Cargo Engine leasing Cargo conversions MRO forecasting

Air Cargo: Connecting the Globe ISSUE 95 March–April 2015

Published by

March–April 2015 Issue 95 www.afm.aero

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

Foreword

Contributors Mary-Anne Baldwin, Graham Newton and Hannah Davies.

Writing recent news reports, it’s clear the air cargo market is still struggling.

Advertising Manager Alan Samuel alan@afm.aero +44 (0)208 831 7519 Editorial Director Joe Bates joe@aviationmedia.aero Design Erica Cooper erica@afm.aero Website Jose Cuenca jose@aviationmedia.aero Michael Sturman michael@aviationmedia.aero Published on behalf of MRO Network by 91 - 93 Windmill Road, Sunbury-on-Thames, Surrey, TW16 7EF 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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For example, according to the International Air Transport Association (IATA), growth in air cargo has slowed so far this year. In addition, Martinair Cargo has recently announced that it will cut 330 staff members and get rid of a number of its freighters (both of which we report in more detail in the news section). However, while growth is slowing it’s still there and in some regions it’s very healthy. For example, according to IATA, Asia-Pacific carriers grew their freight tonne kilometres by 6.9 per cent in January 2015 compared with the same period in the year before. Marking Asia’s success in air cargo, we speak to Mark Sutch, general manager of cargo sales and marketing at Cathay Pacific Cargo about its “significant improvements” from three years ago. We also examine the case for cargo conversions, hearing from some of the main players in the industry. While demand for conversions is low, particularly for widebody conversions, it still persists and its players are primed for a pickup in demand. Of course, fuel is of particular importance to this discussion. When fuel costs are low, such as they are now, airlines tend to hold on to older aircraft, meaning there’s less feedstock for conversions. But, low fuel prices also have a positive impact on GDP and general product demand, which equates to cargo demand. In addition, it dramatically lowers operating costs for passenger carriers and increases the demand for air travel. This is all good

news, but how long will it last? We examine this subject in this issue’s fuel report. Another focus of this issue is the impact of leasing (which is a strong and expanding market) on MRO. In this issue we look at the effect of both engine leasing and leasing in general on the MRO industry and, thanks to CAVOK and TeamSAI, provide a forecast of the overall MRO market. Lastly, it would be remiss to ignore the shocking news we heard recently regarding Germanwings’ pilot, Andreas Lubitz, who intentionally crashed his aircraft, killing both himself and all those on board. It was a dark day for the aviation community and for the friends and family of those who died. It’s led both us and the public to question safety legislation governing air pilots and whether there is more we could, and should, be doing to protect passengers. reports on the concerns surrounding cockpit rules and pilot mental health issues on page 28, and we would also like to take this opportunity to offer our sincerest condolences and sympathies to everyone affected by the incident.

Editor Mary-Anne Baldwin

The views expressed in each edition of Airline Fleet Management (AFM) are not necessarily the views of MRO Network, but of individual authors and contributors and MRO Network shall therefore not be liable for the contents of any articles included in this publication. AFM, part of 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 95 – March–April • www.afm.aero

Contents 18

03 Foreword

06 News The latest on deals, mergers, appointments and more.

Focus

Trading, legal and finance

One to One: Cathay Pacific Cargo Mark Sutch, general manager of cargo sales and marketing at Cathay Pacific Cargo, talks to AFM about the development of the airline and the cargo market in general.

Freighter conversions: Demand during difficulty With air cargo demand still low, the call for freighter conversions has been slow for many years. However, there is still movement in the market and conversion companies are primed for a pickup. Mary-Anne Baldwin reports from ISTAT where industry players discussed the matter.

32 Aircraft investment: An alternative to negative yield bonds Executives at AviaAM Leasing, Tomas Sidlauskas and Tadas Goberis, examine the aircraft finance market.

afm • Issue 95 – March–April • www.afm.aero

Data

Fleet operations

Maintenance operations

The impact of leasing on MRO As increasing numbers of the world’s aircraft and engines are owned by lessors, MRO companies – and the airlines using them – will have to adapt to lessors’ demands. AFM speaks to a selection of companies that will be exhibiting at MRO Network’s upcoming ap&m Europe expo in May about the subject.

Engine leasing: Watch this space Hannah Davies reports on the changing landscape of the engine lease business as MROs, OEMs and lessors cross over into each other’s markets.

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

44 Fleet and MRO forecast: Turbulence ahead CAVOK, with its inclusion of TeamSAI, offers its forecast of the global commercial fleet and its MRO needs. John Smiley, manager of Data Services, and Chad Porter, technical analyst at CAVOK, the aviation technical services and consulting division of Oliver Wyman, report.

afm • Issue 95 – March–April • www.afm.aero

NEWS

Air cargo growth slows

rowth in the air cargo market has slowed so far this year, according to the International Air Transport Association (IATA). Data covering the global air freight markets shows a 3.2 per cent expansion in freight tonne kilometres (FTKs) in January 2015 compared with the same month last year. However, the growth is slower than the average of 4.5 per cent in 2014. Asia-Pacific, African and Middle Eastern airlines showed strong growth but airlines in Europe and North and Latin America reported a fall in demand. IATA noted a decline of business confidence since mid 2014

and that export orders tailed off towards the end of the year. It also found a reversal of the positive trade-todomestic production ratio, which boosted cargo volumes last year. “January was a disappointing start to the year for air cargo. And it is difficult to be too optimistic about the rest of the year, given the economic headwinds in Europe and growing concerns over the Chinese economy. Add to that the continuing trends of on-shoring production and trade protectionism and 2015 is shaping up to be another tough year for air cargo,” said Tony Tyler, IATA’s director general and CEO.

NEWS IN BRIEF Martinair Cargo cuts back Martinair Cargo is to scale back its full-freighter fleet, affecting more than 330 of its employees. “Air FranceKLM-Martinair Cargo has decided on a business model which requires less freighter capacity, rather than a model with no freighters at all,” the group said in a public statement. “The reduction is unavoidable if the cargo business is to be restored to good health.” This decision affects around 170 ground staff in the Netherlands, 50 abroad and 110 cockpit crew. From 2016, Martinair Cargo will continue to operate a fleet of two 777Fs at Paris Charles de Gaulle and four 747-400s at Amsterdam Schiphol, supplemented by 15 747 Combis.

DOT allows Delta to keep Haneda slots The US Department of Transportation (DOT) has made a tentative decision to allow Delta Air Lines to retain its slots at Tokyo’s Haneda International Airport. Delta resumed its non-stop service between Seattle and Haneda after a temporary seasonal suspension. Should Delta’s Haneda–Seattle service fail, the DOT plans to hand the slots to American Airlines. Hawaiian Airlines, which also competed for the slots, said in a statement: “Hawaiian’s proposed route would have generated more economic benefit than that offered by either Delta or American. None of these facts are in dispute by the DOT.”

TransDigm closes Telair purchase TransDigm Group has completed its purchase of the Telair Cargo Group for $725m in cash. It borrowed $75m under its existing revolving credit facility and took the rest of the sum from existing funds. Telair, which produces cargo loading and handling systems plus unit load devices, consists of three major operating units, Telair International, Nordisk Aviation Products and Telair US. Telair revenues are anticipated to be about $300m, with earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins approaching 20 per cent for fiscal year ending May 2015.

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NEWS

Start-up deal rouses CSeries programme

tart-up carrier, Flymojo, has signed a letter of intent for 20 CS100s, with options for another 20. It’s the first CSeries order since September and the first ever from the Asia-Pacific region, which is a key growth market. The deal is also a first for the new Malaysian airline, which plans to fly the aircraft on about 10 routes from its primary hub at Senai International Airport, Johor and its secondary one in Kota Kinabalu, Sabah. “As the only airline utilising the Southern Corridor as its headquarters, Flymojo will transform Senai into a key regional aviation and logistics hub,” Malaysia’s deputy minister of transport, Aziz Kaprawi, said. However, troubles aren’t over for CSeries. The CSeries has faced numerous delays, technical issues (including the Pratt & Whitney GTF engine fire) and additional development costs, leading some analysts to predict that Bombardier will take a write-down on the programme.

Airbus plans to sell more shares in Dassault Airbus is to sell a further 15 per cent of its stake in Dassault Aviation, lowering its previous stake from 42 to 27 per cent. It plans to sell 1.38 million Dassault shares. Dassault will reclaim five per cent of its share capital at a maximum of €980 a share. The French State has elected not to exercise its right of first refusal under the shareholder agreement with Airbus Group. In November 2014, Airbus Group sold an eight per cent holding back to Dassault Aviation through an offmarket block trade.

Its plan was to take up to half of the 100 to 149 seat market, creating a revenue of $5bn to $8bn, yet its programme costs have been estimated to reach $5.5bn, with sales unlikely to exceed that. In addition, Qatar Airways recently cancelled its order, saying it had already waited too long, and Moscow-based lessor, Ilyushin Finance Corporation (IFC), is reportedly “re-evaluating” its order for 32 CS300s. Ross Mitchell, Bombardier’s VP of business acquisition, said at the International Society of Transport Aircraft Trading (ISTAT) Americas, in March, that he is confident the CSeries will enter the market. “We may not be on time but we made a promise and we’re keeping it,” he told delegates. Mitchell claims the CSeries backlog is “where we expect it to be” and says the company is “well on its way” to hitting its target of 300 orders by entry into service (EIS), however, that date has not been reset.

NAC increases debt facility Global turboprop lessor, Nordic Aviation Capital (NAC), has increased the debt facility it signed in January 2015 to $400m. The company will use the proceeds to part finance turboprop and regional jet aircraft, which it will then lease to airlines. “This is an important transaction for our company,” said Kim GravenNielsen, CEO of NAC. “We thank the participating banks for providing the capital to fuel our continued growth. NAC has had 18 consecutive years of net income growth and this facility will help us continue our strategy.” Deutsche Bank led the deal as sole structuring agent and Deutsche Bank and Citibank acted as global bookrunners.

Etihad signs Korean finance lease Etihad Airways has become the first company to finance an A380 aircraft using only a Korean finance lease. The UAE airline has acquired an A380 aircraft under a private placement with a group of major Korean institutional investors. London-based aviation finance specialists, Magi Partners, arranged the deal in conjunction with their Korean associates, Youjee Partners. The transaction is structured as a 15-year, fixed coupon full-payout finance lease. Peter Vardigans of Magi Partners, said: “We anticipate that Korean institutions will provide a growing strategic source of capital for the global aviation market.”

afm afm••Issue Issue95 95––March–April March–April••www.afm.aero www.afm.aero

NEWS

Cape Town unlocks EETC deals

ir Canada has closed an enhanced equipment trust certificate (EETC) financing transaction, making a trifecta of recent EETC deals for non-US airlines. The Canadian carrier struck a $1.03bn EETC deal for the purchase of eight Dreamliners. The private offering came under three tranches and was comprised of class A, B and C certificates with a combined weighted average interest rate of 3.81 per cent. The deal is secured by one 787-8 aircraft delivered in January 2015, and eight new 787-9 aircraft, which are scheduled for delivery from July 2015 to March 2016. Air Canada is the third airline within one month to announce an EETC deal, a type of financing that has until now been considered unusual, particularly outside the US. It follows Turkish Airlines, which raised a $328.3m EETC transaction secured by three new 777-300ER aircraft

scheduled for delivery in March 2015 and April 2015. Avianca also closed an enhanced aviation investment vehicle (EAIV) private EETC transaction for 787 and two A320 family aircraft late last year, it disclosed in mid March. Traditionally, EETCs have been a US financing vehicle but, thanks to the Cape Town Convention, that has changed. In the event of an airline bankruptcy, EETCs relied on US laws allowing lenders to re-possess aircraft used as collateral. Now the Cape Town Convention – an international treaty – has applied the same protection to lenders in other countries. This has allowed US lenders to deal with foreign airlines with less risk and has given those airlines access to the US capital markets. Not only does it provide a welcome new form of financing, EETCs also typically offer lower interest rates than other forms of aircraft financing.

NEWS IN BRIEF Hainan to order 30 Dreamliners Hainan Airlines is to order 30 787-9 Dreamliners in a deal worth $7.7bn at list prices. The Chinese airline said it would use the aircraft to meet growing demand from China’s increasing middle-class which, with more disposable income, are more inclined to travel. It is Boeing’s biggest order to date this year and will bring its backlog for the mid-sized version of the Dreamliner to 855 aircraft. The aircraft manufacturer said it plans to increase its Dreamliner production to at least 14 a month by 2020.

Air New Zealand buys data firm Air New Zealand and Aimia, a Canada-based marketing and loyalty analytics company, have jointly purchased 11Ants Analytics. 11Ants has developed a cloudbased retail analytics platform that allows retailers to obtain actionable insights from their customer data. “Businesses all over the world have an appetite for customer analytics, but typically they don’t have the know-how or the budget to execute. 11Ants Analytics’ solutions make customer science accessible, affordable and immediately deployable,” said the company’s CEO, Tom Fuyala.

ALTA travel rises 10 per cent Passenger figures rose 10.5 per cent in Latin America and the Caribbean, according to the Latin American and Caribbean Air Transport Association (ALTA). ALTA members carried 15 million passengers in February, up 1.4 million passengers from the same period in the year before. Traffic (RPK) grew 10.1 per cent and capacity (ASK) 8.7 per cent, bringing up the load factor one percentage point to 80.1 per cent compared with the year before. Freight tonne kilometres dropped 9.3 per cent in February and 8.5 per cent in the year-to-date.

afm afm••Issue Issue95 95––March–April March–April••www.afm.aero www.afm.aero

NEWS: People

On the

move

Lockheed picks engine MRO GM Bill Brotherton has been appointed as president and general manager of Lockheed Martin’s engine MRO and testing arm. He steps up from his role as director of business operations for the C-5 military aircraft programme and previously worked on the C-130 programme. Brotherton has worked for Lockheed Martin since 1990. He takes over the responsibility for leading Commercial Engine Solutions’ San Antonio, Texas and Montreal, Canada facilities, which offer MRO on engines that power 737, 747, 767, A300, A320, DC-10 and CRJ aircraft.

Sabreliner appoints engineering director US-based MRO, Sabreliner Aviation, has named James Clifford as its director of engineering. Clifford joins from gas turbine engine manufacturer, Williams, and will be responsible for overseeing the MRO’s engineering offerings. He will also head its aircraft renewals programme.

Wesco Aircraft appoints Castagnola as CEO Parts supplier, Wesco Aircraft, has appointed David Castagnola as its president and CEO, replacing Hal Weinstein as of May 4, 2015.

Castagnola, who is currently president of landing systems at UTC Aerospace Systems, has more than 35 years of experience in the sector.

Austrian’s CEO to join SunExpress Austrian Airlines’ CEO, Jaan Albrecht, is to step down from his role at the airline to head SunExpress. Albrecht will be CEO of SunExpress, a joint venture between Lufthansa and Turkish Airlines, from 1 June. Following its merger with Tyrolean, Austrian Airlines has named Klaus Froese as its COO. Froese, who has more than 27 years’ experience in the industry, has held positions at Deutsche Luftverkehrsgesellschaft, the predecessor of Lufthansa CityLine and Lufthansa.

Aergen appoints senior team

Dublin-based lessor, Aergen Management Services, has named Heinz Westen as its CFO. Westen, who has more than 25 years’ experience in aviation finance, joins from Dubai Aerospace Enterprises. In addition, Michael Barry has been appointed as chief marketing officer and Tom Kaluza as SVP; they both join from DAE Capital.

Advantage Technologies appoints president US-based MRO and PMA parts manufacturer, Advantage Aviation Technologies (AAT), has named Dennis Moore as its president. Moore, who has more than 25 years of executive operations experience, will be responsible for overseeing AAT’s business and production operations.

Accelya names group CEO Airline finance and business intelligence firm, Acceyla, has appointed John Johnston as its CEO. Johnston, who is the former CEO of Champ Cargosystems, replaces Phillipe Lesueur, who will remain on the board as an adviser. Johnston has held senior executive positions in several countries and has provided senior management and consulting services to a number of global airlines.

afm • Issue 95 – March–April • www.afm.aero

RJ appoints Misto as CEO The Royal Jordanian board of directors has appointed captain Haitham Misto as Royal Jordanian’s president and CEO. He has been acting president and CEO since 26 October, 2014. Misto has 33 years of experience at Royal Jordanian. During his career, he held several managerial and technical responsibilities. He was head of the Flights Operations Department before being appointed as acting president.

One to One: Cathay Pacific Cargo Mark Sutch, general manager of cargo sales and marketing at Cathay Pacific Cargo, talks to AFM about the development of the airline and the cargo market in general.

afm • Issue 95 – March–April • www.afm.aero

FOCUS: Cathay Pacific Cargo

We’ve seen a gentle rebound in cargo with good levels of trade in Asia. Would you say business is good for Cathay Pacific Cargo at the moment? After a strong year in 2010, the air cargo market had three very tough years and in 2014 saw some improvements, really beginning in the 2Q. The year finished strong and when you look at the results for January and February combined (to adjust for the Chinese New Year shift from 2014/2015) it was a significant improvement on the previous January/February in 2014. So far, March has proved to be robust – particularly on trans-Pacific routes with freight originating in China, Hong Kong (Pearl River Delta) and Vietnam. So for now, one could say business is in significantly better shape than 2014, but it is important to put this into context with poor years 2011 and 2013 and a super strong year in 2010. You had great cargo figures for February but I’m aware that was influenced by increased exports made in advance of the Chinese New Year. How is March playing out so far and do you expect healthy figures for the near term? The stronger January/February has continued through to March. Some of this has been boosted by troubles in US coastal ports on the west coast that has been widely

covered in the press. Moreover, we have seen some good project shipments as well as a number of charters on the back of inventory problems in the US – particularly automotive ex Japan to USA. What are the key growth areas both for you and the cargo industry as a whole? What are your development and expansion plans? The growing and strong markets are trans-Pacific and intra-Asia. This is particularly the case for Cathay Pacific, although industry stats do paint a similar picture. A significant percentage of our dedicated freighter capacity is now deployed on the trans-Pacific. In the coming IATA season, we will operate 37 weekly trans-Pacific freighters to the US, Canada, Mexico and we hope to build on this in the traditional 3Q and 4Q peak. In Europe, we operate somewhere between nine to 11 weekly freighter services. Asia-Europe remains a more difficult market. Yields are affected by large over-capacity, much of it a result of increased belly capacity on passenger services. Cathay Pacific has just launched freighters to Calcutta in India and in the last 18 months has opened Mexico City,

afm • Issue 95 – March–April • www.afm.aero

FOCUS: Cathay Pacific Cargo

On certain lanes the increased belly capacity is forcing over-capacity but with our network we are well balanced to commit to freighters for many years to come.

Guadalajara, Calgary, Columbus (Ohio), Phnom Penh (all freighters). This month we launch passenger flights to Zurich followed by Boston and Düsseldorf later in the year. All are operated by 777-300ER with good belly capacity. Can you tell me about your cargo mobile App? Is this something customers asked for, or just a ‘value add’? Our Cargo App was launched in December 2014 and has received good feedback from our customers. It was launched on the back of an App that our passenger side of the business has had for some years. We’re making enhancements at the moment to add features and we will make new releases when it makes sense. It’s a value add, but also we believe it’s something that’s really expected these days. Mobile communications has become the norm and not the exception. Cathay Pacific leads the way in e-Air Waybill globally and is committed to all sorts of efficiencies in regards to e-freight initiatives. What cargo aircraft do you operate and what do you have on order? We operate 21freighters in total; six 747-ERFs, 13 747-8Fs and two 747-400Fs. We have one remaining 747-8F due for delivery in 2016. On the passenger side of the business, we have a large outstanding order for A350-900/1000 as well as more 777-300ERs and future generation 777-Xs.

Mark Sutch, general manager, cargo sales and marketing at Cathay Pacific Cargo.

If you could choose the perfect freighter for your fleet – either an existing one, or a prospective clean sheet or conversion – what would it be? For us, the 747-8F is a very suitable freighter, given our network composition. As an airline we do operate the 777-300ER and thus know the capabilities of that aircraft and some good efficiencies of having two engines. Passenger aircraft are able to carry an increasing amount of belly freight. Do you think this will have an effect on your dedicated cargo subsidiary? The Cathay Pacific network and our strength in Cargo trans-Pacific means we are certainly dedicated to operate freighters. Passenger aircraft are becoming hugely efficient in terms of cargo and we take good advantage of that on, for example, the HKG-LHR route where we operate five 777s per day with an average payload of 20 tonnes each. That’s 100 tonnes per day just in the bellies, or the equivalent of a 747-400F. On certain lanes the increased belly capacity is forcing over-capacity but with our network we are well balanced to commit to freighters for many years to come. Do you use your passenger airline to support your cargo operations in any way? In 2014, 56 per cent of all our tonnage carried was in the bellies of our passenger aircraft. We are growing fast and that stat shows the importance of belly freight.

afm • Issue 95 – March–April • www.afm.aero

FOCUS: Cathay Pacific Cargo

You have been very vocal in your support of a third runway at Hong Kong International Airport, the world’s busiest airport for international freight. Why is it so critical and what will it mean to you as a company? The decision to build the runway has been made. It will help the expansion of Cathay Pacific. It will help grow our network, our connectivity and our capacity through increased daily and weekly flight movements. It’s an exciting next stage for Hong Kong International Airport and is important for Hong Kong’s development as a whole. We welcome the decision. What other capacity issues are there in the Asia-Pacific cargo market? Air freight is competitive. Many airlines are growing and taking, in particular, widebody deliveries. But as the aircraft population grows so do economies, and as economies grow so does the demand for air freight. We are well positioned to take advantage. How has the Asian export market changed in terms of what they’re exporting? Has this affected your business in any way? Asia is a big export market. Hi-tech electronics (mobile devices etc) still form a large amount of the annual tonnage. Markets differ – we have some markets that are very strong on electronics and some are strong on garments as well as raw materials for fashion etc. As a freighter operator we are also able to carry much of the out-of-gauge large cargo. We are experts in that area and being a nose door freighter operator we have an advantage over some of our cargo competition.

Is Asia’s cargo traffic growth sustainable? We believe so. There will be shifts in the growth but much of it will remain in Asia. Manufacturing will shift and we will follow it and provide a solution. Incomes will increase as will demand for products in Asia and we will help satisfy that. E-commerce is growing and we too will be part of that. How competitive is the Asian cargo market? The global air freight market is competitive and Asia is no exception. We compete by providing a good service, a wide range of specialist products, a great network, a smooth transfer proposition in Hong Kong with our new 2.6 million tonne capacity and a great fleet – both on the passenger and freighter side. How much competition are you seeing from shipping and has that decreased? This year we have seen a shift from ocean to the air as a result of west coast port issues. Over the years it has been the other way around. Air freight is different to ocean and speed to market will always be a requirement. We have seen less of a shift from air to ocean in the last couple of years. How greatly has the demand for express deliveries affected competition between shippers and air cargo operators? We are not an integrator and do not pretend to be. However, we are very much part of the express delivery business – both for integrators and post offices. This business, mainly on the back of e-commerce, is growing and we will be part of that. We are investing in our mail tracking business, which has been welcomed by the post offices we work with.

afm • Issue 95 – March–April • www.afm.aero

FOCUS: Cargo conversions

afm • Issue 95 – March–April • www.afm.aero

FOCUS: Cargo conversions

ccording to Douglas Kelly, SVP of asset valuation at Avitas, the freighter market has read like “a tale of two stories” in recent years, with a good amount of interest in narrowbody conversions, such as the 737 and 757, but not so much for widebodies.

Asked if this lack of interest in widebody freighters is likely to stick, Dan da Silva, VP of modification and conversion services at Boeing, said: “I just try to keep it alive and let the forecasters try to decide whether it will come back or not. The reality is that if you look at 100 tonne freighters out there, they’re all dedicated to long-range, mostly Asia to Europe, Asia to the US market. Those were the markets that suffered the most during the downturn.” He added: “That side of demand is recovering but we have a lot of over-capacity in the marketplace. Over 50 747 Freighters were parked just over the last two to three months. About a dozen of those airplanes have come back into service, or are in the process. But when that entire capacity will be absorbed, or what part of it is available to re-enter the market, we don’t know.” However, Wolfgang Schmid, VP of sales, marketing and customer support at EFW, is more optimistic. He explains that, as the freighter conversion centre for Airbus aircraft, EFW has converted more than 200 widebodies and is now working on A330-300 and A330-200 conversions. “We believe that the A330 – both types – will be placed in the widebody market for the long-term.” And that’s not the only passenger to freighter (PTF) programme in its sights. “It’s an open secret that EFW is working on an A320 / A321 conversion programme,” Schmid admitted. But while he said it would be a “very attractive” offering, he wouldn’t comment on the price.

Meanwhile, EFW’s counterpart, Boeing, is currently working on the 767-300 Boeing Conversion Freighter (BCF) and delivered the first of two to Uzbekistan Airways in November last year. It’s also working on 767-300 BCFs for China’s SF Express, with deliveries due to start in 2H 2015. In addition, Boeing is developing the 737-800 programme, which da Silva says is now live. He explains: “Boeing works slightly different to third-party conversion programmes. We treat it like any other Boeing product development programme; we have to go through data processes, gain customers before we consider a programme officially launched. But we do now have authority to offer the 737-800 conversion programme.” However, it’s also been forced to shelve a number of programmes – namely the 747 and 777 conversions. According to da Silva, Boeing still has the ability to convert the 747 but there just isn’t demand. “We also have on the shelf a 777 conversion programme, which we developed a few years ago with a lot of help from Fed-Ex. We think we have a great design. However, the 777 has been a rare commodity as a converted freighter and demand for that size disappeared over the last few years. But, I think as demand comes back and the feedstock becomes available, there is a chance there’ll be interest in that programme again, and we’ll be ready to move forward.”

Forecasting freighter demand While da Silva isn’t particularly inclined to predict the future, it doesn’t mean he won’t ever give it a try. According to him, the 767 will be the most regularly converted widebody during the next five years. However,

afm • Issue 95 – March–April • www.afm.aero

FOCUS: Cargo conversions

a somewhat biased Schmid claims: “The 767 will be successful for a couple of days” only to be replaced by the A330. “The 777 is a different category for me.” Opening up this question to delegates at the International Society of Transport Aircraft Trading (ISTAT) conference in March, where the industry players spoke, 51 per cent predicted that the most converted widebody freighter would be the 767, 11 per cent said the A330 and seven per cent the 777. So, what about the narrowbody market? The majority of delegates – at 38 per cent – predicted the 757 would be the most frequently converted aircraft; 32 per cent believed it will be the 737NG, and 25 per cent said the 737 Classic. Regarding second-generation narrowbodies, 68 per cent of the delegates picked the 737-800 and 13 per cent the A321, with the remaining smattering choosing the 737-700 and -900. According to Robert Convey, SVP of sales and marketing at Aeronautical Engineers Inc (AEI), demand for 737-800 Freighters when conversion starts in 2017 will be “huge”, reaching – he predicts – 150 conversions or more a year. Kelly agrees that it will be the “dominant narrowbody freighter in the world in 30 to 40 years,” but according to da Silva there will be technical problems with the 737-300

variant, which means the economics “just don’t work”. On 757 conversions, Brian McCarthy, VP for sales at Precision Aircraft Solutions, predicts about 130 over the next five years but expects the feedstock to run out by 2020.

Conversion costs Despite narrowbody conversions being the most popular, the consensus among the freighter conversion panel at ISTAT was that the narrowbody conversion market is particularly price-sensitive. According to McCarthy, lease rates for a converted 38 metric tonne, 15 pallet 757 are $175,00 to $180,00 a month. For a 737-400 it’s $120,000 to $140,000. “The airlines know that the aircraft needs to haul enough cargo to pay for its engines,” he explains. Da Silva agrees, advising: “You need to ask ‘what’s your daily utilisation’ – can you carry the cost?” He notes that as a conversion company, its service is only one aspect of the cost and airlines need to factor in such things as feedstock and transitioning the engine. So how do airlines know which aircraft to convert? Part of the decision will be down to individual needs and preference. The biggest considerations are the aircraft’s range, model and payload, but Kelly says the operator should

afm • Issue 95 – March–April • www.afm.aero

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FOCUS: Cargo conversions

also consider cockpit commonality, age and its number of cycles.

choose to hold on to their older gas guzzling aircraft for longer.

According to McCarthy, the “sweet spot” for cycles is 25,000 to 28,000, but even 35,000 cycles at two flights a day are worthy of conversion.

In fact, according to Edward O’Byrne, chief investment officer at the leasing company, AerCap, who spoke on the conference’s Used Aircraft panel: “Airlines are consistently coming to us for used aircraft in order to manage their capacity.” These cheaper aircraft mean airlines can use them when needed and ground them when not.

Da Silva adds maintenance costs to the list, and says: “People are realising that calendar age is one thing… but that systems are much more robust than they once were.” In fact, he says his company has converted 767 aircraft as old as 23 years. While systems are more robust, sometimes it pays to leave some alone. For example, Convey advises that conversion companies avoid altering avionics in order to keep down costs, although he recognised that some airlines may wish to anyway. “At the end of the day, costs per kilo marks the deal,” Schmid surmises.

Freighter feedstock Another key consideration affecting both conversion costs and demand is feedstock; if there aren’t enough aircraft available to convert, their acquisition costs and market value often make them unviable for conversion. This issue is of particular concern when fuel prices are low (such as they are now) because airlines often

According to Daniel Pietrzak, MD of aircraft transactions at Delta Air Lines, carriers such as his are using older aircraft to create flexibility. He explains: “Pursuing both a new and a used strategy means we can play one off against the other.” The other issue affecting feedstock is aircraft teardown. For example, Pietrzak says Delta parted-out 20 of its own aircraft last year in order to supply its own fleet with parts. He notes that airlines will buy end-of-life leased aircraft in order to strip them of components, stopping those aircraft from ever entering the conversion market. While production rates for new-build aircraft are at a record high, one would expect there to be an oversupply of older aircraft. But Abdol Moabery, CEO of GA Telesis, notes that the market generally absorbs aircraft as fast as they enter it. He surmises: “Every time we think there’ll be a surplus of used aircraft the market rights itself.”

afm • Issue 95 – March–April • www.afm.aero

TLF: Fuel forecast

Fuel report: The highs and lows Airlines have celebrated a recent dip in fuel prices, but how long will this last and what effect will it have on the industry? Graham Newton and Mary-Anne Baldwin report. The cost of oil has fuelled debate across the globe and not least within the aviation sector. While we celebrate low fuel prices, we’re also wary of becoming reliant on them. Fortune is fickle and not least with fuel. The price of oil has dropped about 50 per cent compared with 12 months ago. And there are plenty of reasons to suggest that the trend is not about to end any time soon. US shale production has increased the overall supply of oil, as have the Canadian Tar Sands and the return of Libyan oil to the market. At the same time, the Organization of the Petroleum Exporting Countries (OPEC) has said that it has no intention of cutting production from its 30 million barrels a day quota, even if oil fell to $20 per barrel (pb).

However, oil guru and SVP at Avitas, Adam Pilarski, who addressed the issue of fuel at ISTAT, said: “I can’t understand any analyst who says airlines won’t reduce ticket prices.” He argues that so long as supply and demand remain the same, you can lower costs and still fly the number of passengers needed to make the right return. Either way, as fuel costs fall, GDP and disposable income – which many people use to travel – will rise. According to Pilarski, GDP rises by between 0.1 and 0.4 per cent for every 10 per cent decline in fuel prices.

OPEC’s major player, Saudi Arabia, has enormous cash reserves, and although it may need oil prices to double to balance its budget, it can afford to be patient. Indeed, Middle Eastern suppliers have shrugged off OPEC’s concerns about oversupply, suggesting they’re happy to continue delivering large quantities of oil at low prices.

Fuel, fleets and finance

A new chapter

According to Pilarski, “big changes will happen” to lease and market rates, as well as to the age at which aircraft are retired.

Stuart Elliott at energy specialist, Platts, has suggested that the oil market has entered a new chapter of its history, “which is now starting to operate like any non-cartel commodity market”. All things being equal, by mid 2015, oil stocks may come close to the all-time high of 2.83 billion barrels reached in August 1998. At that point, the price averaged a little over $11pb. It seems, by and large, like good news for airlines. With fuel accounting for 30 to 40 per cent of their total costs, the reduction significantly affects their bottom line. That’s also good news for air service development, as airlines will look to re-invest surplus cash into new aircraft and routes. Some analysts have suggested that airlines will use fuel cost savings to bolster their balance sheets. Indeed, in a poll of the delegates at this year’s International Society of Transport

Aircraft Trading (ISTAT) Americas, the majority (45 per cent) believed airlines would invest savings instead of passing them on to their customers or shareholders.

Fuel costs are also likely to have an effect on aircraft acquisitions. In periods of high fuel prices, operators clamour for new, fuel-efficient aircraft, but with today’s prices they’re more likely to retain older aircraft and lease used aircraft at relatively cheap rates.

Highlighting this trend, Edward O’Byrne, chief investment officer of AerCap, said at ISTAT: “Airlines are consistently coming to us for used aircraft in order to manage their capacity.” However, in a later panel, Ron Baur, VP of fleet for United Airlines, said he takes a conservative approach to the effect of low fuel costs on fleet acquisition and added that the airline hasn’t adjusted its fleet plan due to low prices. “Long-term decisions on aircraft really can’t be taken on short-term fuel price changes,” surmised Phil Seymour, chief operating officer of IBA Group. But, that’s not to say it won’t have an effect. “Falling fuel prices have never been more than a temporary boost to airlines and their shareholders,” says Brian Pearce,

afm • Issue 95 – March–April • www.afm.aero

TLF: Fuel forecast

afm • Issue 95 – March–April • www.afm.aero

TLF: Fuel forecast chief economist at the International Air Transport Association. “Competition and the nature of airline economics means that a uniform cost reduction like this gets passed on to consumers, once the delay caused by hedging passes. However, airlines will need to use some of the cash from any reduction in fuel costs to pay down debt, renew old fleets and invest in service improvements.” Fuel hedging means that most airlines are either not yet benefiting from lower fuel prices or they are reporting mark-to-market losses – depending on the type of fuel hedge, says Pearce.

Don’t count your coffers Unfortunately there’s a lot more to this story than meets the eye, and airlines shouldn’t be counting their coffers just yet. While it seems there is a short-term trend for low oil prices, the bigger picture is very hard to judge. It’s reported that OPEC and US shale oil producers are waiting to see who will blink first – that is, cut production – as the current price of oil is simply unsustainable if many existing wells are to continue production. Arctic oil, for example, does not work at less than $100pb, says Brendan Cronin at Poyry Managing Consultants, so any plans for polar drilling are likely to be shelved for the foreseeable future. And at $50pb, North Sea oil is also unprofitable. So it could be that just as the world economy starts to boom and air travel follows suit, oil supply will fall dramatically. This would lead to tremendous upwards pressure on oil prices and potentially a greater spike than during 2008. Contrary to what some say, Pilarski believes that on a global level we aren’t running out of oil, yet he acknowledges there’s division on how long these low prices will last.

He raises serious concerns about the risk of numerous political tensions, which could severely affect oil supply in either direction. These include conflict in Syria, Russia, Iraq and Iran, plus deflation, which is particularly serious in Europe. We are, he says, in a bubble surrounded by high levels of risk on all sides. Access to fuel remains a concern too. Many African airlines risk fuel not reaching them and the issue is not just far afield. At London Heathrow, for example, there is only enough tankage for 1.7 days. It should be at least double that. Other issues will also come into play, from refinery capacity to the demand for biofuels. How it all plays out could have a fundamental effect on airline strategy. The low cost of fuel could tempt low-cost carriers into the long-haul market, for example, which could have a shattering impact on the existing network. Such uncertainty means it’s hard for airlines to form a clear strategy. “It is fuel price volatility that makes life so difficult for airlines,” says Pearce. “They can adapt to periods of high or low fuel prices, as we have seen with improving profitability in the past two years. If airlines could be sure low prices will persist they could start to adapt.” The futures market suggests oil prices will recover to about $70pb by 2019, with most experts agreeing on between $40pb and $80pb. “The challenge for forecasting price is that oil markets are driven just as much by strategic supplier decisions as market fundamentals,” concludes Pearce. “This makes it hard to predict. But it’s likely that airlines will not plan on the basis that fuel prices will stay low.”

afm • Issue 95 – March–April • www.afm.aero

TLF: Pilot mental health

Pilot profiles: Monitoring mental health Mary-Anne Baldwin examines the need for new aviation legislation following the recent air crash in which pilot, Andreas Lubitz, intentionally killed himself and 149 passengers and crew. Fatal air crashes are always shocking but few dazed us as much as hearing that Andreas Lubitz, former Germanwing’s co-pilot, deliberately wrecked his aircraft, killing both himself and 149 others on board. His decision is incomprehensible. We can understand that he was depressed – suicidal even – but it’s very hard to accept how this could lead him to kill other people, and that he could carry out these plans unnoticed. No one expects this kind of thing to happen – which is perhaps why protocol wasn’t in place to stop it. But that’s not to say pilot suicide – or indeed pilot murder – never happens.

Is pilot suicide really that rare? Deliberate air crashes are rare, but not unknown. In 1997, SilkAir pilot, Tsu Way Ming, crashed his flight 185 from Jakarta to Singapore, carrying 104 passengers. The US National Transportation Safety Board (NTSB) ruled that it was deliberate. He was not alone. In 1999, EgyptAir co-pilot, Gameel Al-Batouti, was involved in a fatal crash when his aircraft, on flight 990 from New York to Cairo, crashed into the Atlantic, killing 217 on board.

The NTSB ruled that too was deliberate. The unconfirmed, but general consensus, was that it was revenge for disciplinary action given by a colleague who was on board when it crashed. Al-Batouti was reportedly told it was his last transatlantic flight following the disciplinary for sexual misconduct. In 2013, an Air Mozambique captain, Herminio dos Santos Fernandes, locked the door while his co-pilot was on a toilet break and then deliberately crashed his E190 on flight TM470 from Mozambique to Namibia, killing 33 people. It had eerie similarities to Lubitz’s actions. The Germanwings co-pilot waited for the captain to leave the cockpit before locking the door and putting the aircraft into a controlled descent towards the French Alps where it crashed. It’s thought that Lubitz heard, but ignored, numerous warnings from the aircraft alarm system and pleas from his captain.

Onboard precautions Bizarrely, Lubitz was able to lock his colleagues out of the cockpit because of safety measures put in place following 9/11; these protect against terrorists taking control of the aircraft. At that time, old cockpit doors were replaced with near-impenetrable ones that are able to withstand gunfire.

afm • Issue 95 – March–April • www.afm.aero

TLF: Pilot mental health

The pilot or co-pilot can open the door using a security pin code, but not if the pilot inside has locked them out. While it’s unexpected that a pilot would deliberately lock himself away, it had already happened. For this reason, the US has for the last decade applied a rule that at least two people be in the cockpit at all times. If a captain or co-pilot temporarily leaves, a member of the cabin crew must enter. In addition, some European airlines, such as Ryanair and Aer Lingus, independently adopted the rule, but it was only after the Germanwings incident that European Aviation Safety Agency (EASA) recommended this course of action and, so far, it’s not a legal requirement in Europe.

Psychological profiles Another question we’re left asking is how no one noticed that Lubitz was suffering with a psychosis so severe that he was unfit to fly. This question has shaken our confidence in the safety of air travel and the solidity of its regulations. Germanwings and its parent company, Lufthansa, have been condemned for failing to spot Lubitz’s illness – but the issue, it seems, it not specific to individual carriers. According to a recent UK documentary, How safe are our planes?, the civil aviation authority requires doctors to make a general enquiry about mental health, such as mood, sleep

afm • Issue 95 – March–April • www.afm.aero

TLF: Pilot mental health

and alcohol use. But there are no mandatory psychiatric tests for any pilots once they have passed training. While a pilot’s abilities are regularly tested throughout their careers, their mental health is only considered during their initial training. Serious psychological issues could stop a pilot from receiving their licence, but once granted it’s at the employee’s discretion as to whether they are fit to fly. During employment, pilots are expected to self-report any psychological issues they may have. But is someone suffering depression always able to make logical and ethical decisions? Speaking to the documentary makers, former pilot, Jim Termini, said there is too much burden on air crew to decide whether they are fit to fly. “The airlines trust the pilots to self-report and to self-diagnose to a huge extent,” he claims. So if a pilot is likely to lose their career by making such an admission, it may mean they hide that information. But Lubitz had informed Lufthansa of his mental illness. The airline admitted that Lubitz admitted a “serious depressive episode” while in training at a Lufthansa flight school in 2009. His confessions were made in emails sent to the Arizona flight school when he resumed his training after a break, the reason for which was not disclosed. He was also treated for suicidal tendencies before he qualified – something pilots can fail their training for. Yet clearly Lubitz did keep things hidden from his employers, as demonstrated by the many doctors’ notes found at his home, each requesting a leave of work. Many of these were torn up and one was dated for the day of the crash. Under current legislation, Germanwings and its parent, Lufthansa, had no way of knowing exactly what was going through Lubitz’s mind before the fatal crash. Could it have done more? Certainly, yes. But very few companies will go above and beyond regulations or recommended guidelines – particularly when it comes to the delicate topic of mental health.

Pilot confidentiality

Others have suggested that doctors inform employers. The initial concern is patient confidentiality; if doctors readily disclose sensitive information to employers, patients may be less likely to seek the care they need. But doctors are already exempt from these rules when it’s in the best interests of the patient and the public – for example, if their patient has suicidal or murderous intentions.

Much of this comes down to whether personal mental health information should be made accessible to employers. Some have suggested that flight crew be contractually obliged to divulge this, but it’s clear that some may avoid doing that for fear of penalty or judgement.

According to the German newspaper, Der Spiegel, Lubitz was seeing an “astonishing” number of doctors before the incident – it claims at least five, including psychiatric specialists and a neurologist. “For a young man he consulted an astonishing number of doctors,” an investigator told the newspaper.

Lufthansa has been pointedly quiet on the matter and although that does little for public relations, the airline bears a legal responsibility to let the investigation take place before it publicly responds.

While many people argue for mental health to be discussed more openly, just as we do with physical ailments, the taboo remains.

afm • Issue 95 – March–April • www.afm.aero

TLF: Pilot mental health

Staff counsellors are another option, but that would only work if staff felt relaxed enough to discuss their issues with them. Much of that is down to the workplace culture. The onus would have to be on supporting and mentoring rather than quizzing and condemning, with airlines creating a safe space in which all staff members can discuss both personal and work issues. Another possibility is mandatory psychological profiles, but such testing could itself create further strain and psychological distress. Airlines should be looking to lower their pilots’ stress levels instead of just monitoring them. The worry is in knowing where to draw the line. According to the World Health Organization (WHO), 350 million

people worldwide suffer from depression. Should all of these people risk being professionally penalised? No doubt numerous possibilities will be discussed in the wake of the incident and as more information is explored during the investigation. Indeed, we are yet to have a formal and final conclusion as to what really happened. But whether there are new laws or expert commissions for medical diagnoses, lessons should be learned. Before his death, Lubitz boasted that he would do something to make everyone know his name. Sadly, no one foresaw what he meant. But it’s the others who died in the crash that should be remembered and commemorated with regulations that protect those who follow.

afm • Issue 95 – March–April • www.afm.aero

TLF: Aircraft investment

Aircraft investment: An alternative to negative yield bonds Executives at AviaAM Leasing, Tomas Sidlauskas and Tadas Goberis, examine the aircraft finance market.

n February 2015, Germany and Finland auctioned off their government bonds with negative interest rates, attracting a total of over $4.5bn. The success of the placement was predetermined by the investors’ readiness to pay for the exceptionally safe sovereign bonds as a means of insurance against risk. However, in order to scrape some profit, investors also explore additional options to supplement their portfolios, one of which is aircraft-backed four to six per cent yields bonds.

An unforecasted anomaly In February, Finland raised approximately $1.06bn in bonds with a -0.017 per cent yield, thus becoming the first eurozone country to sell its five-year sovereign bonds with negative yields.

Days later, Germany’s Bundesbank also auctioned five-year bonds with an average -0.08 per cent yield, contributing an additional $3.5bn to the overall $2.35tn negative yield bond market. At some point, the expansion of the market is driven by institutional investors such as pension funds, which are obliged to invest a part of their funds in low-risk sovereign bonds (e.g. Germany’s). Other investors choose negative yield government securities as an insurance against the potential risks common in the private sector. As the interest rates of governmental bonds considered most safe are close to zero (both below and above),

afm • Issue 95 – March–April • www.afm.aero

TLF: Aircraft investment

corporate bonds tend to follow the trend. “Using the opportunity in the European market, which struggles with exceptionally slow inflation, the private sector is also driving the yields down in order to receive cheaper financing. The bonds of certain high rated companies are traded at below one per cent yields, with some of them even turning negative – an anomaly few could imagine a decade ago,” shares Tadas Goberis, the CEO of AviaAM Leasing.

“In addition to traditional financing sources, like commercial banks and export agencies, the industry is more actively using alternative finance products as well. For instance, the issuance of corporate bonds, enhanced equipment trust certificates (EETCs), aircraft asset-backed securitisation (ABS) and other similar securities. This applies to all industry players – from manufacturers and leasing companies to operators.”

When investment means profit “Financial markets are certainly not what they used to be in the 2000s, and they keep changing. As a result, investment patterns and fund structuring have also become more complicated,” comments Tomas Sidlauskas, the VP at AviaAM Leasing.

In 2014, Virgin Australia raised $300m in corporate bonds, Fly Leasing $400m, Lufthansa $529m and Airbus $1.38bn. The Canadian manufacturer, Bombardier, is also planning to raise over $2bn in bonds with a 120- and 42-month maturity later this year.

afm • Issue 95 – March–April • www.afm.aero

TLF: Aircraft investment

Lessor bond comparisons Coupon (%)

Rating

Maturity

Bid Price

Yield (%)

ACG

7.13

BBB-/BBB-

10/15/2020

115

4.20

AWAS

7.00

Ba2/BBB

10/17/2016

102

3.56

AYR

6.25

Ba3/BB+

12/1/2019

107.25

4.60

FLY

6.75

B2/BB

12/5/2020

102

6.28

AER

7.13

Ba1/BBB-/BBB-

9/1/2018

112.75

3.44

AER

6.25

Ba2/BB+/BB+

5/15/2019

108.25

4.19

AER

4.63

Ba2/BB+/BB+

4/15/2021

100.75

4.49

Source: Bloomberg, Goldman Sachs Global Investment Research.

While manufacturers turn to capital markets for the expansion and development of new products, and for general corporate purposes, airlines and leasing companies are raising funds mostly to finance new aircraft deliveries.

fixed monthly lease payments, which cover both aircraft acquisition and financing costs. This significantly lowers the risks for both the lessor and the holders of its securities,” explains Goberis.

“An aircraft is a hard asset-backed investment, which can generate up to 10 to 15 per cent ROIs [return on investment] on equity depending on the aircraft type and end user. It is also a relatively low risk asset as carriers keep raising their profits and passenger traffic, thus spending more and more on fleet renewal and expansion,” says Sidlauskas.

“At the same time, the aircraft-backed bond market is still rather young and unfamiliar to many institutional investors. This explains why the issuers are ready to offer higher coupons, which on average range from four to seven per cent – i.e. the ones issued by ILFC, BBAM, etc. On the secondary market, the yields for aircraft leasing companies’ bonds are also relatively high – around four to five per cent.”

“Moreover, even if the demand in a single region is squeezed, the aircraft can be easily re-located to another region,” says Sidlauskas. “However, the aviation industry is a very specific and complicated market from both legal and financial points of view. Without a relevant background, or an asset manager for their investment, investors from outside the industry might just end up with no profit, or even suffer losses. For that reason, EETCs and other aircraft-backed securities, in contrast to direct investment, have become one of the main trends in the aircraft financing market over the last several years.” According to Boeing, in 2014, bond funding of new aircraft deliveries might have reached $30bn, or over a quarter of all deliveries that year – up from approximately 15 per cent in 2013. As the overall annual demand for new deliveries is expected to rise from $110bn to almost $140bn by 2018, the role of capital markets is anticipated to increase as well.

Attention seekers “From a leasing company’s perspective, an aircraft represents a stable and recurring monthly cash flow, immune to short-term swings in market lease rates throughout the industry’s cycle. The stability is secured by

In addition, as the market price for a five to 10 year old narrowbody aircraft reaches $20m to $30m (let alone new aircraft), investing into aircraft-backed assets allows one to deploy significantly larger funds with fixed returns over the bond maturity period, which is usually five or 10 years. “At the same time, in most cases bond equity investors are not the only participants in the deal. Depending on the finance structure, they are usually either senior or junior debt providers with the remaining funds coming from commercial banks, export agencies or the issuer itself,” says Sidlauskas. “But even if we consider a junior loan to finance approximately 30 per cent of a mid-life 737-800, the owners of five-year bonds are likely to enjoy $0.5m to 0.6m in interest per year. “In other words,” he concludes, “aircraft-backed securities are likely to receive more attention over the coming years, particularly from those equity investors that are aiming to earn from their investment rather than just freeze their funds.”

afm • Issue 95 – March–April • www.afm.aero

FLEET OPS: Leasing in MRO

ith over 40 per cent of the world’s fleet under lease, now more than ever lessors have a particular interest in the maintenance of aircraft, engines and components. They must ensure that their valuable assets remain in good condition, no matter who is operating them. Mark Hughes, EVP of corporate finance at Falko Regional Aircraft, which will be exhibiting at the upcoming ap&m Europe expo in May, explains: “Good maintenance is a prerequisite for maintaining an aircraft’s value, as poor maintenance can have a big negative impact.” He says that while it’s generally best for airlines to do their own maintenance planning, lessors should carry out regular aircraft inspections. Stuart Schwartzberg, VP for CIT Aerospace and a panel member at the ap&m summit, agrees that the primary way to maintain aircraft and engine value is to ensure quality maintenance is performed in a timely manner. He says: “While the maintenance of the aircraft during the term of a lease is the responsibility of the lessee, our leases often require a higher standard to protect our ability to transfer the aircraft to another jurisdiction at the end of the lease.”

The tricky triangle As airlines increasingly turn to external MROs, a third party is introduced to the lessor/lessee relationship, creating what has been described as the ‘tricky triangle’. Successful management of this relationship is clearly in the interests of all parties concerned, but it becomes of particular significance during the asset’s delivery and re-delivery. Hughes comments: “The largest impact for lessors is when aircraft transition between lessees as this is when the lessor has greatest financial exposure. Lessors that manage regular aircraft movements have closer MRO

relationships and more influence on contracting.” The nature of such relationships has, of course, been affected by the OEMs’ entrance into the MRO sector. As Schwartzberg says: “It is becoming more common for operators of new aircraft to look to the OEMs for their maintenance needs, especially with respect to large engines. For many years, airlines have signed Total Care Agreements with Rolls-Royce for the Trent engines, and they are now beginning to look at OnPoint from GE as well. As a lessor, we generally support this approach as we feel the engine manufacturers have an interest in quality maintenance being accomplished on their products.” Bob James, MD and CEO of AerFin, explains the challenge this presents to independent MROs. “The independent MRO sector is going to come under increasing pressure from the OEMs as they continue to see the aftermarket as a significant growth area through the lifecycle of their products. “Unless the MROs are closely affiliated with OEM shops and operations, they’re going to find it increasingly challenging to compete on newer generation products in the MRO market, both for engine maintenance and aircraft components.” This is of particular significance to lessors that specialise in mature products and end-of-life assets, such as AerFin. As James explains: “As the ultimate owners of leased equipment, you’re not just incurring the cost of capital from owning that asset, you’re also hedging on the residual value of that asset at the end of the lease. As MROs become more challenged by OEM dominance in the aftermarket, aircraft lessors are becoming more concerned as to what the actual residual values will be – because those aircraft are not as liquid in the marketplace when the only buyer for surplus material, or the only procurer of aftermarket services, is the manufacturer.”

afm • Issue 95 – March–April • www.afm.aero

FLEET OPS: Leasing in MRO

Parts of the problem However, this is not the only problem for leasing companies. Speaking last year at MRO Network’s Engine Leasing, Trading & Finance conference, Jon Sharp, CEO of Engine Lease Finance Corporation, argued that some strategies adopted by OEMs to protect their revenue streams have a damaging effect on the value of a lessor’s older assets.

“Without such certification they [the owner] are unable to sell the parts back into what is an OEM-controlled MRO market,” says Sharp. In this scenario, he imagines: “I go back to the broker without the certification, and instead of paying me $3m, they offer me $1m or don’t take the engine at all.”

At the heart of this issue is the use of PMA parts and DER repairs. Although approved and certified by the relevant bodies, they are not accepted by OEMs, which want control of those markets. This affects the perceived value and marketability of any aircraft asset with PMA parts or DER repairs.

Of course, not only are OEMs moving beyond their traditional role; lessors are doing it too, particularly in regard to parts supply. As owners of numerous aircraft and engines, all of which will ultimately be retired and harvested for parts, lessors sit on a large inventory. So, it’s not surprising that some have moved beyond their core business to also welcome parts supply into their remit.

It’s a particular issue for end-of-life assets. As Sharp explained, it is sometimes hard to trace the maintenance records of an aircraft that was leased 15 years ago, particularly if the operator was never contractually obliged to record the use of PMA parts or DER repairs. Some prior operators may have gone bankrupt, the relevant employees may have left or – in the best scenario – they may have those records, but will charge to access them.

The relationships between lessors, lessees and MRO providers will always hold a potential for problems. Each party will seek to protect its own interests, so contractual negotiations are always essential. While there may be no simple way to guarantee that the process is smooth, Schwartzberg offers the kind of advice that can easily be forgotten: “The best way to ensure a smooth transition is to maintain excellent relationships. The key is to be fair and reasonable.”

afm • Issue 95 – March–April • www.afm.aero

MRO: Engine leasing

Engine leasing: Watch this space

Hannah Davies reports on the changing landscape of the engine lease business as MROs, OEMs and lessors cross over into each other’s markets.

he demand for aircraft and engine lease solutions is rapidly increasing as airlines seek more costeffective solutions in order to remain competitive.

As the market sees a rise in demand for spare engines during shop visits, the engine lease market is presenting itself as a vibrant and profitable business, especially to those maintenance, repair and overhaul (MRO) providers that already possess an in-depth engine knowledge. It seems as though everyone wants a share of the engine lease market. MROs are stepping into the field to offer solutions from pooling to long-term leases, meanwhile original equipment manufacturers’ (OEMs) flight hour agreements continue to clash with the maintenance reserves offered by engine lessors. So, with many companies expanding their portfolios, we ask whether the market will remain competitive, or whether the future will see independent lessors being forced out of their own sector.

A powerful investment Purchasing an engine is a huge investment, for example CFM International’s CFM56-7B26 engine, which powers the 737-800, has a full life market value of $8.6m, whereas the market lease rate for the same engine is just $0.065m, according to IBA’s

JetData in October 2014. So, it’s no great surprise that leasing is a highly attractive alternative to operators. Unsurprisingly, there is now a trend for airlines freeing themselves from costly spare engine ownership and leasing instead. And, there is no denying that paying a fixed monthly or hourly rate compared with a significant lump sum has clear financial benefits. For example, AeroTurbine leases its engines as a CareFree Engine Lease, meaning maintenance reserves are not paid and a supplemental rent is only paid for the actual hours or cycles accumulated. So, the burden of the engine maintenance resides with AeroTurbine, explains Mike King, CEO of the company. However, there are some disadvantages to leasing an engine; an operator is expected to maintain the asset to a certain standard and return it in accordance with the re-delivery documents. And, such documents can outline restrictive rules such as preventing the use of parts manufacturer approval (PMA) in repairs. Indeed, lessors such as Willis Lease, Engine Lease Finance Corporation (ELFC) and AeroTurbine are being forced to up their game, especially as MROs such as MTU Maintenance and ST Aerospace move into the engine lease space, armed with expert engine knowledge and integrated solutions.

afm • Issue 95 – March–April • www.afm.aero

MRO: Engine leasing The company has also set up a dedicated engine lease pool that gives customers access to one or more spare engines at “competitive market rates”. In addition, MTU offers stand-by arrangements, short-term leasing so that it is able to provide customers with spare engines at short notice, and sale and leasebacks, which give operators the option to release some equity without the engine needing to change location. That’s not forgetting the teardown services and re-marketing of parts, which are offered by MTU on behalf of third party customers. According to MTU, the company has “in-depth engine knowledge and can easily assess the value of the asset – either as a whole or as the sum of its parts”, says Friis-Petersen. MTU strongly believes that it has found an “interesting niche” with its service portfolio, by combining its knowledge as an engine MRO with its attractive lease options, according to Friis-Petersen. And, there is definitely something attractive about a one-stop service. But customers can still greatly benefit from leasing with a traditional lessor. King argues that AeroTurbine brings a suite of services and capabilities to its customers, such as engine trading, engine exchange, engine and airframe parts supply chain, component leasing, records services and MRO services. AeroTurbine’s Miramar engine shop.

The one-stop service MTU Maintenance is one of the world’s leading engine MRO providers, but for 15 years the company has also leased engines to airlines for the duration of their shop visits, or in case of aircraft on ground (AOG) situations. And in 2013, the company, which has an engine MRO portfolio of more than 20 different types of engines and turbofans such as the GE90 and the V2500, expanded its offering to better respond to market demand for engine leasing by forming two new joint ventures (JVs). Together with Sumitomo Corporation (Sumitomo), the MRO formed MTU Maintenance Lease Services (80 per cent MTU stake), which offers short- and medium-term lease solutions to the market, and Sumisho Aero Engine Lease (10 per cent MTU stake), which concentrates on long-term lease activities. “The demand for an expansion of our lease services came from the needs of our customers. In the end, it was just a question of the right partner and we have found that with Sumitomo,” explains Martin Friis-Petersen, managing director at MTU Maintenance Lease Services. And, the company promises to offer comprehensive solutions to customers for the entire life cycle of an engine, covering everything from acquisition and MRO services during operations to phase-out.

While there is, of course, competition from the MRO engine lessor, “most MROs are engine repair specialists and they have a singular focus to this activity”, explains King. He adds that: “Engine leasing is our specialty and we have been perfecting this business line for many years.”

Reactive strategies As customers demand more comprehensive solutions and OEMs continue to step further into the aftermarket, MROs are forced to expand, innovate and deliver better and more comprehensive solutions. ST Aerospace’s subsidiary, ST Aerospace Engines, set up Total Engines Asset Management (TEAM) – a 50:50 JV with Marubeni Corporation – and through it offers lease solutions for the CFM56-3, CFM56-5B, CFM56-7B and V2500 engines. TEAM has more recently strengthened its market presence by establishing two new subsidiaries: TEAM France 01 and France 02, which will support the company’s engine lease operations. ST Aerospace Engines has since injected even more capital into the business, further proving that MROs really are serious about penetrating this market. Bob James, CEO at AerFin, explains that MROs are adopting reactive strategies because they need to do something to seek competitive advantages where they can, especially when they can see their own business models coming under pressure from the likes of OEMs.

afm • Issue 95 – March–April • www.afm.aero

MRO: Engine leasing

An engine ready for maintenance at MTU’s facility.

However, MTU argues that it was a natural step for the company to expand its existing lease business and the MRO’s move was not intended to counteract the OEMs’ entrance into the aftermarket. Instead, the partnership with Sumitomo was formed thanks to the two companies having similar ambitions with regard to increasing their services with more comprehensive lease solutions. AeroTurbine, a lessor with a portfolio of over 80 engines and around 150 leasing customers, predicts that the increasing competitive leasing market will bring both challenges and opportunities. But he agrees that “it is a natural evolution of the market for MROs, OEMs and others to enter the market”, and the company had anticipated such activity for some time. While AeroTurbine acknowledges the competition, King comments that engine leasing is a “boutique and limited market” and trust between lessor and lessee is the key to success. “In the end you must produce a quality and reliable product at a competitive price,” he says. According to King, AeroTurbine was “the first lessor to offer the CareFree Engine Lease alternative, which is designed for the operator to lease engines effortlessly with the comfort of guaranteed support and predictable costs”. When looking for an engine, an operator seeks “availability, technical soundness, competitive lease rates, easy transaction process and logistical support”, he explains. Yet, stepping into this field has proven positive for MTU, which believes that including one-stop-shop solutions combined as leasing, MRO services and asset management into its product portfolio will lead to increased customer numbers across all three segments.

Trends and challenges However, when asked how MROs moving into the engine lease market will shape the future of the business, James says: “It is increasingly challenging for the MROs and independent lessors alike to source the engine lease transactions they seek.” “The OEMs are increasing their market share, particularly on newer equipment and this is putting increasing pressure on the MROs and independent lessors,” he adds. In fact, AerFin – a company that offers end-of-life engine lease solutions – sees this trend continuing on to the next generation of mid-thrust engines offered on Airbus’ A320 neo aircraft. Consequently this has led to the market already seeing lessors “align themselves with OEMs, MROs and airframe traders in a strategy to grow by forward purchasing spare engines as early as possible”, says James. AeroTurbine for example welcomes new entrants to the market, as “every competitor is also a potential business partner”, says King. And, because the market is “extremely small” with regard to the number of engine lessors, the company sees opportunity in building business relationships with other lessors. However, “engine leasing is a very specialised and capital intensive business [and] over time, organisations that do not have the available capital, strong customer base, technical acumen, global logistics and sales force capability may struggle to compete”, comments King. While MROs are entering the engine lease market, major engine lessors have invested heavily in “capital, infrastructure, systems and experienced staff to become world leaders in their markets”, he explains.

afm • Issue 95 – March–April • www.afm.aero

MRO: Engine leasing So, it’s clear that AeroTurbine doesn’t see major lessors being forced out of the game as a result of MROs’ movement into this field. But, King comments: “Smaller lessors may try to enter the market and for the new entrants, longevity is the big question.”

AerFin doesn’t see the new MRO engine lessor as a huge threat, however, as the company’s focus is “predominantly end-of-life equipment that is not supported by OEMs or MROs adequately”.

Another good example of how the traditional lessor remains strong is the recent acquisition of ELFC by Mitsubishi UFJ Lease and Finance (MUL), a partnership that will no doubt see the two become a force to be reckoned with, considering that MUL is one of Japan’s largest leasing companies and ELFC is a lessor with 25 years of experience.

The engines that AerFin invests in, such as the CFM56-5C4, are not seen as “investment grade” products and are therefore more difficult to finance. So, the company, which has a long-term relationship with Cathay Pacific to acquire its fleet of 11 A340-300 aircraft, doesn’t fret over the increasingly competitive engine lease market.

Integrated solutions

While not every MRO will go down the route of leasing, the market will no doubt see a trend for MROs teaming up with lessors and consolidating with other companies in order to offer comprehensive solutions and to secure a more prosperous future.

Naturally, as OEMs, MROs and lessors move into each other’s markets, existing players are forced to re-think their services and indeed strengthen them, especially at a time when technological innovations and product development are at the forefront.

“Integrated solutions are the new trend,” agrees Friis-Petersen, explaining that customers prefer one-stop-shop solutions like those offered by MTU because of the key benefits they bring, such as reduced costs and optimised residual value.

And, as the next generation of engines become more efficient, we are under no misconception that MROs will suffer. The result of longer intervals between maintenance checks and the heavy investments needed to adapt to new maintenance processes will indeed put MROs under financial strain.

So, perhaps the MRO engine lessor will be the industry underdog after all, especially as customer demands continue to drive the market towards a future of consolidation and toe stepping.

Therefore, investing in assets such as engines, or consolidating and crossing over into other markets, will provide MROs with the security and capital they so greatly want.

afm • Issue 95 – March–April • www.afm.aero

MRO: Market forecast

Fleet and MRO forecast: Turbulence ahead CAVOK, with its inclusion of TeamSAI, offers its forecast of the global commercial fleet and its MRO needs. John Smiley, manager of Data Services, and Chad Porter, technical analyst at CAVOK, the aviation technical services and consulting division of Oliver Wyman, report.

ilbur Wright once said: “I confess that in 1901, I said to my brother Orville that man would not fly for 50 years… Ever since, I have distrusted myself and avoided all predictions.”

Wilbur proved himself wrong just a few years after his prediction. Not only was he incorrect, but 50 years after his statement large aircraft were topping subsonic speeds and commercial air travel was no longer a novelty. Today, the global commercial fleet consists of more than 24,000 aircraft (with almost 1,000 joining in 2014) carrying more than nine million passengers each day. Unlike Wilbur, we at CAVOK are confident in predicting this industry and its growing maintenance, repair and overhaul (MRO) market. And just seven years after the global financial crisis, we see that the airline industry is at its most profitable point in history, with opportunities for both airlines and MROs expanding in mature and developing markets.

year-on-year but continued to lead the industry with an 83.6 per cent load factor. But industry growth isn’t just reflected in traffic figures – the sizeable number of aircraft orders perhaps most clearly demonstrates the confidence in the market. Approximately 24,000 commercial aircraft supported the demand for passenger and freight traffic in 2014, an increase of nearly 1,000 from the previous year. The in-service fleet is expected to grow at a healthy 3.7 per cent average annual rate to more than 34,400 by 2025 (net of aircraft retirements). Aircraft manufacturers continue to have a very positive outlook over the forecasted period, even with low fuel prices. Given the volatility of the oil market and the continued drive to reduce costs, Airbus and Boeing have both dismissed any near-term negative effect on demand. Indeed, orders for new Airbus and Boeing aircraft were 2,888 (net of cancellations) in 2014, increasing the pair’s combined backlog to more than 12,000.

Future fleet growth Market growth Today, the industry is in the second consecutive year of growth, having come out of the dip in one of its cycles. Last year, the industry carried a record number of passengers, growing 5.9 per cent (up 0.7 points from 2013) year-onyear to over 3.3 billion passengers. This, combined with airlines’ continued capacity discipline, has increased the passenger load factor by 0.2 points to 79.7 per cent. Added to that, a six-year low in fuel prices led the industry to an unprecedented $19.7bn profit in 2014, according to IATA. Regionally, Middle Eastern carriers again saw the largest passenger volume increase of 12.6 per cent while Africa stagnated to just a 0.3 per cent increase. The mature North American market had a modest increase to 2.7 per cent

With the continued effort to increase already high production rates, OEMs are predicted to deliver 1,850 aircraft each year on average for the next decade. So, over the next five years we should expect to see almost 8,865 new aircraft deliveries enter the market. Of those, 64 per cent will be narrowbodies and 22 per cent will be widebodies, while regional jets and turboprops will account for eight and six per cent, respectively. But don’t be fooled by the huge backlog – it isn’t all for growth. The systematic elimination and replacement of older, less-efficient aircraft is expected to improve airline costs by reducing fuel and maintenance expenses over the life of the aircraft. Replacements for retiring aircraft will constitute 43 per cent of new deliveries, or roughly 8,010 of the 18,491 new aircraft to be delivered over the next decade – meaning only 57 per cent of deliveries are for growth.

afm • Issue 95 – March–April • www.afm.aero

MRO: Market forecast

2015–2025 Global MRO market forecast by segment ($USD)

$120

Airframe

Engine

Component

Line $100.4

$100

Billions

$83.2 $80

$67.1

$60 $40 $20 $0 2015

2020

2025 Source: betterinsighttm by CAVOK.

Billions

and Embraer are projected to lose market share; this is North American airlines have created the highest demand despite the introduction Bombardier’s CSeries for new aircraft, nearly 4,100 – although, interestingly, 77 2015–2025 Global MRO markettrue forecast by aircraftof class ($USD) and it’s in part due to the increasing trend to up-gauge per cent of those are replacements for ageing aircraft. regional jets to narrowbodies. Narrowbody Regional Jet Turboprop But that’s not to say growth isn’t happening. China,Widebody for $120 Within the regional jet sector, Embraer aircraft are example, is forecasted to receive 2,548 deliveries, most of $100.4 anticipated to retain the top rank for global MRO, even as which are for expansion. Much of these aircraft will be $100 the value declines by 0.3 per cent annually until 2025. supplied by Boeing and Airbus; Boeing is expected to $83.2 Bombardier will see its MRO decline by more than 40 per maintain the largest share of the global fleet but its lead $80 cent as the market potential of its current aircraft declines. on Airbus will decrease over the$67.1 forecasted period. Total MRO value for regional jets is forecasted to decline $60 forecast by 8.5 per cent by 2025. MRO market So, how will the flurry of new and more reliable aircraft As for turboprop maintenance, ATR is expected to almost affect demand$40 for aircraft maintenance? single-handedly drive the growth of this aircraft class. The $20 overall MRO value for turboprops is anticipated to climb MRO for all commercial aircraft is predicted to be worth 17.6 per cent by 2025 with ATR’s share rising 6.9 per cent. just over $67bn in 2015 and the market is expected to $0 annual rate of 4.1 per cent for the full grow at an average 2020 Bombardier’s turboprop MRO 2025 value will grow just 0.7 per period, topping the $100bn mark2015 in 2025. cent annually throughout the forecasted period; meanwhile Embraer’s will shrink by 6.3 per cent annually over the next As the fleet distribution shifts towards Asia and other 10 years. developing regions, spend in MRO will follow. While North America will remain the largest region for total MRO value over the forecasted period, its increase from $20bn to $21.3bn represents the lowest regional growth rate at only 0.6 per cent. China, in contrast, is expected to increase its market share from 7.6 per cent to 11.6 per cent while more than doubling its current MRO spend to $11.7bn by 2025. The two largest OEMs will continue to drive the majority of MRO. Today, Boeing and Airbus have a combined 88 per cent of the world’s MRO and that share is expected to increase to 90 per cent by 2025. Bombardier afm • Issue 95 – March–April • www.afm.aero

MRO: Market forecast

2015–2025 Global MRO market forecast by aircraft class ($USD) $120

Narrowbody

Widebody

Regional Jet

Turboprop $100.4

$100

Billions

$80

$83.2 $67.1

$60 $40 $20 $0 2015

2020

2025 Source: betterinsighttm by CAVOK.

Implications for MRO There will be turbulence in the MRO sector over the next 10 years as airlines continue to eliminate older aircraft and shift towards late-vintage aircraft. New aircraft types designed around the latest technologies and materials will re-shape the MRO market; technological advances will change the nature of the maintenance work while reducing and re-distributing MRO spend. The largest fleets in terms of MRO value will change dramatically over the next decade. Aircraft of the 2010 and late 2000s vintages will represent more than a third of MRO demand in just 10 years – a growth of $30bn. The business implications cannot be underestimated. New entrants such as the 787, A350, CSeries and MRJ will drive MROs to certify, re-train and re-tool in order to support its customers. Derivative aircraft such as the A320 Neo, A330 Neo, 737 MAX and 777X will each introduce new challenges as well. New generation aircraft also represent a major shift in technology. The incorporation of more composite materials will change the nature of heavy maintenance visits, leading to new inspection and repair techniques. While OEMs have done a good job of designing temporary composite repairs, there are significant challenges ahead regarding approved permanent repairs, personnel training and investment in expensive, but infrequently used, equipment. Likewise, the more sophisticated and widespread use of advanced avionics and electronics carries with it a number of business considerations. These include the cost of avionics equipment; software revision and control at the MRO level; the ability for airlines and MROs to handle and

properly utilise big data; and the availability of technical data from OEMs. For component maintenance in particular, OEMs’ efforts to assert themselves in the aftermarket regarding their latest generation of aircraft will effectively squeeze many smaller independent MROs out of the sector, meaning the survivors need to develop innovative, cost-effective partnerships to stay competitive. In the spare parts market, advances in, and the acceptance of, additive manufacturing capabilities will allow MROs (and even airlines) to develop spare parts inventories on demand, enabling fast repairs, while reducing both aircraft downtime and operating costs. New generation aircraft feature advanced health-monitoring systems, creating large amounts of data that can be turned into actionable information if properly analysed. The monitoring systems will reduce the waste of unnecessary parts and related shop visits in which no faults are found. Their new technologies including wearable devices, such as Google Glasses, and inspection drones will be highly effective tools to increase accuracy and safety, and reduce the time it takes to accomplish maintenance inspections. Both technologies will be game changers that will challenge the status quo of the market. It’s clear that the aftermarket is changing and independent MROs will need to be nimble and innovative in order to remain competitive. History has shown that the global aviation industry can change on a dime, and well-founded methods can quickly become obsolete. The key to success will lie in the ability to turn off the corporate autopilot and find ways to evolve with the market.

afm • Issue 95 – March–April • www.afm.aero

INDUSTRY DATA: Deals

Industry data Aircraft deals 47 53

Firm orders

List prices and lease rates

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

Aircraft deals from 28 January to 7 March, 2015 MSN

Manufacturer

Model

Event

Owner

Operator

Date

27984 1597 19000349 41802 26910 36426 24691 39831 41203 34018 5426 15063 36111 1450136 24828 29256 28995 2265 6446 24312 35317 3532 702 26334 32417 26161 4812 5526 6459 1450368 6447 39834 41803 6468 581 580 28703 1229 37361 30785

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

737-800 A330-300 E- 190 737-800 747-400 787-8 737-400 737-800 737-800 747-400F A320-200 CRJ-900 787-8 ERJ-145 737-500 747-400F 737-500 A319-100 A320-200 747-400BDSF 787-9 A320-200 ATR72-500 737-400F 737-700 757-200 A320-200 A320-200 A321-200 ERJ-135 A320-200 737-800 737-800 A321-200 ATR42-500 ATR72-500 737-400 ATR72-600 737-800 737-800

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 Operating lease Operating lease

Defag AerCap Airfleet Credit AerCap AerSale Inc TUI Travel Plc Bank of Utah Lion Air Aviation Capital Group Wilmington Trust Pembroke Group Ltd Bombardier Capital AerCap bmi Regional Advantage Aviation Atlas Air Eagle Support Corp Sunrise Asset Mgmt China Aircraft Leasing Avion Aircraft Trading AerCap HSH Nordbank Nordic Aviation Capital Petrus Aircraft AWAS Aerolease International Pembroke Group Ltd CIT Aerospace GECAS ECC Leasing Co Ltd SMBC Aviation Capital Lion Air AerCap GECAS Nordic Aviation Capital Aircraft Leasing & Mgmt AerCap Air Lease Corporation BBAM BBAM

Tailwind Airlines Singapore Airlines Helvetic Airways Donghai Airlines Wamos Air Thomson Airways Xtra Airways Batik Air Aeroflot-Russian Airlines Kalitta Air Indigo Air Nostrum Ethiopian Airlines Sparrow Aviation Bravo Airways Etihad Airways Albatros Airlines Allegiant Air Air India Aerotrans Cargo LAN Airlines Air Berlin Villa Air DHL Network Operations Southwest Airlines National Airlines IndiGo Frontier Airlines Condor Airlink Vanilla Air Batik Air Donghai Airlines Thomas Cook Scandinavia EasyFly Flyways Linhas Aereas Med-View Airlines APEX Airlines Jeju Air AirExplore

28/01/2015 28/01/2015 28/01/2015 29/01/2015 29/01/2015 29/01/2015 30/01/2015 30/01/2015 30/01/2015 30/01/2015 30/01/2015 30/01/2015 31/01/2015 01/02/2015 02/02/2015 03/02/2015 04/02/2015 04/02/2015 04/02/2015 05/02/2015 05/02/2015 05/02/2015 05/02/2015 06/02/2015 06/02/2015 06/02/2015 06/02/2015 06/02/2015 06/02/2015 06/02/2015 07/02/2015 09/02/2015 09/02/2015 09/02/2015 09/02/2015 09/02/2015 10/02/2015 11/02/2015 12/02/2015 13/02/2015

Source: IBA’s JetData.

afm • Issue 95 – March–April • www.afm.aero

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

Aircraft deals from 28 January to 7 March, 2015 MSN

Manufacturer

Model

Event

Owner

Operator

Date

6449 6477 6480 24438 25184 33789 35233 1892 6475 23739 25607 39954 6472 1450249 6473 1606 1450060 1450089 41204 19000285 28868 723 39833 41327 43401 1889 3025 6210 1226 6458 6232 6476 6482 1603 41205 828 6488 782 41804 1439 1450 865 28869 28565 33019 38101 30338 23900 330 30271 5426 4017 23980 32417 36884

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

A320-200 A321-200 A320-200 737-400F 737-400F 737-700 747-400ERF A320-200 A321-200 737-300 737-300 737-800 A321-200 ERJ-135 A321-200 A330-200 ERJ-145 ERJ-145 737-800 Embraer 190 737-300 ATR72-500 737-800 737-800 737-800 A320-200 A320-200 A321-200 ATR72-600 A320-200 A321-200 A320-200 A321-200 A319-100 737-800 A320-200 A321-200 ATR72-500 737-800 A320-200 A320-200 ATR72-500 737-300 737-500 737-800 737-800 757-200 767-200ER A330-200 737-700 A320-200 DHC8-400Q 737-400 737-700 737-800

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 Operating lease Operating lease Operating lease Operating lease Operating lease Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned

BOC Aviation GECAS BOC Aviation Aircraft Consultants Inc Air Contractors SMBC Aviation Capital Aircastle AerCap Air Lease Corporation BCI Aircraft Leasing Menen Aircraft Leasing Garuda Indonesia Wells Fargo Bank NW ECC Leasing Co Ltd Wells Fargo Bank NW Wells Fargo Bank NW ECC Leasing Co Ltd ECC Leasing Co Ltd Aviation Capital Group Airfleet Credit Corp Cara Aircraft Leasing Lighthouse Beta Ltd Lion Air Air Lease Corporation GECAS GECAS AerCap Rosewind Bermuda ltd Avation PLC AWAS Rosewind Bermuda ltd AWAS AerCap SMBC Aviation Capital Aviation Capital Group GECAS BOC Aviation Nordic Aviation Capital A/S AerCap AerCap AerCap VOE Leasing One LLC Aviation Capital Group GECAS The CIT Group Inc Aviation Capital Group Wells Fargo Bank NW GS/MC Leasing LLC AerCap Aviation Capital Group Pembroke Group Ltd Jetscape Nordic Aviation Capital AWAS Avolon Aerospace

Tianjin Airlines Juneyao Airlines Beijing Capital Airlines Swiftair TNT Airways Southwest Airlines Air Bridge Cargo British Airways Sichuan Airlines Unknown (China) Nauru Airlines Garuda Indonesia American Airlines Airlink American Airlines Hawaiian Airlines Air Mandalay Air Mandalay Aeroflot-Russian Airlines Helvetic Airways Boliviana de Aviacion Jettime Batik Air China Southern Airlines China Southern Airlines Air Berlin Freebird Airlines Wow Air Air India Regional Kuwait Airways Wow Air Kuwait Airways American Airlines Ural Airlines Aeroflot-Russian Airlines Limitless Airways EVA Air Kan Air T'Way Air Iberia Express Iberia Express Passaredo Linhas Aereas Alas U GECAS The CIT Group Inc Aviation Capital Group Wells Fargo Bank NW GS/MC Leasing LLC AerCap Aviation Capital Group Pembroke Group Ltd Jetscape Nordic Aviation Capital AWAS Avolon Aerospace

13/02/2015 13/02/2015 16/02/2015 17/02/2015 17/02/2015 17/02/2015 17/02/2015 17/02/2015 17/02/2015 18/02/2015 18/02/2015 18/02/2015 19/02/2015 22/02/2015 24/02/2015 24/02/2015 24/02/2015 24/02/2015 25/02/2015 25/02/2015 26/02/2015 26/02/2015 27/02/2015 27/02/2015 27/02/2015 27/02/2015 27/02/2015 27/02/2015 27/02/2015 28/02/2015 01/03/2015 02/03/2015 02/03/2015 04/03/2015 05/03/2015 05/03/2015 05/03/2015 05/03/2015 06/03/2015 06/03/2015 06/03/2015 06/03/2015 07/03/2015 28/01/2015 28/01/2015 29/01/2015 29/01/2015 29/01/2015 29/01/2015 30/01/2015 30/01/2015 31/01/2015 01/02/2015 01/02/2015 01/02/2015

Source: IBA’s JetData.

afm • Issue 95 – March–April • www.afm.aero

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

Aircraft deals from 28 January to 7 March, 2015 MSN

Manufacturer

Model

Event

Owner

5526 580 53187 26562 5919 6016 948 1162 25411 3532 30277 48502 48503 48504 28671 14 28043 37363 30037 26075 25184 39011 39012 1074 2420 1450021 34954 3515 35280 35283 26471 7266 1896 22 38 31713 28530 37159 37884 7165 982 30636 737 749 29047 27974 395 828 43 782 404 967 22190 558 5194

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

A320-200 ATR72-500 MD-83 747-400BDSF A321-200 A321-200 A330-200 ATR72-600 767-300ER A320-200 737-700 MD-11F MD-11F MD-11F 737-300 A340-200 767-300ER 737-900ER 737-700 737-500 737-400F 737-800 737-800 A319-100 A319-100 ERJ-145 737-800 A320-200 737-800 737-800 767-200ER CRJ-200 A320-200 A340-200 A340-200 737-800 777-200ER 737-800 737-800 CRJ-200 ATR72-500 737-800 A320-200 A320-200 737-700 757-200 A320-200 A320-200 A340-200 ATR72-500 DHC8-300B A330-200 757-200SF A320-200 A320-200

Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned Returned off sub-lease Returned off sub-lease

CIT Aerospace The CIT Group Inc Aircraft Leasing & Mgmt Aircraft Leasing & Mgmt AWAS AWAS Deucalion Capital Deucalion Capital VEB-Leasing VEB-Leasing VEB-Leasing VEB-Leasing Aviation Capital Group Aviation Capital Group Avation Airframe Holding Avation Airframe Holding GECAS GECAS HSH Nordbank HSH Nordbank Aviation Capital Group Aviation Capital Group Boeing Capital Boeing Capital Boeing Capital Boeing Capital Boeing Capital Boeing Capital GECAS GECAS Aldebaran Leasing Aldebaran Leasing AWAS AWAS CIT Aerospace The CIT Group Inc AerCap AerCap GECAS GECAS Air Contractors Air Contractors AerCap AerCap AerCap AerCap Volito Aviation Volito Aviation GECAS GECAS ECC Leasing Co Ltd ECC Leasing Co Ltd NBB Leasing Co Ltd NBB Leasing Co Ltd Aircraft Purchase Ltd Aircraft Purchase Ltd AerCap AerCap AerCap AerCap Boeing Capital Boeing Capital PL Panorama Leasing PL Panorama Leasing RCM Aviation Ltd RCM Aviation Ltd Aldebaran Leasing Aldebaran Leasing Republic financial Republic financial NBB Leasing Co Ltd NBB Leasing Co Ltd Pembroke Group Ltd Pembroke Group Ltd AerCap AerCap GECAS GECAS PL Panorama Leasing PL Panorama Leasing Nordic Aviation Capital Nordic Aviation Capital AerCap AerCap GECAS GECAS GECAS GECAS Volito Aviation Volito Aviation GECAS GECAS Polkadots Properties 185 Polkadots Properties 185 GECAS GECAS Republic Financial Republic Financial Nordic Aviation Capital Nordic Aviation Capital Avionco Canada Ltd Avionco Canada Ltd Aviation Capital Group Aviation Capital Group Barclays Mercantile Barclays Mercantile Volito Aviation Avion Express MCAP Tigerair

Operator

Date 01/02/2015 01/02/2015 02/02/2015 03/02/2015 04/02/2015 04/02/2015 04/02/2015 04/02/2015 05/02/2015 05/02/2015 06/02/2015 06/02/2015 06/02/2015 06/02/2015 09/02/2015 10/02/2015 11/02/2015 13/02/2015 14/02/2015 15/02/2015 17/02/2015 17/02/2015 17/02/2015 17/02/2015 17/02/2015 17/02/2015 18/02/2015 18/02/2015 19/02/2015 19/02/2015 20/02/2015 20/02/2015 24/02/2015 24/02/2015 24/02/2015 25/02/2015 25/02/2015 26/02/2015 26/02/2015 26/02/2015 27/02/2015 28/02/2015 28/02/2015 28/02/2015 01/03/2015 01/03/2015 01/03/2015 01/03/2015 01/03/2015 03/03/2015 03/03/2015 04/03/2015 06/03/2015 01/02/2015 01/02/2015

Source: IBA’s JetData.

afm • Issue 95 – March–April • www.afm.aero

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

Aircraft deals from 28 January to 7 March, 2015 MSN

Manufacturer

Model

Event

Owner

Operator

Date

26606 810 726 357 28733 273 117 357 25794 517

Boeing Airbus Airbus Airbus Boeing Airbus Airbus Airbus Boeing Airbus

737-400F A321-200 A320-200 A320-200 737-300 A340-300 A340-300 A330-300 737-500 A321-100

Returned off sub-lease Returned off sub-lease Returned off sub-lease Returned off wet-lease Returned off wet-lease Returned off wet-lease Returned off wet-lease Returned off wet-lease Returned off wet-lease Returned off wet-lease

Petrus Aircraft MSN AerCap AerCap S Group Aviation Vista Georgia ORIX Aviation Falak Investments Thomas Cook Scandinavia Alpha Aircraft mgmt AerCap

DHL Network Operations Onur Air YanAir S Group Aviation Vista Georgia AirAsia X Hi Fly Thomas Cook Scandinavia Vista Georgia Air Mediterranee

04/02/2015 17/02/2015 01/03/2015 30/01/2015 01/02/2015 02/02/2015 12/02/2015 14/02/2015 26/02/2015 05/03/2015

6411 Airbus 39834 Boeing 6358 Airbus 6470 Airbus 39954 Boeing 95082 Sukhoi 2270 Airbus 6463 Airbus 17000455 Embraer 42186 Boeing 1231 ATR 17000452 Embraer 17000458 Embraer 43661 Boeing 6479 Airbus 17000454 Embraer 17000457 Embraer 1604 Airbus 42122 Boeing 6487 Airbus 6489 Airbus 32596 Boeing 30625 Boeing 19000349 Embraer

Sold & leased back Sold & leased back Sold & leased back Sold & leased back Sold & leased back Sold & leased back Sold & leased back Sold & leased back Sold & leased back Sold & leased back Sold & leased back Sold & leased back Sold & leased back Sold & leased back Sold & leased back Sold & leased back Sold & leased back Sold & leased back Sold & leased back Sold & leased back Sold & leased back Sold off lease Sold off lease Sold off lease

Wells Fargo Bank NW Avolon Aerospace ICBC Wells Fargo Bank NW SMBC Aviation Capital Sberbank-Leasing Air Lease Corporation Wilmington Trust Company Wells Fargo Bank NW Wilmington Trust Company AviancaTaca Holding SA US Bank US Bank Avolon Aerospace Wilmington Trust Company Wilmington Trust Company Wells Fargo Bank NW Hong Kong Aviation Capital Air Lease Corporation Wilmington Trust Company Goshawk Aviation Southwest Airlines Eastar Jet Airfleet Credit Corp

Avianca BatikAir Spring Airlines Volaris Garuda Indonesia Aeroflot-Russian Airlines Iberia Airlines Spirit Airlines Republic Airlines United Airlines Avianca Skywest Airlines Skywest Airlines Aeromexico US Airways United Airlines Republic Airlines SriLankan Airlines Emirates Spirit Airlines Wizz Air Southwest Airlines Eastar Jet Airfleet Credit Corp

28/01/2015 09/02/2015 11/02/2015 11/02/2015 18/02/2015 19/02/2015 20/02/2015 23/02/2015 24/02/2015 25/02/2015 25/02/2015 25/02/2015 25/02/2015 26/02/2015 26/02/2015 26/02/2015 26/02/2015 02/03/2015 03/03/2015 05/03/2015 06/03/2015 28/01/2015 28/01/2015 28/01/2015

26487 26489 24781 24862 492 608 534 24444 406 26606 2265 1975 27273 1498

Delta Air Lines Delta Air Lines Aero Capital Solutions Aero Capital Solutions Airbus Asset Mgmt Airbus Asset Mgmt Nordic Aviation Capital AFO Aircraft (NZ) Ltd Danish Air Transport Vensecar Internacional Sunrise Asset Mgmt Air Canada VAS Aero Services LLC Air Tanker Ltd

29/01/2015 29/01/2015 30/01/2015 30/01/2015 01/02/2015 01/02/2015 01/02/2015 02/02/2015 03/02/2015 04/02/2015 04/02/2015 04/02/2015 05/02/2015 05/02/2015

Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease

Jet Midwest Global LLC Al-Naser Airlines Federal Express Federal Express Air Transport Acquisition

06/02/2015 08/02/2015 10/02/2015 10/02/2015 10/02/2015

53187 391 41068 41069 49952

A320-200 737-800 A320-200 A320-200 737-800 SSJ 100-95 A321-200 A320-200 Embraer 175 737-900ER ATR72-600 Embraer 175 Embraer 175 737-800 A321-200 Embraer 175 Embraer 175 A330-300 777-300ER A320-200 A320-200 737-700 737-800 Embraer 190 Boeing 757-200 Boeing 757-200 Boeing 737-400 Boeing 737-400 Airbus A340-500 Airbus A340-500 ATR ATR42-500 Boeing 737-400 Airbus A320-200 Boeing 737-400F Airbus A319-100 Airbus A320-200 Boeing 737-300 Airbus A330200MRTT McDonnell Douglas MD-83 Airbus A340-600 Boeing 767-300F Boeing 767-300F McDonnell Douglas MD-83

Source: IBA’s JetData.

afm • Issue 95 – March–April • www.afm.aero

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

Aircraft deals from 28 January to 7 March, 2015 MSN

Manufacturer

Model

Event

Owner

Operator

Date

49414 27273 27273 1450939 53187 257 15175 32749 39011 39012 E2089 34954 6210 6232 E2196 35280 35283 23819 770 1299 19000367

McDonnell Douglas Boeing Boeing Embraer McDonnell Douglas Airbus Bombardier Boeing Boeing Boeing BAE Systems Boeing Airbus Airbus BAE Systems Boeing Boeing Boeing Airbus Airbus Embraer

MD-87 737-300 737-300 Legacy 600 MD-83 A340-300 CRJ-900 737-700 737-800 737-800 146-200 737-800 A321-200 A321-200 146-200 737-800 737-800 747-400 A320-200 A321-200

Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease

Jet Engine Technology Capital Trade & Energy Global Air Fleet LLC Orfro LLC Advantage Aviation Sibiti 1 Inc Skyservice Business Southwest Airlines Norwegian Air Intl Norwegian Air Intl Tronos PLC Norwegian Air Intl Rosewind Bermuda ltd Rosewind Bermuda ltd Wells Fargo Bank NW Rosewind Bermuda ltd Rosewind Bermuda ltd Delta Air Lines AeroTurbine Inc AS Air Lease VII (Ireland)

10/02/2015 11/02/2015 11/02/2015 11/02/2015 11/02/2015 12/02/2015 12/02/2015 13/02/2015 17/02/2015 17/02/2015 18/02/2015 18/02/2015 18/02/2015 18/02/2015 19/02/2015 19/02/2015 19/02/2015 20/02/2015 20/02/2015 20/02/2015

23818 293 23922 27072 31713 19000285 37159 37884 24342 24343 622 95052 32750 1846 1771 685 24445 5781 395 E2196 24752 24753 570 26544 39829 26334 535 26910 24255 117 296 1423 3589 2462 642

Boeing Airbus Boeing Boeing Boeing Embraer Boeing Boeing Boeing Boeing Airbus Sukhoi Boeing Airbus Airbus Airbus Boeing Airbus Airbus BAE Systems Boeing Boeing ATR Boeing Boeing Boeing Airbus Boeing Boeing Airbus Airbus Airbus Airbus Airbus Airbus

Borajet Airlines Delta Air Lines AeroTurbine Inc Midamerican Aerospace Boeing Capital Norwegian Air Intl Airfleet Credit Corp Norwegian Air Intl Norwegian Air Intl Jet Midwest Global LLC Jet Midwest Global LLC Socrates 622 Ltd Interjet Southwest Airlines AerFin GECAS Airbus Asset mgmt Swiftair American Airlines Dart Airlines Neptune Aviation Services Unknown (USA) Unknown (USA) Nordic Aviation Capital Cargo Aircraft Mgmt Transportation Partners Petrus Aircraft MSN AerCap AerSale Inc GECAS Falak Investments AerCap AirAsia X Doric Asset Finance Wind Rose Airlines AerCap

Borajet Airlines Delta Air Lines AeroTurbine Inc Midamerican Aerospace Boeing Capital Norwegian Air Intl Airfleet Credit Corp Norwegian Air Intl Norwegian Air Intl Jet Midwest Global LLC Jet Midwest Global LLC Socrates 622 Ltd Interjet Southwest Airlines AerFin GECAS Airbus Asset mgmt Swiftair American Airlines Dart Airlines Neptune Aviation Services Unknown (USA) Unknown (USA) Nordic Aviation Capital Aloha Air Cargo 9 Air Southern Air Jubba Airways Saudi Arabian Airlines Alitalia ConViasa AirBlue ConViasa HolidayJet Air Blue Daallo Airlines

22/02/2015 23/02/2015 23/02/2015 24/02/2015 24/02/2015 25/02/2015 25/02/2015 26/02/2015 26/02/2015 26/02/2015 26/02/2015 26/02/2015 26/02/2015 27/02/2015 27/02/2015 28/02/2015 01/03/2015 02/03/2015 04/03/2015 04/03/2015 05/03/2015 06/03/2015 06/03/2015 19/02/2015 23/02/2015 02/02/2015 06/02/2015 17/02/2015 25/02/2015 02/02/2015 03/02/2015 04/02/2015 10/02/2015 25/02/2015 25/02/2015 05/03/2015

Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Sold off lease Embraer 190 Sold off lease 737-800 Sold off lease 737-800 Sold off lease 767-300ER Sold off lease 767-300ER Sold off lease A340-600 Sold off lease SSJ 100-95 Sold off lease 737-700 Sold off lease A319-100 Sold off lease A320-200 Sold off lease A340-500 Sold off lease 737-400F Sold off lease A319-100 Sold off Lease A320-200 Sold off lease 146-200 Sold off lease 767-300ER Sold off lease 767-300ER Sold off lease ATR72-500 Sold off lease 767-300ERBDSF Sold with lease 737-800 Sub-leased 737-400F Sub-leased A321-100 Sub-leased 747-400 Sub-leased 737-300QC Wet-leased A340-300 Wet-leased A330-200 Wet-leased A330-300 Wet-leased A319-100 Wet-leased A321-200 Wet-leased A321-100 Wet-leased Embraer 190

747-400 A320-200 737-300 747-400 737-800

afm • Issue 95 – March–April • www.afm.aero

INDUSTRY DATA: Firm orders Firm orders – From 28 January to 26 March, 2015

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

Source: IBA’s JetData.

Firm orders – From 28 January to 26 March, 2015 Manufacturer Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus ATR ATR Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Boeing Bombardier Bombardier Bombardier Bombardier Bombardier Comac Embraer Mitsubishi Aircraft Sukhoi

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

Variant

Customer

Order date

No of Aircraft

Engines

A321ceo A321neo A330-200 A320neo family A330-900neo A320neo A320neo A320ceo A330-900neo A321LR A330-200F A330 ATR 72-600 ATR 72-600 737-800 787-8 737-800 777F 737-800 737-900ER 737-800 787-8 737 MAX 747-8F 787-9 737 DHC8-Q400 CRJ900 DHC8-Q400 CRJ900 DHC8-Q400 C919 E175 MRJ SSJ-100

ANA Holdings ANA Holdings Undisclosed Avianca Holdings S.A. ARKIA Israeli Airlines AirAsia Undisclosed Undisclosed Air Lease Corporation Air Lease Corporation Turkish Airlines RwandAir Avation Air Madagascar All Nippon Airways Unidentified Customer(s) Ryanair Korean Air Transavia Alaska Airlines Unidentified Customer(s) Royal Air Maroc Unidentified Customer(s) Silk Way West Airlines Air Tahiti Nui GECAS Chorus Aviation Inc. American Airlines Luxair Mesa Airlines Palma Holding Limited Huaxia Financial Leasing Republic Airways Holdings Inc Japan Airlines Interjet

30/01/2015 30/01/2015 30/01/2015 05/02/2015 18/02/2015 24/02/2015 27/02/2015 27/02/2015 09/03/2015 09/03/2015 09/03/2015 24/03/2015 23/02/2015 18/03/2015 30/01/2015 06/02/2015 11/02/2015 12/02/2015 12/02/2015 12/02/2015 16/02/2015 17/02/2015 23/02/2015 26/02/2015 27/02/2015 05/03/2015 02/02/2015 09/02/2015 12/02/2015 12/03/2015 17/03/2015 29/01/2015 11/03/2015 28/01/2015 13/02/2015

4 3 5 100 4 9 18 5 25 30 4 2 5 3 5 2 3 5 17 6 3 1 50 3 2 2 13 24 3 7 1 20 5 32 10

PW1100G-JM Trent 7000 CFM LEAP-1A Trent 772B PW127M PW127M CFM56-7B CFM56-7B GE90-115B CFM56-7B CFM56-7B CFM56-7B CFM LEAP-1B CFM PW150A CF34-8C5 PW150A CF34-8C5 PW150A CFM LEAP-1C CF34-8E5 PW1200G SaM 146

Source: IBA’s JetData.

afm • Issue 95 – March–April • 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 2015 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 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 Embraer Embraer Embraer Fokker Fokker Sukhoi ATR ATR ATR ATR

Average List Price $74.30m $88.60m $97.00m $113.70m $229.00m $232.20m $253.70m $304.80m $428.00m $78.30m $93.30m $99.00m $368.40m $160.20m $191.50m $193.70m $269.50m $305.00m $309.70m $330.00m $218.30m $257.10m $40.00m $45.80m $48.90m $30.34m $22.20m $29.10m $40.00m $43.10m $47.70m $50.50m $18.10m $18.90m $21.90m $22.70m

Type A300-600R A310-300 A318-100 A319-100 A320-200 A321-100 A321-200 A330-200 A330-200F A330-300 A340-200 A340-300 A340-500 A340-600 A350-900XWB A380-800 B717-200 B737-300 B737-400 B737-500 B737-600 B737-700 B737-800 B737-900 B737-900ER B747-400 B747-8F B757-200 B767-200ER B767-300ER B767-300F B777-200 B777-200ER B777-200LR B777F B777-300 B777-300ER B787-8 B787-9 MD-81 MD-82 MD-83 MD-87 MD-88 MD-90 CRJ-100/200 CRJ-700/705 CRJ-900 CRJ-1000 Q200 Q300 Q400 ERJ-135 ERJ-145 E170 LR E175 LR E190 LR E195 LR Fokker 70 Fokker 100 SSJ 100-95B ATR 42-500 ATR 72-500 ATR 42-600 ATR 72-600

Oldest $3.50m $2.50m $9.00m $6.50m $3.50m $8.50m $13.00m $19.00m $69.00m $14.00m $5.00m $5.00m $17.00m $20.00m $120.00m $7.50m $1.00m $2.00m $1.00m $7.50m $10.00m $14.00m $15.00m $26.50m $7.50m $120.00m $4.00m $2.50m $5.50m $19.00m $16.00m $23.00m $65.00m $125.00m $35.00m $72.00m $89.00m $0.30m $0.35m $0.50m $0.35m $0.60m $3.50m $1.10m $6.80m $9.50m $19.00m $5.00m $6.50m $7.50m $1.50m $2.00m $10.50m $14.00m $16.00m $17.50m $1.50m $1.50m $16.50m $4.20m $6.50m -

Newest $9.00m $7.00m $16.00m $37.20m $44.00m $13.00m $52.00m $93.50m $88.00m $105.00m $6.00m $24.00m $30.00m $38.00m $143.80m $225.00m $10.00m $3.50m $5.40m $3.00m $12.40m $37.00m $48.00m $19.00m $50.00m $27.00m $175.00m $16.00m $10.00m $58.60m $60.00m $37.00m $99.00m $132.00m $165.00m $63.00m $165.00m $118.00m $134.00m $0.50m $0.70m $1.15m $0.70m $1.80m $4.50m $3.80m $19.50m $24.50m $28.00m $8.00m $10.00m $21.50m $4.00m $6.50m $26.00m $29.50m $33.00m $35.00m $2.00m $2.00m $23.50m $12.00m $17.50m $16.00m $21.00m

% Change 4% 5% -4% 0% 0% 0% 0% 0% 0% -2% -12% 0% -2% -6% 0% 0% 25% 5% 5% 5% 2% -2% 0% 6% 0% 0% 0% 8% 0% 0% 0% 0% 0% -4% -1% -1% -2% 0% 0% 0% 0% 0% 0% 0% 7% -2% -3% -2% 1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Dry Lease Rate Oldest $0.060m $0.055m $0.120m $0.120m $0.060m $0.100m $0.190m $0.225m $0.650m $0.200m $0.160m $0.170m $0.225m $0.270m $1.150m $0.080m $0.040m $0.050m $0.030m $0.110m $0.140m $0.190m $0.125m $0.250m $0.170m $1.300m $0.080m $0.055m $0.150m $0.220m $0.220m $0.340m $0.600m $1.200m $0.380m $0.700m $0.800m $0.020m $0.020m $0.020m $0.020m $0.020m $0.060m $0.035m $0.080m $0.100m $0.170m $0.060m $0.075m $0.090m $0.035m $0.045m $0.115m $0.140m $0.160m $0.165m $0.045m $0.050m $0.140m $0.060m $0.080m -

Newest $0.120m $0.120m $0.195m $0.320m $0.390m $0.200m $0.440m $0.820m $0.800m $0.920m $0.200m $0.300m $0.360m $0.525m $1.250m $2.000m $0.125m $0.075m $0.100m $0.065m $0.145m $0.340m $0.420m $0.200m $0.425m $0.350m $1.500m $0.200m $0.180m $0.450m $0.480m $0.340m $0.720m $1.000m $1.400m $0.630m $1.550m $1.100m $1.200m $0.040m $0.045m $0.050m $0.040m $0.050m $0.090m $0.055m $0.185m $0.225m $0.260m $0.080m $0.100m $0.185m $0.060m $0.070m $0.215m $0.250m $0.280m $0.290m $0.065m $0.080m $0.225m $0.140m $0.170m $0.155m $0.185m

% Change 0% 3% 2% 2% 3% 2% 2% 0% 0% 0% 0% 0% 0% 0% 0% 0% 3% 0% 0% 0% 0% 2% 2% 0% 0% -2% 0% 0% 0% 0% 0% -3% -4% 0% 0% -1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

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

afmafm • Issue • Issue 87 –95 November–December – March–April • 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 2015

Source: IBA’s JetData.

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

Engine data – April 2015 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 January 2015

Current half-life market value January 2015

$0.95m $1.40m $2.00m $8.75m $6.75m $5.40m $7.10m $7.90m $8.65m $8.95m $2.08m $4.90m $5.10m $6.85m $3.90m $5.20m $4.00m $16.00m $31.90m $8.10m $0.85m $5.40m $4.80m $4.05m $2.20m $14.25m $14.95m $21.00m $20.80m $2.15m $3.95m

$0.58m $0.70m $1.20m $6.25m $4.30m $3.65m $4.60m $5.40m $6.15m $6.50m $1.20m $3.25m $3.35m $5.15m $2.40m $3.40m $2.50m $10.20m $24.10m $5.40m $0.55m $2.80m $2.00m $2.60m $1.30m $8.30m $8.60m $13.50m $14.10m $1.15m $2.45m

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 $0.023m $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 afm •• Issue Issue95 95––March–April March–April••www.afm.aero www.afm.aero