AFM issue 70: Airline Fleet Management

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AIRLINE FLEET

MANAGEMENT

INDEPENDENT ANALYSIS FOR OPERATORS OF, AND INVESTORS IN, AIRCRAFT & AIRLINES

RE-ENGINE PROGRAMMES: WILL THEY EVER GET OFF THE GROUND? PLUS: INTERVIEW WITH BIRKIR HÓLM GUÐNASON, CEO OF ICELANDAIR UPDATE AND ANALYSIS ON STORED AIRCRAFT FIGURES YOUR SUMMARY OF THE DISCUSSIONS AT ISTAT AIRPORTS AND LCCS: BUILDING A BETTER RELATIONSHIP November-December 2010 Issue: 70

As rare as a CFM shop visit.

In March 2010, the Australian town of Lajamanu experienced a freak downpour of spangled perch. An event almost as rare as a CFM* shop visit. CFM reliability is legendary. 70% of all CFM56-5B and CFM56-7B engines in the world are yet to make their first shop visit.

Over the life of the engine a CFM56 will undergo just three shop visits. In fact, it can be up to 10 years before it is removed for servicing.

For a long range forecast on airline profitability, visit www.cfm56. com/reliability-metrics. You’ll see how bright the outlook could be.

CFM, CFM56 and the CFM logo are all trademarks of CFM International, a 50/50 joint company of Snecma and General Electric Co.

*

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C O N T E N T S November-December 2010 • Issue 70

NEWS ROUND-UP ASSISTANT EDITOR Mary-Anne Baldwin: Mary-Anne.Baldwin@ubmaviation.com Tel: +44 (0) 207 579 4843

JOURNALIST Alex Derber: A.Derber@ubmaviation.com

CONTRIBUTORS Bernard Fitzsimons, Scott Hamilton, Paul Clark, David Watts and Martin Roebuck.

PRODUCTION Kalven Davis: Kalven.Davis@ubmaviation.com Tel:+44 (0) 207 579 4851

DISPLAY ADVERTISING Simon Barker: Simon.Barker@ubmaviation.com Alan Samuel: Alan.Samuel@ubmaviation.com Tel: +44 (0) 207 579 4845/46

GROUP PUBLISHER & SALES Anthony Smith: Anthony.Smith@ubmaviation.com Tel:+44 (0) 207 579 4875

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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E-EDITOR & CIRCULATION MANAGER Paul Canessa: paul.canessa@ubmaviation.com Tel: +44 (0) 207 579 4873 Website: www.ubmaviationnews.com Printed in England by Wyndeham Grange Ltd. Airline Fleet Management™ is a licensed trademark of UBM Aviation Publications Limited. All trademarks used under license from UBM Aviation Publications Limited. ©1999 – 2010, UBM Aviation Publications Limited. All rights reserved.

Airline Fleet Management, part of UBM Aviation, has used its best efforts in collecting and preparing material for inclusion in Airline Fleet Management 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 Airline Fleet Management whether such errors or omissions result from negligence, accident or any other cause.

This publication may not be reproduced or copied in whole or in part by any means without the express permission of UBM Aviation Publications limited.

2 The latest news from the airline and aircraft finance industries

INTERVIEW 10 Icelandair: After the volcano Birkir Hólm Guðnason became Icelandair's CEO in May 2008. Since then the airline has coped with a collapse of the country's banking system and a volcanic eruption that had flights cancelled across Europe – but he tells Bernard Fitzsimons that the future, at least, looks bright.

FOCUS 16 Split views on the re-engine programme Decisions by Airbus and Boeing on whether to re-engine their venerable A320 and 737 families have been driven by divergent views that appear to put the two OEMs at odds with both each other and themselves. Scott Hamilton reports.

TRADING, LEASING AND FINANCE 24 Caught in the sand In the past, airline recoveries have been accompanied by a glut of capacity returning to market, either through over-exuberance on the part of new operators or the frantic efforts of established players to retain market share. Usually, this meant a marked drop in the number of stored aircraft. The turnaround in 2010, however, has been different.

Alex Derber reports.

30 Question time at ISTAT How is ECA support lowering the economic life of aircraft? When will banks return to financing? Who actually wants the re-engining programme to become a reality?

Mary-Anne Baldwin reports from ISTAT’s recent European conference in Munich at which leaders in the aviation industry tackled some of the big questions.

34 Deals news Catch up on recent Airbus and Boeing aircraft deals news.

FLEET OPS 38 Airport and LCCs: Building a better relationship “It’s a problem getting that balance between what an airport wants, what an airline wants, and what the customer wants,” Mike Luddy CCO of Gatwick Airport, recognises. Airports are asked to provide seamless flight operations, support a mini-city of shops, cope with government taxes, and all the while endure the demands of LCCs. And then they must make a profit. Mary-Anne Baldwin covers some of the major issues.

44 The changing nature of travellers’ expectations Have you ever been polled for customer satisfaction and wondered which bin your comments ended up in? Perhaps your company is grappling with low passenger figures but does not know how to listen to its customers. Paul Clark, author of the book Stormy skies: Airlines in Crisis, discusses the need for change.

48 Controlling the future: New possibilities in control room design Control rooms are a significant yet crucial investment. As the airline sector moves forward it must find ways to increase efficiency and savings. Balancing these two needs can be challenging yet by understanding human factors, new possibilities in control room operations are being formed. David Watts, MD of CCD, the integrated design and ergonomics consultancy, considers the opportunities.

CARGO & FREIGHT OPS 53 GSAs: Market review Cargo general sales agents (GSA) have reported an upturn in the market and they provide an increasingly important service to cargo-carrying airlines. Martin Roebuck opened discussions with a number of those in the field, reviewing capacity and the rate of return, increasing service levels and growing networks.

INDUSTRY DATA 58 Aircraft transactions and other data Airline Fleet Management | 1

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BOC lands first THAI deal Bank of China-owned BOC Aviation has ordered eight 777-300ERs from Boeing for long-term lease to Thai Airways (THAI). The aircraft, powered by GE90115BL engines, will be delivered from August 2012 to October 2013.

NEWS HIGHLIGHTS

Emirates closes on $1bn 1H profit Emirates has more than tripled profits in the first half of 2010, posting a result of $925m. Net profit in 1H 2009/10 was $205m. Load factor also hit a record high of 81.2 per cent, while cargo volumes rose by a quarter. The airline said fuel remained its most significant cost, having risen 22 per cent to $6.3bn for the half.

Rostechnology firms order for 50 737NGs The leasing arm of Russian state-owned company Rostechnology has finalised an order for 50 737NGs and purchase rights for an additional 35. The agreement was announced on September 17 during the Sochi Investment Forum in Russia. Valued at $3.7bn based on average list prices, the order includes 15 737-700s, 25 737-800s and 10 737-900ERs.

Ferrovial offloads Swissport Ground handling giant Swissport has been sold to a French private equity firm for CHF900m ($908m). Spanish infrastructure group Ferrovial, which also owns UK airport operator BAA, sold Swissport to Pai Partners as part of its asset rotation plan. The deal should be completed by early 2011, after which the proceeds will be used by Ferrovial to fund key infrastructure projects.

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Estonian Air has signed a firm order with Bombardier for three CRJ900 aircraft and has taken options for a further two. The deal is worth $123m, or $211m with options based on list prices. It replaces a firm order for three of the aircraft by SAS Airlines and three of its affiliate airlines, including Estonian Air, announced March 10, 2008. “We require aircraft with less capacity than our mainline jets,” said Andrus Aljas, president and CEO, Estonian Air.

EU to refuse €100m investment in Air Malta

Ryanair raises full-year guidance Ryanair has announced a half-year profit of €452m ($634m), up 17 per cent on 1H 2009/10, and raised its fullyear guidance from €350m-€375m to €380m-€400m. The company said costs incurred as a result of volcanic ash disruption were €32m, some €18m less than previously estimated. The carrier’s fuel bill rose 44 per cent to €660m. On its future fuel requirements, Ryanair said it was 90 per cent hedged for 2011 at $730 per tonne and 60 per cent hedged for 2012 at $760 per tonne.

Estonian Air orders three CRJ900s

Broughton questions US security demands British Airways chairman Martin Broughton has slammed US hypocrisy over airport security checks. “America does not do internally a lot of the things they demand that we do,” Broughton told an airport operator conference in the UK, according the Financial Times. He cited the requirement for USbound passengers to remove their shoes and separate laptops from bags as rules that were inconsistently applied on US domestic services. “We should only do things which we consider to be essential and that Americans also consider essential,” he added. Broughton also said that several security measures were “completely redundant” and that European airports should not “kowtow to the Americans every time they wanted something done”.

Transport secretary Philip Hammond has responded that the UK government would allow airports to review their own security measures but that it had no control over US demands.

EU prepares to sue member states The European Commission is to launch infringement proceedings against member states over their bilateral aviation agreements with Russia, in an effort to force Russia to renegotiate overflight fees with the EU. Peter Crowther, an EU/Competition partner at law firm Dewey & LeBoeuf, commented: “This is a very interesting and innovative international use of the EU antitrust rules; to sue the Member States and possibly their airlines for allowing terms that, from an EU perspective, are not very attractive anyway. If successful, this could be a significant breakthrough in negotiations with Russia. One wonders, however, if this could potentially backfire, if it exposes the Member States or the airlines to class actions for having agreed overcharges in the EU.”

IATA leans towards passenger profiling After the failed attempts to blow up cargo aircraft with explosives hidden in freight shipments, the International Air Transport Association (IATA) has called on security regulators around the world to work together to improve cargo security and the collection of cargo data in a coherent and coordinated manner. IATA wants to improve the airport screening processes for passengers and plans to build a model checkpoint for the future. The new approach would be based on more sophisticated use of passenger data to profile travellers and filter out potential terror suspects. "We must shift the screening focus from looking for bad objects to finding terrorists," said IATA president Giovanni Bisignani. "The enormous amount of data that we collect on passengers can help governments to identify risks." Bisignani’s proposal echoes previous calls, for example, from pilot unions, to employ controversial passenger profiling to improve airline security.

Air Malta’s future is in the balance as the European Commission is expected to turn down the government’s request to inject €100m into the carrier, according to The Sunday Times. Without the capital, Air Malta will likely need a restructuring and rescue plan under which it could then secure government funding. The carrier is expected to continue to make losses, which last year hit €31m.

Resource Group acquires college from BAE BAE Systems has sold Dundridge College, an accredited CAA training provider for air traffic control, electronic warfare, air defence and aviation English, to Resource Group. The college has been renamed Cwmbran Training College. Resource Group’s services include flight crew leasing, safety-critical software engineering, MRO project support, specialist engineering recruitment and EASA training.

Ryanair punishes Hahn for green tax Ryanair has reacted to Ger-many’s new environmental flight tax by slashing flights at Frankfurt Hahn, where it is the dominant carrier. The carrier said it would cut flights by almost a third “as a direct result of Germany’s new €8 ($11) tourist tax ” and discontinue nine routes, including services to Berlin, Prague, Seville and Agadir in Morocco. Ryanair says the cuts will mean 150 job losses among its pilots and cabin crew.

Air France-KLM upgrades forecast A sharp improvement in revenues in recent months has caused Air France-KLM to raise its full-year forecast. The airline had expected a break-even result, excluding the €158m ($219m) costs incurred from volcanic disruption, but now predicts it will be in profit for the financial year to March 2011.

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Vueling growth continues in 3Q Spanish buget carrier Vueling has posted a €43m ($59m) profit for the 3Q on sales of €277m. The company is predicting pre-tax earnings of €60m-€70m for the full year. ($1=€0.72)

Finnair back to black Finnair has reported an operating profit for the 3Q of €42m ($58m), its first profitable quarter in almost two years. Key to the turnaround was growth in business travel demand in traffic between Europe and Asia, a market Finnair several years ago decided to focus on. The company, which saw sales in Japan during August exceed those in Finland, will increase Asian capacity by a fifth in 2011.

Embraer announces 3Q figures Embraer delivered a total of 44 aircraft during the 3Q with sales reaching $1bn.

Its firm order backlog is stable at $15bn and net cash is $624m, compared with $659m recorded for 2Q 2010. EBIT margin was six per cent, bringing the year-to-date EBIT margin to 7.3 per cent – above the current guidance. During the period, Embraer sold one ERJ 145, one E170, one E174, 11 E190s and six E195s to the commercial market.

LAN purchases AIRES Chile’s LAN Airlines is to purchase 99 per cent of the outstanding shares of AIRES in a deal worth $32.5m.

Colombia-based AIRES is the secondlargest operator in the region’s domestic market with 22 per cent market share, 27 domestic and three international routes. The airline holds nine 737-700, 11 Q200, and four Q400 aircraft. Both parties have signed the agreement and the acquisition is expected to be finalised within the next 30 to 60 days subject to regulatory approval.

777-200 sale Ireland-based Squadron Leasing has bought an ex-Air India 777-200 (MSN: 269170) from Wells Fargo Bank. Bristol Associates arranged the sale to Squadron, which is serviced by Apollo Aviation.

NEWS HIGHLIGHTS Qantas A380 in emergency landing Qantas grounded its entire A380 fleet following an engine issue that forced an emergency landing on November 4 at Singapore Changi. It appears that the aircraft (reg: VH-OQA ) lost the cowling from its number two engine shortly after take-off en route from Singapore to Sydney. Indonesian media showed Qantas liveried debris on the island of Batam and passengers reported hearing an explosion. Qantas said in a statement: "We have commenced our own investigations as to how this incident occurred and have notified the ATSB [Australian Transport Safety Bureau]. We will continue to work with them as they investigate the issue." None of the 459 people aboard were injured, but Alan Joyce, Qantas CEO, has said that the all A380 flights will halt until Qantas is sure that its safety standards – famous for being amongst the highest in the world – are met. It is the latest, though most serious, in a string of problems affecting the A380’s Rolls-Royce Trent 900 engines. In August a Lufthansa A380 suffered an in-flight engine shut-down of one its Trent 900s. A similar incident was believed to have occurred on another A380 within the previous 12 months. Singapore Airlines also reported engine problems, though minor, on entry into service of its A380s. The airline said it would not ground any of its 11 A380s following the Qantas incident.

EADS seeks to take pressure off Airbus Airbus parent company EADS has outlined plans to spend up to €2bn ($2.7bn) on acquisitions. Louis Gallois, CEO, says the European aerospace organisation wants to maintain more balance among its different divisions, and not be so reliant on Airbus for revenue. Gallois stated that a “few targets” had already been identified in the defence, security and services sectors, with a particular focus on the United States, as well as emerging countries. He told the Wall Street Journal that US economic policies were both threatening the company, and providing an opportunity for acquisitions in the country.

“I fear that the US administration could be tempted to play the game of the weak US dollar,” he commented. “Our concern is certainly the absolute level of currencies, but of even more concern is the fact that it’s possible for the US dollar to lose 15 per cent against the euro in just three weeks. We need some kind of dampening of fluctuation for currencies. On the other hand, the situation reinforces our argument for being more present in the US. And for that, we make the US our top priority for acquisitions.”

Airbus currently accounts for nearly two-thirds of EADS’ revenues; Gallois’ strategy to more evenly balance revenues among the company’s divisions comes in the context of a situation where despite selling the Airbus aircraft in dollars, most of its costs are accrued in euros and sterling.

Year-long BA dispute could end as cabin crew vote on new proposal British Airways (BA) cabin crew are to vote on a new proposal being made by the airline to resolve the year-long dispute between staff and management. Unite, the union representing the cabin crew, is to put the airline’s proposals to members. No details of the proposals have been released, but BA says the offer is “very fair and reasonable and represents a genuine solution to the remaining issues in this dispute”. Unite says the consultative ballet on the offer will get underway “as soon as practically possible”. The dispute has so far seen flight attendants walk out on 22 days.

BA-Iberia wedding date set British Airways and Iberia will complete their merger in January 2011, subject to shareholder approval.

Guidance documents have now been released to shareholders of the Spanish and British carriers, who will vote on the merger on November 29.

The boards of both companies have already approved the tie-up, which would see BA take 56 per cent of what would become the world’s third-largest airline, with Iberia holding the rest.

VAS Aero secures term loan from GB Merchant GB Merchant Partners, the investment management affiliate of Gordon Brothers, has provided a term loan to VAS Aero Services, an aftermarket component services and distribution company.

Formerly a division of AB Volvo, VAS Aero Services was acquired by an affiliate of HIG Capital in October 2010. Details of the loan were not given, but GB Merchant said that its debt investments were usually junior secured, tranche B or enterprise value loans, ranging on average from $10m to $50m.

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NEWS HIGHLIGHTS Boeing posts 3Q net profit and ups 2010 forecast

New Orleans Airport privatisation plans dropped Officials have rejected plans to privatise Louis Armstrong New Orleans International Airport. The New Orleans Aviation Board said in a statement: “After analysing the conditions required… and the current state of capital markets [the airport] is not well positioned at this point”. The privatisation process was started in late 2008 under Mayor Ray Nagin’s term in office when officials submitted a preliminary application to the FAA.

DVB and ICBC ink $163m loan facility DVB Bank has secured a five-year loan facility for $163m with ICBC Financial Leasing (ICBCFL), a subsidiary of Bank of China. In September this year, DVB’s Singapore-based subsidiary DVB Group Merchant Bank arranged and underwrote financing for eight aircraft, comprising Boeing and Airbus new-generation narrowbodies, which the company sent to four international and Chinese lessees under operating leases.

B/E profits up B/E Aerospace has seen profits jump by 20 per cent, to $80m for the 3Q of 2010. Amin Khoury, CEO of B/E Aerospace said the year-on-year improvement was “driven by solid revenue growth and substantial margin expansion at both our consumables management segment and our commercial aircraft segment”.

The company expects full-year 2011 revenues to rise 20 per cent to $2.4bn.

Fuji Dream orders E175 Fuji Dream Airlines (FDA) of Japan has ordered a new E175. The aircraft becomes FDA’s fifth Embraer jet and will be configured in a single class with 84 seats.

The order also includes an option for one additional aircraft of the same model.

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Boeing has raised its forecast for the year having reported revenues of $17bn and an $800m net income for the 3Q. The company increased its 2010 operating cash flow guidance to more than $1.5bn and its earnings per share guidance to between $3.8 and $4 per share. Commercial aircraft deliveries reached 124 in the 3Q of 2010, 11 up on the same period last year. However, on a year-to-date basis Boeing delivered 346 aircraft – four per cent and 13 units down on 2009. The manufacturer said it is now on track with the 787 and 747-8F programmes, and that its commercial programme in general had showed a “strong performance”.

Boeing Capital Corporations reported total consolidated debt is down from last year at $12.4bn for the 3Q against last year’s $12.9bn. Its 3Q revenues are up two per cent from 2009 at $170m and earnings from operations rose 15 per cent to $45m. On the nine-month year-to-date basis, revenues changed only marginally from $496m in 2009 to $494m in 2010, but earnings from operations increased 30 per cent to $146m. Compared to the same period last year, Boeing’s 3Q revenues were up two per cent and operating cash flow up 55 per cent. On a year-to-date basis comparing 2010 to 2009 however, revenue fell five per cent and operating cash flow slipped 23 per cent.

Passenger found strangled in Gulf Air toilet A passenger aboard a Gulf Air flight has been found dead in the toilet.

Flight attendants discovered the 36year-old Filipino man strangled with his own jacket during routine prelanding checks. Upon realising that the toilet door was locked, they knocked on the door, and after no one responded, forced it open to find the body. The man’s family said he was employed as a technician in Dubai, but no other details have been given. Police are investigating to determine whether it was suicide.

The flight was landing in Manila, having taken off from Bahrain.

Cebu Pacific raises $539m in IPO Cebu Air, the parent firm of the Manila-based low-cost carrier Cebu Pacific (CEB), has achieved the world’s largest budget airline flotation, it says. The LCC raised PhP23bn ($539m) prior to exercise of an over-allotment option from its initial public offering (IPO) in late October However, the capitalisation remained below the company’s prediction last month that it would raise as much as $725m. The stock reportedly became the most sought-after shares on Manila’s stock exchange and rose 6.4 per cent in its first day of trading. It was issued at PhP125 ($2.89) per share and closed at PhP133 ($3.08). CEB sold 187 million shares, equivalent to 30.4 per cent of its total outstanding shares, though last month it planned to issue 215 million common shares.

The funds are to be mainly used for aircraft acquisition.

Export financing argument gets louder

S&P raises Delta to ‘stable’

European and US airlines have expressed increasing concern that foreign carriers are able to enjoy favourable aircraft financing conditions from European/US government banks, which are intended to promote the export of Airbus and Boeing aircraft. This argument has mainly been fuelled by the rapid growth of Emirates, Etihad Airways and Qatar Airways in the Middle East. The US Export-Import Bank has now denied allegations that its aircraft financing led to market distortions. Fred Hochberg, the institute’s chairman and president, told reporters that the export banks provide credit to airlines that would otherwise struggle to get loans, arguing that, especially after the financial crisis, private banks were reluctant to provide loans for export aircraft orders. Current regulations for export credits at the Organisation for Economic Co-operation and Development (OECD) will expire at the end 2011, and so will require renegotiation. The Air Transport Association (ATA), which represents international airlines, has called for the reduction of export financing from current levels and the introduction of credit caps. ATA claims that during the last 10 years export credit has financed approximately 20 per cent of aircraft deliveries.

Delta Air Lines has had its credit rating raised from negative to stable by ratings agency Standard & Poor (S&P). Delta shares rose 11 per cent to $12.97 on its financial results. The airline reported $363m in 3Q earnings and $574m profit in the year to October. The company said it expects its first profitable 4Q since 2000. Other US airlines have also seen share prices rise, including US Airways, which rose seven per cent to $10.83 and American Airlines’ parent company AMR, which rose eight per cent to $7.03.

Japan backs US-Asia airline JV Japanese authorities have granted anti-trust immunity to ANA, Continental Airlines and United Airlines for their trans-pacific joint venture (JV) on flights between Asia and the Americas. The airlines gained tentative agreement from the US Department of Transportation (DOT) earlier this month. Having received backing from the Japanese government’s Ministry of Land, Infrastructure, Transportation and Tourism, the airlines must wait for final approval from the DOT.

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International operations start at Haneda Airport

NEWS HIGHLIGHTS

Tokyo Haneda became an international airport with the opening of its new runway and terminal on October 21.

Japan Airlines was the first to fly under its new international status with a chartered passenger aircraft bound for Gimpo in South Korea. International flights will start on October 31 for the first time in 32 years. With the hope of boosting tourism the airport, now named Tokyo International Airport, will fly to cities including London, Los Angeles, New York, Paris, Vancouver, Beijing, Shanghai and Singapore and will focus on low-cost carrier operations. The airport previously serviced only domestic and some shorthaul flights.

United Continental Holdings reports revenue United Continental Holdings has reported individual financial earnings for the premerged companies. United reported a 3Q net income of $473m, or $2.12 diluted earnings per share, up $533m from the previous year. United’s consolidated passenger revenue rose 21 per cent in the 3Q compared with the same period in 2009.

Continental took $367m during the quarter, up $365m on 2009. Its 3Q consolidated passenger revenue rose 21 per cent. The companies ended the 3Q with a combined $9.1bn in unrestricted cash, cash equivalents and short-term investments.

Waha to purchase 20 per cent of AerCap Waha Capital is to acquire approximately 30 million shares in NYSElisted AerCap, worth about $380m. In return, Waha will pay $105m plus its 50 per cent interest in AerVenture, and will transfer 40 per cent of its interest in a portfolio of 16 aircraft including A330, 777, A320, A321, 737 and Bombardier regional aircraft.

Following the share issuance, Waha will own 20 per cent of AerCap and will elect two candidates to its board of directors.

Japan and the United States have paved the way for greater airline cooperation between the two countries with a pre-liminary open skies agreement. The memorandum of understanding, signed on October 26, allows carriers to better align fares, schedules and cost-saving programmes. A statement from Japan’s transport ministry read: “As of today’s signing, Japanese and US aviation industries are fully liberalised.”

Hamburg International files for bankruptcy

Norwegian celebrates record quarterly profit Norwegian has taken NOK733m ($125m) in pre-tax profit for the 3Q, the best single-quarter result in the company’s history. The airline said its passenger numbers rose by 25 per cent to over 3.8 million compared with the same quarter last year. The total turnover exceeded NOK2.8bn, also up 25 per cent. Load factor was 80 per cent “despite considerable capacity boost”. Unit costs including fuel were down six per cent.

US-Japan open skies deal

Price of carbon must increase for industry to reach emissions targets British Airways (BA) says the price of carbon needs to be €30 a tonne by 2020 – double today’s level – for the aviation industry to succeed in capping carbon dioxide emissions.

An increase in price is necessary to motivate the industry to pursue fuel efficiency measures, alternative fuels and new technology. The airline’s head of environment, Jonathan Counsell, speaking at the Reuters Summit on Environment and Alternative Energy, explained: “I think €30 [is a good price level] but the key is that it stays and that everyone is paying it. It has to be global. By 2020 there should be a strong-enough price signal out there for the manufacturers to spend significant money to bring forward the technology quicker.” Counsell is confident the industry can get to year 2000 levels of emissions by 2050 – but “we will rely on carbon trading”.

Delta cabin crew reject union representation Delta Air Lines cabin crew have rejected representation through the Association of Flight Attendants (AFA). Just over half the participating flight attendants voted against the unionisation in a poll that became necessary after the merger of Delta and Northwest Airlines in 2008. AFA had represented Northwest flight attendants for over 60 years. The election turnout was 94 per cent among the combined cabin crew workforce of nearly 20,000 employees. The AFA claims that Delta used illegal and unfair methods to sway the vote and will submit interference charges to the US national mediation board. "Once again, Delta management overwhelmed flight attendants with heavy-handed intimidation and coercion of voters," said Patricia Friend, AFA’s international president. Delta’s management wants to align pay, benefits, work rules and produce a single seniority list for all flight attendants.

“I Hate Ryanair” turned over Belying its tough-talking, rhinoceros-skinned corporate persona, Ryanair has forced the closure of ihateryanair.co.uk, the website set up by Londoner Robert Tyler for disgruntled passengers to vent their frustration with the airline.

On the site Tyler branded Ryanair “the world’s most hated airline and “a bunch of filthy, thieving bastards”. The hurt budget carrier complained to internet regulators that the site was “vitriolic and highly disparaging”. The adjudicator, however, ruled that the site would have been allowed to stand, but for the fact that Tyler had earned £322 from commercial links published on the site, saying: “If they draw in internet users by using a domain name containing a company’s brand, then they must be wholly devoted to honest criticism and open discussion and not potentially tainted by commercial concerns.” Tyler was forced to hand over the domain name to Ryanair, but has nonetheless continued posting on ihateryanair.org.

The German charter carrier Hamburg International filed for bankruptcy protection on October 19, resulting in the revoking of its operating licence by the Luftfahrt-Bundesamt, the country’s civil aviation authority. The airline’s fleet comprises eight A319s and one 737. Last year, the company carried 875,000 passengers and reported sales of €130m. ($1=€0.7)

Bahrain props up Gulf Air with $1bn Bahrain is to support its ailing flag carrier Gulf Air with a capital injection of more than $1bn. A company spokesperson told reporters that the financing will grow the total share capital to BHD530m ($1.4bn), suggesting a threefold increase from the previous level. This will be the first capital restructuring since the island emirate took over the loss-making airline in 2007. Gulf Air is owned by the Bahrain Mumtalakat Holding Company, a government wealth fund. Gulf Air has increasingly lost ground to Abu Dhabi’s Etihad Airways, Qatar Airways, and Emirates in recent years. It made a loss of $502m in 2009 and put in place a restructuring plan to turn the company around to profitability over the next two to three years.

SkyTeam to sign Aerolíneas Argentinas Aerolíneas Argentinas has signed with SkyTeam to join the airline group. The Argentinean flag carrier will become the first South American airline to join the alliance. SkyTeam said it is “actively working to strengthen its presence in Latin America”. Aerolíneas Argentinas, which is currently under a five-year restructuring plan, is looking to renew its fleet, add international routes, and boost the number of domestic and regional flights.

BAE Systems to remarket A340s GMT Global Republic Aviation has mandated BAE Systems to remarket eight Airbus A340-200/300s. All of the aircraft currently on lease from GMT are due to become available, for sale or lease, from April 2011 with the final aircraft released early in 2012.

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Palestine plans international airport in the West Bank

NEWS HIGHLIGHTS

Aircastle is to acquire two 747-400 freighter aircraft currently operated by Japan Airlines (JAL). Aircastle has already secured letters of intent “with industryleading cargo carriers” for the lease of both aircraft, which are due to be delivered in 4Q 2010.

Palestinian authorities are to build a $340m international airport in the West Bank of Jerusalem, yet have not secured the financing or permission from Israel. Over half of the airport would be built on land controlled by Israel and, according to media reports, although plans have been submitted, no approval has been sought.

Sa’di al-Kurunz, Palestinian minister of transportation, said construction could start as early as the first half of next year, although financing from international investors would have to be secured. The airport is planned to have one terminal for freight and passenger traffic and six boarding gates.

NetJets places massive order with Embraer Embraer has received an order from NetJets which could be worth in excess of $1bn. The fractional jet operator has ordered 50 Embraer Phenom 300 executive jets, with options for 75 more. The terms of the agreement were not disclosed, so the value estimate is based on list prices.

The deal is Embraer’s largest ever in the business jet sector. Deliveries of the Phenom 300 aircraft are expected to begin in 2013.

Iran to confront fuel blocks at European airports Iran Air has warned that its LondonTehran flights may be forced to make an unscheduled refuelling stop at Hamburg or Vienna due to “ongoing fuel supply problems” at London Heathrow. According to Iran, some of its airlines are still being refused fuel at a number of European airports following UN sanctions against the country for continuing its nuclear programme.

Speaking at a press conference, foreign ministry spokesman Ramin Mehmanparast said fuel restrictions were “beyond the relevant regulations, even beyond those of the illegal UN Security Council’s resolution, and under international law… unlawful”.

Sikorsky to invest in Eclipse Sikorsky Aircraft has reached an agreement in principle with Eclipse Aerospace to make an investment in the Albuquerque, New Mexico-based company. Eclipse Aerospace provides engineering, service, and support for the fleet of 260 Eclipse 500 twin-engine jets. “This agreement in principle affords us an opportunity to invest in a great product and to further leverage our strong aftermarket and product support capabilities for fixed-wing application,” said Mark Cherry, VP of strategy and synergy at Sikorsky.

Aircastle to purchase two 747400Fs from JAL

GECAS places two 737-800s Stelios settles easyJet spat The acrimonious branding dispute between easyJet and founder Sir Stelios HajiIoannou has ended with the airline allowed to keep its name. The parties have hammered out a deal that will see easyJet pay easyGroup royalties totalling 0.25 per cent of revenues. In return, Stelios has renounced both his right to chair the easyJet board, and easyGroup’s right to representation on the board. Most importantly, easyJet has been granted autonomy over ancillary revenue opportunities, the pursuit of which lay at the heart of the dispute and about which Stelios has repeatedly expressed serious misgivings. The airline will also be free to co-brand with other travel businesses.

Stelios said: “I am content this is a fair deal for both sides. The way low-cost airlines make money has changed over the 10 years since the original licence was signed. This amendment allows the airline to now grow its business even further by removing some of the restrictions imposed by the original agreement. The agreed amendments will result in increased competition from the airline for the other easyGroup licensees.

However, the royalty payable provides appropriate remuneration for easyGroup.”

Southwest returns to black with $205m 3Q income Southwest Airlines has reported a 3Q net income of $205m, or $0.27 per diluted share. The airline swung its fortunes from a $16m net loss recorded in the yearago period. Gary Kelly, president and CEO, said the improvement was due to a improved revenue performance. “Our 3Q 2010 unit revenues increased 16.1 per cent over 3Q last year and marked the fourth consecutive quarter we’ve reported record unit revenues,” he commented. Unit costs, excluding special items, rose 7.1 per cent compared with the same quarter in 2009; the airline said this was largely due to an 11.7 per cent increase in fuel costs. Excluding fuel and other special items, unit costs rose 5.1 per cent year-on-year.

GE Capital Aviation Services (GECAS) has delivered one 737-800 aircraft each to Okay Airways and Japan Airlines (JAL). It is the first aircraft GECAS has leased to Tianjin-based Okay Airways, which operates passenger and freight service in China.

The other aircraft was delivered to JAL under a sale and leaseback transaction; it was part of an existing order agreement between Japan Airlines and Boeing.

Major flight cancellations as Paris runs out of fuel Paris Orly airport said on October 19 that it had cancelled 50 per cent of its flights due to fuel shortages, with about a third of those remaining likely to meet delay. Other Paris airports, including Charles de Gaulle, faced the cancellation of 30 per cent of their flights, according to the French aviation authority, due to a major fuel shortage following a national strike over a revised national pension scheme that would see the retirement age rise by two years to 62.

EU to strengthen links with Brazil Strong 3Q profits recorded by major US airlines Three of the biggest US airlines have posted strong profits and revenues in their 3Q results. On the back of the summer travel season, the busiest time of year for airlines, American Airlines parent AMR recorded its first profit since 3Q 2007, while Delta Air Lines and US Airways exceeded analysts’ expectations. AMR reported a net profit of $143m for 3Q 2010, or $0.39 per diluted share. This compares with a net loss of $359m for 3Q 2009, or $1.26 per share. Delta recorded a net income for 3Q 2010 of $929m, or $1.10 per diluted share, excluding special items. This is an $878m improvement year-over-year. Delta’s GAAP net income was $363m, or $0.43 per diluted share, for the quarter. US Airways Group reported a GAAP net profit of $240m for 3Q 2010, or $1.22 per diluted share. This compares with a net loss of $80m, or $0.60 per share, for 3Q 2009. US Airways said the $240m net profit was the highest 3Q net profit in the company’s history.

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The European Union has granted the European Commission a mandate to open negotiations on an air transport agreement with Brazil. The agreement, which would open the market for airlines wishing to fly between Brazil and the EU and strengthen safety and security, is expected to generate €460m ($640m) in consumer benefits annually and boost traffic by 335,000 passengers in the first year. The decision comes in time for the FIFA World Cup in 2014 and the Olympic Games in 2016, both hosted by Brazil.

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The latest on deals, mergers, appointments and more

BA CityFlyer orders two E190 jets British Airways (BA) has ordered two E190 jets from Embraer. BA’s subsidiary, BA CityFlyer (BACF), will operate the aircraft on new routes from London City Airport, including to StockholmArlanda Airport in Sweden. The delivery, which is expected in the first quarter of 2011, will boost BACF’s fleet to 13 E-Jets, including six E170s and seven E190s. The new jets will be configured with 98 seats.

FAA panel criticises new pilot flight hours cap An FAA advisory panel has objected to a new law that raises the bar on copilot flying hours. The panel expressed concern that the increase would lead to higher wage demands. The legislation calls for co-pilots to have the same number of flying hours as more senior pilots, raising the number of necessary flight hours from 250 to 1,500. But reports suggest the advisory panel, comprised of airline executives and university professionals, warned that it would be harder to retain co-pilots on the same wage and that they may be tempted to forgo correct training in lieu of building flight hours.

Share issue to raise $3M for Hanger8 Hangar8 is to raise £2m ($3.2M) with the placing of ordinary shares. Proceeds will fund growth, marketing, staffing, and equipment, according to the company. Hangar8 is a European operator of privately owned passenger jet aircraft. The company currently manages a fleet of 19 aircraft but does not own any aircraft.

Dustin Dryden, CEO of Hangar8, said: “We are a service business with no large capital assets, base costs are typically covered by contracted management fees and revenues are tied to hours flown rather than number of passengers.”

SriLankan Airlines to receive seven aircraft Sri Lanka’s flag carrier, SriLankan Airlines, is soon to acquire its first new aircraft in more than a decade. The airline has ordered two Twin Otter aircraft and five A320s, three of which are new, and all of which are to be leased. The airline last took delivery of new aircraft in June 2000, when it received the last of six A330-200s.

Two A320s are to be delivered in December 2010 and early 2011; the remaining three will arrive from May to November 2011. The two Twin Otters will be used to re-launch the airline’s domestic Air Taxi service this winter.

NEWS HIGHLIGHTS European Commission listens to aviation sector

The first meeting of the Aviation Platform, between the European Commission and top-level representatives of the European aviation sector, has taken place. The Aviation Platform was set up in the wake of April’s volcanic ash crisis to give strategic advice to the European Commission about future challenges for aviation in Europe. The inaugural meeting in Brussels established the need for: the full implementation of the Single European Sky; extension of the work already being done by the Commission to strengthen the possibilities for European aviation to enter new markets though the signing of bilateral agreements; an effective governance structure for the future deployment of SESAR (Single European Sky Air Traffic Management Research); and, the extension of Single Sky principles to areas beyond the borders of the European Union.

Boeing bullish on cargo prospects Boeing has predicted that world air cargo will hit its pre-recession high by the end of the year. The airframer forecasts that air cargo, which usually signposts wider air transport industry slumps or recoveries, will average growth of 5.9 per cent over the next two decades. "In addition to the strong economic rebound, anecdotal evidence suggests that many industrial shippers have turned to air cargo in response to the overcorrection that constrained capacity in other modes of transport, particularly containerships," the company said in a statement. Leading the recovery will be intraAsian freight, which is set to grow at 9.2 per cent, Boeing added.

IT gremlins cost Virgin Blue $20m Computer errors that forced Virgin Blue to shut down check-in desks in late September cost the carrier roughly A$20m ($20m), the company has said. The Australian carrier closed airport desks on September 26 after its reservations, check-in and boarding systems crashed. The airline was hit with ongoing failures for the following 11 days.

Virgin Blue has said it will “actively pursue all avenues” to recover costs incurred by the outage of the Navitaire/Accenture-hosted systems.

AerSale purchases 19 747-400s from JAL AerSale has purchased a fleet of 19 747-400s from Japan Air Lines (JAL), clearing JAL’s fleet of the aircraft type. Robert Nichols, AerSale’s COO, believes that most of the 686 747-400 passenger and freighter aircraft currently in service will continue to fly, but added: “This said, we are proceeding to disassemble a few of the aircraft and a good many of the 76 GE CF6-80C2B1F engines installed on-wing so as to position AerSale to become the leading provider of aftermarket CF6-80C2 engines and material.”

Nicolas Finazzo, AerSale’s CEO, said the deal is the second of “several largescale multi-fleet acquisitions” within the company’s 2010 business plan, and that further announcements will soon follow.

West Atlantic to be launch operator for A320 P2F European cargo operator West Atlantic is to become the launch operator for the A320 P2F. West Atlantic will take an initial three aircraft on lease from AerCap, with deliveries between 2012 and mid-2013 and the option of a further four aircraft by 2015. The aircraft are part of AerCap’s P2F conversion of up to thirty A320s, a project that was agreed with Airbus Freighter Conversions (AFC) in 2008.

AerCap subsidiaries AeroTurbine and AFC will provide some spares, crew training and line support to West Atlantic.

Avion Capital Partners acquires UAB Avion Express Avion Capital Partners and other unnamed investors have purchased UAB Avion Express, a Lithuanian airline.

David Masson, chairman of Avion Capital Partners, said the airline will be developed as a wet lease specialist.

Other plans are in place for Avion Capital Partners and Avion Express to utilise distressed or troubled assets “to offer a range of flexible and competitive solutions to airlines”. UAB flies four SAAB340 cargo and passenger aircraft on ACMI and charter basis for a number of European clients.

Passengers pay out $17bn for flight delays Airline flight delays are costing passengers $17bn a year, according to the Federal Aviation Administration (FAA). Looking at data for 2007, the last year in which all relevant information was recorded, the body said that the cost to airlines for delayed flights was $8.3bn, most of which was for crew and fuel. More than half of the collective cost, at $33bn, was handed to the customer. Costs are likely to be lower this year with 63,000 flight cancellations – lower than in 2007.

Iraq, Armenia services from Flydubai Flydubai will start flights to Sulaimaniyah in Iraqi Kurdistan and Yerevan in Armenia in November. It is the airline’s second route to Iraq, following the launch of flights to Erbil in August.

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PEOPLE IN THE NEWS Aggarwal to lead Kingfisher

Stobart invests in Aer Arann Irish carrier Aer Arann has secured a €2.5m ($3.6m) investment from British logistics group Stobart. The cash will support the launch of a new route to Southend Airport, but is conditional on Arann exiting examinership (bankruptcy protection). The Irish courts were told that an investment agreement and business plan to ensure such an exit would be in place by October 13.

Cathay group receives 18 per cent more passengers The number of passengers carried by Cathay Pacific and its subsidiary Dragonair rose 18 per cent in September. Load factor climbed 1.6 percentage points to 81.8 per cent and capacity in available seat kilometres (ASK) rose 12.9 per cent, both on a year-on-year basis. In the year to October, passenger numbers rose 11 per cent and ASKs three per cent.

ANA begins Haneda codeshare with seven others ANA will codeshare on flights from the newly refurbished Tokyo International Airport (Haneda). Star Alliance members Air Canada, Air China, Asiana Airlines, Singapore Airlines and Thai Airways International, as well as Eva Airways and Malaysia Airlines, will share codes with ANA, doubling the airline’s daily flight frequency and increasing its route network by a third. ANA will fly 11 routes and 44 daily flights out of Haneda.

ASUR acquires Copenhagen Airport’s stake in ITA Copenhagen Airport has sold its remaining 49 per cent stake in Inversiones y Tecnicas Aeroportuarias (ITA) to Fernando Chico Pardo, the chairman and CEO of Grupo Aeroportuario del Sureste (ASUR), the Mexican privatised airport group. Pardo now directly or indirectly owns all shares in ITA.

LH cargo recalls freighters, increases flights The 1H of 2010 has seen Lufthansa Cargo raise freight volumes by a fifth.

Responding to the uptick in demand, from November the carrier will have all of its 18 MD-11 freighters back from storage. It has also said that it will raise weekly flights to Japan from seven to 12.

8| Airline Fleet Management

Former SpiceJet boss Sanjay Aggarwal has become chief executive of Kingfisher Airlines, effective immediately. Aggarwal is tasked with returning India’s secondlargest domestic carrier to profitability after six years of losses. Under Aggarwal’s leadership, budget carrier SpiceJet was India’s only listed airline to turn a profit last year, but the CEO quit following the purchase of a stake in the airline by billionaire Kalanithi Maran.

Cargolux CEO and SVP of sales indicted over price fix The CEO and SVP of sales and marketing at Cargolux Airlines International have been indicted for conspiring to fix air cargo surcharges to and from the US. Ulrich Ogiermann, president and CEO, and Robert Van de Weg, SVP sales and marketing, now belong to the 14 executives from 18 airlines to have been charged by the Department of Justice (DoJ) over the cargo conspiracy. Cargolux entered into a plea agreement and agreed to pay a fine of $119m over a period of five years.

BA-Iberia confirms board, new airline heads IAG, the holding company formed by the British Airways and Iberia merger, has appointed Antonio Vázquez Romero as chairman, Martin Broughton as deputy chairman and Willie Walsh as MD of the board of directors. The appointments mean that Keith Williams and Rafael Sanchez-Lozano will take over as CEOs of BA and Iberia respectively. Also on the IAG board are Cesar Alierta Izuel, Patrick Cescau, Jose Manuel Fernández Norniella, Denise Kingsmill, James Lawrence, Jose Pedro Perez Llorca, Kieran Poynter, Rodrigo de Rato y Figaredo, and John Snow.

Air France KLM appoints Herzog SVP marketing Air France KLM has appointed Christian Herzog to succeed Patrick Roux as SVP marketing. Herzog’s most recent role was SVP for the Americas. He joined the French flag carrier in 1982 and held marketing responsibility for different European regions in the following years.

Elliott joins JetBlue as VP, crew and values relations JetBlue Airways has appointed Michael Elliott as VP of crew and values relations. “Michael brings a wealth of experience to an important new position for JetBlue,” said Joanna Geraghty, JetBlue’s chief people officer. Elliott joins the New York-based airline after 20 years at Airborne Express and later DHL, where most recently he was VP of human resources. Elliot’s new role is effective immediately; he will report to Geraghty.

New CEO for Air Mauritius Air Mauritius has named Soobhiraj Bungsraz CEO of the airline with effect from October 1, 2010. The appointment follows the resignation of Manoj Ujoodha from the post. The airline says that Bungsraz has held a variety of aviation management positions in Australia.

Dublin Aerospace welcomes new CEO Donal Rogers has been appointed CEO of Dublin Aerospace, effective January 1, 2011. He will move from the Mexican low-cost airline, vivaAerobus, where he is currently executive board director. He has also occupied the positions of CFO and CEO at the airline. Rogers has also served as CFO/deputy CEO of Turkey’s Pegasus Airlines.

Croatia Airlines names new CEO Croatia Airlines has named Sreko Šimunovi as its new president and CEO after Ivan Mišet stepped down from the role. The appointment is for fiveyears. Previously, Šimunovi was VP, marketing, at the airline, having joined Croatia Airlines in 2002. Predecessor Mišeti spent almost 14 years at the helm of the company.

Mazur to take over Mikosz’s duties at LOT Polish Airlines Zbigniew Mazur is to take on the duties of president of the management board of LOT Polish Airlines, following the resignation of Sebastian Mikosz.

Embraer deliveries reach 44 during 3Q period Embraer announced that it delivered 44 jets during the 3Q and 154 from January to October. Of those delivered during the 3Q, 20 went to the airline market and 24 to the executive jets market. The manufacturer said the firm order backlog “remained stable” at $15.3bn, on September 30, 2010.

Air Lease firms order for 15 E190s Air Lease Corp has signed the final agreement for 15 E190s, a deal that was originally announced at the Farnborough Air Show in July. “This purchase order of the Embraer 190 aircraft begins a new period in the growth of our company,” commented John Plueger, president and COO of Air Lease Corp. Delivery of the first aircraft is scheduled for June 2011.

Cathay and JAL extend codeshare Cathay Pacific Airways and Japan Airlines have extended their codeshare arrangement to cover more destinations in Japan.

Cathay’s code will be placed on JAL’s flights between Haneda Airport and 10 Japanese cities, including: Asahikawa, Aomori, Hiroshima, Hakodate, Kochi, Kumamoto, Komatsu, Kagoshima, Kushiro, and Obihiro. The code will also extend to flights between Tokyo’s Narita Airport and Sapporo, and between Osaka and Okinawa and Sapporo.

Blue Air bankruptcy looms Romanian financial media has reported that Blue Air has failed to halt bankruptcy procedures against it. A Bucharest court has rejected the privately-owned Romanian carrier’s request to suspend insolvency procedures, citing the need to ensure the company’s debts are paid. Four creditors are claiming from the airline.

ICAO sets out CO2 reduction goals The International Civil Aviation Organisation (ICAO) has formalised the first global governmental agreement to curb aviation CO2 emissions. The resolution was reached between the 190 member states of the UN in Montreal on October 8, calling for fuel efficiency to be improved by two per cent per annum until 2050, and total aviation CO2 production to be capped by 2020. While the European Union (EU) endorsed the global scale of the ICAO resolution, it warned that the pace was too slow. The EU emphasised that the agreement did not jeopardise its emissions trading scheme (ETS) and that it will go ahead as planned.

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Icelandair

Birkir Hólm Guðnason became Icelandair’s CEO in May 2008.

Since then the airline has coped with a collapse of the country’s banking system and a volcanic eruption that had flights cancelled across Europe — but he tells Bernard Fitzsimons that the future, at least, looks bright.

ICELANDAIR:

AFTER THE

VOLCANO “THE MOST IMPORTANT THING IN THIS BUSINESS IS TO ADJUST very quickly to the external environment,” says Birkir Hólm Guðnason, Icelandair’s CEO. He speaks from experience. He has applied the principle so effectively that the airline’s restructuring and cost cutting in response to the economic crisis of 2008 was followed by its best ever operational profit in 2009: “And 2010 seems to be similar or better, despite the volcano erupting on us”.

Through the crises The 2008 restructuring led to the elimination of three SVP and six director positions. “We created a structure that was more lean and mean,” Guðnason says. “We have only four SVPs today instead of seven, and we laid off 380 people. We cut the capacity down 28 per cent while other airlines were cutting four to six per cent, but the passenger loss for the European airlines was maybe 20 or 25 per cent so they were losing a lot of money.” Other measures included consolidation of overseas offices, the closure of local call centres in favour of a single centre in Iceland, and the consolidation of back office support functions in the Iceland head office, relieving local offices of administrative tasks so they could focus on sales and marketing.

“We told the market and told our employees that we would be going through this cost cut to create a more competitive company cost-wise and we would become stronger out of it,” Guðnason recalls. “In 2009 we decided to go into Seattle with very short notice when we saw that SAS was pulling out after 47 years, and we’ve been flying Seattle now for over a year, five times a week.” Seattle is an attractive destination for Icelandair, he points out: “If you look at the flight plans of the European airlines to the US west coast, they all fly over Iceland. With our 757s we have the best cost structure; we are able to fly to Seattle from Iceland in seven and a half hours, which is the same flying time as Orlando, while the other carriers from Europe are flying big Airbus A340s with extra crew and extra pilots.”

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Having taken out the costs in 2008 and returned to profitability in 2009, the airline increased capacity by 13 per cent for 2010.

“The outlook was very good,” he says. “Before the volcano erupted [in April] we were 30 per cent up on bookings compared to the same time last year.” Ironically, during the following six days Icelandair continued to fly while the rest of Europe was closed. “We were flying every day because it was not affecting our airport, the ash clouds blew to the east. We were operating every day to the US and we operated to gateways in Europe that opened up.”

During those days, the airline used European airports such as Trondheim in Norway, Sundsvall in Sweden and Turku in Finland: “We flew five times in one day into Trondheim and five times one day into Glasgow.” Then, when Europe finally opened up, the airline had 18 hours notice that its own base was about to be closed.

“We decided to move our hub from Keflavik [Iceland] to Glasgow,” Guðnason says. “We moved the whole route network to Glasgow, we flew out crew, ground staff, check-in people – 200 people, and we operated in Glasgow while our international airport was closed.” So transatlantic passengers from New York to Amsterdam went via Glasgow instead of Keflavik, while flights to Iceland were maintained using an airport in the north of the country that remained open, and so Iceland was never cut off.

“That was basically something no other airline did,” he reflects.

“Of course it cost a lot of money, but the most important thing was first of all not to be locked in, it would hurt the image of Iceland. Secondly, we wanted to operate the whole time so that it didn’t affect the strong booking flow we had, and it never did.” The market to Iceland suffered, because people were afraid of travelling there while the volcano was erupting, but it is picking up now. “Then when we came out of it we had a very good summer, a very good transatlantic business and a strong market out of Iceland. It’s picking up. So even though we went through the volcanic eruption, we are able to maintain the 13 per cent capacity increase this year. We haven’t been cutting out any flights.”

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IATA described the 2008 economic crisis as the worst ever, and the subsequent volcanic eruption caused huge loses to the airlines.

“I’ve been with the company 10 years but [been its] CEO since May 2008 and I’ve been through two bigger crises,” says Guðnason.

“But the spirit here was never to give up and to operate at all times. All through the ash crisis, we were able to operate 85 per cent of our schedule on days when airports were closed, and 100 per cent when there were no clouds or closedowns. So that was pretty remarkable. But of course we were also lucky that it only lasted six weeks, because our staff were working 24 hours-a-day and resources were very tired. In retrospect we were lucky. If it had lasted three or six months we probably would have been locked in for a few days. It is controllable for two months, but for six months it would be more difficult.”

Flexibility is key Financial and volcanic rises aside, Guðnason says the most important factors in the airline business are variations in costs stemming from changes in oil prices, demand and currency rates.

Here again, rapid reaction is crucial, as it was after the banking system collapsed in 2008. “The situation was such that the Icelandic market collapsed, people travelling out of Iceland cancelled all their trips. We had huge cancellations. So what we did was change focus and find opportunities in it.”

The weak Krona represented a opportunity to increase the number of tourists to Iceland. “We took all the resources that were based in Iceland and put them into the foreign market. We managed to increase tourism to Iceland in 2009 by 10 per cent, and with higher revenue because of higher currency. Seventy five per cent of our revenue is foreign currency, because the home market is only 25 per cent, so the way you control it and steer it is very important.”

In terms of the route network, for example: “We took out frequency or destinations that had the greatest proportion of passengers flying out of Iceland, because that market collapsed.”

Capacity to Orlando and Glasgow was reduced, yet capacity to cities including New York and some in continental Europe were increased “because we saw opportunities for more passengers to Iceland.”

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“

The 757 is really the aircraft that fits the location of our country and our route network, You can reach the west coast of the US, you can reach Minneapolis and Orlando, and you can utilise it on the European legs as well. Maybe some new technology will be there, but if not then of course we will take two different sizes of an aircraft, but probably the same type.

– Birkir Hólm Guðnason, Icelandair CEO.

”

Future fleet Icelandair currently operates 12 757s – making its fleet the biggest it has been – and will add two more next year. Another eight aircraft on its AOC are used by fellow Icelandair Group subsidiaries, Icelandair Cargo and charter/ACMI operator Loftleidir Icelandic. The type is perfectly suited to the airline’s route network, Guðnason says, and there has been no decision yet on when, or what to replace them with.

“We have been meeting the manufacturers for the past two years. We know that by around 2020 the 757 will be fading out, and we are going through the work of reviewing what options we have.” In the absence of a direct replacement, it may not be possible to renew the fleet using a single type.

Revenue management is also important, Guðnason says: “Like many airlines, most of our cost is in dollars but most of our revenue is in European currencies, so what we do is steer it very dynamically”. That means opening more seats or increasing frequencies in response to changes in the Euro or Dollar rate.

Dynamic management of the route network involves monitoring the trend of flights three to six months in advance: “We cut out flights that are weak and we add to flights that are very strong.

But the steering and measurement tools we are using today are very strong, so from September last year, for example, we haven’t taken out any flights, because we have added capacity only into empty slots where we see opportunities for extra revenue.”

Experts and top management meet every week in a schedule committee to review the individual routes, their profitability and prospects, and decide on adding or reducing flights or destinations. The three to six month planning horizon means changes do not have to be implemented too quickly: “We want to do it well in advance. So every week we review the situation with the fares and currency changes, and then we adjust it if it changes by more than a certain percentage.”

Next year, Guðnason adds: “We are planning a 16 per cent growth in capacity. We see opportunities in the coming years. We are in a market in Iceland, that has problems in the economy, but 75 per cent of our business is transatlantic or foreigners travelling to Iceland, so we put all our focus on that and we see opportunites in that. The name of the game is to adjust very quickly to the changes in the alignment.” In 2008, for example, when fuel prices spiked “It was very important to cut costs, to be cost-competitive. Sometimes in the winter it was better to leave the aircraft in the airport than to fly it, because it would cost so much to fly it.”

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“The 757 is really the aircraft that fits the location of our country and our route network,” Guðnason elaborates. “You can reach the west coast of the US, you can reach Minneapolis and Orlando, and you can utilise it on the European legs as well.

Maybe some new technology will be there, but if not then of course we will take two different sizes of an aircraft, but probably the same type.” Yet nothing has been decided: “We might take a decision in two years to extend the 757 to 2025, or we might decide to start earlier and change everything in 2015”.

A single type fleet is preferable, Guðnason stresses: “You save a lot of cost in maintenance, a lot of cost in pilots, plus there is a great value in having a single type fleet in terms of inventory. The complications are fewer, it’s always more complicated to have two types, or aircraft from two different manufacturers.” A single type is also a limitation: “The 757 is not flying to the far west coast, we are not flying to Los Angeles or Asia, but that is basically not our strategy. We have been focusing on the east coast, mid-North America and Europe. That has been our business case.”

But, says Guðnason, that could change: “In 2015 to 2020 we might consider new markets outside our existing route network… If we saw a market in Los Angeles or Asia we would lease in an aircraft or buy an aircraft to fly it. But our business model is North America and Europe, and the 757 fits that market perfectly.”

Whatever the future holds, it is unlikely to be as challenging as Guðnason’s first two years as CEO. “It’s been a strange two years,” he comments, “and at the same time we’ve been trying to create a five to 10 year strategy for both the fleet and the operation. Basically, the situation of the company is that it’s more competitive now regarding cost and it came out of the volcanic eruption pretty strongly. So we are satisfied with the last two years despite everything that has hit us.”

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AFM70_Re-engine:AFM 68 B&B

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Re-engine programmes

Decisions by Airbus and Boeing on whether to re-engine their venerable A320 and 737 families have been driven by divergent views that appear to put the two OEMs at odds with both each other and themselves. Scott Hamilton reports.

John Leahy, Airbus COO of customers

SPLIT VIEWS: THE RE-ENGINE PROGRAMME DURING THE 2008 FARNBOROUGH AIR SHOW, JOHN LEAHY, Airbus COO of customers, dismissed the prospect that the A320 might be re-engined, declaring that airlines were uninterested.

Two years later, at the same forum, Leahy touted the A320 New Engine Option (NEO) as all but a ‘done deal’. The business case was made internally, he said. All that remained was to determine whether engineering resources could be released from the troubled A380 and A400M programmes and assigned to the NEO effort. This decision was to be made by the end of September but was delayed until mid-October, and later to the end of the year. At the time of going to press no announcement had been made.

Boeing is still weighing its decision on whether to re-engine or design and build a new aircraft. Like Airbus, it too has been unsure of the wisdom of a re-engine programme. Jim McNerney, CEO of Boeing, noted that a re-engine of the 737 would cost 2030 per cent of that for a new aircraft, however later said the business case was better than he had originally thought.

16| Airline Fleet Management

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Airline Fleet Management | 17

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The CSeries: A driving force in the decision to re-engine

Then Lufthansa Airlines ordered the Bombardier CSeries for its subsidiary, Swiss Air. Nico Buchholz, Lufthansa’s fleet planner, publicly stated that one reason was that he was tired of being captive to Airbus and Boeing and wanted to demonstrate there is an alternative. Another reason was his net present value analysis that showed receiving the CSeries in 2014 with 15 per cent cash operating cost improvement over today’s jets made more economic sense than waiting until what was then billed as a 2020-2022 entry into service (EIS) date for replacements of the A320s and 737s with goals of 16 per cent cash operating cost (COC) savings.

Given the company’s financial drain resulting from the troubled 787 and 747-8 programmes, aerospace analysts concurred that Boeing simply could not create a new aircraft, yet Jim Albaugh, CEO of Boeing Commercial Airplanes (BCA) has said that doing nothing was not an option. Albaugh, McNerney and James Bell, Boeing’s CFO have each said the value proposition for a re-engine programme is not enough for its customers and that they back a new-build aircraft. Although a decision on the future of the aircraft is still slated for year-end, Albaugh now says it could slip into early 2011.

Later Republic Aviation Holdings placed an order for 40 CSeries, plus 40 additional options. It was this order that made Airbus begin serious consideration of a re-engining programme.

Boeing has said it is more concerned over China’s COMAC new entrant 150-210 seat C919 than the 110-149 seat CSeries.

However, it has been suggested that this may be part of Boeing’s covert campaign to undermine market perception of the CSeries.

Indeed, BCA’s Albaugh reasoned that the consideration for a major production rate increase on the 737 was to avoid ‘driving’ orders to the CSeries. Boeing has since announced a rate increase to 38 737s a month and is said to be considering a further increase to 42 a month.

Competition: Bombardier’s CSeries Airbus and Boeing were quite content to continue with the status quo for the A320 and 737 families. The firms were preoccupied with programme difficulties involving the A380, A400M, 787 and 747-8; and for Airbus, the additional cash requirements for research and development of the A350. Although airlines complained about the price of fuel, its instability, and the risky nature of fuel hedging, as long as the duopoly remained intact there was little incentive for Airbus or Boeing to provide anything more than incremental improvements to their mainstays.

18| Airline Fleet Management

Southwest Airlines has been an exclusive Boeing customer since it began operations in 1971 and has ordered more 737s than any other customer, yet is has been in discussions with Bombardier about the CSeries, which competes directly with the 737-700 – the mainstay of Southwest’s fleet. In an interview at the 2010 Farnborough Air Show, Albaugh vowed to protect Boeing’s position with Southwest in the market that is covered by the 737700. As one supplier close to Boeing remarked: “Boeing does not underestimate Bombardier’s position in the single-aisle market.”

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AFM70_Re-engine:AFM 68 B&B

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of his position in the industry, added: “Remember this is without maintenance costs, and in a world with low margins of three to four per cent, lower DOC can decide between life and death over the long run. And if oil goes up, savings go up, too.

Also to be considered are extra costs including higher landing fees due to increased weight and additional training and spares required for a new engine in the system. Airbus’ Leahy says the list price premium for the A320 NEO will be half the net present value of the fuel savings, or $7m-$8m – a price that appraisers and potential customers find exceedingly high. Some note that when Boeing offered the 737NG, which was an 80 per cent allnew aircraft compared to the 737 Classic, the price premium was $2m-$3m – a figure at least one appraiser thought made sense prior to Leahy’s figure becoming public.

At UBM’s leasing conference in New York City in September, AerCap provided analysis that the A320 NEO only has $50,000/mo DOC benefit, according to Edward O’Byrne, head of portfolio management, or just $600,000 per year at current fuel prices. Over 25 years – the aircraft’s typical technological lifespan in passenger service – this is $15m. Of course if the aircraft does not fly for its full 25 years, this falls.

“

While re-engining improves the current products from Airbus and Boeing, our analysis shows that the CSeries has advantages even over a re-engined A319 and 737-700.

– Nico Buchholz, Lufthansa’s fleet planner

”

Economic benefits… or not Bombardier’s CSeries, as well as COMAC’s C919 and Irkut’s MS21, are all promoting COC improvements of 12-16 per cent.

However, these are clean-sheet designs with engines and airframes optimised for each other. Airbus and Boeing engineers face very different issues. The A320 is a 1980s design and the systems are essentially the same. The 737’s fuselage is a descendent of the 707, designed in 1954, and the basic 737 systems architecture dates to the 1960s, with incremental upgrades through the decades. The A320’s wing was advanced for its 1980s era. The 737NG’s wing is a decade younger yet each need work to accommodate the heavier engines represented by the Geared Turbo Fan (GTF) and the Leap-X. Additionally, the lower ground clearance of the 737 presents Boeing with special challenges to re-engine its aircraft. Engineers found ways to accommodate either the GTF or the Leap-X but it is easier with CFM’s smaller diameter and conforms to the exclusive engine supplier agreement between Boeing and CFM in the process.

Boeing says the direct operating cost benefit to an airline is just three to four per cent but Airbus’ reaction to that figure is less than supportive. Airbus says it can lower the COC by 15 per cent.

When the aircraft is also equipped with Airbus’ Sharklet wingtips, 3.5 to four per cent is added for the sharklets, the remainder for the engines. How can the two manufacturers come to such divergent numbers? Boeing declined requests for an interview for this article and Airbus regards its data as proprietary. A neutral, third party, calculates that with today’s fuel at about 40 per cent of COC, if an airline saves 15 per cent fuel it lowers its COC by about six per cent. The 15 per cent fuel savings would therefore result in direct operating cost (DOC) savings of three to four per cent. This same neutral, who required anonymity because

20| Airline Fleet Management

This figures compares with an estimated $1.77m cost savings on a 500nm trip with the CS300, according to Bombardier. CIT Aerospace’s John Savinsky, speaking at the same conference, said the A320 NEO would only bring performance to parity with the 737-800, a view expressed separately by Boeing.

Why re-engine?

If the benefits of re-engining are so low, why do it? Airbus and Boeing will say that customers demand it. But perhaps Airbus is more mercenary. At the Airbus Innovation Days in May, Leahy said flatly; “We don’t want to make the same mistake Boeing made with Airbus, and that is to not take Bombardier seriously”.

Airbus wants to kill the CSeries. Tom Williams, EVP of programmes, speaking at the same event, asserted more than once; “There is no business case for the CSeries if the A320 [family] is re-engined.”

However, Lufthansa’s Buchholz disagrees; “While re-engining improves the current products from Airbus and Boeing, our analysis shows that the CSeries has advantages even over a reengined A319 and 737-700.” He added, “We have told Airbus that if they re-engine, they should first start on the larger aircraft moving down later, i.e. first the A321 and then the A320.

The larger the aircraft, the greater the benefit.”

A lessor believes another motivation for Airbus to re-engine the family is that the A321 and A320 sometimes have load restrictions against high headwinds across the US transcontinental routes. Leahy responds that Sharklets will solve this without the need to re-engine. Airbus views that technological advances great enough to justify a new aircraft will not converge until 2025 or later, so re-engining now makes sense.

There was, and still is, a faction within Airbus that was not convinced the business case for re-engining makes sense. Aside from whether Airbus has the resources to take on a derivative programme, the value proposition is a matter of debate. For Boeing, the cost is as much as three times higher for the derivative than Airbus estimates for its A320 NEO, but Boeing is also faced with a major revamp of its 777 to meet the A350 competition. So it could well have other reasons (such as cash requirements) to avoid taking on two major derivatives while the 787 and 747-8 programmes remain challenging.

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AFM70_Re-engine:AFM 68 B&B

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Steve Peck, director of product and market strategy for aerostructures at Vistagy, which analyses software-composites does not see an issue with downsizing composites but rather the ability to deliver 40 A320/737 class aircraft per month for each of the two big OEMs. “Even down to the business jet-size of airplane, the technology has some real application that is out there now. We have crossed that point where technology has started to prove itself,” Peck says.

Technology: big bet on engines, differing view on composites

Jim Albaugh, CEO of Boeing Commercial Airplanes

The big driver in reducing fuel costs is, of course, engines.

Airbus and Boeing differ sharply on the future. Clearly, Airbus is betting that the open rotor will be the engine of the future, and this technology will not be ready until 2025-2027, or even later. “It may not be the open rotor as we know it today,” Airbus’ Leahy said during the Innovation Days in May. Rolls-Royce appears to be betting on the Open Rotor even as it develops the RB285 three-stage conventional engine. As the RB285 is not getting any traction with Airbus or Boeing, RollsRoyce may have little choice but to place its bet on the open rotor.

Airbus said Rolls-Royce was out of the running for a re-engine option and since then the engine company has claimed there is no business case for it to re-engine an aircraft and is talking down the features of Pratt and Whitney’s GTF. Boeing, however, does not like the open rotor. Albaugh, along with his senior advisory group, which includes the legendary Joe Sutter, have little good to say about the concept. Sutter expresses open disdain for the engine: “You don’t [and won’t] see propellers on Boeing airplanes,” he said during a preFarnborough press briefing.

As noted, Airbus believes technologies are not ready to converge for at least another 15 years to justify a new aircraft. This technology includes composites for the fuselage of the smaller, 150-210 class of aircraft; advanced engines; other aircraft architectures; and major advances in air traffic management, combining to permit 30-40 per cent reduction in DOCs. Boeing’s Albaugh does not believe the fuselage technologies are that far away. In an interview during the Farnborough Air Show, he said, without being specific, that Boeing could use a number of technologies that would allow a 737 successor to be ready for EIS by 2020.

This contrasts with Airbus’ view that downsizing composites from the 787 to the smaller A320/737 class is not yet possible. Boeing’s Randy Tinseth, VP of marketing, expressed a similar view in March, saying that getting the same weight-savings as the 787 would require a thinner composite that would not withstand bird and hail strikes.

Airbus and Boeing note that Mitsubishi abandoned composites for critical elements of its MRJ 70-90 passenger regional jet because downsizing and construction was more difficult than the benefits. Bombardier is using advanced aluminum lithium for the fuselage of its 100-149 seat CSeries, which dimensionally is roughly similar in size to the A319-320 and 737-700.

22| Airline Fleet Management

Residual value risk Many fear re-engining will accelerate the depreciation of today’s A320/737 families and that it will likewise result in steeper declines in residual values as the replacement aircraft approach EIS. The A320 first entered service in 1988 and it will be 27 or 28 years old when the A320 NEO is projected to enter service in 2015 or 2016. The A320 has had a series of incremental upgrades though a major refresh is needed and Boeing’s 737 family generally outperforms the A320 family in range and economics.

By definition, the A320 NEO is already an interim aircraft. With a projected EIS of 2015 or 2016, the A320 NEO faces a 10-12 year period before the assumed EIS of the A3XX replacement. This creates a lot of hand-wringing, but the timeline is not without precedent. The 737 Classic entered service in 1988; the 737NG EIS was 1998, and the 737NG was 80 per cent new despite retaining the 737 name. RVs of the Classic suffered, but did not drop off the cliff.

But unlike the 737NG, Airbus’ Leahy has so far been adamant that the A320 NEO will have 95 per cent in common with the current aircraft, which is both an advantage and disadvantage.

The commonality simplifies maintenance, but not providing major systems upgrades means the A320 is a compromise.

Appraisers have long been more favorable of the 737 for RV, much to the annoyance of Airbus. This is partially due to Airbus’ policy to maintain production rates during downturns, which appraisers believe leads to an oversupply in the market and depressed prices. Airbus disputes this view but moreover, the A320 carries slightly fewer passengers than the 737-800 and it has two engine choices (CFM56 and IAE 2500) versus just the CFM56 for the 737. The prospect that Airbus might offer four engine choices for the A320 family causes appraisers to roll their eyes in disbelief.

Given the continued disarray in the 787 and 747 programmes, it seems unlikely Boeing will undertake an entirely new aircraft effort now. Information suggests it is most likely to re-wing the 777 with a composite design including a composite centre wing box. Aerodynamic improvements and engine upgrades also appear certain but as of today, re-skinning the aircraft with composites does not seem likely.

If Boeing undertakes the 777 enhancements, incremental improvements in the 737 are likely to happen first. As Boeing believes the net DOC gain for the NEO is only three to four per cent, it is perhaps the case that more could be squeezed out of the 737 through further refinements. One source suggested that a composite floor might be offered to reduce weight, but one engineer believes that the weight saving on the 777 is 300lbs, so it will be substantially less for the 737. Yet every pound counts and a little bit here and there would go toward achieving that three to four per cent DOC gain without the expense of reengining the 737.

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AFM70_TLF Stored Aircraft:Repossession

TRADING, LEASING & FINANCE

5/11/10

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Stored aircraft

In the past, airline recoveries were accompanied by a glut of capacity returning to market, either through overexuberance on the part of new operators or the frantic efforts of established players to retain market share.

Usually, this meant a marked drop in the number of stored aircraft. The turnaround in 2010, however, has been different. Alex Derber reports.

CAUGHT IN THE SAND NOTHING EVOKES AN AIRLINE SLUMP BETTER THAN RANKS OF parked aircraft dotting the lifeless Arizona desert – the army of hulking, impotent machines a silent reminder of good times turned sour, failed ambition and the transience of technology.

One might presume, therefore, the opposite to be true; that recovery would see the parked regiments shed units, leaving only the most decrepit to the sand. With demand rising again, one expects airlines to add capacity, restoring mothballed aircraft as they do so.

However, no big reduction in stored aircraft has occurred. Figures from OAG show 2,391 parked aircraft in September 2010, compared with 2,485 in 2009. At the same time in 2008, there were only 1,965. Ascend calculates its figures slightly differently to OAG, but nonetheless paints a similar picture with 2,366 aircraft stored in October 2010, versus 2,409 at the beginning of the year.

There are several reasons why the figures do not accurately reflect industry fortunes. The first, as one might expect, is a degree of lag due to the time taken in getting aircraft in and out of storage. Over the last decade there have been two peaks in stored aircraft numbers. It took until 2003 for the full effect of capacity cuts caused by September 11 to feed through the system and, combined with the effect of SARS in Asia, push the parked total to an all-time high of 3,100. Seven years later, in 2009, stored numbers peaked again, but still a year after fuel prices had plateaued in mid-2008.

Rob Shaw, director of analytics products at OAG, says: “It’s only when things are going bad, and going bad for a prolonged period that airlines start looking at their network and fleet plans

24| Airline Fleet Management

“

Well over two-thirds of the stored fleet is not really stored – it’s waiting for the scrap man.

”

– Chris Seymour, head of market analysis, Ascend and start thinking seriously about how they will shed some capacity. Most airlines tend to shed their leased aircraft first as that can offer the most flexibility as storage can be costly.”

But even if storage totals do roughly reflect industry cycles, albeit with a time delay, they can also be misleading because many parked aircraft are so old, and have been static for so long, that they are effectively retired. Chris Seymour, head of market analysis at Ascend, believes that a big majority fit this description.

“Well over two-thirds of the stored fleet is not really stored – it’s waiting for the scrap man,” he says. “Aircraft that are at least 20 years old and have been parked for over two years are not going to come back, even for freighter service.”

AFM70_TLF Stored Aircraft:Repossession

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Narrowbodies Seymour estimates that only 12 per cent of parked aircraft are current generation types. Because of this, he feels that storage totals are becoming an increasingly unreliable barometer of airline fortunes. If he is right, it will require a significant uptick in aircraft scrappage and recycling capacity to trim numbers to a total that can confidently be factored in when assessing not just economic cycles, but aircraft lease rates and values.

At OAG Shaw agrees that part of the analysis is about “trying to remove the noise of those aircraft that just get placed out forever”. The data is best used, he believes, when one refines it to look at aircraft type and operator. “When you see people like BA, Singapore and American start to put aircraft into storage it adds more value to the numbers,” he comments.

Yet despite the welter of rusting dinosaurs in the stored ranks, there is solid evidence that a sizeable number of aircraft remain parked because of impressive capacity restraint on the part of airlines. Two downturns and a fuel price crisis in one decade appear to have curbed over-exuberance in the industry, and with a recovery underway, fleet planners are allowing load factors to creep up to record levels, while resisting the temptation to recall aircraft.

Take, for instance, the A320: along with the 737, it is the backbone of the modern fleet, and one would expect it to be the first recall of any airline executive responding to a surge in demand. Yet there are more A320s parked now than in 2009 – 60, according to OAG data.

But whether that is entirely due to capacity restraint is debatable, counters Seymour. “You tend to forget with the A320 that it’s a new technology aircraft, but it’s been around for about 25 years now and a lot of the early aircraft – A1s, the early engine ones – are being replaced and retired as well,” he adds.

Shaw agrees: “The A320 was launched back in the 1980s and there are different build types as you go along. You’ll find that those aircraft that went out to storage were of the older generation and therefore have a lower market value.”

The 737NG line is half the age of the A320 line, and the analysts’ points are borne out by its storage numbers, which have reduced in 2010 – from 28 to 16 aircraft, according to Ascend data.

However, as with the A320, there is a limit to how much one should read into this as in-service numbers eclipse the tiny fraction parked.

Airline Fleet Management | 25

AFM70_TLF Stored Aircraft:Repossession

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HISTORICAL STORED AIRCRAFT REPORT (shown averaged per period) as of September 15, 2010 Summary by Aircraft Category Category Aircraft Type 2001 A Jet Aircraft 1069 B Turboprops 973 C Executive Jets 83 D Russian Aircraft 256 *Total* 2381 Summary by Equipment Type Equipment Group (selected types) 2001 A300 44 A320 38 A330 24 ATR 50 B717 2 B727 162 B737 132 B747 82 B757 8 B767 22 B777 2 BAE146 16 CRJ 23 DC10 93 DHC8 21 EMB120 38 EMB145 6 ERJ170 SAAB340 43

2002 1572 1121 95 244 3032

2003 1615 1171 86 234 3106

2004 1366 1148 79 242 2835

2005 1200 1013 85 202 2500

2006 1164 855 78 189 2286

2007 825 679 86 169 1759

2008 981 673 131 180 1965

2009 1502 618 120 245 2485

2010 1508 551 95 237 2391

2002 56 61 21 64 19 306 280 89 24 40 4 34 26 93 34 67 9

2003 63 68 18 80 8 335 238 101 37 61 8 44 10 99 60 108 5

2005 32 23 5 33

2006 36 18 6 24 6 152 177 70 19 56 5 61 93 51 26 56 5

2007 29 12 7 16 4 115 123 53 6 36 4 58 40 32 23 31 5

72

105

2004 48 32 10 55 3 263 170 98 25 62 8 46 22 87 58 99 12 1 104

85

58

2008 36 22 7 21 6 92 179 57 24 42 4 56 38 31 40 26 37 5 47

2009 73 51 21 40 11 84 284 101 51 57 5 63 68 46 29 30 83 10 68

2010 80 60 37 37 8 64 296 99 45 53 6 68 59 49 27 31 78 6 64

201 160 84 20 53 1 46 24 63 42 81 14 1 105

Source: OAG

Ageing warhorse the MD80 has fared pretty well in 2010, with 45 aircraft coming out of storage during the year to October.

That still leaves several hundred parked, but Seymour points out that with the type’s values so low, “it is probably the cheapest to buy or lease for a 150-seater so it does have some appeal”.

Widebodies “Most of the 747 Classics won’t come back,” comments Seymour. “On top of that, 747-400s are still being replaced by 777-300ERs, very few are being converted and there’s no real secondary passenger market. We’ve started seeing part outs: we had the first last year with an Air New Zealand machine and there will be some more this year. Again, there are more efficient aircraft out there. We’ve seen values and lease rates coming down and there’s probably further to go.”

Regional Aircraft The fuel crisis of 2008 was a hammer blow to many regional jets, whose per-seat economics dropped through the floor. The struggles of the US majors only accelerated their exit from the fleet, as mainline carriers began slashing capacity purchase deals with regional partners. Between 2008 and 2009, the number of CRJ100/200 and E145 series aircraft in storage doubled to 140 aircraft. A few of those machines have returned since, but Mexicana’s bankruptcy has added 15 CRJs to the stored total. On top of this, the decision of Delta-owned Comair to retire all of its 72 CRJ100/200s will soon mean a steady stream of the ageing regional jet into the desert.

So, a gloomy picture for the 747, which – despite some recalls

by British Airways – will only deteriorate when bankrupt Japan Airlines sheds its fleet of 21 747-400s. OAG shows roughly 100 747s of all types in storage, almost double the 2008 total, while Ascend reports 69 747-400s parked to date, five more than at the beginning of the year.

Airbus’ most venerable widebody, the A300/A310, has also seen storage numbers creep up in recent years, as airlines opt for more efficient types and even freighter operators begin to explore alternate opportunities with the 767 and A330.

Delays to the 787 programme have meant a longer lease of life for the larger 767 types, with -300ERs coming back into service over 2010. The A330 remains popular, with only a handful in storage, though the A340 has fared less well, and less than 10 777s are categorised as stored by both OAG and Ascend.

26| Airline Fleet Management

Though scrappage does occur, analysts feel that some aircraft have been parked for so long that they will never return to service and are effectively retired.

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AFM70_TLF Stored Aircraft:Repossession

5/11/10

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“

What’s needed is not just the place to store but also a facility to look after aircraft and do some maintenance on them if they fly out again. The facilities make their money on looking after the aircraft, not just on the parking fee.

– Chris Seymour, head of market analysis, Ascend

”

Ownership and location At a rough estimate, about 250, or 10 per cent, of the stored fleet belong to banks. With the wave of airline failures triggered by the economic downturn, this is unsurprising, but Shaw expects the number of bank-owned aircraft to fall.

The ultra dry conditions of America's deserts are ideal for aircraft storage

“CRJs have been hit by cutbacks in the US market so it’s a bit of a one-way street there and I can see more part-outs occurring.

Scope clauses were a factor – airlines would have liked more 7090-seaters but they couldn’t because of scope clauses,” comments Seymour.

In Europe, the BAE146 has hung on with more success than the CRJ in North America, albeit in smaller numbers than the Bombardier type: parked BAE and Avro RJ aircraft have hovered around the 60-mark since 2006, according to OAG. Shaw comments: “The 146 is used for short take-off and landing in places like London City. I wouldn’t expect to see a huge increase in stored numbers because there are not a lot left out there and those that are, are some of the workhorses for niche passenger and freighter operations.”

Turboprops are also staying in service quite successfully. From around 1,000 in storage in 2005, numbers have fallen to 550 today by OAG’s count, 720 according to Ascend – the difference accounted for by Ascend’s inclusion of smaller-capacity turboprops in its count. Modern iterations of the dominant types – the ATR42/72 and Bombardier Q400 – are staying with operators, with older types accounting for the 64 recorded parked in September 2010, little change on the year-ago period.

Aircraft parked in the Mojave desert

28| Airline Fleet Management

“Up to 2008, lots of banks were getting involved in aircraft leasing. But come the financial crisis they clamped down and several leasing firms were sold as separate companies or disbanded completely. Banks must decide how they want to progress strategically and in the short-term aircraft leasing won’t be a priority for them. Longer term we may see banks coming back into the market as liquidity improves,” he says.

Wells Fargo is the bank that appears most often on the title deeds of parked aircraft, and many of its assets are in the Arizona desert, one of the driest spots on earth and, as such, ideal for mass aircraft storage. The three largest storage sites in the world are Marana, Arizona; Roswell, New Mexico; and Victorville, California, which between them hold almost 400 aircraft. By contrast, the three biggest non-US sites – Mexico City, Johannesburg and Moscow – account for only 63 aircraft.

Although there is some potential in terms of climate and space for new sites to develop outside the US – in Africa’s deserts, for example – Seymour does not see this happening for quite some time. “What’s needed is not just the place to store but also a facility to look after aircraft and do some maintenance on them if they fly out again. The facilities make their money on looking after the aircraft, not just on the parking fee. So I don’t think there’s much demand for an all-new facility. The US sites are well established and are the main places to keep an aircraft preserved for what could potentially be a long period.”

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AFM70_TLF2 ISTAT:ISTAT

4/11/10

16:54

TRADING, LEASING & FINANCE

Page 30

ISTAT

…

There are no more than 15 active banks in the market and they will not be able to meet the $1.7bn needed in commercial loans each year. Buyers will continue to depend on ECAs support yet how long they can continue to do that?

– Jose Abramovici, head of aviation finance, Credit Agricole

30| Airline Fleet Management

…

AFM70_TLF2 ISTAT:ISTAT

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Page 31

How is ECA support lowering the economic life of aircraft?

When will banks return to financing? And who actually wants the re-engining programme to become a reality?

Mary-Anne Baldwin reports from the recent ISTAT European conference in Munich at which leaders in the aviation industry tackled some of the big questions.

QUESTION TIME AT

ISTAT Steven Udvar-Hazy, CEO of Air Lease Corp

Financing: the return of banks Jose Abramovici, global head of aviation and rail finance, Credit Agricole said he is “not very optimistic about the number of banks coming into the market,” and Fraser Chestney, assistant GM at Sumitomo, Mitsui Banking Corporation agreed, saying that while “we’ve seen signs of a few commercial banks coming back,” the rate of return is slow.

One bank to have returned to aircraft financing however, is Deutsche Bank. Pamela Smith, MD global head of aviation at the company said the reason for this is that “aircraft are far less volatile than shipping or real estate assets over a long-term period… It takes longer for the downturn to come through on lease rates.” Smith says that the market will not reward you with quick and easy money, but long-term investments are worth while. “If you come in on the right loan-to-value you will not loose money, though if you’re in it for the short-term you might loose out. You have to be able to sit it out,” she says.

According to Smith, there are “local pockets of liquidity” returning to the industry, particularly in China. But she adds that the financing rarely extends outside of the country. “I don’t think there will be a huge amount of capital coming back,” she says, and Europe and the US will continue to be wary.

Abramovici estimated that there are no more than 15 active banks in the market and that they will not be able to meet the $1.7bn needed in commercial loans each year. He believes buyers will continue to depend on ECAs support yet he raised concern over how long they can continue to do that.

ECA financing: friend or foe?

Andrew Dewney, MD of HSBC agrees that ECA support is still essential. “There isn’t enough capacity in commercial banks yet,” he said. Yet a market heavily supported by ECA financing has its disadvantages. Like any wise investor, ECA’s will look to support lucrative investments with the highest return – as such new and desirable aircraft are in; used and older aircraft are out. This has caused a disproportionate number of new aircraft deals compared to old.

Airline Fleet Management | 31

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predict with a lessor rather than an airline as your customer, he added that “the lessor adds one other layer of protection.”

“

When I look at all issues and all complexities [of reengining], it’s hard to see a meaningful benefit to the industry other than in terms of the environment and noise emissions… in terms of bottom-line benefit to owners of the aircraft, to operators of aircraft, it’s a very slim margin.”

– Udvar-hazy

”

The speakers agreed that ECA support is flooding the market with new aircraft while older aircraft are becoming increasingly hard to finance. Indeed many airlines that were only able to take secondary or tertiary leases prior to the downturn have been able to buy new aircraft with ECA funding. It is estimated that aircraft manufacturers are now producing at a rate that is 49 per cent above the median of recent years – a result of ECA investment.

Of course, this is of benefit to those airlines that are supported in buying only the best equipment, but others argue that it is creating an imbalanced market as these airlines have the edge over those that invested in older aircraft or invested heavily in newer aircraft some years ago.

The phenomenon is likely to be long-term. According to Steven Udvar-Hazy, CEO of Air Lease Corp at a retirement rate of two per cent, 23 per cent of today’s fleet will be retired by 2020, however the demand growth rate for aircraft with 100-seats or more will increase from 19,000 in 2010 to 25,000-26,000 in 2020.

While aircraft are built with a lifespan of 25 years for tax purposes, many are not reaching that age before they pass into retirement. It was commented that a number of 2004-built A319s have already been parted out and the overall shortening economic lifespan of aircraft will continue to dent lessors’ profits.

Speaking from the floor at the conference, a member of Airbus was quick to comment that there is ‘no trend’ for declining aircraft life and that the value of an aircraft in terms of its lifespan has not changed. But while most aircraft can run for as long as they were intended, often they do not – there is a disconnect between an aircraft’s technological lifespan and its economic one. Airbus will argue that older aircraft can and will be placed in markets that continue to grow and in those that typically take older aircraft at lower prices. However, it is these non-EU, nonUS, ‘emerging market’ countries that are increasingly booking orders for new aircraft. Also the rate of aircraft that have been placed into storage shows that the second-hand market is certainly less than vibrant.

In this respect, the downturn has brought unexpected benefits to some airlines, but what about lessors? With ECA financing having been so significant, have airlines been able to side-step lessors and buy aircraft directly from the manufacturers? Those on the leasing panel said that airlines are buying more new aircraft but the leasing business is still strong. And according to the self-named ‘godfather’ of leasing, Udvar-Hazy, less than one per cent of the world’s fleet was on an operating lease in 1970, yet this has risen to 34 per cent of the world’s jet fleet and is set to rise further to 45 per cent by 2020.

Those on the financiers’ panel were united in believing that lending to lessors was preferable to lending to airlines. Chestney commented that fluctuations in asset value are much easier to

32| Airline Fleet Management

“We’re a big fan of lessors,” commented Ambramovici, qualifying that lessors typical have a higher financial rating than airlines.

Re-engining: Who wants it?

Heavily debated during the ISTAT conference was the proposed re-engine programmes of both Airbus and Boeing and the effects they might have on the market.

Airbus gave no confirmation on their ‘NEO’ re-engine programme and it seems Boeing is content to let Airbus make the first move. “To focus on competition is to be mediocre,” were the sentiments of Randy Tinseth, VP marketing communication, Boeing. “What’s key is not to be first to market, not be a fastfollower, but to be best to market.” On the 777, he said Boeing would make a number of improvements with re-engining a possibility and that Boeing will have a decision on this aircraft by the end of next year, but added: “At the end of the day we will bring a new airplane to the market.” On re-engining for the 737 Tinseth said: “We’ve gotten a mixed result... some say, ‘do whatever you can today to improve performance of the plane.’

Others have said the business case just doesn’t close. Now we’re taking our time to be sure we do the right thing.”

What is certain is that many in the industry are unsold on the idea. Criticism came from Steven Aliment, VP European sales at Bombardier who said that Boeing’s projected 15 per cent fuel savings would equate to seven or eight once drag and weight are considered. “For a product that will fly for about eight years, that doesn’t make sense,” he said.

Udvar-Hazy agreed and said from a lessors’ perspective there is likely to be little financial reward. According to his calculations with costs including insurance, spares and lack of commonality, the 2.5 per cent cost efficiency to airlines (half the total five per cent lower fuel costs resulting from the 15 per cent better fuel efficiency, according to Boeing) would become an ever “slimmer margin”. He added that he sees little other advantage than “some PR benefit to the outside world.” He said: “When I look at all issues and all complexities, it’s hard to see a meaningful benefit to the industry other than in terms of the environment and noise emissions… in terms of bottom-line benefit to owners of the aircraft, to operators of aircraft, it’s a very slim margin.”

Klaus Heninemann, CEO AerCap surmised: “It may simply be a rate that is too low to be effective.”

From an engine leasing perspective, Jon sharp, CEO of ELFC, said engine values are “all over the place”. The lessor invests in engines that would potentially be affected by the programmes.

“So this has become a concern to us. Do we have to start accelerating our depreciation on those engines because their obsolescence has been accelerated?” He complained of “huge amounts of uncertainty” regarding where to invest while Boeing and Airbus “prolonged this soap opera.” He added that ELFC passed on many deals throughout the year as lease rates have been poor and “there are no deals around.”

In terms of valuations, Charles Willis, CEO of Willis Lease Finance said he would be more concerned if he were the owner of the airframes as at the end of an aircraft’s life, the airframe’s worth is dependant on the value of the engine. “Going forward I think it depends on what price they offer those engines and airframes at.

If they offer them at a much higher price then that probably won’t have much of an affect on current residual values but because they have to be competitive. I don’t know if that will be the case.”

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AFM70_Deals:AF&NM Special Feature

5/11/10

DEALS NEWS & BANK RANKINGS

10:07

Page 34

September 1st to October 27th, 2010

FLEET FINANCE – Deals report Equipment Model

New Owner/ Operator

Previous Owner/ Operator

Serial No. or No. of (Orders)/(Options)

Engine Model

Date of Manf or First Exp Deliv

Equipment

Date

Sub-Leased Sold Leased Sold Leased Sold Sold Sold Returned Sold Sold Returned Returned Returned Returned Returned Returned Sold Leased Returned Returned Returned Returned Leased Leased Returned Sold Sold Leased Returned Returned Returned Leased Returned Leased Leased Leased Returned Leased Repossessed Sold Leased Delivered Returned Returned Returned Sold Delivered Leased Leased Delivered Sale-Leaseback Returned Returned Returned Delivered Sold Leased Returned Delivered Sale-Leaseback Delivered Sold Leased Returned Returned Returned Returned Delivered Delivered Delivered Delivered Delivered

2010.09.01 2010.09.16 2010.09.24 2010.09.16 2010.09.01 2010.09.21 2010.09.21 2010.09.21 2010.09.09 2010.09.09 2010.09.09 2010.09.09 2010.09.09 2010.09.09 2010.09.11 2010.09.11 2010.09.13 2010.09.17 2010.09.17 2010.09.17 2010.09.11 2010.09.19 2010.09.30 2010.09.24 2010.09.23 2010.09.26 2010.09.29 2010.09.03 2010.09.30 2010.09.28 2010.09.28 2010.09.28 2010.09.07 2010.09.28 2010.09.08 2010.09.11 2010.09.17 2010.09.22 2010.09.25 2010.09.22 2010.09.29 2010.09.29 2010.09.23 2010.09.28 2010.09.29 2010.09.28 2010.09.28 2010.09.30 2010.09.01 2010.09.01 2010.09.13 2010.09.15 2010.09.15 2010.09.11 2010.09.15 2010.09.21 2010.09.28 2010.09.28 2010.09.15 2010.09.23 2010.09.24 2010.09.22 2010.09.22 2010.09.22 2010.09.04 2010.09.10 2010.09.16 2010.09.17 2010.09.30 2010.09.27 2010.09.30 2010.09.30 2010.09.28

Aircraft Transactions September 1st to October 27th 2010 Boeing 737-236 737-230 737-230 737-230 737-228 737-3b7 737-3b7 737-3b7 737-322 737-322 737-322 737-3l9 737-3y0 737-3y0 737-3m8 737-36n 737-33a 737-3h4(W) 737-3h4(W) 737-36n 737-36n 737-36n 737-306 737-306 737-33v 737-448 737-406 737-4q8 737-4q8 737-48e 737-48e 737-48e 737-46j 737-45d 737-45s 737-45s 737-45s 737-45s 737-45s 737-73s 737-76q(W) 737-76q(W) 737-7k2(W) 737-7bx(W) 737-7bd(W) 737-7hf(W) 737-7hf(W) 737-7afc(W) 737-8s3 737-8s3 737-823(W) 737-823(W) 737-8as(W) 737-8as(W) 737-8as(W) 737-8u3(W) 737-8q8(W) 737-8q8(W) 737-8q8(W) 737-823(W) 737-823(W) 737-8fz(W) 737-8fz(W) 737-8fz(W) 737-8q8(W) 737-8q8(W) 737-8bk(W) 737-8bk(W) 737-823(W) 737-881(W) 737-8as(W) 737-8as(W) 737-8as(W)

Interlink Airlines Canalgrange Rutaca Canalgrange Trigana Air Service Midamerican Aerospace Midamerican Aerospace Midamerican Aerospace Security Pacific Unknown Brickell Asset Mgmt Unknown Celestial Celestial Eighth Waha Lease Celestial AWMS I US Bank Southwest Airlines Celestial AFT Trust Celestial KLM Kenya Airways Air Nigeria Calima De Aviacion Bank Of Utah Aersale Nok Airlines Saga Airlines ARN ARN Rak Airways Celestial Utair Aviation Utair Aviation Utair Aviation Sabaka Utair Aviation Elviria Leasing Wells Fargo Southwest Airlines KLM ACG Enerjet Unknown Hanwa United States Navy Saga Airlines Saga Airlines American Airlines American Airlines CIT Blue Air CIT Garuda Airways Wells Fargo Sun Country Airlines Miami Air International American Airlines American Airlines Delta Air Lines Babcock & Brown Malaysian Airline System Miami Air International Shrewsbury Aircraft Leasing CIT CIT American Airlines All Nippon Airways Ryanair Ryanair Ryanair

34| Airline Fleet Management

Safair Wells Fargo Canalgrange Wells Fargo Wells Fargo Aircraft Stat Trust Aircraft Stat Trust Aircraft Stat Trust United Air Lines Wilmington Trust Unknown Sama Airways Sama Airways Sama Airways Sama Airways Sama Airways Blue Air Wachovia Bank US Bank Viking Airlines Sama Airways Viking Airlines Kenya Airways KLM Celestial Air Algerie Wells Fargo Bcc Leasing MSA V Atlasjet Atlasjet Saga Airlines Twelth Waha Lease LOT Polish Airlines Bowlik Bowlik Bolisa CSA Czech Airlines Sabaka Star1 Airlines Wells Fargo Wells Fargo Boeing Virgin Blue Transavia Airlines White Sapphire Bank Of Utah Boeing Sunrock Sunrock Boeing Wilmington Trust Blue Air Travel Service Airlines Blue Air Boeing ILFC Wells Fargo TUI Airlines Boeing Wilmington Trust Boeing Delta Air Lines Babcock & Brown TUI Airlines Blue Air Blue Air Norwegian Air Boeing Boeing Boeing Boeing Boeing

21790 22121 22121 22124 23007 23379 23380 23381 24301 24301 24301 24570 24680 24681 25016 25138 27267 27935 27935 28560 28563 28567 28719 28720 29342 24474 24529 24703 24707 25773 25773 25775 27213 27256 28473 28474 28476 28477 28477 29083 30280 30280 30369 30744 33920 35977 35977 40574 29246 29247 29556 29556 29925 29926 29926 30149 30332 30332 30670 31105 31105 31779 31779 31779 32799 32841 33019 33022 33214 33899 34980 34981 34983

JT8d-15a JT8d-15 JT8d-15 JT8d-15 JT8d-15a CFM56-3b2 CFM56-3b2 CFM56-3b2 CFM56-3b1 CFM56-3b1 CFM56-3b1 CFM56-3b2 CFM56-3b1 CFM56-3b1 CFM56-3b2 CFM56-3b2 CFM56-3c1 CFM56-3b1 CFM56-3b1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3b1 CFM56-3b2 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-7b22 CFM56-7b24 CFM56-7b24 CFM56-7b20 CFM56-7b20 CFM56-7b20 CFM56-7b27 CFM56-7b27 CFM56-7b20 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b24 CFM56-7b24 CFM56-7b24 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b27 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b24 CFM56-7b24 CFM56-7b24

1979-08 1980-11 1980-11 1980-11 1983-02 1987-02 1987-03 1987-05 1988-11 1988-11 1988-11 1989-12 1990-09 1990-09 1991-01 1991-10 1994-03 1996-04 1996-04 1997-04 1997-07 1997-11 1997-08 1997-10 1999-10 1989-06 1989-08 1990-02 1991-05 1997-06 1997-06 1997-08 1994-02 1994-02 1998-03 1998-04 1999-02 1999-11 1999-11 1999-09 2001-11 2001-11 2010-08 2001-10 2005-06 2006-08 2006-08 2010-09 2000-01 2000-01 2010-08 2010-08 2000-05 2000-11 2000-11 2010-08 2001-01 2001-01 2004-03 2010-08 2010-08 2010-08 2010-08 2010-08 2004-02 2005-04 2004-04 2005-02 2010-09 2010-09 2010-09 2010-09 2010-09

AFM70_Deals:AF&NM Special Feature

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Equipment Model

New Owner/ Operator

Previous Owner/ Operator

737-84p(W) 737-84p(W) 737-8eh(W) 737-8hx(W) 737-8hx(W) 737-8hx(W) 737-8u3(W) 737-8u3(W) 737-85c(W) 737-85c(W) 737-85c(W) 737-84p(W) 737-84p(W) 737-8jp(W) 737-8jp(W) 737-8bk(W) 737-8bk(W) 737-8fe(W) 737-8jp(W) 737-8kg(W) 737-8kg(W) 737-8kg(W) 737-8kg(W) 737-8as(W) 737-823(W) 737-823(W) 737-823(W) 737-8hc(W) 737-866(W) 737-8d6(W) 737-8jp(W) 737-8fh(W) 737-8fh(W) 737-8c9(W) 737-85c(W) 737-9gper(W) 737-9fger(W) 737-9fger(W) 747-269b 747-269b 747-2u3b(F) 747-236b(F) 747-446 747-446 747-446 747-412 747-422 747-412 747-446 747-446 757-2s7 757-2s7 757-2g5 757-2g5 757-23a(Etops) 757-23a(Etops) 757-28a(Etops) 757-236 757-2q8(Etops) 757-2y0 757-29j 757-2z0 757-2q8(Wetops) 757-2q8(Wetops) 757-28a 757-28a 767-281 767-281 767-281 767-281 767-281 767-281 767-238er 767-332 767-332 767-338er 767-33aer(W) 767-33aer(W) 767-319er 767-319er 767-3q8er

Air Italy Poland Hainan Airlines GOL ACG SCAir Skymark Airlines ACG Garuda Airways Xiamen Airlines Xiamen Airlines Xiamen Airlines BOC Hainan Airlines CIT Norwegian Air CIT Garuda Airways Virgin Blue Norwegian Air Dubai Aerospace T'way Air Dubai Aerospace Virgin Blue Ryanair American Airlines American Airlines American Airlines Sunexpress Egyptair Air Algerie Norwegian Air RBS Aerospace Shandong Airlines Luxair Xiamen Airlines Lion Air Boeing Bus Jets Saudi Ministry, Finance & Economy Transatlantic Transatlantic Triton Air Atlanta Icelandic Aersale Aersale Aersale Orient Thai Airlines Phuket Airlines Wells Fargo Twin Crane Leasing Wells Fargo Boeing Company Federal Express East Trust-Sub 2 Sunrise Astraeus Airlines Saudi Arabian ACG Acquisition Federal Express Saudi Arabian National Air Cargo BCC National Air Cargo Group Wilmington Trust Delta Air Lines Wilmington Trust North American Airlines ABX Air ABX Air ABX Air ABX Air ABX Air ABX Air Swift Air Kabo Air Delta Air Lines Cargo Aircraft Mgmt Flying Fortress Hawaiian Airlines Omni Leasing Omni Air ILFC

Air Italy Boeing Transavia Airlines Boeing Boeing Company SC Air Boeing ACG Boeing Boeing Boeing Boeing BOC Boeing CIT Boeing CIT Boeing Boeing Boeing Dubai Aerospace Boeing Dubai Aerospace Boeing Wilmington Trust Boeing Wilmington Trust Boeing Boeing Boeing Boeing Boeing RBS Aerospace Boeing Boeing Boeing Boeing Boeing Company Wells Fargo Wells Fargo Star Airlines Bullfinch JAL JAL JAL Wells Fargo Wells Fargo Wilmington Trust JAL Twin Crane Leasing Us Airways Wilmington Trust Euro Atlantic East Trust-Sub 2 Easyjet Astraeus Airlines Omni Air IAI V Astraeus Airlines Airplanes Holdings Sky Wings Airlines Air China ILFC Wilmington Trust ILFC Wilmington Trust Cargo Aircraft Mgmt Cargo Aircraft Mgmt Cargo Aircraft Mgmt Cargo Aircraft Mgmt Cargo Aircraft Mgmt Cargo Aircraft Mgmt KMW Leasing Tradecraft Wilmington Trust Qantas ILFC Flying Fortress ILFC Omni Leasing ILFC

Serial No. or No. of (Orders)/(Options) 35074 35761 35831 36848 36848 36848 36850 36850 37150 37151 37152 37425 37425 37818 37818 37819 37819 37823 39003 39448 39448 39449 39449 40289 40580 40581 40581 40755 40757 40858 40865 40883 40883 (1) (10) 37272 39318 39318 21542 22740 22769 23711 24423 24427 26343 26548 26881 27071 27100 27100 23323 23323 23983 23983 24292 24292 24368 24772 25621 26154 27204 27259 28169 28169 30043 30043 22785 22786 22789 23021 23141 23146 23306 23436 24852 24407 25531 25531 26264 26264 27616

Engine Model CFM56-7b26 CFM56-7b26 CFM56-7b27 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b24 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b27 CFM56-7b27 CFM56-7b27 Jt9d-7j Jt9d-7j Jt9d-7q RB211-524d4 CF6-80c2b1f CF6-80c2b1f CF6-80c2b1f PW4056 PW4056 PW4056 CF6-80c2b1f CF6-80c2b1f RB211-535e4 RB211-535e4 RB211-535e4 RB211-535e4 RB211-535e4 RB211-535e4 RB211-535e4 RB211-535e4 RB211-535e4 RB211-535e4 PW2037 RB211-535e4 PW2037 PW2037 RB211-535e4 RB211-535e4 CF6-80a CF6-80a CF6-80a CF6-80a CF6-80a CF6-80a JT9d-7r4e CF6-80a2 CF6-80a2 CF6-80c2b6 PW4062 PW4062 CF6-80c2b6 CF6-80c2b6 CF6-80c2b6f

Date of Manf or First Exp Deliv 2007-03 2010-08 2010-01 2010-08 2010-08 2010-08 2010-08 2010-08 2010-09 2010-08 2010-08 2010-08 2010-08 2010-08 2010-08 2010-08 2010-08 2010-09 2010-08 2010-07 2010-07 2010-08 2010-08 2010-09 2010-08 2010-08 2010-08 2010-08 2010-08 2010-08 2010-09 2010-08 2010-08 2013-03 2015-12 2010-09 2010-08 2010-08 1978-07 1981-12 1982-04 1987-01 1989-08 1990-02 1992-04 1992-05 1993-06 1995-10 1999-11 1999-11 1985-11 1985-11 1987-12 1987-12 1989-02 1989-02 1989-01 1990-02 1992-04 1992-08 1993-11 1994-03 1997-04 1997-04 2000-04 2000-04 1983-03 1983-04 1983-07 1984-09 1984-11 1985-06 1985-08 1987-01 1990-06 1988-11 1992-02 1992-02 1994-09 1994-09 1998-07

Equipment

Date

Sub-Leased Delivered Returned Delivered Sold Leased Delivered Leased Delivered Delivered Delivered Delivered Leased Delivered Leased Delivered Leased Delivered Delivered Delivered Leased Delivered Leased Delivered Sale-Leaseback Delivered Sale-Leaseback Delivered Delivered Delivered Delivered Delivered Leased Ordered Ordered Delivered Delivered Sold Transferred Transferred Returned Leased Sold Sold Sold Sold Leased Sold Returned Sold Returned Sold Returned Sold Returned Sub-Leased Returned Sold Sub-Leased Sold Returned Sold Sold Leased Sold Leased Sale-Leaseback Sale-Leaseback Sale-Leaseback Sale-Leaseback Sale-Leaseback Sale-Leaseback Leased Leased Lease-Buyout Sold Sold Leased Sold Leased Sold

2010.09.03 2010.09.10 2010.09.23 2010.09.08 2010.09.08 2010.09.08 2010.09.08 2010.09.08 2010.09.21 2010.09.14 2010.09.17 2010.09.22 2010.09.22 2010.09.09 2010.09.09 2010.09.17 2010.09.17 2010.09.29 2010.09.16 2010.09.10 2010.09.10 2010.09.15 2010.09.15 2010.09.28 2010.09.02 2010.09.15 2010.09.16 2010.09.15 2010.09.29 2010.09.29 2010.09.23 2010.09.20 2010.09.20 2010.09.01 2010.09.01 2010.09.27 2010.09.17 2010.09.17 2010.09.21 2010.09.21 2010.09.13 2010.09.09 2010.09.16 2010.09.21 2010.09.16 2010.09.17 2010.09.23 2010.09.15 2010.09.16 2010.09.16 2010.09.15 2010.09.15 2010.09.10 2010.09.14 2010.09.05 2010.09.06 2010.09.16 2010.09.07 2010.09.30 2010.09.24 2010.09.16 2010.09.08 2010.09.10 2010.09.10 2010.09.09 2010.09.09 2010.09.30 2010.09.30 2010.09.30 2010.09.30 2010.09.30 2010.09.30 2010.09.01 2010.09.01 2010.09.02 2010.09.23 2010.09.29 2010.09.29 2010.09.23 2010.09.23 2010.09.16

Airline Fleet Management | 35

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Equipment Model

New Owner/ Operator

Previous Owner/ Operator

Equipment

Date

767-3q8er 767-306er 767-306er 767-346er 777-212er 777-212er 777-212er 777-3dzer 777-39ler 777-367er Airbus A300b4-605r A300b4-605r A310-325et A310-325et A318-111 A318-121 A319-132 A319-112 A319-112 A319-112 A319-132 A319-132 A319-132 A319-132 A319-112 A319-112 A319-111 A319-111 A319-111 A319-133 A319-133 A319-133x A320-232 A320-211 A320-214 A320-231 A320-214 A320-232 A320-232 A320-232 A320-232 A320-232 A320-232 A320-232 A320-232 A320-232 A320-231 A320-216 A320-216 A320-216 A320-216 A320-212 A320-212 A320-232 A320-214 A320-232 A320-214 A320-216 A320-214 A320-232 A320-214 A320-214 A320-214 A320-232 A320-214 A320-214 A320-232 A320-232 A320-216 A320-216 A320-232 A320-232 A320-232 A320-214 A320-214 A320-214 A320-232 A320-232 A320-232 A320-232

Rossiya Wilmington Trust North American Airlines JAL Vebl Transaero Airlines Royal Brunei Airlines Qatar Airways Air China Cathay Pacific

ILFC ILFC Wilmington Trust Boeing Singapore Airlines Vebl Singapore Airlines Boeing Boeing Boeing

27616 28098 28098 40363 28514 28514 30869 38244 (4) (6)

CF6-80c2b6f CF6-80c2b6f CF6-80c2b6f CF6-80c2b7f Trent892b Trent892b Trent892b GE90-115b GE90-115b GE90-115bl2

1998-07 1996-02 1996-02 2010-08 1998-06 1998-06 2001-09 2010-08 2013-07 2013-06

Leased Sold Leased Delivered Sold Leased Leased Delivered Ordered Ordered

2010.09.16 2010.09.07 2010.09.07 2010.09.30 2010.09.02 2010.09.02 2010.09.20 2010.09.23 2010.09.01 2010.09.01

Squadron Leasing Wells Fargo GPFC Ireland + GA Telesis Phoenix AFS Investments LAN Ecuador Zest Airways ILFC ILFC ILFC Wells Fargo Volaris Wells Fargo Volaris ILFC Whitney Leasing Easyjet Easyjet Easyjet Hainan Airlines West Air Unknown Jetblue Airways Unknown ILFC Phoenix Air Berlin Wells Fargo Qantas Jetstar Airways Wells Fargo Qantas Jetstar Airways Wells Fargo Qantas Jetstar Airways Unknown Aercap Alitalia Aercap Alitalia ILFC Rossiya China Eastern Airlines China Southern Airlines China Eastern Airlines Air France Airasia Libyan Airlines Shenzhen Airlines Saudi Arabian Aerventure Wataniya Airways Israir Philippine Airlines Air Philippines Tiger Airways Sichuan Airlines Airasia Thai Airasia Aerventure Wells Fargo Spirit Airlines GECAS Saudi Arabian Air Berlin BOC Arcu Qantas Jetstar Airways

American Airlines Squadron Leasing CSA Czech Airlines GPFC Ireland + GA Telesis Frontier Airlines LAN Airlines Johannesburg Mexicana Mexicana Mexicana ILFC Wells Fargo ILFC Wells Fargo Mexicana Mexicana Airbus Airbus Airbus Airbus Hainan Airlines Airbus Wells Fargo Wells Fargo Mexicana Cyprus Airways Niki Luftfahrt Wombat Wells Fargo Jetstar Airways Wombat Wells Fargo Jetstar Airways Wombat Wells Fargo Jetstar Airways Wells Fargo Airbus Aercap Airbus Aercap ILFC Ireland ILFC Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Aerventure Airbus Airbus Philippine Airlines Airbus Airbus Airbus Airasia Airbus Airbus Wells Fargo Airbus GECAS Airbus Airbus Airbus Arcu BOC

645 645 672 672 2276 3469 1074 1866 1872 1925 3491 3491 3590 3590 3790 4275 4437 4444 4451 4452 4452 4428 1546 1973 3123 316 3242 3474 3474 3474 3495 3495 3495 3783 3783 3783 386 4143 4143 4152 4152 427 427 4309 4325 4342 4402 4404 4405 4407 4408 4411 4411 4413 4415 4415 4421 4424 4426 4426 4431 4431 4431 4432 4432 4433 4434 4434 4434 4434

CF6-80c2a5 CF6-80c2a5 PW4156a PW4156a CFM56-5b8/P PW6122a V2524-A5 CFM56-5b6/P CFM56-5b6/P CFM56-5b6/P V2524-A5 V2524-A5 V2524-A5 V2524-A5 CFM56-5b6/3 CFM56-5b6/3 CFM56-5b5/3 CFM56-5b5/3 CFM56-5b5/3 V2527m-A5 V2527m-A5 V2527m-A5 V2527-A5 CFM56-5a1 CFM56-5b4/P V2500-A1 CFM56-5b4/P V2527-A5 V2527-A5 V2527-A5 V2527-A5 V2527-A5 V2527-A5 V2527-A5 V2527-A5 V2527-A5 V2500-A1 CFM56-5b6/3 CFM56-5b6/3 CFM56-5b6/3 CFM56-5b6/3 CFM56-5a3 CFM56-5a3 V2527-A5 CFM56-5b4/3 V2527-A5 CFM56-5b4/3 CFM56-5b6/3 CFM56-5b4/P V2527-A5 CFM56-5b4/3 CFM56-5b4/3 CFM56-5b4/3 V2527-A5 CFM56-5b4/3 CFM56-5b4/3 V2527-A5 V2527-A5 CFM56-5b6/3 CFM56-5b6/3 V2527-A5 V2527-A5 V2527-A5 CFM56-5b4/3 CFM56-5b4/3 CFM56-5b4/3 V2527-A5 V2527-A5 V2527-A5 V2527-A5

1992-06 1992-06 1993-02 1993-02 2004-08 2008-05 1999-08 2002-11 2002-11 2003-02 2008-04 2008-04 2008-07 2008-07 2009-02 2010-04 2010-09 2010-09 2010-09 2010-09 2010-09 2010-08 2001-07 2003-03 2007-04 1992-03 2007-09 2008-03 2008-03 2008-03 2008-05 2008-05 2008-05 2009-01 2009-01 2009-01 1992-11 2009-12 2009-12 2009-12 2009-12 1994-02 1994-02 2010-08 2010-09 2010-09 2010-08 2010-08 2010-08 2010-08 2010-08 2010-08 2010-08 2010-09 2010-09 2010-09 2010-09 2010-09 2010-09 2010-09 2010-08 2010-08 2010-08 2010-09 2010-09 2010-09 2010-09 2010-09 2010-09 2010-09

Sold Sold Returned Sold Returned Sub-Leased Leased Returned Returned Returned Sold Leased Sold Leased Returned Returned Delivered Delivered Delivered Delivered Leased Delivered Leased Leased Returned Sold Returned Sold Leased Sub-Leased Sold Leased Sub-Leased Sold Leased Sub-Leased Leased Sold Leased Sold Leased Sold Leased Delivered Delivered Delivered Delivered Delivered Delivered Delivered Delivered Delivered Leased Delivered Delivered Leased Delivered Delivered Delivered Leased Delivered Sold Leased Delivered Leased Delivered Delivered Sold Leased Sub-Leased

2010.09.01 2010.09.01 2010.09.30 2010.09.30 2010.09.16 2010.09.13 2010.09.02 2010.09.06 2010.09.06 2010.09.06 2010.09.01 2010.09.02 2010.09.07 2010.09.07 2010.09.06 2010.09.06 2010.09.15 2010.09.24 2010.09.30 2010.09.30 2010.09.30 2010.09.22 2010.09.14 2010.09.24 2010.09.06 2010.09.22 2010.09.20 2010.09.15 2010.09.15 2010.09.15 2010.09.21 2010.09.21 2010.09.21 2010.09.21 2010.09.21 2010.09.21 2010.09.23 2010.09.16 2010.09.16 2010.09.17 2010.09.17 2010.09.24 2010.09.24 2010.09.09 2010.09.21 2010.09.01 2010.09.08 2010.09.27 2010.09.16 2010.09.09 2010.09.27 2010.09.22 2010.09.22 2010.09.21 2010.09.23 2010.09.23 2010.09.30 2010.09.28 2010.09.30 2010.09.30 2010.09.14 2010.09.14 2010.09.14 2010.09.21 2010.09.21 2010.09.13 2010.09.28 2010.09.28 2010.09.28 2010.09.28

36| Airline Fleet Management

Serial No. or No. of (Orders)/(Options)

Engine Model

Date of Manf or First Exp Deliv

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Equipment Model

New Owner/ Operator

Previous Owner/ Operator

A320-232 A320-214 A320-233 A320-232 A320-232 A320-214 A320-214 A320-214 A320-214 A320-214 A320-233 A320-212 A320-214 A320-200 A321-231 A330-223(Hgw) A330-223 A330-243 A330-243 A330-243 A330-243 A330-243 A330-243 A330-343e A330-343e A330-343e A330-343e A330-343e A330-343x A330-343e A340-313x A350-900XWB A380-861

Qatar Airways Goair LAN Airlines Hainan Airlines Beijing Capital Airlines TAM Linhas Aereas GECAS AFS Investments Virgin America Lufthansa Silkair Royal Falcon Genesis Lease CIT China Southern Airlines Korean Air Lines Edelweiss Air Calliope Livingston CIT Air Transat CIT Air Transat Airasia X Singapore Airlines Saudi Arabian Singapore Airlines Turk Hava Yollari Thomas Cook A/S Xl Airways Iberia Cathay Pacific Emirates

Airbus Airbus Airbus Airbus Hainan Airlines Airbus Airbus Airbus AFS Investments Airbus Airbus ILFC Ireland Philippine Airlines Airbus Airbus Airbus Swiss Sierra Leasing Calliope Mexicana CIT Mexicana CIT Airbus Airbus Airbus Airbus Airbus Thomas Cook [UK] Iberworld Airlines Airbus Airbus Airbus

Serial No. or No. of (Orders)/(Options)

Engine Model

Date of Manf or First Exp Deliv

Equipment

Date

Delivered Delivered Delivered Delivered Leased Delivered Delivered Sold Leased Delivered Delivered Leased Returned Cncl-Order Delivered Delivered Sub-Leased Sold Leased Returned Leased Returned Leased Delivered Delivered Delivered Delivered Delivered Returned Sub-Leased Sold Ordered Delivered

2010.09.28 2010.09.29 2010.09.15 2010.09.30 2010.09.30 2010.09.27 2010.09.27 2010.09.27 2010.09.27 2010.09.24 2010.09.30 2010.09.20 2010.09.01 2010.09.01 2010.09.16 2010.09.29 2010.09.01 2010.09.28 2010.09.28 2010.09.30 2010.09.30 2010.09.30 2010.09.30 2010.09.24 2010.09.13 2010.09.27 2010.09.17 2010.09.28 2010.09.14 2010.09.12 2010.09.01 2010.09.16 2010.09.01

4436 4438 4439 4440 4440 4446 4448 4448 4448 4449 4457 814 936 (-4) 4430 1155 291 551 551 966 966 971 971 1131 1146 1147 1149 1150 357 833 387 (30) 042

V2527-A5 CFM56-5b4/3 V2527e-A5 V2527-A5 V2527-A5 CFM56-5b4/3 CFM56-5b4/3 CFM56-5b4/3 CFM56-5b4/3 CFM56-5b4/3 V2527e-A5 CFM56-5a3 CFM56-5b4/P V2533-A5 PW4170 PW4168a Trent772b-60 Trent772b-60 Trent772b-60 Trent772b-60 Trent772b-60 Trent772b-60 Trent772b-60 Trent772b-60 Trent772b-60 Trent772b-60 Trent772b-60 Trent772b-60 Trent772b-60 CFM56-5c4 Trentxwb-83 GP7270

2010-09 2010-09 2010-09 2010-09 2010-09 2010-09 2010-09 2010-09 2010-09 2010-09 2010-09 1998-03 1998-12 2010-08 2010-09 1999-07 2003-11 2003-11 2008-10 2008-10 2008-11 2008-11 2010-05 2010-08 2010-06 2010-08 2010-09 2000-08 2007-03 2001-01 2016-08 2010-04

Aircraft Transactions October 1st – 27th Boeing 737-230 737-3s1 737-3s1 737-3q8 737-4c9 737-4c9 737-524 737-71b 737-71b 737-86n(W) 737-86j(W) 737-823(W) 737-85c(W) 737-846(W) 737-823(W) 737-800(W) 737-9gper(W) 747-446 747-451 747-451 747-422 747-446 757-2g5 757-28a 757-2k2(W) 757-258(Etops) 757-256(Etops) 767-25der 767-25der 767-33aer 767-304er 767-304er(W)

Rutaca Hemus Air Aerco Asia Alpha Airways Lux Volito Aviation Ab Transaero Airlines Macquarie China Southern Airlines Yakutia Airlines RBS Aerospace American Airlines Xiamen Airlines JAL American Airlines Air Lease Corp Lion Air Aersale Phuket Airlines Saudi Arabian Saudi Arabian Unknown Allegiant Air Air Finland Air Finland Saudi Arabian Titan Airways ACG Acquisition ACG Acquisition Nordwind Airlines Garuda Airways TUI Airlines

Canalgrange Bulgaria Air Hemus Air Triton Blue Air Lux Wells Fargo ILFC Macquarie Viking Airlines Blue Air Wilmington Trust Boeing Boeing Boeing Boeing Boeing JAL Wells Fargo Blue Sky Four Phuket Airlines Wells Fargo Sunrise Easyjet Easyjet Astraeus Airlines Easyjet Mexicana Mexicana AWMS I Thomson Airways Thomson Airways

22124 24834 24834 26303 25429 25429 28924 29370 29370 28617 29641 33214 37579 40347 40582 (54) 37273 25308 26474 26474 26881 27099 23983 26269 26330 27622 29309 24733 24734 27310 28979 29138

JT8d-15 CFM56-3b2 CFM56-3b2 CFM56-3b2 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-7b24 CFM56-7b24 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b24 CFM56-7b26 CFM56-7b26 CFM56-7b27 CF6-80c2b1f PW4056 PW4056 PW4056 CF6-80c2b1f RB211-535e4 RB211-535e4 RB211-535e4 RB211-535e4 RB211-535e4 CF6-80c2b6 CF6-80c2b4 CF6-80c2b6f CF6-80c2b7f CF6-80c2b7f

1980-11 1990-06 1990-06 1994-06 1992-01 1992-01 1998-07 2006-11 2006-11 2000-02 2005-01 2010-09 2010-09 2010-08 2010-09 2012-01 2010-09 1991-10 1993-06 1993-06 1993-06 1994-04 1987-12 1994-03 1996-05 1997-02 2000-07 1989-03 1989-04 1994-06 1998-02 2000-01

Leased Returned Returned Leased Returned Sold Leased Sold Leased Sub-Leased Returned Sale-Leaseback Delivered Delivered Delivered Ordered Delivered Sold Leased Sub-Leased Sub-Leased Leased Sold Returned Returned Sub-Leased Returned Returned Returned Leased Sub-Leased Leased

2010.10.01 2010.10.04 2010.10.05 2010.10.11 2010.10.05 2010.10.11 2010.10.05 2010.10.01 2010.10.02 2010.10.11 2010.10.05 2010.10.01 2010.10.08 2010.10.04 2010.10.08 2010.10.01 2010.10.06 2010.10.01 2010.10.12 2010.10.12 2010.10.06 2010.10.01 2010.10.01 2010.10.10 2010.10.02 2010.10.01 2010.10.06 2010.10.08 2010.10.08 2010.10.05 2010.10.10 2010.10.06

Airbus A310-325 A310-325 A320-216 A320-216

AI Leasing V Avsa Sarl Aercap Alitalia

Blue Line Blue Line Airbus Aercap

650 674 4119 4119

PW4156a PW4156a CFM56-5b6/3 CFM56-5b6/3

1992-04 1993-03 2009-11 2009-11

Returned Returned Sold Leased

2010.10.06 2010.10.06 2010.10.04 2010.10.04

Airline Fleet Management | 37

AFM70_Fleet Ops Airports:Asia Pacific

FLEET OPERATIONS

4/11/10

16:46

Page 38

Airports and LCCs

“It’s a problem getting that balance between what an airport wants, what an airline wants, and what the customer wants,” Mike Luddy CCO of Gatwick Airport, recognises. Airports are asked to provide a system for seamless flight operations, support a mini-city of shops and eateries, meet the requests of government taxes, and all the while endure the demands of low-cost carriers and other airlines forever thinking about their tight margins. And then they must make a profit. Mary-Anne Baldwin covers some of the major issues raised at the recent World Routes event in Vancouver.

AIRPORTS AND LCCS: BUILDING A BETTER RELATIONSHIP

38| Airline Fleet Management

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THE FINANCIAL CRISIS IS ESTIMATED TO HAVE COST THE European airport industry three years of growth and the volcanic eruption took a further €300m ($420m); but the issues they face are spread globally. In particular, Western and US airports have decreased passenger traffic yet are evermore competitive. Satisfying both passengers and airlines is an increasingly hard task.

Taxes, fees and regulations The most contentious of disputes between airlines and airports is over take-off and landing fees. In particular, low-cost carriers (LCC) – both significant in number and in force – are putting increasing pressure on airports. Some demand low fees, others none at all. Without the right price, an airline may choose to fly to another airport.

|39

AFM70_Fleet Ops Airports:Asia Pacific

4/11/10

16:47

While airport fees count considerably in an airline’s total profit, airports argue that they are necessary and that some airlines are unfairly bartering against them. Ryanair, prominent in headlines about these costs, has used harsh tactics to lower fees and is cutting flights to a number of airports that will not bend to its will. Ireland’s Shannon Airport, which says Ryanair “failed miserably” to reach passenger targets and may take legal action against the airline, is just one.

Dallas Fort Worth Airport also serves numerous LCCs, but Joseph Lopano, EVP of marketing and terminal management says that due to regulations, rates are equal among all airline operators.

Were this regulation to spread worldwide, airports could operate on an even ground with much less threat of driving away airline custom.

According to Angela Gittens, director general of ACI World, airports and airlines “Like to fuss over charges” but the larger threat is from taxes. “The German aviation tax has really been a wake-up call that we need to work together.” This would take a toll on airports, airlines and passengers. Using Ryanair again as an example, due to tax, the airline has cut flights and suspended expansion to a number of destinations including Germany, where it says there is potential to raise its number of bases from three to 12.

Speaking at a separate event, the Regional Airports’ Forum, Olle Sundin MD of Gothenburg Airport, said regarding regional airports that they are “clearly focused on reducing their own costs, but this can be tricky. Many of these costs are driven by regulation, in particular for security and safety, placing a disproportionate burden on smaller airports. Moreover, visiting costs for airlines also relate to associated airport activities, in particular air traffic control, over which we have no control and the costs keep going up… Ultimately, this situation is hurting the connectivity of many regions across Europe.”

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Airport ownership Speaking from a closer business perspective, Mike Luddy, CCO of Gatwick, which BAA sold under duress to Global Infrastructure Partners (GIP), said “regulation in the London market doesn’t help us work in the right way.” Luddy says the dominance of its former owner led to stricter regulations, which in turn impeded relationships between airports and airlines. According to the UK Office of Fair Trading (OFT), under BAA, Heathrow and Gatwick airports underperformed international quality surveys and that competition was likely to have been a factor. While competition between airports is generally strong, airport groups including BAA, continue to monopolise chunks of the market and the effect is often negative to both airlines and passengers.

Luddy agrees, saying BAA’s market dominance “didn’t breed good behaviour”. According to him, the sale of BAA and other airports has been beneficial to passengers and to the way they do business. “In the last nine months there have been dramatic changes in the way we operate and work with airlines.” He adds: “My belief is that privatisation produces the right behaviour.”

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AFM70_Fleet Ops Airports:Asia Pacific

4/11/10

16:49

According to the president and CEO of Tourism Vancouver, Rick Antonson: “On the management side yields were much higher when it [the airport industry] was government-owned and not everyone could enter the market place because of regulations, so competition was not as fierce.”

Janice Antonson, VP of Airport Marketing and Strategy (ASM) polled a number of delegates at the Routes conference, at which, she commented: “The resounding message that I got from airlines, airports and passengers was to stay the course with the privatisation of both airports and airlines… the industry is far more transparent and accountable, and to go back to stateowned or government ownership takes away all the entrepreneurial spirit.”

The airlines’ perspective Some carriers may use their clout to lower airport charges and taxes but some have been unfairly threatened with other costs.

EasyJet was put on trial for employing 170 staff at Paris Orly Airport under legal British contracts with prosecutors demanding a €225,000 fine and €10m reimbursement on social security charges. Likewise, Ryanair had a lawsuit filed against it for the employment of 200 pilots and cabin crew at Marseille Airport, which were legally registered as Irish staff under the European Directive on Transport Workers. At present the power is with airlines and unsurprisingly, following the case above, Ryanair announced it will close its base at Marseille in January 2011.

Yet legacy airlines with market dominance, such as those in airline alliances, are failing to have their demands met by airports.

Horst Findeisen, VP of business development at Star Alliance commented on the need for airports to embrace airline alliances, such as enforcing his plan to ‘move under one roof’ – a term used

by Star Alliance to describe the streamlining of operations so that member airlines fly from close proximity and are linked by a single ‘hub’ lounge. Connecting passengers would receive the benefit of spending less time in transit between flights.

Supporting the ever-increasing alliances in a move that also raises customer satisfaction seems a win-win situation but the cost of restructuring an airport so that it houses such a hub is significant enough to put a block on it.

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“

Ultimately we are all in this together; the customer experience is something we both produce.

– Horst Findeisen, VP of business development at Star Alliance

”

The effect on passengers Regarding the power budget airlines have over airports and the operations they run under that contol, Luddy of Gatwick, which serves a number of LCCs and whose largest airline customer is easyJet said that having low-cost airlines as customers does “present some challenges.” Not least in terms of passengers who typically receive a poorer quality of service. “I get so annoyed seeing the queues at an unnamed Irish operator,” he bemoans.

Not only is this a black mark against customer relations, it has a negative impact on the turnover of airport retail outlets as despite the suggestion to arrive a lengthy two hours before takeoff, many low-cost passengers spend their time trapped in snaking check-in queues instead of shopping.

With passengers kept from shops and cafes, airports may argue that they receive a dwindling return when supporting low-cost airlines – yet the LCC argument is that they can increase footfall more than most legacies can. Another concern is that if airports do not tick LCCs’ wish lists they may move elsewhere, such as to secondary airports that had previously seen only marginal passenger numbers. The result is increased competition and an even poorer service for passengers. Forced to travel to more remote airports with fewer facilities, passengers may have to pay more for their taxi from the airport to their final destination than they did on their return flight. It may also take just as long to reach.

In the relationship between airports and LCCs neither should fight for dominance – an imbalance in their partnership will inevitably lead to resentment from the other party. Instead, they must focus on the old adage ‘the customer always comes first.’

Make it an enjoyable experience for the customer and airports and airlines will both see their profits rising. “Ultimately we are all in this together; the customer experience is something we both produce,” surmised Findeisen.

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4/11/10

15:04

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AFM70_Travellers expectations:Asia Pacific

FLEET OPERATIONS

4/11/10

16:40

Page 44

Travellers’ expectations

Have you ever been polled for customer satisfaction and wondered which bin your comments ended up in? Perhaps your company is grappling with low passenger figures but does not know how to listen to its customers. Paul Clark, author of the book Stormy Skies: Airlines in Crisis, discusses the need for change.

THE CHANGING NATURE OF TRAVELLERS’ EXPECTATIONS FROM TIME TO TIME, WHEN SITTING IN A ZOMBIE-LIKE TRANCE in an aircraft, I am asked to complete a customer satisfaction survey. Personally, I find the questions limiting and the forms never seem to allow enough space to say what I really want. If the survey designer has grudgingly provided a line or two for ‘additional comments’ I might, depending upon my mood, praise a particularly helpful crew or blast the airline over their fuel surcharge policy. When I have been particularly incensed over some detail of customer service, I have even written to the airline CEO to provide helpful guidance. I have never received a reply nor, to be perfectly honest, expected one. In fact, I am convinced that no airline executive has ever taken notice of my opinions.

But all that needs to change, and for three reasons. Firstly, the tidal wave of low-cost carriers (LCCs) has irrevocably changed passengers’ expectations of air travel. Secondly, the rapid emergence of social media is handing an unprecedented degree of market power to the individual. Thirdly, lifestyles and values of emerging generations of travellers need to be better understood.

The consequence is that the classical approach to the airline market segmentation is under threat and in some cases, may already be dead.

The complexities of passenger expectations Every passenger has an individual basket of expectations for the service they are about to experience. These may be conscious or subconscious, and may vary according to geography, culture, nationality, journey purpose, journey length, gender, age, and socio-economic status.

Synovate, a leading global market research company, has conducted wide-ranging analysis of air travel expectations embracing many of the variables described above. In a survey of 6,900 air travellers in markets covering the Americas, Europe, the Middle East, the Gulf region and Asia, passengers were asked to

44| Airline Fleet Management

state the key thing they liked about air travel. One of the attributes the respondents could choose was ‘it’s fast and it gets me to where I need to be quickly’. The majority of people – at 56 per cent – chose this response and, significantly, the highest score for this attribute came from the United States, with 84 per cent. That result would seem to deliver a clear message; Americans just want to get from A to B as rapidly and painlessly as possible. In a country where air travel takes place on such a huge scale and is so critical to the nation’s well-being, it is a logical result. Synovate classifies this particular type of travel as purely transactional.

However, at the other end of the scale, 42 per cent of Egyptians rate ‘being served’ as their favourite feature of air travel. In the Egyptian culture, air travel is considered a prestigious activity rather than a necessity, so passengers expect traditional Arabic hospitality and respect. Egyptair recognises this in its corporate vision, which is to ‘deliver competitive customer service with true Egyptian spirit’.

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AFM70_Travellers expectations:Asia Pacific

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succinctly, and almost by stealth, every airline has become something of a low-cost carrier. This is not strictly true across the board, as there will always be a place for quality travel, but it is certainly broadly true in short- to medium-haul markets where low-cost carriers have mostly taken root.

The true dilemma for airlines is to understand what parameters drive a customer’s choice of carrier. The answer is wrapped in another enigma, which is how to build an understanding of customers’ perception of a charged service, especially one that had previously been offered free of charge. And this is the crux of the matter. The low-cost carriers have succeeded in creating a completely new perception of what air travel is all about. They have not had to focus on preconceptions to the same degree as traditional carriers because so much of their market has been relatively new. The onus is therefore more on the traditional airlines to re-educate the market.

Building an understanding of where market expectations lie is an essential part of any airline’s commercial strategy and pretty obvious. But it is too simplistic to imagine that all customers fall either into the transactional side of the spectrum or not. So, airlines pursuing a highly diverse market, in terms of network breadth, culture, journey purpose and so on, are clearly faced with a more complex product and service design task than airlines that focus on a particular market segment or else operate a simple network. Hence, the marketing challenge for low-cost carriers is somewhat more straightforward.

But the commercial battle lines have been confused. Many traditional airlines have adopted low-cost principles in a quest for efficiency and to meet the expectations of the price-conscious traveller. At the same time, low-cost airlines have adopted many of the product and service features of the traditional airlines in a quest to differentiate themselves from competitors. The convergence of the traditional product-led and cost-led models has eroded the purity of the original low-cost model. Gradually,

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Clearly, airline choice is now driven by value for money. This is an inevitable consequence as air travel has transitioned from being perceived as a luxury to being a true mass-market commodity.

Couple this trend with the economic pressures brought about by recession and a new cocktail has been mixed. The industry is now focused on low-cost and competitive pricing; the days of needless and wasteful investment in product quality to garner market share are dead and buried. However, not all markets have succumbed to this trend. Long-haul, high-yield, business-driven markets are still influenced by high product quality and are likely to remain so.

A wedge is being driven between the two extremes. Travel markets are being polarised into short-haul, price-driven, valuefor-money routes; whereas business travel is driven by quality.

Perhaps the middle ground of the future is only available as a niche business for a small number of long-haul low-cost wannabes.

AFM70_Travellers expectations:Asia Pacific

4/11/10

How the tail wags the dog The new superpowers of the Internet are social media sites such as Facebook, Twitter, and YouTube. These sites provide a gigantic platform for individuals to comment, endorse, rant, or scream about products and services. Social media enables airlines to target individual customers, launch special offers, communicate details of delays, test new ideas and concepts, solicit opinion and feedback and cultivate loyalty. The marketing potential is truly amazing. If Facebook were a country it would rank as the world’s third largest by population. It is estimated that one-third of all bloggers post opinions about products and services, and that 78 per cent of consumers trust peer recommendations. How can the airline industry ignore such mind-bending statistics?

The flip side is that social media can be used by any individual who wishes to air a grievance. A bad customer service experience, or a delayed flight could easily act as a catalyst for a weary traveller to pull out a mobile or laptop and promptly share his or her thoughts with a vast and impressionable audience. An example of just how easily things spiral is with South African Airways (SAA). Television presenter Richard Quest became frustrated when his flight from Cape Town to Johannesburg was delayed, blaming SAA for what turned out to be adverse weather conditions that were beyond the control of the airline. Quest’s reaction was to ‘tweet’ his views on the situation to his followers, numbering more than 31,000 in October 2010. SAA defended itself admirably, but the damage had already been done.

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…

If Facebook were a country it would rank as the world’s third largest by population. It is estimated that onethird of all bloggers post opinions about products and services… How can the airline industry ignore such mind-bending statistics?

…

online population. Apart from being tech-savvy, they are optimistic and demanding. As Generation Y matures and wealth grows, this segment will become an increasingly significant group with high travel propensity, so building a long-term relationship with Generation Y should begin now.

A dramatic example of the power of social media was when a Canadian musician, Dave Carroll, repeatedly given the cold shoulder by United Airlines after his guitar was damaged by baggage handlers, exacted revenge by writing and posting three music videos that described his experience on YouTube. The total number of views of all three United Breaks Guitars videos exceeded 10 million and United Airlines was duly humiliated.

It is not surprising, given such experiences, that Twitter has been described as little more than an underground rage factory. But Southwest Airlines’ Christi Day, who is responsible for emerging media, disagrees, saying that such a description is ‘completely off the mark’. She says that social media is no longer a fad. ‘We are in the middle of a huge revolution in all forms of communication.

It’s definitely where business is going.’ Yet, surprisingly, airlines have been slow to adapt to social media, although there are some startling exceptions. JetBlue Airways can boast over 1.6 million Twitter users and Southwest Airlines over one million.

Social media is not for everybody, however. Airlines whose markets are not connected to the blogosphere may need to consider more traditional means of connecting with customers.

However, like it or not, the phenomenon of social media is growing rapidly and airlines need to develop coherent strategies to deal with it.

Plugging the generation gap You would not be surprised to learn that it is the younger, technology-savvy generation that is most likely to be found using social media. There is, however, a difference in behaviour and expectations between Generation X (those born between the mid-1960s and the end of the 1970s) and Generation Y (those born between 1980 and the mid-1990s). Generation X’ers consider technology as a vital means to support their lifestyle needs, such as shopping and banking, for example. Generation Y uses computers just as much as their elder cousins, but, importantly, considers computers as virtually embedded into all of their activities. Generation Y is considered as the first native

Future air travellers will also come from the group known as Generation Z – those born from the mid-1990s onwards.

Generation Z can Google almost before they can walk and will take technology very much for granted. They will grow up in a world where ethnicity and culture are transparent and they will develop a sense of entitlement. Already, Generation Z is highly influenced by social media, and we can expect the emergence of a new market segment with completely different expectations in terms of how they communicate with airlines.

Do not expect Generation Z to spend too much time analysing; they will make their decisions mostly according to peer recommendations, which they will pick up from social media. In addition, it is highly likely that a large percentage of Generation Z will be employed in industries that do not even exist today.

Therefore, keeping abreast of their attitudes and aspirations is especially important.

As a Baby boomer, I have been exposed to very different influences than those of the new ‘Generations’. My tastes and expectations reflect this, but can airlines recognise and respond to my particular profile? The next time I am handed a customer satisfaction survey, I am expecting (rather than merely anticipating) that I will be quizzed in a manner that shows that the airline recognises the new traveller expectations and concerns brought by the low-cost revolution. I want to feel as though I am being treated as an individual and that my responses to questions will be respected and acknowledged. I want to be reassured that the airline is taking note of the various lifestyle typologies that make up their market. If not, then the CEO will be getting another letter from me. Only this time I will be armed with Facebook, YouTube and Twitter accounts.

Stormy Skies: Airlines in Crisis is published by Ashgate Publishing.

Airline Fleet Management | 47

AFM70_Control Rooms:Asia Pacific

FLEET OPERATIONS

5/11/10

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Control room design

Control rooms are a significant yet crucial investment and as the airline sector moves forward it must find ways to increase efficiency and cost savings wherever reasonable. Balancing these two needs can be challenging yet with the benefit of understanding human factors, new possibilities in control room operations are being formed. David Watts, MD of CCD, the integrated design and ergonomics consultancy, considers the opportunities.

CONTROLLING THE FUTURE:

NEW POSSIBILITIES IN CONTROL ROOM DESIGN FOR AIRLINES, THE NEED TO GET MORE FROM THEIR assets is imperative. Control rooms are an important investment and a key cog in any airline’s operation. The need to keep an up-to-date facility is critical to the running of an airline. Managers will be conscious of the need to keep costs at a minimum and new facilities are often no longer an option – at least in the short-term. As such, operators are looking at ‘life extension’ – how to get more out of existing facilities without compromising safety.

It is essential to identify which elements truly need refurbishing or upgrading, and which parts are most likely to fail within a given period. The challenge is how to modify the building to create the right working environment and to ensure staff can work to their best. Undertaking a ‘life stretch audit’ is a quick and effective way of prioritising this kind of investment.

The control room should be a central focus for airline operations as it is a key element to the co-ordination and management of air traffic control (ATC). Extending the use of assets and promoting leaner operations without compromise to safety are the main ways to effectively reduce costs.

Beyond the physical environment, a complete review of the structure and organisation may bring results. Are the information and communication flows optimal? Are the roles and responsibilities correct? Is the information provided to the team the right information, at the right time? Because communication systems, information, and protocol improve in a fluid manner.

What worked two years ago may well be wrong now. As such, everything should come under the microscope.

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AFM70_Control Rooms:Asia Pacific

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Getting more from the existing environment is an achievable ambition, even when few staff are manning it. Improving the working environment can lead to greater productivity – better concentration levels, better vigilance, and better motivation.

Relatively small investments in interiors include improved lighting and ventilation. Historically, control room environments are dull and uninviting, but a more interesting interior can have measurable psychological impacts on staff. Adding windows, artwork or colour variations can make a surprising difference to the interior and to morale. Branding a control room helps reinforce the company’s values, strengthening team working and contributing to positive working relationships.

Merger mania Inevitably, merger mania has become a feature of the industry and even where mergers are not taking place, global alliances are shaping the industry. These place a further burden on airlines to enhance and improve their operations divisions. Mergers have occurred for years, and the current congested environment, which has had too many players chasing too few passengers, has accelerated that process. The underlying marketing premise of airline alliances and mergers is improve customer service and seamless travel. These are also the driving factors in decision making in control centres.

Part of the change management for any merged airline is to review the whole control environment. In an ideal world, the best approach is to review and identify best practice, applying that to the merged operation. But airlines may struggle to establish a common culture from two different operations. From an operational perspective, the challenge is to create a singular system. While the objective may be clear, the transitional stages can impact on short-term efficiencies.

In the case of the consolidation of control room operations, it is not difficult for one centre to do the work that was previously done by two. The transition stage is challenging, but a single facility has many benefits.

Consolidation has a number of consequences – such as the impact on team working and the retention of knowledge.

Cultural differences within organisations need to be overcome as systems and procedures are brought together. Every airline has developed a strong corporate culture, and where mergers take place, challenges emerge – especially in the case of international mergers. Cultural and behavioural differences must be recognised and developed in different working environments.

For designers, this means understanding whether these people have different expectations or stereotypes around design conventions. In addition to design standards, how do the operational philosophy and culture differ? How does the experience, background and training of the operators vary? How do these affect the design?

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AFM70_Control Rooms:Asia Pacific

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force can lead to difficulties and a reduction in the level of efficiency as people struggle with integrating new roles. The aim is to understand the consequences before organisational changes are made. By using the right techniques to predict performance and to understand how people work, organisations can make the right decisions regarding improving processes and removing redundant elements in the system, whether that is people or equipment.

Systems integration

Mergers are an expensive business in absolute fiscal terms as well as in management time. Ensuring effective integration is key to ensuring the future success of the airline. Effectively merging operations is a way of creating much leaner operations – one merged airline does not need the same number of control room staff as two separate businesses.

As such, combining organisational structures will almost inevitably lead to a reduction of staff. While reducing manpower is an inevitable consequence of merged operations, cutting a work-

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Airline operations rely on information that is streamed into the control room from various discrete parts of the overall aviation system. Information will be garnered from systems that manage the maintenance of the aircraft, that roster and manage crew, and others that help co-ordinate air traffic control. These systems too often sit in silos, which can create inefficiencies when airlines need to recover service levels following a problem such as delayed departure. It is estimated that up to three per cent of annual revenues are lost due to disruptions and it is fair to comment that the daily plan is never flown completely as scheduled. By integrating systems, cross fertilisation of information can be achieved, giving operators a ‘bigger picture’ and a better chance of being able to manage situations.

Additional integration of systems can improve the customer experience and reduce the number of complaints. Too often passengers complain that they are given a lack of information following a flight delay or diversion – this is because the customer service agents simply do not have the information available to them.

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from the use of their own mobile phones. The benefits of this system are that it is intuitive by nature – making it safer, more efficient, and cheaper with regards to training costs. The dynamic nature of the interface creates potential for shared controls and collaborative working. The ergonomic challenge is to recognise what delivers benefits and what simply looks good.

Control rooms are covering a wider territory that includes airlines, airspace, electricity grids, the fire service, offshore installations, and roads. The airline sector has been a leader in many areas, yet this has often been achieved because of the industry’s financial strength. Now that times have changed, the industry should begin to look to other sectors to see how other organisations have overcome general control room challenges. In particular, the rail sector – which operated under significant constraints but with the same rigorous safety standards for many years.

What the aviation sector is likely to find on such analysis is the requirement for a better understanding of control room needs, what brings efficiency and cost savings and ultimately how human behaviour can be paired with state-of-the-art technology.

David Watts, MD of CCD

“

The danger of technology is creating a work pattern that is mostly underloaded but has rare peaks of overloading. Using a human factors methodology, these peaks and troughs can be managed more efficiently.

”

Solving this dilemma could be tremendously beneficial to airlines and to staff dealing with customer complaints. Keeping passengers better informed is likely to stem their frustration, making such circumstances more manageable and making them more likely to fly with the airline again.

Future possibilities Further benefits to staff are that better integration of technology can reduce workload and increase overall efficiency. However, it can lead to a change in work patterns whereby a relatively stable level of activity becomes one with peaks and troughs. The application of technology therefore needs a different management approach. Managers need to think carefully about what the operator does when an event occurs. What would they be doing? What information would they have? What information will they have to absorb and how quickly? What information will enable them to make the right decision and the right response?

Too much information from a bank of screens will create an overload that hinders rather than helps the right response. Yet too little information will mean staff will not be able to quickly assess the situation and make the right decisions. The danger of technology is creating a work pattern that is mostly under-loaded but has rare peaks of overloading. Using a human factors methodology, these peaks and troughs can be managed more efficiently.

In the future Multi-Touch screen technology may become more prevalent – it enables gestural movements to work as commands, such as a pinching movement to zoom or a flicking movement to turn a page. Many operators will already be familiar with this

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AFM70_CargoFreightOps:Cargo

CARGO & FREIGHT OPS

8/11/10

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GSAs

Cargo general sales agents (GSA) have reported an upturn in the market and they provide an increasingly important service to cargo-carrying airlines. Martin Roebuck opened discussions with a number of those in the field, reviewing capacity and the rate of return, increasing service levels and growing networks.

GSAS: MARKET REVIEW THERE WAS AN UPBEAT MOOD AT THE RECENT ANNUAL meeting of EGSAC, the network of independent cargo sales agents. Ton Smulders, president of the organisation and MD of Active Airline Representatives in the Netherlands, says: “All our members reported increased volumes and are generally optimistic, even in the countries that are at risk of a double-dip recession.”

Active Airline remained profitable in 2009 and was ultimately justified in keeping all of its personnel through the downturn. “If you slim down too far, you bite into your operational quality,” Smulders says. “It costs you to lay off staff, then as soon as the market turns back up you have to hire and train new people.”

Healthy traffic in September and October brought Active level with 2008 for the first time, largely as a result of Saudi Airlines Cargo’s decision to outsource its sales. The carrier has massive freighter capacity from Brussels into its main hubs in Jeddah, Riyadh, and Dammam, operating up to 18 747s and MD-11s per week. “We were appointed as GSSA for the Netherlands in August and they’re doing the same at all offline locations, including Italy and Tunisia. An agent in Barcelona has been appointed for Spain, and Frankfurt will come soon,” Smulders says.

Once the cargo division had separated from the parent airline it was obliged to generate a profit independently, and he believes this drove Saudia’s decision to close its own offices. “An in-house sales team is a constant cost, no matter the state of the market.

Saudia had three people but we took on only one of them.

It’s sufficient. If you take over all the staff, you have taken on all the cost. Our existing team has absorbed the rest of the work,” Smulders says.

…

It is about more than merely selling, and that is why some proactive agents now add the extra ‘S’ – for service – to underline the extension of their traditional GSA role to that of general sales and service agents (GSSA).

…

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AFM70_CargoFreightOps:Cargo

8/11/10

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Interior of an Alaska Airlines 737-400 Combi

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AFM70_CargoFreightOps:Cargo

5/11/10

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“

Capacity decreases have helped the market offering to right itself. But my big fear about carriers bringing their freighters back into service and increasing frequencies is that we could see a return of overcapacity.

–Don Cochran, president of GSA Platinum Air Cargo.

”

He thinks GSSAs are “far more aggressive” than airlines’ sales personnel, possibly because they have more to prove. But it is about more than merely selling, and that is why some proactive agents now add the extra ‘S’ – for service – to underline the extension of their traditional GSA role to that of general sales and service agents (GSSA).

“There’s an important service aspect, and very few principals now say ‘We’ll pay you less commission but we don’t want additional services’. You’re in daily or even hourly contact with them,” Smulders says.

In Saudia’s case, pallets are built at Amsterdam Schiphol, an important point of origin, ready for transfer to Brussels by dedicated daily truck. The haulier, Essers, is contracted to Saudia but Active organises the flow of vehicles and advises the handler, Aviapartner, what is coming. “We notify the final bill of lading the day before so they know how many pallet positions are for which destinations. They build everything to the contour of the MD-11, in case there is a change to the aircraft Saudia sends.

Those pallets can fit on the 747 if necessary but of course it would not work the other way round.”

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After adding A310 freighters to its fleet, Saudia introduced new regional connections in September to Addis Ababa, Amman, Casablanca, Khartoum, Lagos and Sana’a. “We’re concentrating mainly on the three Saudi destinations so far because there have been some crew issues with the A310s,” Smulders says. “You don’t want cargo sitting in Jeddah for days if the onward flight doesn’t go.”

Cargo for Saudi Arabia includes oil-related equipment, computer parts and dangerous goods. Shipments are typically larger than on Active’s other accounts, with even fresh flowers flying two to three tonnes at a time. Organisationally, this is why the company has been able to cope with just one extra member of staff.

Smulders points out that a multi-tonne shipment involves no more back office work than 10kg packages to the Dutch Antilles on behalf of another client airline, Leisure Cargo.

The US air freight market may be rebounding slightly more slowly than in Europe. Don Cochran, president of Houston-based GSA Platinum Air Cargo, says rates have recovered to an extent this year, but believes the industry has climbed back to only its 2007 level. “Capacity decreases have helped the market offering to right itself. But my big fear about carriers bringing their freighters back into service and increasing frequencies is that we could see a return of overcapacity,” Cochran says. “We represent Etihad and you only have to look at its competitors in the Middle East, such as Emirates and Qatar Airways [to see the scale of fleet expansion]. Lufthansa has brought all its freighters back online and the US carriers such as Delta and United-Continental are also adding capacity.” Cochran claims this could all be “too much, too fast”, especially as US export volumes have benefited little so far from the weakening dollar. “We haven’t seen much action from manufacturers.”

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AFM70_CargoFreightOps:Cargo

5/11/10

09:23

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Platinum Air Cargo has found increasing business in Egypt with EgyptAir and Etihad

The relationship with one new client, Egyptair, has nevertheless begun encouragingly. When the contract went to tender in spring, Platinum won the business against an incumbent of 30 years’ standing. “That gave us a perception issue to overcome, but it’s going pretty well,” Cochran says. “We’ve opened a second office in New York to keep neutrality between Egyptair and Etihad.”

The daily service from New York JFK to Cairo was initially by 777200 but Egyptair has upgraded to a 777-300, with the curious effect of almost doubling cargo capacity. “As a Star Alliance member they’ve focused on first class and business, so there are only 46 more seats,” Cochran says – providing a real bonus below stairs for the cargo sales team. The win was about quality standards and not merely price, he stresses. Under its previous

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agreement, Egyptair saw its pallets built offsite, for example.

Through its warehousing and ground-handling subsidiary, Cargo Aircraft Services, Platinum receives consignments and builds pallets on-airport at JFK. Meanwhile there will soon be a productive extension to the GSA’s work for SAS. Having almost become what Cochran’s calls a “small boutique carrier” compared to its mainstream European opposition, SAS is rebuilding its long-haul fleet and will reinstate daily flights from Newark to Oslo in March, supplementing its existing services to Copenhagen and Stockholm. The new service will use A330-300s offering up to 17 tonnes of cargo and mail capacity, a bonus for Platinum in the oil capital of Houston. “Texas to Oslo and Stavanger is a huge trade lane,” Cochran says.

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Nick Lawson, MD of Manchester-based AirSpace UK, says: “The GSA option has never been more important to the airline industry, with the flexibility to adapt quickly to market conditions.” The philosophy of shared risk and reward opened doors even during the recession. GSAs had “a particularly rough ride” as yields and margins fell, but Lawson says: “Wherever possible we have worked with our airline partners to take on additional responsibilities and activities, making our services more cost-effective.” Although the basic commission structure still works well, giving the agent “constant motivation to perform”, Lawson points out that deeper relationships are evolving as some airlines seek to position their GSA partners as a seamless extension of their own operations.

With three UK offices plus a Dublin facility, AirSpace represents carriers that include Delta, Air New Zealand, Sri Lankan Airlines and Canadian charter operator Air Transat. A new recruit to the EGSAC network, taking over as the exclusive UK member in 2009, the company saw its profile raised immediately. “Members can offer coverage within part or all of a single state, or across multiple countries. An airline customer can appoint and manage each member separately, or manage all chosen EGSAC representatives through a single point of control,” Lawson says.

The network “is about giving members the support and resources of a large organisation, without taking away their independence and autonomy,” he adds. “We believe EGSAC can match the benefits offered by the multinationals, with the invaluable addition of thorough local knowledge and the total motivation of individuals who have a direct interest in the success of their company.”

Cargoitalia firmly espouses the GSA philosophy. The Italian allcargo carrier added Shanghai to its network following the delivery of a third MD-11 freighter last May, and now operates three services a week there from its Milan Malpensa hub.

Roberto Gilardoni, commercial director of Cargoitalia

The airline also flies to Hong Kong, Dubai, Sharjah, New York, and Chicago. The addition of Shanghai opens the potential for transhipment traffic via Milan to and from the US. Cargoitalia was re-launched in April 2009 under new ownership.

“As a small airline returning to the market, one of the priorities was to minimise our fixed costs. We have employed GSAs everywhere except in Italy, where we have a direct sales operation,” says commercial director Roberto Gilardoni. “A combination carrier may look for a GSA to contribute to revenue but it’s not core business. For us, cargo is the only thing we do. We needed to be able to penetrate the local market very quickly.

Using a third party gives you flexibility if you’re trialling a new route, for example.”

Cargoitalia has depended on European GSAs in offline points of origin far less than Gilardoni first imagined, however. “Hong Kong is the biggest air freight trade lane out of Italy and the import-export imbalance is less than from other European

“

Our GSAs are involved in a lot of things – they share our strategy on how we want to approach the market, and have a clear understanding that it’s not just about revenue but the type of cargo, the product mix. What we’re trying to do is establish a strong partnership.

–Roberto Gilardoni, commercial director of Cargoitalia.

”

countries,” he explains. “When we first set up we put in agents for southern France, Switzerland, and parts of Germany and told them we would see how it went. But they knew we would give priority to our own [Italian sales] operation.

“When specific cargo gives a good revenue contribution, like pharmaceuticals out of Switzerland or cars from southern Germany, it makes good sense, but we can’t give the GSAs space guarantees if the business is marginal. They’re not too excited about that, but it’s a transparent situation and they have to accept it.”

To manage backloads into Italy cost-effectively, Gilardoni envisages offline agents supplementing the work of the main GSA at the main hub airport. In North America, Cargoitalia briefly experimented with Toronto as a destination but could not maintain it. “The market wasn’t there,” he says. “But we still have a GSA with targets to meet, which will sometimes take two, three, or four pallet positions. He has to work through Heavyweight, our online GSA for Chicago and New York. It’s not easy to manage this kind of relationship because there is natural competition between GSAs, but again you have to be clear up front how it will work.”

Heavyweight also represents Cargoitalia in Dubai, although this is only an inbound market currently. The agent for Hong Kong and Shanghai is New Asia Capital Resources. “Our GSAs are involved in a lot of things – they share our strategy on how we want to approach the market, and have a clear understanding that it’s not just about revenue but the type of cargo, the product mix. What we’re trying to do is establish a strong partnership,” Gilardoni says. “GSAs act as our branch offices. The market needs to recognise them as Cargoitalia and not be aware that they are selling other carriers. This extends to visual identification if they’re on the ground with the aircraft – they should look like Cargoitalia, not the GSA.” Smaller local agents may be better able to tailor their services to Cargoitalia’s requirements, Gilardoni points out. “The global players have a more standardised business approach and technology; it’s more difficult to get them to change any aspect of their organisation.”

The carrier has paid its GSAs on a commission basis so far.

Gilardoni believes that for fixed rate agreements to work properly; “you have to re-define the minimum rate very often”. In some markets where the base rate is low, fuel surcharge is incorporated into the commission calculation and he is now looking to further incentivise agents by building in performance-related payments for service, responsiveness, and customer satisfaction.

Cargoitalia hopes to appoint a GSA in India before the end of this year, ready for a start-up in 2011, but has recognised that serving this new market will require dedicated services and therefore a fourth aircraft.

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AFM70_Data:AFNM

5/11/10

FACTS & FIGURES

12:53

Page 1

Fleet finance, firm orders, aircraft transactions, list prices and lease rates

Aircraft transactions — 7th September – 20th October 2010 Contract Date 7/9/10 7/9/10 7/9/10 7/9/10 7/9/10 8/9/10 8/9/10 9/9/10 9/9/10 9/9/10 9/9/10 9/9/10 9/9/10 9/9/10 9/9/10 10/9/10 10/9/10 10/9/10 10/9/10 10/9/10 10/9/10 10/9/10 10/9/10 11/9/10 11/9/10 11/9/10 11/9/10 13/9/10 13/9/10 13/9/10 13/9/10 13/9/10 13/9/10 14/9/10 14/9/10 14/9/10 14/9/10 14/9/10 14/9/10 14/9/10 14/9/10 14/9/10 14/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 15/9/10 16/9/10 16/9/10 16/9/10 16/9/10 16/9/10 16/9/10 16/9/10 16/9/10 16/9/10 17/9/10

S/N 3590 24772 28098 7353 041 28473 28473 148 24301 24301 37818 30043 53448 11323 11323 23357 45865 47181 47425 47438 53198 569 11521 609 609 28474 28474 1951 30021 53076 53448 569 569 4431 23983 48632 7291 7305 7358 11276 11306 11314 11338 405 405 405 602 621 637 641 670 679 703 711 724 729 730 737 770 783 3474 925 23365 23542 27935 29556 39449 27071 27100 23323 48753 49660 53226 145696 145724 145155 20192 20202 E3155 22121 22124 40581 24423 26343 27100 4129 4129 1149

A/C Model Airbus A319 Boeing 757 Boeing 767 Bombardier (Canadair) CRJ Regional Jet Bombardier (de Havilland) Dash 8 Boeing 737 (CFMI) Boeing 737 (CFMI) ATR ATR 42 Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 737 (NG) Boeing 757 Boeing (McDonnell-Douglas) MD-80 Fokker 100 Fokker 100 Boeing 737 (CFMI) Boeing (McDonnell-Douglas) DC-9 Boeing (McDonnell-Douglas) DC-9 Boeing (McDonnell-Douglas) DC-9 Boeing (McDonnell-Douglas) DC-9 Boeing (McDonnell-Douglas) MD-80 Bombardier (McDonnell-Douglas) Dash 8 Fokker 70 ATR ATR 42 ATR ATR 42 Boeing 737 (CFMI) Boeing 737 (CFMI) Airbus A320 Boeing 737 (NG) Boeing (McDonnell-Douglass) MD-80 Boeing (McDonnell-Douglas) MD-80 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Airbus A320 Boeing 757 Boeing (McDonnell-Douglas) MD-11 Bombardier (Canadair) CRJ Regional Jet Bombardier (Canadair) CRJ Regional Jet Bombardier (Canadair) CRJ Regional Jet Fokker 100 Fokker 100 Fokker 100 Fokker 100 Airbus A300 Airbus A300 Airbus A300 Airbus A300 Airbus A300 Airbus A300 Airbus A300 Airbus A300 Airbus A300 Airbus A300 Airbus A300 Airbus A300 Airbus A300 Airbus A300 Airbus A300 Airbus A300 Airbus A300 Airbus A320 ATR ATR 72 Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 737 (NG) Boeing 737 (NG) Boeing 747 Boeing 747 Boeing 757 Boeing (McDonnell-Douglas) MD-11 Boeing (McDonnell-Douglas) MD-80 Boeing (McDonnell-Douglas) MD-80 Embraer ERJ-135 Embraer ERJ-135 Embraer ERJ-145 Fokker 50 Fokker 50 BAE SYSTEMS (HS) 146 Boeing 737 (JT8D) Boeing 737 (JT8D) Boeing 737 (NG) Boeing 747 Boeing 747 Boeing 747 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Airbus A330

58| Airline Fleet Management

Variant 130 (IAE) 200 (RR) 300ER (GE) 200LR 100 400 400 300 300 300 800 Winglets 200 (RR) 83 (MDC)

Reg No N504VL N247SS N765NA N87353 P2VQ-BIG VQ-BIG F-HAEK N350UA N350UA LN-NOX N755NA N972AS EP-ATE F-GPXJ 300 HS-AAS 31 (Stg 3 Hks) N8928E 31 (Stg 3 Hks) N8945E 32 (Stg 3 Hks) N926NW 32 (Stg 3 Hks) N613NW 83 (MDC) N198MD 300 PH-DMR HP-1731PST 500 I-ADLU 500 PR-TKC 400 VQ-BIF 400 VQ-BIF 210 (CFM) HB-IJU 900 Winglets N323AS 83 (MDC) N962AS 83 (MDC) N972AS 300 PH-DMR 300 N569AW 230 (IAE) N604NK 200 (RR) N950PT Freighter (M) (P&W) N276WA 200LR N7291Z 200LR N7305V 200LR N17358 VH-XWM VH-XWR VH-XWS VH-XWT 600 (GE) EX600 (GE) D-AIAL 600 (GE) EX620R (P&W) JA8375 620R (P&W) JA8377 620R (P&W) JA8558 620R (P&W) JA8559 620R (P&W) JA8561 620R (P&W) JA8562 620R (P&W) JA8564 620R (P&W) JA8565 620R (P&W) JA8527 620R (P&W) JA8529 620R (P&W) JA8566 620R (P&W) JA8573 620R (P&W) JA8659 620R (P&W) JA011D 230 (IAE) VH-VQF 500 VN-B237 300 HS-AAO 300 OM-ASD 300 Winglets N627SW 800 Winglets N851NN 800 Winglets VH-VUW 400 (P&W) N270RP 400 (GE) JA8919 200 (RR) N903AW ER (GE) N785BC 82 (MDC) N894GA 82 (MDC) EK-82226 LR D2-SRC LR D2-SRB EP D2-SRA PH-LMT PH-FZG 300 ZS-SOR 200 Adv (Stg 3 Hk) YV 200 Adv (Stg 3 Hk N214AG 800 Winglets N852NN 400 (GE) N344AS 400 (GE) N364AS 400 (GE) N919UN 400 HK-4727 400 HK-4727 340 (RR) 9V-STQ

Owner Name Macquarie Aerospace Limited FedEx Flying Fortress US Leasing Inc Squadron Leasing V LLC Airlines PNG UTair Sberbank Leasing AT1 SARL Brickell Asset Mgmt VII LLC Q737 Aircraft Ltd CIT Aerospace International Flying Fortress US Leasing Inc Alaska Airlines Iran Aseman Airlines Aircraft Intl Renting (AIR) Ltd AirAsia GA Telesis LLC GA Telesis LLC GA Telesis LLC GA Telesis LLC J.T.R. Company S.A.L. Bombardier Services Corp Intl Aviation Services Corp Airtrails TRIP UTair Sberbank Leasing Undisclosed Bank / Broker / Lessor Alaska Airlines Avioserv Avioserv TKC Aerospace US Dept of State - Florida AerVenture Leasing 1 Ltd Sunrise Asset Mgmt LLC Flying Fortress US Leasing Inc Bombardier Services Corp Bombardier Services Corp Bombardier Services Corp Alliance Airlines Alliance Airlines Alliance Airlines Alliance Airlines Bukovyna Airlines Cyrrus Air Kyrgyz Trans Avia GA Telesis LLC GA Telesis LLC GA Telesis LLC GA Telesis LLC GA Telesis LLC GA Telesis LLC GA Telesis LLC GA Telesis LLC GA Telesis LLC GA Telesis LLC GA Telesis LLC GA Telesis LLC GA Telesis LLC GA Telesis LLC Undisclosed Bank / Broker / Lessor Vietnam Aircraft Leasing Company MidAmerican Aerospace Ltd MidAmerican Aerospace Ltd Undisclosed Bank / Broker / Lessor NAS Investments 1 Inc Gate Capital (Delaware) One LLC Eagle Aircraft Leasing Ltd SB Leasing Ireland Limited FedEx FedEx Allegiant Air Middleton Group Ltd Air 26 Air 26 Air 26 SAMCO Aircraft Maintenance SAMCO Aircraft Maintenance Kingsfield Aviation Leasing Three (PTY) LTD Canalgrange Ltd Canalgrange Ltd NAS Investments 2 Inc AerSale AerSale Undisclosed Bank / Broker / Lessor Aires Colombia Nordic Aviation Capital Waha Leasing

Operator Name Volaris FedEx North American Airlines Squadron Leasing V LLC Airlines PNG UTair UTair Equaflight Service Brickell Asset Mgmt VII LLC Q737 Aircraft Ltd Norwegian North American Airlines Alaska Airlines Iran Aseman Airlines Magellan Air Thai AirAsia GA Telesis LLC GA Telesis LLC GA Telesis LLC GA Telesis LLC Khors Air Bombardier Services Corp Intl Aviation Services Corp Airtrails TRIP UTair UTair Swiss Alaska Airlines Avioserv Avioserv TKC Aerospace US Dept of State - Florida Spirit Airlines Sunrise Asset Mgmt LLC World Airways Bombardier Services Corp Bombardier Services Corp Bombardier Services Corp Alliance Airlines Alliance Airlines Alliance Airlines Alliance Airlines Bukovyna Airlines Cyrrus Air Kyrgyz Trans Avia Japan Airlines International Japan Airlines International Japan Airlines International Japan Airlines International Japan Airlines International Japan Airlines International Japan Airlines International Japan Airlines International Japan Airlines International Japan Airlines International Japan Airlines International Japan Airlines International Japan Airlines International Japan Airlines International Jetstar Vietnam Airlines MidAmerican Aerospace Ltd MidAmerican Aerospace Ltd Southwest Airlines American Airlines Virgin Blue Airlines Deucalion Aviation Funds Japan Airlines International FedEx FedEx Allegiant Air Ararat International Airlines Air 26 Air 26 Air 26 SAMCO Aircraft Maintenance SAMCO Aircraft Maintenance African Airlines Investments Canalgrange Ltd Canalgrange Ltd American Airlines AerSale AerSale Transaero Aires Colombia Aires Colombia Singapore Airlines

Event Remarks Purch’d - subject to existing lease Purchased - parked Purch’d - subject to existing lease Purchased - parked Purchased - parked Purchased Purchased - sale & lease-back Purch’d - subject to existing lease Purchased - parked Purchased - parked Purch’d - sale to S.P.C. by lessor on del Purch’d - subject to existing lease Purchased - parked Purchased Purch’d - subject to existing lease - pkd Purch’d off lease / fin term comp - pkd Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purch’d off lease/fin term comp - pkd Purchased - parked Purchased - parked Purchased - parked Purchased Purchased Purchased - sale & lease-back Purch’d - subject to existing lease Purch’d off lease / fin term completed Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purch’d - sale to S.P.C. by lessor on del Purchased - parked Purch’d - subject to existing lease Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - sale & lease-back Purchased - sale & lease-back Purchased - sale & lease-back Purchased - sale & lease-back Purchased - sale & lease-back Purchased - sale & lease-back Purchased - sale & lease-back Purchased - sale & lease-back Purchased - sale & lease-back Purchased - sale & lease-back Purchased - sale & lease-back Purchased - sale & lease-back Purchased - sale & lease-back Purchased - sale & lease-back Purch’d - subject to existing lease Purch’d - sale & lease-back on del Purchased - parked Purchased - parked Purch’d - subject to existing lease Purch’d - sale & lease-back on del Purch’d - sale to S.P.C. by lessor on del Purchased - parked Purch’d - subject to existing lease - pkd Purchased - parked Purchased - parked Purch’d off lease / fin term completed Purchased - parked Purchased Purchased Purchased Purchased - parked Purchased - parked Purch’d - subject to existing lease - pkd Purchased - parked Purchased - parked Purch’d - sale & lease-back on del Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purch’d - sale & lease-back - pkd Purch’d - sale & lease-back on del

AFM70_Data:AFNM

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FACTS & FIGURES

14:35

Page 2

Fleet finance, firm orders, aircraft transactions, list prices and lease rates

Aircraft transactions — 7th September – 20th October 2010 continued Contract Date 17/9/10 17/9/10 17/9/10 17/9/10 17/9/10 17/9/10 20/9/10 20/9/10 21/9/10 21/9/10 21/9/10 21/9/10 21/9/10 21/9/10 21/9/10 21/9/10 21/9/10 22/9/10 22/9/10 22/9/10 22/9/10 22/9/10 22/9/10 22/9/10 23/9/10 23/9/10 23/9/10 23/9/10 23/9/10 23/9/10 23/9/10 23/9/10 24/9/10 24/9/10 24/9/10 24/9/10 24/9/10 24/9/10 24/9/10 24/9/10 24/9/10 24/9/10 24/9/10 24/9/10 24/9/10 26/9/10 27/9/10 27/9/10 27/9/10 27/9/10 27/9/10 27/9/10 27/9/10 27/9/10 28/9/10 28/9/10 28/9/10 28/9/10 28/9/10 28/9/10 28/9/10 29/9/10 29/9/10 29/9/10 29/9/10 29/9/10 29/9/10 29/9/10 29/9/10 29/9/10 30/9/10 30/9/10 30/9/10 30/9/10 30/9/10 30/9/10 30/9/10 30/9/10 30/9/10 30/9/10 30/9/10 30/9/10 30/9/10 30/9/10 30/9/10 30/9/10 30/9/10 30/9/10

S/N E2096 21951 28476 28476 30762 11491 48513 49667 0386 3495 3783 357 23379 23380 23381 24427 145244 0316 0386 E2069 E2077 E3187 31779 561 432 39003 40865 24407 26264 48437 7572 352 0427 1973 359 31105 49325 49762 7018 7022 7027 7260 7264 7275 7325 405 3110 4448 29370 53043 7378 7378 7391 481 2749 2867 4434 551 25773 30332 48519 0545 4438 1004 24529 37823 25531 444 447 448 643 643 672 3163 2696 2696 2835 2835 35977 22785 22786 22789 23021 23141 23146 46001 46109 48450

A/C Model BAE SYSTEMS (HS) 146 Boeing 727 Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 747 Fokker 100 Boeing (McDonnell-Douglas) MD-11 Boeing (McDonnell-Douglas) MD-80 Airbus A320 Airbus A320 Airbus A320 ATR ATR 72 Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 747 Embraer ERJ-145 Airbus A320 Airbus A320 BAE SYSTEMS (HS) 146 BAE SYSTEMS (HS) 146 BAE SYSTEMS (HS) 146 Boeing 737 (NG) Bombardier (de Havilland) DHC-6 TO ATR ATR 72 Boeing 737 (NG) Boeing 737 (NG) Boeing 767 Boeing 767 Boeing (McDonnell-Douglas) MD-11 Bombardier (Canadair) CRJ Regional Jet Bombardier (de Havilland) DHC-6 TO Airbus A320 Airbus A320 Airbus A340 Boeing 737 (NG) Boeing (McDonnell-Douglas) MD-80 Boeing (McDonnell-Douglas) MD-80 Bombardier (Canadair) CRJ Regional Jet Bombardier (Canadair) CRJ Regional Jet Bombardier (Canadair) CRJ Regional Jet Bombardier (Canadair) CRJ Regional Jet Bombardier (Canadair) CRJ Regional Jet Bombardier (Canadair) CRJ Regional Jet Bombardier (Canadair) CRJ Regional Jet Airbus A300 Airbus A318 Airbus A320 Boeing 737 (NG) Boeing (McDonnell-Douglas) MD-80 Bombardier (Canadair) CRJ Regional Jet Bombardier (Canadair) CRJ Regional Jet Bombardier (Canadair) CRJ Regional Jet Bombardier (de Havilland) Dash 8 Airbus A320 Airbus A320 Airbus A320 Airbus A330 Boeing 737 (CFMI) Boeing 737 (NG) Boeing (McDonnell-Douglas) MD-11 Airbus A320 Airbus A320 Airbus A330 Boeing 737 (CFMI) Boeing 737 (NG) Boeing 767 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland Dash 8 Airbus A300 Airbus A300 Airbus A310 Airbus A318 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Boeing 737 (NG) Boeing 767 Boeing 767 Boeing 767 Boeing 767 Boeing 767 Boeing 767 Boeing (McDonnell-Douglas) DC-8 Boeing (McDonnell-Douglas) DC-8 Boeing (McDonnell-Douglas) MD-11

Variant Reg No 200 CP-2634 200F (M) Adv(Stg 3Hk) N750DH 400 VQ-BIE 400 VQ-BIE 400F (GE) N768CL PHPassenger (GE) N513AY 82 (MDC) N895GA 230 (IAE) N386BV 230 (IAE) VH-VQE 230 (IAE) VH-VQA 200 C-FCRZ 300 N504AU 300 N505AU 300 N506AU 400 (GE) N273AS MP G-CGJR 230 (IAE) M-ABCW 230 (IAE) N386BV 200 ZS-SOW 200 ZS-SOV 300 ZS-SOP 800 Winglets N 300 OY-ATY 210 C800 Winglets LN-DYE 800 Winglets LN-DYH 300ER (GE) N319CM 300ER (GE) N411LF Passenger (P&W) N272WA 200ER N549MS 300 N300EH 210 (CFM) EI-DZR 210 (CFM) N197FG 310 (CFM) CC-CQA 800 Winglets N853NN 82 (MDC) N33414 88 N601ME 100ER N918CA 100ER N920CA 100ER N926CA 200LR N77260 200LR N7264V 200LR N17275 200LR N97325 600 (GE) EP-MNI 110 (CFM) N810FR 210 (CFM) N835VA 700 B-5235 81 N820AG 200LR VQ-BGV 200LR VQ-BGV 200LR C-GFLZ 300 C-GXAI 210 (CFM) OE-LEE 210 (CFM) OE-LEX 230 (IAE) VH-VGN 240 (RR) EI-EON 400 N773SJ 800 Winglets N801SY Passenger (P&W) N273WA 210 (CFM) HB-IJB 210 (CFM) VT-WAN 240F (RR) TC-JDO 400 N529PR 800 Winglets VH-VUX 300ER (P&W) N583HA 200 N444YV 200 N447YV 200 N448YV 600R (GE) N7082A 600R (GE) N7082A 320 (P&W) M-ABCX 110 (CFM) N812FR 210 (CFM) D-ABDE 210 (CFM) D-ABDE 210 (CFM) D-ABDG 210 (CFM) D-ABDG BBJ1 HL7227 200PC (GE) N767AX 200PC (GE) N768AX 200PC (GE) N774AX 200PC (GE) N788AX 200PC (GE) N791AX 200PC (GE) N796AX 73CF N810UP 73CF N809UP Passenger (GE) N269WA

Owner Name Minera San Christobal Kalitta Charters II LLC UTair Sberbank Leasing Undisclosed Bank / Broker / Lessor Undisclosed Bank / Broker / Lessor NEFF Air Allegiant Air AeroTurbine Inc Undisclosed Bank / Broker / Lessor Undisclosed Bank / Broker / Lessor Calm Air MidAmerican Aerospace Ltd MidAmerican Aerospace Ltd MidAmerican Aerospace Ltd AerSale ECC Leasing Co Ltd Phoenix Aircraft Malaysia Sdn Bhd Eastok Aviation FZE Kingsfield Aviation Leasing Five (PTY) LTD Kingsfield Aviation Leasing Two (PTY) LTD Kingsfield Aviation Leasing One (PTY) LTD BBAM LLC Seaplane Holdings AS Unconfirmed Canadian Airline DY1 Leasing LLC Banc of America Leasing Ireland Co Ltd Cargo Aircraft Mgmt Inc Omni Aviation Leasing LLC Flying Fortress US Leasing Inc EDC Lease Finance Trust No.3 Tactical Air Operations Inc ILFC Aircraft 32A-427 Limited South Jet One Limited LAN Airlines NAS Investments 2 Inc Jet Midwest Dynamic JetLease LLC Avmax Intl Aircraft Leasing Inc Undisclosed Bank / Broker / Lessor Avmax Intl Aircraft Leasing Inc Bombardier Services Corp Bombardier Services Corp Bombardier Services Corp Bombardier Services Corp Mahan Air Q Aviation Ventures I Ltd AFS Investments 52 LLC Macquarie AirFinance Tiger Aircraft Trading Inc PL Panorama Leasing Limited UTair Bombardier Inc Air Inuit Macquarie AirFinance Macquarie AirFinance Arcu Aircraft Leasing Limited Calliope Ltd ARN 737 Ltd (Bermuda) MSN 30332 Trust Flying Fortress US Leasing Inc NBB-545 Lease Partnership ALAFCO Aviation Lease and Finance Comp Turkish Airlines (THY) Undisclosed Bank / Broker / Lessor VB LH 2010-11 No.2 Pty Ltd Flying Fortress US Leasing Inc Avmax Intl Aircraft Leasing Inc Avmax Intl Aircraft Leasing Inc Avmax Intl Aircraft Leasing Inc Squadron Leasing II LLC Undisclosed Bank / Broker / Lessor Phoenix Aircraft Leasing PTE Ltd Q Aviation Ventures I Ltd China Aircraft Leasing (HK) Company Ltd Chengdu Airlines Chengdu Airlines China Aircraft Leasing (HK) Company Ltd Hanwha Chemical Corp Cargo Aircraft Mgmt Inc Co-Mar of Dayton Inc Cargo Aircraft Mgmt Inc Cargo Aircraft Mgmt Inc Cargo Aircraft Mgmt Inc Cargo Aircraft Mgmt Inc AerSale AerSale BBAM 92 Statutory Trust

Operator Name Minera San Christobal Kalitta Charters II LLC UTair UTair Undisclosed Bank / Broker / Lessor Undisclosed Bank / Broker / Lessor Finnair Allegiant Air AerCap Jetstar Jetstar Calm Air MidAmerican Aerospace Ltd MidAmerican Aerospace Ltd MidAmerican Aerospace Ltd AerSale ECC Leasing Co Ltd Phoenix Aircraft Leasing PTE Ltd Eastok Aviation FZE African Airlines Investments Cronos Airlines African Airlines Investments BBAM LLC Seaplane Holdings AS Unconfirmed Canadian Airline Norwegian Norwegian Cargo Aircraft Mgmt Inc Omni Aviation Leasing LLC World Airways GECAS Tactical Air Operations Inc Rossiya - Russian Airlines South Jet One Limited LAN Airlines American Airlines Jet Midwest Dynamic Aviation Group Inc Avmax Intl Aircraft Leasing Inc Undisclosed Bank / Broker / Lessor Avmax Intl Aircraft Leasing Inc Bombardier Services Corp Bombardier Services Corp Bombardier Services Corp Bombardier Services Corp Mahan Air Q Aviation LLC Virgin America China Southern Airlines Tiger Aircraft Trading Inc UTair UTair Bombardier Inc Air Inuit Niki Niki Jetstar ILFC Atlasjet Airlines Sun Country Airlines World Airways Swiss Go Air Turkish Airlines (THY) Undisclosed Bank / Broker / Lessor Virgin Blue Airlines Hawaiian Airlines Avmax Intl Aircraft Leasing Inc Avmax Intl Aircraft Leasing Inc Avmax Intl Aircraft Leasing Inc Squadron Leasing II LLC Undisclosed Bank / Broker / Lessor Phoenix Aircraft Leasing PTE Ltd Q Aviation LLC Chengdu Airlines Chengdu Airlines Chengdu Airlines Chengdu Airlines Hanwha Chemical Corp Cargo Aircraft Mgmt Inc Cargo Aircraft Mgmt Inc Cargo Aircraft Mgmt Inc Cargo Aircraft Mgmt Inc Cargo Aircraft Mgmt Inc Cargo Aircraft Mgmt Inc AerSale AerSale BBAM LLC

Event Remarks Purchased - parked Purchased - parked Purchased Purchased - sale & lease-back Purchased - parked Purchased - parked Purch’d - sale & lease-back - pkd Purch’d off lease / fin term completed Purchased - parked Purch’d - subject to existing lease Purch’d - subject to existing lease Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purch’d - subject to existing lease - pkd Purch’d - subject to existing lease Purch’d - subject to existing lease - pkd Purchased Purchased - parked Purchased - parked Purch’d - sale & lease-back on del Purch’d - sale & lease-back on del Purchased - parked Purchased - parked Purch’d - subject to existing lease Purchased - parked Purchased Purch’d - subject to existing lease Purchased - parked Purch’d off lease / fin term comp Purch’d - sale & lease-back on del Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased Purchased - parked Purch’d - sale to S.P.C. by lessor on del Purch’d - subject to existing lease Purchased - parked Purch’d - sale & lease-back - parked Purchased - parked Purchased - parked Purchased Purch’d - subject to existing lease Purch’d - subject to existing lease Purch’d - sale to S.P.C. by lessor on del Purchased - parked Purch’d - sale & lease-back - parked Purch’d - subject to existing lease Purch’d - subject to existing lease Purch’d - subject to existing lease Purch’d - sale & lease-back on del Del - purchase of used / demo. aircraft Purchased - parked Purch’d - sale & lease-back on del Purch’d - subject to existing lease Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - sale & lease-back Purchased Purchased Purchased - sale & lease-back Purchased Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked

Airline Fleet Management | 59

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FACTS & FIGURES

14:35

Page 3

Fleet finance, firm orders, aircraft transactions, list prices and lease rates

Aircraft transactions — 7th September – 20th October 2010 continued Contract Date 30/9/10 30/9/10 30/9/10 30/9/10 1/10/10 1/10/10 1/10/10 1/10/10 4/10/10 4/10/10 4/10/10 4/10/10 5/10/10 5/10/10 8/10/10 8/10/10 8/10/10 8/10/10 8/10/10 8/10/10 11/10/10 11/10/10 11/10/10 12/10/10 13/10/10 13/10/10 13/10/10 14/10/10 14/10/10 14/10/10 15/10/10 15/10/10 15/10/10 16/10/10 17/10/10

S/N 53623 53624 7302 562 33214 25308 23983 4137 4033 4167 40347 28174 026 17000129 1156 927 24548 25302 25302 120097 28523 14501016 20307 40582 796 22022 49469 4459 24777 29381 E2074 31723 25213 E2180 1304

A/C Model Boeing (McDonnell-Douglas) MD-80 Boeing (McDonnell-Douglas) MD-80 Bombardier (Canadair) CRJ Regional Jet Bombardier (de Havilland) Dash 8 Boeing 737 (NG) Boeing 747 Boeing 757 Bombardier (de Havilland) Dash 8 Airbus A320 Airbus A320 Boeing 737 (NG) Boeing 757 Bombardier (de Havilland) Dash 8 Embraer 170 Airbus A330 ATR ATR 72 Boeing 737 (CFMI) Boeing 747 Boeing 747 Embraer EMB-120 Brasilia Boeing 777 Embraer ERJ-135 Fokker 50 Boeing 737 (NG) BAE SYSTEMS (Jetstream) Jetstream 31 Boeing 737 (JT8D) Boeing (McDonnell-Douglas) MD-80 Airbus A320 Boeing 747 Boeing 757 BAE SYSTEMS (HS) 146 Boeing 737 (NG) Boeing 747 BAE SYSTEMS (HS) 146 Airbus A320

Variant 83 (MDC) 83 (MDC) 200LR 300 800 Winglets 400 (GE) 200 (RR) 400 210 (CFM) 210 (CFM) 800 Winglets 200 (RR) 100 SU 340 (RR) 500 400 400BCF (GE) 400BCF (GE) ER 200ER (RR) Legacy 600 800 Winglets 200 Adv (Stg3 Hk) 82 (MDC) 230 (IAE) 400 (GE) 200 (RR) 200 800 Winglets 400D (GE) 200 230 (IAE)

Reg No N973TW N974TW N77302 C-FPAE N854NN N238AS N950PT HK-4724 HB-IOR N416AV JA332J N752NA N808WP JA04FJ 9V-STR VN-B239 N426US N919CA N919CA ZS-SSV EI-UNR M-ESGR PK-BRW N855NN C-GZOS HC-CJI N443AA VN-A198 N473AS N754NA ZS-PUZ N N894DB EX-27007 LV-BRA

Owner Name Dougherty Equipment Finance LLC Dougherty Equipment Finance LLC Bombardier Capital Inc Provincial Airlines NAS Investments 2 Inc AerSale Allegiant Air Aires Colombia IGAL Msn 4033 Limited Soundair 19 JS Aviation 4 Ltd Flying Fortress US Leasing Inc Island Air Suzuyo Group Waha Leasing Vietnam Aircraft Leasing Company RPK Capital XVI LLC AIO-AC Ltd National Air Cargo Runway Asset Mgmt (Pty) Transaero Unconfirmed Isle of Man Operator Aviastar Mandiri General Electric Capital Corp Integra Air ICARO Air Undisclosed Bank / Broker / Lessor AWAS 4459 Ireland Limited AerSale Undisclosed Bank / Broker / Lessor BAE Systems (Operations) Ltd BBAM LLC Undisclosed Bank / Broker / Lessor Avia Traffic Company LAN Airlines

Operator Name American Airlines American Airlines Bombardier Capital Inc Provincial Airlines American Airlines AerSale Allegiant Air Aires Colombia Belair Airlines Avianca Japan Airlines Intl North American Airlines Island Air Fuji Dream Airlines Singapore Airlines Vietnam Airlines US Airways Nexgen Aviation Capital National Air Cargo Runway Asset Mgmt (Pty) Transaero Unconfirmed Isle of Man Operator Aviastar Mandiri American Airlines Integra Air ICARO Air Undisclosed Bank / Broker / Lessor Jetstar Pacific Airlines AerSale North American Airlines Airlink - SA Airlink BBAM LLC Universal Asset Mgmt Inc Avia Traffic Company LAN Argentina

Event Remarks Purch’d - subject to existing lease Purch’d - subject to existing lease Purchased - parked Purchased Purch’d - sale & lease-back on del Purchased - parked Purchased - parked Purchased - parked Purch’d - subject to existing lease Purch’d - subject to existing lease Purch’d - sale & lease-back on del Purch’d - subject to existing lease Purch’d off lease / fin term comp - pkd Purchased Purch’d - sale & lease-back on del Purch’d - sale & lease-back on del Purch’d - subject to existing lease Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased Purch’d - sale & lease-back on del Purchased Purchased Purchased - parked Purch’d - sale to S.P.C. by lessor on del Purchased - parked Purch’d - subject to existing lease Purchased - sale & lease-back Purchased Purchased - parked Purchased Purch’d off lease / fin term completed

Current passenger aircraft availability – 3rd November 2010 Equipment Model 747-146B 747-146B 747-251B 747-251B 747-437 747-446 767-222(ETOPS) 767-222(ETOPS) 767-222 767-222(ETOPS) 767-222 767-222 767-222 767-222 767-222 767-223ER 767-269ER 767-238ER 767-266ER 767-266ER 767-260ER 767-204ER 767-2J6ER 767-3BGER 767-3Y0ER 767-3Y0ER 767-319ER 767-33AER 767-33AER 767-33AER 767-35DER 767-3Q8ER 767-306ER 777-222ER 777-222ER A300B4-120 A300B4-120 A300F4-203 A310-304 A310-304 A340-313X A340-541 A340-541 A340-541 A340-542(HGW)

S/N 22067 23150 21705 21706 27214 24423 21871 21872 21862 21863 21864 21865 21874 21875 21876 22324 23280 23306 23180 23178 23107 24736 24007 30566 25411 26208 30586 27376 27377 27468 24865 27993 30393 26935 26943 094 128 277 481 661 446 624 628 698 775

60| Airline Fleet Management

Engine Line No 427 601 374 377 1034 758 15 20 2 3 4 5 42 43 45 146 131 125 99 97 93 296 204 817 408 505 808 560 561 584 322 619 781 88 92

431

Model JT9D-7A JT9D-7A JT9D-7Q JT9D-7Q PW 4056 CF6-80C2B1F JT9D-7R4D JT9D-7R4D JT9D-7R4D JT9D-7R4D JT9D-7R4D JT9D-7R4D JT9D-7R4D JT9D-7R4D JT9D-7R4D CF6-80A JT9D-7R4E4 JT9D-7R4E JT9D-7R4E JT9D-7R4E JT9D-7R4E CF6-80A2 PW4052 PW4060 PW4060 PW4060 CF6-80C2B6F CF6-80C2B6F CF6-80C2B6F CF6-80C2B6F CF6-80C2B6 PW 4060 CF6-80C2B6F PW 4090 PW 4090 JT9D-59A JT9D-59A CF6-50C2 CF6-80C2A2 CF6-80C2A2 CFM56-5C4 TRENT 553A2-61 TRENT 553A2-61 TRENT 553A2-61 TRENT 553-61

MTOW Mfd 1979-12 1984-09 1979-04 1979-05 1994-05 1989-08 1982-05 1982-06 1981-09 1981-09 1981-11 1981-11 1983-01 1983-01 1983-02 1986-06 1985-11 1985-08 1984-07 1984-06 1984-04 1990-02 1988-01 2000-10 1991-11 1993-06 2000-08 1994-11 1994-11 1995-06 1990-07 1996-06 1999-12 1997-07 1997-07 1979-12 1980-12 1983-09 1988-06 1992-11 2001-12 2005-02 2005-04 2005-09 2006-10

Total (Lbs) 750000 750000 814000 814000 832999 850000 320000 320000 320000 320000 320000 320000 320000 320000 320000 313000 351000 351000 345000 345000 331544 352200 350998 410000 407000 407000 408000 408000 408000 408000 408000 412000 400000 640000 640000 352740 352700 365000 346126 337307 606271 811301 811301 811301 837757

Total Hours 42292 45061 103117 106000 59578 80314 76238 76957 71466 75118 77191 76145 78318 77042 74445 91830 29483 68795 61387 37592 76832 70042 53843 38813 52889 56619 37227 62669 64559 61414 85310 42897 32637 45691 47214 49658 51004 52496 51636 56564 35081 22935 22725 20865 14085

Event Cycles 32730 33810 18171 19000 11172 12671 18723 18724 18902 18559 20054 19470 19845 19709 19033 17350 9875 27528 17946 13887 29131 20721 17948 9552 11141 9325 6334 8738 8929 8665 11065 7561 6185 7710 8087 18127 17418 17294 16061 18773 4192 2081 1856 1702 1212

Configuration C22Y511 C22Y511 F24Y380 F24Y380 F12C26Y385 F12C77Y237 C12Y211 C12Y211 F10C33Y125 Y203 Y186 Y186 F10C33Y125 F10C33Y125 F10C33Y125 F9J30B195 B18Y200 B18Y200 C12Y202 F8C18Y165 Y209 Y266 OR C/Y F18Y196 C30Y206 C14Y268 or Y300 C12Y237or Y300 C24Y220 C30Y175 C25Y180 C25Y180 C18Y229 C24Y238 F50 C32Y244 C32Y244 Y298 Y298 Freighter Y240 OR C/Y C18Y204 F6C24Y264 C60Y155 C60Y155 C60Y155 C60Y155

Sale or Lease Wet/Dry Wet Lease Sale Sale ACMI/Wet Sale/Dry Sale Sale Sale/Lease Sale/Lease Sale/Lease Sale/Lease Sale/Lease Sale/Lease Sale/Lease Sale Sale/Lease Sale Sale Sale Wet Lease ACMI/Wet Sale/Lease Sale Sale/ACMI Sale/ACMI Wet Lease Lease ACMI Lease ACMI Lease ACMI Lease ACMI/Wet Sale Sale Sale Sale/Lease Sale/Lease Sale/Dry ACMI/Wet ACMI/Wet ACMI Lease Sale Sale Sale Sale

When Available Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now Now

Months On Market 98 64 4 4 24 0 22 22 66 66 31 31 37 66 66 32 34 30 12 35 22 22 11 4 20 20 33 3 14 14 23 22 2 21 21 66 66 12 22 0 24 28 28 28 28

FPA_check 104:ATEM

7/4/10

14:52

Page 3

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AFM70_Data:AFNM

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FACTS & FIGURES

Page 5

Fleet finance, firm orders, aircraft transactions, list prices and lease rates

Firm orders — 4th September to 20th October 2010 Mfr & Type

Variant

Customer

Airbus A319 100 (IAE) Germanwings Airbus A319 100 (CFM) China Eastern Airlines Airbus A319 100 (Engines Unannounced) Tibet Airlines Airbus A320 200 (Engines Unannounced) AerCap Airbus A320 200 (CFM) Lufthansa Airbus A320 200 (CFM) Swiss Airbus A320 200 (CFM) LAN Airlines Airbus A321 200 (IAE) Lufthansa Airbus A321 200 (CFM) Swiss Airbus A330 200 (Engines Unannounced) Hong Kong Airlines Airbus A330 300 (RR) Lufthansa Airbus A330 300 (RR) Swiss Airbus A330 200F (P&W) Malaysia Airlines Airbus A350 Series TBD (RR) Hong Kong Airlines Airbus A350 900XWB (RR) Cathay Pacific ATR ATR 72 600 Caribbean Airlines Boeing 737 (NG) Series TBD Unannounced commercial customer Boeing 737 (NG) 800 Winglets Air Lease Corporation Boeing 737 (NG) 800 Winglets Unannounced commercial customer Boeing 737 (NG) 800 Winglets Xiamen Airlines Boeing 737 (NG) 800 Winglets Luxair - Luxembourg Airlines Boeing 737 (NG) 800 Winglets Unannounced commercial customer Boeing 777 200LRF (GE) FedEx Boeing 777 300ER (GE) Cathay Pacific Boeing 777 300ER (GE) Air China Boeing 777 200LRF (GE) Unannounced commercial customer Bombardier (Canadair) CRJ900 RJt900ER NextGen Libyan African Aviation Holding Company Embraer 190 AR Gulf Air Embraer 190 190 Air Lease Corporation

Order date 23/09/2010 15/09/2010 15/09/2010 30/09/2010 23/09/2010 23/09/2010 15/09/2010 23/09/2010 23/09/2010 13/10/2010 23/09/2010 23/09/2010 20/09/2010 13/10/2010 16/09/2010 27/09/2010 12/10/2010 30/09/2010 30/09/2010 30/09/2010 27/09/2010 14/09/2010 28/09/2010 21/09/2010 17/09/2010 09/09/2010 07/10/2010 15/09/2010 13/10/2010

Order/ Number TypeSwap Order 8 Type Swap 5 Order 3 Order 3 Order 19 Order 2 Type Swap 1 Order 1 Order 2 Order 10 Order 3 Order 5 Order 2 Type Swap 15 Order 30 Order 9 Order 30 Order 54 Order 20 Order 10 Order 1 Order 15 Order 2 Order 6 Order 4 Order 3 Order 3 Order 2 Order 15

Engines at Order

Variant at delivery

Engines at delivery

V2500-2524-A5SelectOne 130 (IAE) V2500-2524-A5SelectOne CFM56-5B7/P 110 (CFM) CFM56-5B7/P Unannounced-Unannounced 100 (Engines Unannounced) Unannounced-Unannounced Unannounced-Unannounced 200 (Engines Unannounced) Unannounced-Unannounced CFM56-5B4/3 210 (CFM) CFM56-5B4/3 CFM56-5B4/3 210 (CFM) CFM56-5B4/3 CFM56-5B4/3 210 (CFM) CFM56-5B4/3 V2500-2533-A5SelectOne 230 (IAE) V2500-2533-A5SelectOne CFM56-5B1/3 210 (CFM) CFM56-5B1/3 Unannounced-Unannounced 200 (Engines Unannounced) Unannounced-Unannounced Trent-772B-60EP 340 (RR) Trent-772B-60EP Trent-772B-60EP 340 (RR) Trent-772B-60EP PW4000-4170 Advantage 70 220F (P&W) PW4000-4170 Advantage 70 Trent-XWB 800XWB/900XWB/1000XWB (RR) Trent-XWB Trent-XWB 900XWB (RR) Trent-XWB PW100-127M 600 PW100-127M CFM56-7B Series 700/800 CFM56-7B Series CFM56-7B26/3 800 Winglets CFM56-7B26/3 CFM56-7B26/3 800 Winglets CFM56-7B26/3 CFM56-7B26/3 800 Winglets CFM56-7B26/3 CFM56-7B26/3 800 Winglets CFM56-7B26/3 CFM56-7B26/3 800 Winglets CFM56-7B26/3 GE90-110B1L 200LRF (GE) GE90-110B1L GE90-115B 300ER (GE) GE90-115B GE90-115BL 300ER (GE) GE90-115BL GE90-110B1L 200LRF (GE) GE90-110B1L CF34-8C5 900ER NextGen CF34-8C5 CF34-10E5A1 AR CF34-10E5A1 CF34-10E5 CF34-10E5

Engine data changes 22nd June 2010 to 20th October 2010 Type B737-300 B737-400 B737-500 A321-200 A319-100 A340-300 B737-600 B737-700 B737-800 B737-900ER CRJ-200 CRJ-700 E170 B767-200ER A300-600R MD-11 A330-200 B777-300ER A320-200 MD-82 B747-400 B767-300ER A310-300 B757-200 Fokker 100 A340-600 A330-300 B777-200ER 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 CF34-8C1 CF34-8E5 CF6-80A2 CF6-80C2A5 CF6-80C2D1F CF6-80E1A3 GE90-115B V2527-A5 JT8D-217C PW4056 PW4060 PW4152 RB211-535E4 RB183 Tay 650-15 Trent 556-61 Trent 772B-60 Trent 895 AE3007-A1P BR715A

62| Airline Fleet Management

22 June 2010 20 Oct 2010 Full-life value Full-life value mkt value mkt value

22 June 2010 Percentage Current half-life change rate

20 Oct 2010 Current half-life rate

$2.33m $2.53m $3.03m $8.33m $6.53m $7.89m $6.85m $7.45m $7.95m $8.40m $2.63m $3.55m $3.94m $4.82m $7.01m $7.78m $13.77m $25.02m $7.77m $1.58m $7.09m $7.44m $6.57m $7.40m $2.53m $12.29m $12.85m $18.56m $2.53m $3.33m

0.0% 0.0% -3.3% 0.7% 2.5% -1.8% 1.6% 0.8% 0.8% 0.7% 0.0% 0.0% 3.0% -5.0% 2.0% 1.9% 1.5% 5.7% 0.6% 7.6% 3.5% 3.4% 4.1% 1.6% 0.0% 8.9% 7.2% 9.3% 2.8% 0.0%

$0.80m $1.00m $1.40m $6.40m $4.70m $5.50m $5.05m $5.60m $6.05m $6.50m $1.50m $2.20m $2.68m $1.50m $3.75m $4.40m $9.35m $20.70m $5.70m $0.60m $3.75m $4.10m $2.80m $3.90m $1.50m $8.14m $8.60m $14.00m $1.50m $2.00m

$2.33m $2.53m $2.93m $8.39m $6.69m $7.75m $6.96m $7.51m $8.01m $8.46m $2.63m $3.55m $4.06m $4.58m $7.15m $7.93m $13.98m $26.44m $7.82m $1.70m $7.34m $7.69m $6.84m $7.52m $2.53m $13.38m $13.78m $20.29m $2.60m $3.33m

$0.80m $1.00m $1.50m $6.40m $4.70m $5.50m $5.05m $5.60m $6.05m $6.50m $1.50m $2.20m $2.68m $1.80m $3.75m $4.40m $9.35m $19.35m $5.70m $0.60m $3.75m $4.10m $2.80m $4.00m $1.50m $7.59m $8.00m $12.69m $1.50m $2.00m

22 June 2010 20 Oct 2010 Percentage Mkt lease Mkt lease Percentage change rate rate change 0.0% 0.0% -6.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -16.7% 0.0% 0.0% 0.0% 7.0% 0.0% 0.0% 0.0% 0.0% 0.0% -2.5% 0.0% 7.2% 7.5% 10.3% 0.0% 0.0%

$0.030m $0.032m $0.035m $0.080m $0.060m $0.068m $0.064m $0.067m $0.070m $0.072m $0.025m $0.032m $0.033m n/a n/a $0.085m n/a $0.210m $0.080m $0.023m $0.065m $0.070m $0.060m $0.050m $0.026m $0.110m $0.120m $0.155m $0.030m $0.045m

$0.030m $0.032m $0.035m $0.080m $0.060m $0.068m $0.064m $0.067m $0.070m $0.072m $0.020m $0.027m $0.035m n/a n/a $0.085m n/a $0.210m $0.080m $0.023m $0.065m $0.070m $0.060m $0.050m $0.026m $0.110m $0.120m $0.155m $0.030m $0.045m

0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 20.0% 15.6% 6.1%

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%

AFM70_Data:AFNM

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FACTS & FIGURES

10:24

Page 6

Fleet finance, firm orders, aircraft transactions, list prices and lease rates

Stored Aircraft 20th October 2010 Mfr & type

Fleet Stored

Total Fleet

Fleet Stored %

Seats Stored

Total Seats

Seats Stored%

A.S.T.A. (GAF) Nomad Aerospatiale 262 Airbus A300 Airbus A310 Airbus A318 Airbus A319 Airbus A320 Airbus A321 Airbus A330 Airbus A340 Airbus A380 ATR ATR 42 ATR ATR 72 BAE SYSTEMS (Avro) RJ Avroliner BAE SYSTEMS (BAC) One-Eleven BAE SYSTEMS (HS) 146 BAE SYSTEMS (HS) 748 BAE SYSTEMS (HS) ATP BAE SYSTEMS (Jetstream) Jetstream 31 BAE SYSTEMS (Jetstream) Jetstream 41 Boeing (McDonnell-Douglas) DC-10 Boeing (McDonnell-Douglas) DC-3 Boeing (McDonnell-Douglas) DC-8 Boeing (McDonnell-Douglas) DC-9 Boeing (McDonnell-Douglas) MD-11 Boeing (McDonnell-Douglas) MD-80 Boeing (McDonnell-Douglas) MD-90 Boeing 707 Boeing 717 Boeing 727 Boeing 737 (CFMI) Boeing 737 (JT8D) Boeing 737 (NG) Boeing 747 Boeing 757 Boeing 767 Boeing 777 Bombardier (Canadair) 580 Bombardier (Canadair) CRJ Regional Jet Bombardier (Canadair) CRJ700 Regional Jet Bombardier (Canadair) CRJ900 Regional Jet Bombardier (de Havilland) Dash 7 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) DHC-5 Buffalo Bombardier (de Havilland) DHC-6 Twin Otter Bombardier (Shorts) 330 Bombardier (Shorts) 360 Bombardier (Shorts) SC.7 Skyvan CASA 212 CASA C-295 CASA CN-235 Embraer 170 Embraer 175 Embraer 190 Embraer EMB-110 Bandeirante Embraer EMB-120 Brasilia Embraer ERJ-135 Embraer ERJ-145 Fairchild (Swearingen) Metro Fairchild FH-227 Fairchild/Dornier 228 Fairchild/Dornier 328 Fairchild/Dornier 328JET Fokker 100 Fokker 50 Fokker 60 Fokker 70 Fokker F.27 Fokker F.28 General Dynamics (Convair) 580 Gulfstream Aerospace Gulfstream I Handley Page Jetstream (HP/Scottish) Harbin Embraer Aircraft Industry ERJ-145 Hawker Beechcraft 1900 Hawker Beechcraft 99 Indonesian Aerospace 212 Indonesian Aerospace CN-235 Israel Aerospace Industries Arava Lockheed Galaxy Lockheed Hercules Lockheed L-1011 TriStar Lockheed L-188 Electra NAMC YS-11 Saab 2000 Saab 340 Viking Air DHC-6 Twin Otter

9 15 62 35 13 40 105 15 20 27 1 41 36 34 8 68 18 15 75 23 50 18 62 181 9 274 8 41 31 162 255 235 41 191 92 92 3 1 150 2 4 6 76 15 44 4 14 12 48 1 1 2 2 4 53 57 59 37 50 3 27 20 44 74 35 2 4 37 53 17 17 1 1 40 6 7 6 15 2 191 17 3 11 3 98 1

73 18 375 193 70 1265 2384 615 723 371 40 357 486 163 20 167 67 54 250 93 221 75 109 314 192 958 108 197 155 455 1786 509 3402 967 1009 929 890 2 1042 326 240 57 925 54 550 47 105 63 249 74 187 183 133 313 265 268 298 684 496 6 174 100 110 247 188 4 47 134 93 74 50 4 37 621 150 72 51 73 111 1562 35 16 39 58 408 5

12.33% 83.33% 16.53% 18.13% 18.57% 3.16% 4.40% 2.44% 2.77% 7.28% 2.50% 11.48% 7.41% 20.86% 40.00% 40.72% 26.87% 27.78% 30.00% 24.73% 22.62% 24.00% 56.88% 57.64% 4.69% 28.60% 7.41% 20.81% 20.00% 35.60% 14.28% 46.17% 1.21% 19.75% 9.12% 9.90% 0.34% 50.00% 14.40% 0.61% 1.67% 10.53% 8.22% 27.78% 8.00% 8.51% 13.33% 19.05% 19.28% 1.35% 0.53% 1.09% 1.50% 1.28% 20.00% 21.27% 19.80% 5.41% 10.08% 50.00% 15.52% 20.00% 40.00% 29.96% 18.62% 50.00% 8.51% 27.61% 56.99% 22.97% 34.00% 25.00% 2.70% 6.44% 4.00% 9.72% 11.76% 20.55% 1.80% 12.23% 48.57% 18.75% 28.21% 5.17% 24.02% 20.00%

15 53 12003 4510 1342 3998 15999 2965 5401 5900 474 1835 2351 3096 234 6111 264 456 1251 660 5952 605 68 11040 674 39557 1147 1658 3134 9282 33240 24416 3527 37962 16187 16159 842 0 6841 140 341 248 3786 0 771 0 340 54 834

139

10.79%

41867 23717 6766 163281 378831 115944 196118 98911 18712 13789 30119 14833 618 12142 713 716 4340 2583 11138 2745 165 21639 5717 137858 15961 5584 17716 17529 226848 50495 522001 214466 157673 177866 262573 0 48769 22209 19520 2364 48054 38 8347 60 1108 129 3272

28.67% 19.02% 19.83% 2.45% 4.22% 2.56% 2.75% 5.96% 2.53% 13.31% 7.81% 20.87% 37.86% 50.33% 37.03% 63.69% 28.82% 25.55% 53.44% 22.04% 41.21% 51.02% 11.79% 28.69% 7.19% 29.69% 17.69% 52.95% 14.65% 48.35% 0.68% 17.70% 10.27% 9.08% 0.32%

40 144 150 392 774 1648 1940 1825 575 43 442 604 1292 7198 1648 136 287 1054 3363 138 120 18 50 722 44 147 218 19 0 0 4433 0 335 150 3168 19

382 13280 10691 30436 1771 7186 6880 33390 5257 43 1990 3070 3114 24224 8416 272 3577 3561 5873 532 383 18 1850 9851 308 887 406 116 0 274 7364 0 399 2706 11853 95

10.47% 1.08% 1.40% 1.29% 43.70% 22.93% 28.20% 5.47% 10.94% 100.00% 22.21% 19.67% 41.49% 29.71% 19.58% 50.00% 8.02% 29.60% 57.26% 25.94% 31.33% 100.00% 2.70% 7.33% 14.29% 16.57% 53.69% 16.38%

TOTAL

3782

31090

12.16%

320859

3326438

9.65%

14.03% 0.63% 1.75% 10.49% 7.88% 0.00% 9.24% 0.00% 30.69% 41.86% 25.49%

0.00% 60.20% 83.96% 5.54% 26.73% 20.00%

Data supplied courtesy of Ascend Online Fleets / Ascend V1 database Airline Fleet Management | 63

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Fleet finance, firm orders, aircraft transactions, list prices and lease rates

FACTS & FIGURES

List prices and lease rates Average List Price

Oldest

CMV Newest

A300-600R A310-200 A310-300 A318-100 A319-100 A320-200 A321-100 A321-200 A330-200 A330-300 A340-200 A340-300 A340-500 A340-600 A350-800 A350-900 A380-800 B717-200 B737-300 B737-400 B737-500

$7.10m $2.20m $5.00m $15.20m $12.55m $6.00m $13.15m $20.40m $43.50m $28.50m $23.00m $24.00m $58.00m $63.00m

$14.45m $2.20m $10.00m $26.80m $30.15m $37.50m $20.10m $42.20m $79.30m $86.50m $24.00m $73.75m $85.00m $97.00m

0.0% 0.0% 0.0% 0.0% -2.7% -3.8% 0.0% 0.0% 0.0% -1.7% 0.0% -9.0% -4.4% -4.5%

$0.140m $0.070m $0.120m $0.155m $0.135m $0.090m $0.150m $0.195m $0.420m $0.310m $0.340m $0.350m $0.550m $0.600m

$0.180m $0.070m $0.160m $0.245m $0.275m $0.315m $0.185m $0.365m $0.725m $0.765m $0.340m $0.715m $0.800m $0.915m

20.0% 0.0% 0.0% 0.0% 0.0% 0.0% -2.6% 0.0% 3.9% 0.0% 0.0% 0.0% 0.0% 0.0%

$150.00m $8.30m $2.50m $4.50m $2.75m

$180.00m $12.00m $7.00m $8.35m $6.00m

-1.2% 0.0% -2.1% 0.0% -10.7%

$1.450m $0.110m $0.060m $0.095m $0.065m

$1.700m $0.150m $0.100m $0.130m $0.085m

0.0% 0.0% 0.0% 0.0% 0.0%

$12.10m $15.90m $20.00m $20.00m $19.50m $6.00m $4.50m $9.90m $23.00m $48.80m $92.00m $45.00m $85.20m

$20.85m $31.75m $38.50m $24.75m $60.00m $20.60m $15.00m $56.90m $42.25m $112.55m $131.00m $67.00m $136.20m

0.0% 0.0% 0.0% -2.9% -13.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -4.4% 0.0%

$0.150m $0.165m $0.235m $0.200m $0.380m $0.115m $0.160m $0.200m $0.375m $0.580m $0.820m $0.600m $0.850m

$0.200m $0.280m $0.340m $0.235m $0.710m $0.210m $0.250m $0.500m $0.465m $0.995m $1.035m $0.750m $1.250m

0.0% 0.0% 4.7% 0.0% -2.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Douglas Douglas Douglas Douglas Douglas

B737-600 B737-700 B737-800 B737-900 B747-400 B757-200 B767-200ER B767-300ER B777-200 B777-200ER B777-200LR B777-300 B777-300ER B787-8 MD-11 MD-81 MD-82 MD-83 MD-87

$11.70m $0.50m $1.00m $1.60m $2.00m

$13.10m $1.00m $2.30m $3.40m $2.00m

0.0% 0.0% -4.0% -15.3% -9.1%

$0.190m $0.025m $0.025m $0.040m $0.030m

$0.190m $0.030m $0.045m $0.060m $0.030m

0.0% 0.0% 0.0% 0.0% 0.0%

103 134 160 180 412 188 158 190 313 313 313 382 350 243 285 144 144 144 109

Boeing McDonnell Douglas Boeing McDonnell Douglas Bombardier (Canadair) Bombardier (Canadair) Bombardier (Canadair) Bombardier Bombardier Bombardier Embraer Embraer Embraer Embraer Embraer Embraer Fokker Fokker ATR ATR

MD-88 MD-90 CRJ-100/200 CRJ-700/705 CRJ-900 Q200 Q300 Q400 ERJ-135ER ERJ-145ER E170 LR E175 LR E190 LR E195 LR Fokker 70 Fokker 100 ATR42-500 ATR72-500

$1.70m $5.50m $3.00m $11.30m $14.70m $3.60m $3.50m $8.40m $4.20m $5.20m $14.60m $16.50m $20.50m $22.10m $3.70m $3.50m $5.50m $5.20m

$2.95m $5.50m $9.20m $21.85m $25.05m $8.95m $15.50m $17.95m $5.60m $9.40m $22.70m $24.10m $27.50m $29.10m $3.70m $4.60m $14.15m $17.50m

-13.4% 0.0% -7.5% 0.0% 0.0% 0.0% 0.0% 0.0% -5.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 3.1%

$0.040m $0.090m $0.040m $0.120m $0.150m $0.045m $0.050m $0.110m $0.045m $0.050m $0.150m $0.165m $0.200m $0.205m $0.055m $0.060m $0.070m $0.070m

$0.050m $0.090m $0.085m $0.220m $0.240m $0.085m $0.125m $0.190m $0.060m $0.105m $0.225m $0.230m $0.240m $0.260m $0.055m $0.090m $0.125m $0.170m

0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -8.2% -2.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

144 144 50 70 86 37 50 70 37 50 70 82 98 108 79 108 48 70

Airbus 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

$59.10m $70.30m $76.90m $90.30m $180.90m $200.80m $215.50m $237.10m $249.40m $169.30m $188.15m $327.40m

$53.50m $62.30m $74.50m

$149.25m $212.50m $243.80m $264.50m $162.00m McDonnell McDonnell McDonnell McDonnell McDonnell

$29.50m $33.90m $14.70m $15.70m $25.00m $17.67m $25.04m $29.47m $31.71m $35.12m $37.09m

$15.20m $18.80m

%Change

Dry Lease Rate Oldest Newest

Seating* (Typical C+Y)

Type

Manufacturer

%Change

267 210 210 108 124 150 185 185 250 300 280 295 280 350 270 314 525 117 134 144 104

Data supplied courtesy of Ascend Online Fleets / Ascend V1 database.

Worldwide fleet summary by region — September to November 2010 Region Undisclosed Africa Asia-Pacific Central America Europe Middle East North America South America

Net Orders 35 6 73 9 100 75 1

Delivered new 1 9 63 39 21 85 63

Leased

10 61 8 45 13 79 13

Purchased 2nd hand 19 15 43 12 51 3 257 14

Fleet as of 3rd November 2010 23 2531 7232 1291 7973 1974 17506 3038 Source: OAG Fleet iNET, November, 2010

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