AFM71: Airline Fleet Management by UBM Aviation Publications

AFM71 cover_Layout 1 01/02/2011 10:19 Page 1

The business and financing of airline operations

READY FOR TAKE-OFF: START-UP AIRLINES AND LESSORS

PLUS: n EXAMINING THE MARKET FOR LOW-COST LONG-HAUL n AN UPDATE FROM IATA ON THE FUTURE OF BIOFUELS n THE CASE FOR LOW-COST CARGO n AIR TRAFFIC MANAGEMENT: MOVING FORWARD

January-February 2011 Issue 71

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C O N T E N T S

The business and financing of airline operations

January-February 2011 • Issue 71 EDITOR Mary-Anne Baldwin: Mary-Anne.Baldwin@ubmaviation.com Tel: +44 (0) 207 579 4843

JOURNALIST Alex Derber: aderber@ubmaviation.com

CONTRIBUTORS Chris Kjelgaard, Bernard Fitzsimons, Scott Hamilton, Paul Steele and Martin Roebuck.

DESIGN & 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

NEWS ROUND-UP

TRADING, LEGAL & FINANCE:

2 The latest on deals, mergers appointments and more.

34 The new generation of aircraft lessors: Is this a revolution?

FOCUS: 12 Start-up airlines: Clearing for take-off Launching an airline and ensuring its proﬁtability is not easy, as many failed startups have shown. Chris Kjelgaard investigates Allegiant Air, Feel Air and Porter Airlines to examine the factors that new airlines should take into account when trying to ensure survival.

GROUP PUBLISHER & SALES

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. Cover image by Stephan Zirwes, German photo artist. www.stephanzirwes.com

Catch up on the last month of aircraft deals.

44 Airport development: Sabiha Gökçen, a 21st century success

AIRLINE FLEET MANAGEMENT

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40 Deals News

AIRPORTS AND ROUTES:

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

(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. Subscription records are maintained at UBM Aviation Publications Ltd. 7th Floor, Ludgate House, 245 Blackfriars Road, London, SE1 9UY, UK.

The recent spate of new aircraft leasing companies has surprised some people, given the instability faced by established lessors and the depth of the industry’s downturn. Yet after well-reported industry woes, a string of new lessors, including Air Lease Corp, Avolon and Jackson Square Aviation have materialised. Mary-Anne Baldwin reports on the trend.

FLEET OPERATIONS: 18 Air Traffic Management: Moving forward The next generation of air traffic management systems will need to support more efficient airline operations while coping with the doubling of air traffic. Bernard Fitzsimons examines the situation.

24 The rise and sustainability of low-cost cargo Most European low-cost carriers (LCCs) view cargo as a distraction from their core business of moving passengers as cheaply and efficiently as possible, but as Martin Roebuck discovers, the case for low-cost cargo is still strong.

In the next two decades up to $1tn must be spent on airports worldwide to accommodate a two-fold increase in air traffic. But where that money comes from and how it is spent remains a complex matter. Alex Derber indentiﬁes the major issues and takes a look at Istanbul’s second airport, Sabiha Gökçen, only a decade old but already a success.

50 Low-cost long-haul: Square peg, round hole? The conventional view that low-cost and long-haul are mutually exclusive has been reinforced by recent failures, but some lowcost carriers have not given up the task of proving it can work. Bernard Fitzsimons reports.

28 Biofuels: The climate-friendly fuels of the future They were the unsexy stepsisters of nature’s bounty. Their flavours were unappealing, their nutritional content low and their commercial value limited. Throughout history they have been ignored, derided and often treated as pests – until now. Paul Steele, director of Aviation Environment, IATA, reports.

MAINTENANCE OPERATIONS: 54 OEMs: Chasing profit in a crowded MRO market Original equipment manufacturers (OEMs) are chasing profits in the increasingly crowded MRO field. Why have the big OEMs entered the field? It is for profits, pure and simple. Scott Hamilton asks how far they can and will go for the extra buck.

INDUSTRY DATA 58 Data including transactions and market, list and lease rates.

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2 | AFM • ISSUE 71 January-February 2011

NEWS ROUND-UP The latest on deals, mergers, appointments and more

SWA revamps frequent flyer scheme

Southwest Airlines (SWA) has overhauled its ancient frequent flyer programme in a bid to woo business passengers. Rather than accumulate miles based on the number of flights taken, SWA customers now receive points based on fares paid. As business passengers tend to book late and thus pay higher fares, they should benefit from the new programme. However, leisure travellers will also welcome the cancellation of expiry dates for flying points and the abolition of seat restrictions.

Qantas settles US cargo class action Qantas has settled all claims relating to the purchasers of its freight services between 2001 and 2006 to or from the US by paying $26.5m. For its part in the illegal global cargo cartel, the Australian flag carrier has already paid regulatory fines in Australia, the US, Europe, Canada and Korea. However, it still faces an A$200m ($200m) class action in Australia, which it continues to contest in the courts.

Rockwell dividends announced

Rockwell Collins’ board of directors has declared a quarterly dividend of 24 cents per share on its common stock. This will be payable on March 7, 2011, to shareholders of record at the close of business on February 14, 2011. Meanwhile, FLY Leasing has declared a quarterly cash dividend of $0.20 per common share for Q4 2010. The dividend will be paid on February 18, 2011 to shareholders of record on January 28, 2011.

AirAsia pax up in 2010 AirAsia, Asia’s leading budget operator, has reported a three point rise in passenger load factor for 2010, up to 78 per cent. In 4Q 2010 load factor for the AirAsia group, which includes its Thai and Indonesian operations, was also up three points, to 82 per cent, on the year-ago period. Passenger numbers for 2010 rose 13 per cent to just under 26 million.

NEWS HIGHLIGHTS

Aircraft financing to receive shake-up under new ASU The aircraft finance market will be shaken when approval for a new Aircraft Sector Understanding (ASU), last updated in 2007, is granted. Already beyond its due date for approval, the new ASU will force interest rates and repayments on loans from Export Credit Agencies (ECA) higher, pushing a return to capital markets and commercial debt. The Organisation for Economic Co-operation and Development (OECD) started its review of the ASU in February 2010 because of “market developments, including the marketing of new aircraft models and the growing number of aircraft manufacturers,” it said. The body has also been under pressure from banks, many of which have argued that ECAs are pricing them out of the market. In late December Aviation Industry News reported Kostya Zolotusky, Boeing Capital’s MD, as saying that banks “will get their wish” after being “very vocal about wanting more capacity” but added that ECA support will remain as a “backstop” to financing. “We believe there will be mechanisms so that if the market dislocates or explodes, export credit will function as a backstop from a liquidity standpoint and as a cap on pricing.” Boeing, which benefited from ECAs financing their aircraft during 2009 and 2010, said that the banks’ demands for agencies to step away from financing were “ungrateful to say the least”. “Export credit stabilised the platform they [banks] all do business from,” Zolotusky said. “We wouldn’t have had the problem [of a need for additional financial support] if you [banks] hadn’t run for the bushes when things got tough.” Zolotusky believes that 2011 will bring “a lot of innovation in the capital markets” with new structures to fund lessors that will take some of the elements of the EETC (enhanced equipment trust certificate, a bond backed by aircraft lease rentals) and some of private equity leasing. Deliveries financed by ECA’s rose from 20 to 35 per

cent during the downturn, but many argue that the financing went to the wrong airlines. Funded by the tax-payer, ECAs are obliged to back the most secure airlines – arguably the same airlines that would have been able to secure financing through the commercial market. According to Zolotusky, the new ASU will be the “most complicated ever negotiated”. For the first time, regional and large aircraft will be considered on a single tier. Airlines and lessors will pay different amounts to finance aircraft depending on their credit rating. Those rated AAA to BBB- would face an upfront minimum exposure fee of 7.74 per cent; almost double the four per cent which they have been used to since 2008. Companies rated BB+ and BB would have a fee of 10.47 per cent and CC rated companies 14.77 per cent. Rates will be reset every year and there will be a two-year transition. Loan-to-value rates would also be lowered, but there would be no overall cap on export credit volumes, which home-country airlines had lobbied for. However, included in the new ASU is a revision of the Home Countries Rule, under which export credit agencies in the countries that provide support to Airbus and Boeing – Germany, France, Spain, the UK and US – cannot lend financing to airlines; a situation that operators like Lufthansa and American Airlines believe distorts the market. Canada refused to adopt the rule and supplies export financing for Bombardier’s sales into the US, an exception that has raised the call for new rules. Approval is yet to be granted by participating governments: Brazil, Canada, Japan, the US and the European Union (France, Germany, UK and Italy). A preliminary date was set for January 20, with it coming into play on February 1, but at the time of writing an OECD spokeswoman told AFM that approval had not yet been granted and that there was no official date for this in mind.

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The latest on deals, mergers, appointments and more NEWS

NEWS HIGHLIGHTS Air Greenland: it’s about the oil, Inuit? The fact that Greenland has its own airline, complete with wide- and narrowbody aircraft, might surprise some: like constructing a monorail to transport meals around the home, it’s handy, but a touch excessive. Yet Greenland’s 50,000 or so inhabitants can boast, in Air Greenland, a flag carrier whose fleet comprises an A330-200, a 757-200, eight Dash 7 and Dash 8 turboprops, two smaller propeller aircraft and a large helicopter fleet. Nor is it a mere vanity project for the autonomous realm within the Kingdom of Denmark: Air Greenland, jointly owned by SAS and the governments of Greenland and Denmark, posted profits of around $10m annually throughout the global economic crisis.

ROUND-UP

Air India to consider pay freeze But while success thus far has been built on sound cost management – the airline scrapped its only US connection, Kangerlussuaq-Baltimore after just months due to poor returns – recent oil and gas discoveries off Greenland could allow the carrier to spread its wings. A serious obstacle to that, a staff lockout that saw Air Greenland cancel services to all 60 of its destinations in Greenland for several days in January, as well as on its trunk KangerlussuaqCopenhagen route, has just been resolved with pilots and cabin crew accepting a settlement on pay and conditions after almost two years of disputes. The next challenge is to acquire the diverse range of capabilities and qualiﬁcations necessary to service the offshore oil industry, and the airline is already partway through a training programme that sees its staff engage in work swap programmes.

Consultancy Deloitte has recommended a three-year pay freeze at Air India (AI). The airline, which is seeking a $440m equity injection after losses totalling $3.3bn over the last three years, employs 31,000 people with an average wage of $22,000. Deloitte also recommended that AI negotiate with Indian state oil companies to cut its annual $8.8bn fuel bill.

MAG turns ﬁnancing page With its existing facilities due to expire in July, Manchester Airports Group (MAG) has secured £280m ($440m) of financing from seven banks: The Co-operative, Barclays, RBS, Handelsbanken, Santander and Yorkshire Bank. The fresh funding will be spread over five years and will help fund a £20m ($30m) refurbishment of Manchester Airport’s runway one and a new 60-acre business and retail park called Airport City.

Asiana orders A380s

South Korea’s Asiana Airlines has ordered six A380s on the back of booming Asian travel demand. The airline expects long-haul flights to grow by five per cent a year to the US and Europe. The deal is worth $1.8bn at list prices and the aircraft should be delivered between 2014 and 2017.

Ash, snow and strikes mask Europe’s real problems The Association of European Airlines (AEA) has blamed Icelandic volcano ash, snow, and industrial action for the disappointingly slow recovery of the European airline industry in 2010. Traffic increased by only 2.5 per cent in 2010, compared with the previous year, up to 335 million, according to the AEA’s latest report. Secretary general Ulrich SchulteStrathaus raised concerns about the wider competitive landscape, warning that Europe was losing out to regions experiencing much stronger growth, such as Asia and the Middle East. “While the recession of 2008/9 affected airlines and their markets around the world, the recovery

China Eastern’s profit rockets Capping a remarkable recovery, China’s secondlargest domestic airline has predicted a 10-fold leap in proﬁts for 2010, to the chagrin of certain other players in the region. Three years ago, almost to the day, Singapore Airlines had been expecting to celebrate New Year with the acquisition of a 24 per cent stake in China Eastern. Just weeks earlier, the joint bid by Singapore and Temasek awaited a rubber stamp from China Eastern shareholders, only for last-minute spoiling tactics by Air China to derail what had been regarded as a done-deal. By the end of 2008, though, it appeared that Singapore had dodged a bullet, as Eastern swung

process is very different between one region and another, and particularly in Europe we are lagging behind the rest of the world,” he said. “This alone places European airlines at a competitive disadvantage vis-à-vis their global rivals, and it is vitally important that the political and operating environment within which we do business does not burden us further.” But it is clear from the AEA report that even without the impact of volcanic ash, airlines were not recovering the losses of 2009 in the ﬁrst part of 2010. The association also said that the level of recovery in the rest of 2010 was “extremely weak”. The report stated that “the resilience shown by the market in bouncing back after 9/11 and again after Gulf War 2 and SARS has so far not been in evidence”. This is undoubtedly a major cause for concern.

from marginal proﬁt to an eye-watering $1.9bn loss and called in state aid. Now, however, the potential spotted by Singapore’s investment team has been realised, as China Eastern prepares to post net income in excess of $800m, up from $82m in 2009. Buoyed by the upturn, the airline ordered 50 A320s on December 30, 2010, for delivery from 2012, and it clearly expects resurgent travel demand in China – to which it attributes the surge in proﬁts along with its takeover of Shanghai Airlines – to continue through the decade. So, great news for Eastern’s shareholders – most of whom are Chinese state institutions – less so for Singapore Airlines, which can at least console itself with the purchase of a 16 per cent stake in Shanghai-based China Cargo Airlines.

737-800 NG delivered to Norwegian Norwegian Air Shuttle has received its first 737-800 NG from Boeing. The aircraft was fitted with the new Boeing Sky Interior, and its inaugural flight was scheduled “almost immediately”. The new Boeing interior features sculpted sidewalls and window reveals, larger stow bins and more headroom around the aisle seats.

Winter proposes new Israeli LCC

Ex-easyJet COO Edward Winter is planning a new budget Israeli airline, according to Israeli site Ynetnews. It is to be called Jet Israel and hopes to offer flights to Switzerland, Germany and France. To set up the new airline Winter is seeking government assistance through a $28m safety net that would compensate the start-up carrier if it achieved load factors between 70 and 90 per cent.

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4 | AFM • ISSUE 71 January-February 2011

NEWS ROUND-UP The latest on deals, mergers, appointments and more

GOL to add Qatar code GOL Linhas Aereas Inteligentes (GOL) and Qatar Airways have signed a codeshare agreement that will have Qatar’s national carrier adding its code to GOL’s flights. GOL, the largest low-cost airline in Latin America, will place Qatar’s code on its flights departing from Sao Paulo to 48 destinations in Brazil.

Doha gets new arrivals terminal A new arrivals terminal is almost ready to be opened in Qatar’s Doha International Airport (DIA). The terminal will be a stand-alone facility separate from DIA’s current main terminal and will handle all airport passengers arriving into the country. The terminal forms part of a multi-million dollar re-development plan ahead of the opening of the New Doha International Airport, scheduled for 2012, according to DIA.

EVA invests in China Cargo Taiwanese carrier EVA Airways intends to buy a 16 per cent stake in Shanghai-based China Cargo Airlines. EVA will invest RMB328m ($49m) through its subsidiary, Concord Pacific, for the stake, ahead of China Cargo’s expected merger with Shanghai Airlines Cargo. EVA originally invested in the latter airline, but withdrew its 25 per cent shareholding in favour of a China Cargo investment.

NEWS HIGHLIGHTS easyJet strengthens ties with Airbus but risks Stelios’ wrath Despite founder Stelios Haji-Ioannou’s stronglyvoiced assertion that easyJet has already purchased too many aircraft, the airline has ordered a further 15 A320s, to be delivered from 2012 to 2014. It will also convert an existing order for 20 A319s into the larger-capacity A320 model, and has secured options on a further 33 A320s. The airline’s order book for the A320 family now totals 242. While the airline’s new CEO, Carolyn McCall, said the order would “help deliver easyJet’s strategy of continued proﬁtable growth”, Stelios is unlikely to be impressed, especially considering he is still the company’s largest shareholder. The businessman repeatedly clashed with McCall’s predecessor, Andy

Safety and insurance figures make glum reading

Harrison, over fleet expansion, with Stelios saying that easyJet had ordered too many aircraft and that it would struggle to fill them with passengers in a time of economic uncertainty. Stelios also said that all future fleet expansion should be fundamentally linked to the identification of new routes that met the airline’s profit targets. The easyJet founder has yet to comment on the airline’s new order, although the company did make it known in a statement that he had been consulted in advance of the order. His mood may also be tempered by an October agreement that afforded easyJet greater operational and commercial flexibility in return for royalty payments to easyGroup. In addition, the latest order is merely an exercise of previously existing options. McCall believes that the agreement with Airbus gives easyJet the “flexibility” to “vary the growth rate in its capacity to reflect economic conditions and market opportunities”.

Last year was disappointing both for safety and insurance, according to aviation data provider Ascend. The estimated airline hull and legal liability losses for 2010 reached $2.15bn. That is $370m less than in 2009; however, the 2010 ﬁgure exceeded the forecasted $2.1bn. According to Ascend: “Since 2007, estimated premium income has increased by about a third. However, more than half of this increase came in 2009 following the loss of the Air France Airbus A330 in the South Atlantic that summer.” It added that written

premium has fallen about seven per cent, but that increases in 2011 are likely to exceed this. According to the report, 2010 was a poor year for safety, with the rate of fatal accidents worsening to one in every 1.3 million flights, compared with one in every 1.5 millions flights in 2009. However, this was much better than the average for the 1990s, at one per 700,000 flights, and the average for the 2000s, at one per 1.2 million. Western-built jets were involved in eight fatal accidents – almost 70 per cent of all fatalities during 2010, but about the same as 2009. Losses involving Western-built turboprops rose from 18 in 2009 to 27 in 2010 and Eastern-built turboprops were involved in 12. Eastern-built jets were involved in four fatal accidents.

Strike threat looms over Cathay

Airbus’ 2010 deliveries break record

Cathay Pacific flight attendants may take industrial action after their union voted in favour of a string of labour measures. The dispute has arisen from the airline’s annual pay offer. Among the measures, the Cathay Pacific Flight Attendants’ Union, which represents 5,800 out of the airline’s 14,000-strong cabin crew, voted to refuse working overtime. The airline has publicly called on the union not to take any action that would “inconvenience the travelling public”, while expressing confidence that all cabin crew would “act in a professional and responsible manner”. The airline also stated that while it was always ready to negotiate, it has “contingency measures in place for different situations”.

Airbus delivered a record 510 aircraft in 2010, just up from the 498 delivered during 2009. The manufacturer increased its production output for the ninth year in a row and delivered aircraft to 19 new customers. During the year, Airbus delivered 401 A320 Family aircraft, 91 A330/A340s and 18 A380s. The company took 644 commercial orders worth $74bn net. The number represents 51 per cent of the worldwide orders for aircraft over 100 seats. Commercial orders include 452 A320 Family aircraft, 160 A330/A340/A350 XWB Family aircraft, and 32 orders for the A380. At the end of 2010, Airbus’ commercial order backlog was 3,552 aircraft valued at over $480bn at list prices.

Swissport expands to second Ukrainian city Swissport Ukraine has begun operating in Kharkov, Ukraine’s second largest city, in the east of the country. The company says it is the first step of a business expansion programme to other airports and services within the Ukraine. Kharkov International Airport recently opened a new 20,000m2 terminal with a capacity of two million passengers per year.

Start-up Baltia Air Lines buys second 747 Baltia Air Lines has purchased a long-range 747 aircraft from Kalitta Air. It is the second 747 bought by the US start-up airline. The newly acquired aircraft was previously operated by Northwest Airlines. At the time of writing Baltia was not selling tickets and its operations were subject to government approval.

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The latest on deals, mergers, appointments and more NEWS

February IPO date for Garuda

NEWS HIGHLIGHTS Cost of Heathrow’s Winter None-to-land Scant comfort to those condemned to a night on the tiles at Hotel Heathrow, but figures have emerged showing airlines lost £100m ($158m) as a result of the snow disruption that hit the UK hub in the run-up to Christ-mas. Roughly half those losses were incurred by British Airways, one in eight of whose passengers had their flight cancelled during Britain’s coldest December in a century. Heathrow operator BAA may escape fines even if the chaos re-occurs, due to an outdated regulatory regime

ROUND-UP

– a further slap in the face for the flag carrier and its customers, especially since BAA has conceded that it was under-prepared for the wintry conditions, to the tune of roughly £10m ($15.8m) of snow clearing equipment. Yet, uncomfortable as it is to admit, BAA has a rather solid catch-all defence in these circumstances (albeit one it considers imprudent to rely upon): try running the world’s second-busiest airport without a third runway. As Graham Bolton, a director at airport developer Arup told AFM: “If you have two runways and you use every possible opportunity to put aeroplanes on and off them, as soon as you have fog or snow or anything else your ability to respond is very limited.”

After putting back an IPO of flag carrier Garuda from November last year, the Indonesian government has rescheduled it for February 11. It is hoped the listing will raise up to $500m as the state opens 36.5 per cent of the company to investors. Citigroup and UBS are the international book runners for the offer.

Lonrho announces Angolan airline Lonrho, the African investment company, has started a new Angolan airline and was scheduled to commence flights on December 13, 2010, from Luanda to Cabinda and Soyo using a single aircraft. By mid-2011, the airline plans to operate six aircraft. Lonrho holds assets in companies that span 17 African countries, including Kenyan airline Fly540.

TAP announces new routes for New Year

Portuguese flag carrier TAP has announced six new routes for 2011. The carrier will start services to Athens, Vienna, Düsseldorf, Bordeaux, Manchester and Dubrovnik from its Lisbon hub.

Ryanair scraps German routes

Turboprop upside of soaring fuel price ATR sold 80 aircraft in 2010 with 33 options, attracting five new customers. The turboprop manufacturer’s new -600 model, due to be certified later this year, attracted big orders from Brazilian low-cost carrier Azul, Caribbean Airlines and Air Lease Corporation in the US. CEO, Filippo Bagnato, told a January media briefing in Paris that the lessor deal was particularly important, re-opening a North American market that ATR had been unable to penetrate for the last three years because of the region’s economic problems and customers’ unwillingness to invest. ATR’s turnover was fractionally lower than 2009, at $1.35bn, but the company is confident in the recovering market and is preparing to ramp up production from 50 to 70 aircraft a year from 2012. That may look ambitious with the current backlog standing at just 159 aircraft, but the trend is clear. Turboprops have accounted for 76 per cent of sales in the 30-70 seat segment over the last five years, a

Embraer’s 2010 backlog up two per cent Embraer delivered 246 aircraft during 2010, including 92 jets during the 4Q, 30 of which were to the commercial market and 61 to the executive market. At the end of 2010, the company’s ﬁrm order backlog hit $15.6bn, two per cent up on 2009. During the 4Q,

complete turnaround from the position in 2000 when they took just 15 per cent of the market. Increasing competition in the regional airline sector, against a background of soaring fuel costs, sent out a “very strong message”, Bagnato said. Airlines will need almost 3,000 new and replacement turboprops in the next 20 years. If ATR maintains its current share of the turboprop market, 65 per cent on last year’s sales against 35 per cent for Bombardier, it has apparent scope to build more than 90 aircraft a year. In this context Bagnato said an increase to 70 annual deliveries was “prudent”. ATR expects oil to average $110 per barrel this year, stimulated by high demand from the emerging BRIC markets. “The oil price is important to ATR because economy is our operating edge,” Bagnato emphasised. ATR’s current 70-seat model, the 72-500, burns 700kg of fuel an hour compared with 1,500kg for an equivalent regional jet. Given the corresponding reduction in carbon emissions, this cost advantage will increase when the European Union’s Emission Trading Scheme (ETS) extends to airlines from 2012.

Embraer signed letters of intent (LOI) with Air Lease and Republic for 16 E190; LAM ordered one E190; Lufthansa, eight E195s; CDB Leasing, 10 E190s; one E190 jet was sold to an undisclosed customer; and BA CityFlyer and Fuji Dream Airlines, both previously unnamed customers, were announced to have ordered two E190s and one E175 respectively.

Ryanair will cut services to Berlin, Bremen, Dusseldorf Weeze and Frankfurt Hahn in 2011. In all, the carrier will scrap 34 routes to Germany in response, it says, to the country’s new €8 ($11) flight tax.

BA ups fuel levy

Long-haul fuel surcharges are to rose £10 ($16) each way on British Airways flights from from December 16, 2010. The airline said that the higher levy, which will mean a £63 ($99) surcharge for sub-nine-hour flights in economy, were due to higher oil prices.

Aeroﬂot eyes 777s ahead of Sochi Olympics Aeroflot has signed a letter of intent to buy eight 777-200ERs and eight 777-300ER. The carrier may also order four 787s ahead of the 2014 Winter Olympics in Sochi. If Aeroflot’s board approves the 777 order, the airline intends to receive the aircraft between 2012 and 2017.

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NEWS ROUND-UP The latest on deals, mergers, appointments and more

Garuda Airlines takes 737800s from GECAS

Garuda Airlines has taken delivery of three new 737-800 aircraft from GECAS. The Indonesian airline now has 16 aircraft on lease through GECAS and operates a fleet of 87 aircraft across more than 50 destinations. The aircraft come from GECAS’ existing order book with Boeing.

Air New Zealand and Virgin Atlantic extend codeshare Air New Zealand and Virgin Atlantic have signed a codeshare agreement on routes between the UK and New Zealand; it is expected to come into play on February 28 after regulatory approval. The airlines already share their frequent flyer programmes and have additional interline cross-over.

Mandala Airlines to restructure

Mandala Airlines, the failing Indonesian carrier, has been granted protection from creditors by the South Jakarta Commercial Court. The airline will now continue with a restructuring programme. Mandala will not only suspend payments but also suspend flights as of January 13th.

Saudi Arabian Airlines to join SkyTeam Saudi Arabian Airlines is to become the first Middle Eastern airline to join SkyTeam. The airline has signed an agreement to join the group in 2012. Saudi Arabian will add 35 new destinations to the alliance’s network, from its hubs at Riyadh, Jeddah and Dammam.

Greenwich Kahala registers for $250m IPO

Greenwich Kahala Aviation, the Irish aircraft lessor, has registered for an initial public offering (IPO) of up to $250m. The company, which currently owns only one aircraft, plans to expand its portfolio with the proceeds. It has already agreed to buy a further two aircraft and plans to buy an additional 25 during the year following the IPO.

Latvia joins Eurocontrol as 39th member state. The Republic of Latvia has joined Eurocontrol as its 39th member state. Latvia submitted its application for membership on September 4, 2008, and was accepted in December 2010.

Boeing dividend

Boeing has declared a quarterly dividend of 42 cents per share. The dividend is payable March 4, 2011, to shareholders of record as of February 11, 2011.

NEWS HIGHLIGHTS Cebu seeks to shrug off Asian pincer After a huge IPO in November, Philippine carrier Cebu Pacific has announced a $1bn shopping list for 21 A320s. This would bring Cebu’s total fleet, which comprises A320-family aircraft and seven ATR72s, to 53 aircraft, 16 more than that flown by flag carrier Philippine Airlines. The expansion will also see Cebu hire an additional 2,000 staff over the next four years. Looking at a map of the region, it is easy to see why Cebu needs to bolster its fleet, as the Philippines sits just inside the claws of a crescent of powerful lowcost carriers. From the south, Australia’s Jetstar has already made deep inroads into the Asian market, and has also launched regional brands in Singapore and Vietnam; in the North, Japan is finally catching on to the budget model, with Skymark on a similar growth trajectory to Cebu; Northwest lies the massive potential of China to swamp the low-cost market; to the West, in Malaysia, lurks 500lb gorilla AirAsia; and Southwest is Indonesia’s Lion Air, already operating a fleet of over 50 aircraft. So it’s probably a case of scale up or die for Cebu, especially since the Philippines government is mulling liberalisation of the country’s airspace. However, Cebu must develop a canny route network to exploit its growth, as its gun-saturated home country isn’t top of every tourist’s holiday list. As PAL pointed out in late 2010, of the 47 million seats available to local and foreign carriers in 2009, only 10 million were actually used.

Virgin America to launch A320neo with Airbus’ 10,000th order Virgin America has ordered 60 A320s, including 30 with the manufacturer’s new engine option, the A320neo. The deal brings Airbus’ total orders to 10,000 and firms Virgin America as the launch customer of the A320neo, as Indian carrier Indigo has only signed an MoU for the aircraft. The deal was initially set out at the Farnborough Air Show in July 2010, while the neo order was added later. The aircraft will be fitted with Sharklet winglets, and will have 146-149 seats fitted in a two-class configuration. The engine manufacturer for the aircraft has not yet been announced.

IndiGo signs for 180 A320neos IndiGo has signed an MoU for 180 of Airbus’ re-engined A320, the A320neo. “Ordering more A320s was the natural choice to meet India’s growing ﬂying needs,” said Rahul Bhatia, co-founder of IndiGo. The deal is thought to be worth about $16bn at list prices, though it is likely that IndiGo will transfer some of its 63 outstanding orders for the A320 to the A320neo. The airline ordered 100 A320s in 2005, only 37 of which have been delivered. The engine provider, either Pratt & Whitney or CFM, is yet to be announced.

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AFM71 News_AFM News 28/01/2011 11:22 Page 8

8 | AFM • ISSUE 71 January-February 2011

NEWS ROUND-UP The latest on deals, mergers, appointments and more

Spring puts more winters between it and IPO Shanghai-based Spring Airlines has put back its IPO to 2012 or 2013. A public offering had been expected in 2011, having already been delayed from 2009. The airline said the latest extension was to allow the global economy to recover further and ensure a higher valuation. With no equity offering, Spring said it would use internal resources to finance imminent fleet growth plans.

S&P grades ILFC notes

Ratings agency Standard & Poor’s has assessed lessor ILFC’s planned 10-year notes at BB+. ILFC itself holds a BBBcorporate credit rating with negative outlook, though it has raised significant funds recently and plans to repay $5.3bn of debt in 2011.

airBaltic ﬁrms ﬁnancing for eight Q400s airBaltic has secured financing for eight Bombardier Q400NG aircraft, the remaining five of which should have been delivered by February 2011. The aircraft, which have a value of $212m at list prices, will be financed by Nordic Aviation Capital (NAC), which will then lease the aircraft to airBaltic. Three of the aircraft, worth $80m at list prices, were already owned by airBaltic and have been sold and leased back through NAC.

NEWS HIGHLIGHTS

Russian investigators’ conclusion on the crash that killed the Polish president in April 2010 was caused by pilot error has soured relations between the two countries. Russia’s Interstate Aviation Committee blamed Poland’s chief of air force, General Andrzej Blasik, who had been drinking and ordered the inexperienced crew to land in what were appalling

weather conditions. This pressure from Blasik and other high-ranking passengers, who feared annoying the president, led to the pilots refusing to divert to another airport. The report said Blasik’s reasoning had been impaired because of the alcohol he had consumed, and also claimed that the ﬂight crew had “substantial deﬁciencies” in their training. The April crash killed President Lech Kaczynski and 95 others. Kaczynski’s brother Jaroslaw, who leads Poland's main opposition party, said the report made a “mockery” of Poland, while the country’s interior minister termed the report “one-sided”.

SEAir accused of being Tiger front

Global airline capacity up six per cent, says OAG

Four Philippine carriers have filed an objection to the partnership of Singapore’s Tiger Airways and the Philippines’ Southeast Asian Airlines (SEAir). In a letter to their country’s transport ministry, PAL, Cebu Pacific Air, Zest Air and Air Philippines, argued that SEAir was effectively controlled by Tiger, contravening state rules on foreign ownership. “[This may be] the first salvo of a foreign air carrier operating a Philippine-based international route network in the guise of a Philippine air carrier and making use of Philippine carrier international traffic rights privileges,” the airlines said. Under the SEAir-Tiger deal, SEAir leases aircraft from Tiger and markets its Singapore-Philippines flights on Tiger’s website.

Global airline capacity rose six per cent during December 2010, according to OAG, the aviation intelligence provider. The number of scheduled seats worldwide rose to 312 million during December, the group said in its monthly Frequency and Capacity Trend Statistics (FACTS) report. The number of available seats worldwide has increased by 40 per cent over the last 10 years and the number of flights has risen 24 per cent. On a regional basis, the frequency of flights to and from Africa has risen 14 per cent over the past decade; flights to the Middle East have risen 188 per cent; Asia Pacific 88 per cent and Europe 82 per cent. “Passenger confidence is growing, along with the economy, and while some regions’ growth, like the Americas and Europe, are mirroring the modest improvements in the economic environment, many are growing at a striking rate,” said Peter von Moltke, CEO of UBM Aviation.

Russia’s report on Polish presidential crash causes uproar

Hawaiian to power A330s with Trent 700 engines

Hawaiian Airlines has signed a deal for the supply and aftercare of Trent 700 engines for six of its A330 aircraft. Hawaiian already has 10 Trent 700powered A330s in service or on order; it took delivery of its first Trent 700powered A330 in May 2010. The new deal is worth $420m at list prices.

FAA makes ownership registration mandatory

AirTran records 6.6 per cent rise in passenger revenue AirTran has recorded a 6.6 per cent increase to revenue passenger miles (RPMs) during November, rising to $1.5bn. Passenger numbers rose 5.3 per cent compared with the same period in the year before, topping two million. The airline’s load factor rose 3.9 per cent year-on-year to 80.6 per cent.

Traffic climbs 16 per cent for Alaska Airlines

Alaska Airlines has reported a year-onyear 15.5 per cent increase in traffic during November; the result was on a 9.9 percent increase in capacity. Load factor rose 4.1 percentage points to 83.9 per cent. Alaska’s sister airline and fellow subsidiary of Alaska Air Group, Horizon Air, reported a two per cent decline in traffic on a 6.8 per cent decline in capacity compared with November 2009. Load factor rose 3.7 percentage points to 76.3 per cent.

Operational results for United and Continental reported United Continental Holdings has reported December 2010 and full-year 2010 operational results for United Air Lines and Continental Airlines. United and Continental's combined consolidated traffic (revenue passenger miles, RPM) in December 2010 increased 1.4 per cent versus December 2009 on a consolidated capacity increase of 2.3 per cent. The carriers' combined consolidated load factor decreased 0.7 points compared with the same period in 2009. United and Continental's December 2010 combined consolidated passenger revenue per available seat mile (PRASM) increased an estimated 7.5 to 8.5 per cent, while mainline PRASM increased an estimated 8.5 to 9.5 per cent.

The Federal Aviation Administration (FAA) says nearly a third of the ownership records for the 357,000 aircraft on its registry are inaccurate. The agency says it is making a concerted effort to sort its aircraft record-keeping, and has notiﬁed owners and pilots about recent changes to federal rules that require aircraft to be re-registered every three years. “The agency is moving to a mandatory re-registration system like the ones most states use to register automobiles, so we have more current and complete registration information in our database,” the FAA said. “The data is necessary for important safety reasons, including product recalls, safety directives and locating an overdue ﬂight.”

ALC seeks IPO for $100m

Air Lease Corp (ALC), the new aircraft leasing company headed by Steven Udvar Hazy, is seeking a $100m initial public offering (IPO) to more than double its portfolio of aircraft, despite filing a net loss of $49m. ALC currently has 40 aircraft, 36 of which are narrowbodies, and has a further 148 aircraft, valued at $6.2bn, due to be delivered through to 2017. The lessor plans to have a fleet of 100 aircraft by the end of this year and up to 500 within the next five years. The company did not disclose how many shares would be sold or when.

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The latest on deals, mergers, appointments and more NEWS

NEWS HIGHLIGHTS

Interjet airline orders 15 Superjet 100s

Contrasting fortunes in Cyprus

easyJet chooses fuel over passengers

The administrator of bankrupt Cypriot airline Eurocypria has reported healthy interest from potential investors. These include Archbishop Chrysostomos II, responsible for Church of Cyprus investments, and bidders from Russia and Greece. There are hopes that the airline could rehire some staff this year and begin flying again. Meanwhile, the flag carrier Cyprus Airways faces an uncertain future: it has cut flights on major routes such as Paphos-Athens and Cyprus’ finance minister has warned that the airline could follow Eurocypria into bankruptcy in 2011.

easyJet is dealing with the fallout from a blunder which saw 37 innocent customers booted off a ﬂight under threat of arrest because the aircraft, which had been overloaded with 10 extra tonnes of fuel, was too heavy to take off. The airline’s response to the problem was to lighten the aircraft by ejecting not only a large number of customers, but the luggage of those allowed to ﬂy. easyJet offered £100 ($155) and overnight accommodation to anyone who was willing to give up their seat but, with few takers, later decided to bar the last 37 customers to have checked in. It was reported that when passengers asked what would happen if they did not agree to leave the aircraft, they were told that they would be forcibly removed and that police would be waiting for them.

Cathay bumps passenger and freight volumes

BAA: no case for snow compensation The CEO of airport operator BAA, Colin Matthews, has played down the prospect of airlines receiving compensation for the disruption caused by heavy snowfall in the UK in December. Virgin Atlantic, which lost £10m due to Heathrow’s closure and ﬂight cancellations, and Lufthansa have indicated a desire for ﬁnancial redress. However, Matthews said that Heathrow’s snow plan, which accounted for up to 6cm of snow rather than the 16cm that fell, had long been agreed with the airlines. “I don’t believe we were incompetent or irresponsible. We executed the snow plan, which the airlines knew about. I don’t think there is any basis for compensation,” he told the Telegraph.

Copa traffic up a ﬁfth Copa Holdings has reported a collective increase in November passenger traffic (RPM) of 19 per cent. Capacity (ASMs) increased 20 per cent and collective load factor fell 0.5 percentage points to 80.3 per cent, compared with the same month in 2009. The company’s subsidiary airlines, Copa Airlines and Copa Airlines Colombia, recorded an increase in RPM of 18 per cent and 33 per cent respectively. November’s ASM for the airlines rose 18 per cent and 33 per cent respectively. Copa Airlines’ load factor rose 0.4 percentage points to 82.2 per cent, but Copa Airlines Colombia’s fell 4.5 percentage points to 70.5 per cent.

ROUND-UP

Cathay Pacific and budget subsidiary Dragonair carried three per cent more passengers in December 2010 than in December 2009, but saw load factors fall 3.8 percentage points to 80.1 per cent on the back of a rise in capacity. Cargo volumes were up 12 per cent, though load factors were also somewhat reduced. Cathay Pacific general manager revenue management Tom Owen said: “The quality of revenue in all classes of travel was higher, with an improvement in the revenue efficiency of the operation. Demand out of Hong Kong to all the popular holiday destinations remained strong, and we mounted a number of extra flights in response. We also saw strong demand on key long-haul routes, though results to London and New York were slightly impacted by the major snow disruptions.”

AFA-CWA calls for restraints for young passengers The president of The Association of Flight AttendantsCWA (AFA-CWA), Pat Friend, has called for separate seats and restraints for passengers under two-yearsold. “In an emergency loose items can be dangerous if ﬂying through the cabin. A lap child has the potential to be one of those ‘loose items’ that may not only suffer serious injury themselves but also injure others.” The Federal Aviation Association (FAA) continues to allow parents to hold their children on their laps during landing, takeoff and turbulence.

Mexico’s Interjet has signed a purchase agreement with SuperJet International (SJI) for 15 long-range Sukhoi Superjet 100s (SSJ100), plus options for a further five. The deal is worth $650m at list prices. The aircraft will be configured with 98 seats and are scheduled for delivery starting 2H 2012. SuperJet will also provide aftermarket care under its per-flight-hour SuperCare programme. With this deal, the Superjet 100 has received 170 firm orders.

Ireland to lose PSOs for domestic routes

Ireland’s government has announced that subsidies on many domestic flights to and from Dublin will be withdrawn in July. Transport minister Noel Dempsey said the public service obligation (PSO) grants will be stopped as a result of improvements to rail and road networks. It is thought airlines will now be forced to close a number of regional routes as the PSO will only remain on Dublin-Kerry and Dublin-Donegal routes.

CIT Aerospace orders 38 737NGs CIT Aerospace has ordered 38 737NG aircraft and secured purchase rights for an additional seven. The order, which is the largest placed by the company for Boeing aircraft, includes 15 737-900ERs and 23 737-800s. The aircraft will be delivered through to 2017 in order to expand and update the lessors’ portfolio. As of September 30, 2010, CIT had 140 Boeing aircraft in its portfolio; its estimated total commercial fleet size is 300. The new order brings the company’s order book to 111 aircraft, 58 of which are with Boeing.

US and Brazil ink Open Skies agreement

The US and Brazil have reached an Open Skies agreement that will see route and price restrictions lifted. Airlines of the two countries will also be able to form codeshare agreements. The agreement will stretch to October 2014, after which a full Open Skies policy will take effect and airlines in the US and Brazil will be able to select routes and prices based on consumer demand and market conditions.

THY privatisation tender Turkey’s privatisation administration, Ozellestirme Idaresi Baskanligi (OIB), is tendering for a consultancy to assist deeper privatisation of Turkish Airlines (THY). The OIB is seeking institutions with experience in mergers, strategic sales and IPOs. Turkey’s government currently holds a minority stake of 49 per cent in the airline.

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NEWS ROUND-UP The latest on deals, mergers, appointments and more

RBS delivers 737-800 and extends leases

Jet Airways has received the second of two 737-800s, both of which are on five-year leases with RBS. The Indian airline received the first of the pair on November 25. RBS has also signed a number of lease extensions: TACA signed a 19-month extension for an A319-100; Olympic Air inked a 24month extension for one A319-100; Nouvelair lengthened its lease for an A320-200 by four years; and China Eastern Airlines extended its lease on three A319-100s by three years.

UK traffic down in 2010 Severe winter weather and the volcanic ash cloud have been cited as reasons for the 4.3 per cent decrease in the number of aircraft flying in UK-controlled airspace in 2010. Air navigation service provider NATS said it managed 2,106,689 aircraft in the year, compared with 2,200,326 in 2009. In December, when snowfall led to airport closures, flights were 6.6 per cent lower than the same month the previous year. Of all market sectors, only transatlantic overflights posted positive growth over the course of the year, with an increase of 0.1 per cent.

Bombardier receives orders for nine business jets Bombardier has received orders for nine business jets. Comlux, the Zurichbased charter operator, will add two Global 7000 jets to its fleet of 12 Challenger and Global jets. Additionally, Munich-based Jet Air Flug has ordered five mid-size Learjet 85 and two large-cabin Challenger 605 jets worth $155m at list prices. Patrick Raftery, CEO, Jet Air commented that the order will help the airline’s “ambitious plans” to develop into Africa and serve its existing customer base in Western Europe and Russia.

Jackson Square Aviation secures $400m credit facility Jackson Square Aviation (JSA), the recently launched aircraft leasing company, has closed a $400m secured credit facility. DVB Bank was the agent, and Credit Agricole, BNP Paribas and KfW IPEX-Bank were joint arrangers and underwriters. Half of the funds will be used to finance aircraft that are already owned or have been ordered by JSA, the rest will be used to procure Airbus and Boeing narrowbody aircraft. Scott Weiss, Jackson Square’s COO and EVP of capital markets, said: “We are actively growing and having this long-term solution to finance new deliveries is a major competitive advantage for us and for our customers.”

PEOPLE IN THE NEWS Butschek joins Airbus as EVP, operations

IAA names Molli COO

Airbus has appointed Günter Butschek as EVP of operations, replacing Gerald Weber. Butschek will become a member of the Airbus executive committee and will take up his new position on March 1, 2011. He joins Airbus from Daimler, where he worked for 25 years. He will also become chairman of the board of management of Airbus in Germany. One of Butschek’s main tasks will be to lead the start of serial production of the A350.

Mike Molli has been appointed COO of International Aircraft Associates. The Florida company provides aftermarket support services.

Maroto succeeds Jones as Amadeus’ CEO The former deputy CEO of Amadeus, Luis Maroto, has replaced David Jones as president and CEO of the company. The appointment became effective at the start of 2011, although the succession plan was originally announced in January 2010. Maroto has worked for Amadeus for 11 years in a number of positions, including CFO.

Lindeman defects from Qantas Roger Lindeman has joined the exodus of Qantas staff heading for rival Virgin Blue, joining the latter as general manager of service experience after 40 years with Qantas. He will take up his post in early 2011.

JetBlue promotion JetBlue has promoted Jeffrey Goodell from his former role as director to VP of government affairs, effective immediately.

BOC Aviation appoints Le Meur to marketing team Remi Le Meur has joined BOC Aviation as VP marketing, Europe and Africa. He will be based in Dublin, and will report to Peter Goodman, head of marketing for Americas, Europe and Africa. Le Meur has most recently served as VP of aircraft marketing at an asset management affiliate of the Asian Aviation Group.

ILFC appoints HR head Aircraft lessor International Lease Finance Corporation (ILFC) has named Maggie Luciano-Williams SVP of human resources. Prior to joining ILFC Luciano-Williams was chief human resources officer for digital marketing agency iCrossing.

Lufthansa juggles board Lufthansa has rejigged its supervisory board ahead of the assumption of Wolfgang Mayrhuber’s role as CEO of Deutsche Lufthansa by Christoph Franz. The changes will see three new members join the board from April 2011: Captain Kay Kratky will be responsible for the Frankfurt and ﬂight operations division; Thomas Klühr for Munich and direct services; and Jens Bischof for sales and revenue management.

Jazz names new CFO Canadian carrier Jazz Air has promoted Richard Flynn to chief ﬁnancial officer, effective 28 February 2011. He will replace current CFO Alan Rowe.

Bram Gräber becomes MD of transavia.com Bram Gräber has been appointed MD of Transavia.com, part of the KLM Group. Gräber commented that “there is work to be done” yet assured Transavia.com “is a fantastic airline which has all the qualities to ensure success”. Gräber has worked with KLM since 1995 and appointed director of KLM, Netherlands in 2006.

Kim Hammonds promoted in Boeing’s IT organisation Boeing has promoted Kim Hammonds to chief information officer. She will also remain as VP of the company’s Information Technology Infrastructure organisation, a role she took when joining Boeing in August 2008. Hammonds replaces John Hinshaw, who has been named VP and general manager of Boeing’s new Information Solutions division in Boeing Defense, Space and Security.

Kenyon moves north of the border Cameron Kenyon has joined WestJet from Lynx Aviation in Denver. At Calgary-based WestJet Kenyon will serve as EVP, operations.

Aer Lingus board movements Mella Frewen has joined the Aer Lingus board as a non-executive director, effective January 1. Meanwhile, director Ivor Fitzpatrick has retired from the board. Frewen is director general of the Confederation of the Food and Drink Industries of the EU (CIAA).

Alaska Airlines president appointed to parent board Alaska Air Group has appointed Brad Tilden to the boards of directors of Alaska Air Group and Alaska Airlines. Tilden, the president of Alaska Airlines, oversees the carrier’s operating divisions, as well as cargo, marketing, planning and revenue management.

Non-executive directors join BAA Rachel Lomax and Professor David Begg have joined the BAA board as non-executive directors. Lomax has 40 years’ experience in policy making and served as deputy governor of the Bank of England from 2003 until 2008. Begg has extensive expertise in the transport sector and serves on the board of a number of transport-related bodies.

Williams elected to Boeing board Boeing has elected Ronald Williams to its board of directors, effective immediately. He is currently the chairman of Aetna, a diversified health care benefits company, and stepped down as CEO of the company last month. He will serve on the Boeing board’s audit and finance committees.

AFM71 News_AFM News 28/01/2011 11:27 Page 11

January-February 2011 AFM • ISSUE 71 | 11

The latest on deals, mergers, appointments and more NEWS

ROUTES NEWS Gulf Air ends European hiatus BAHRAIN-BASED GULF AIR will add two new non-stop European services from March 28, when it will begin a thrice-weekly service to Geneva and a four-times weekly service to Milan Malpensa, both to be operated with a 737-700 wet-leased from Privatair. The new routes will complement Gulf Air’s existing European services, which consist of a double-daily service to London Heathrow, and daily ﬂights to Frankfurt and Charles de Gaulle, operated with widebody A330-200 aircraft, and a six-times weekly service to Athens, operated with E-190 equipment. Gulf Air has not expanded in Europe in recent times and discontinued its thrice-weekly service to Dublin in 2007.

Armavia spreads its wings THE NATIONAL CARRIER OF ARMENIA, Armavia, has announced that it will commence two new services from its Yerevan base. Effective January 17, it will start a weekly service from Yerevan to the Slovak capital of Bratislava, to be operated with CRJ200 aircraft. There is no carrier currently operating this route. From April 20, it will add a twice-weekly service from Yerevan to Venice, to be operated with A319 aircraft, also a route not currently served.

Asiana returns to Turkey AFTER NEARLY TEN YEARS, Star Alliance member Asiana Airlines will resume a two-class service from its Seoul Incheon hub to Istabul’s Ataturk Airport. The new route will begin March 29 and will be operated on a thrice-weekly basis with a 777-200. The route is currently well served with fellow Star Alliance member Turkish Airlines offering six weekly ﬂights with a mix of A330 and A340 aircraft. While SkyTeam is represented by Korean Air, which ﬂies four times a week. The route has seen over 156,000 passengers travelling between the city pairs between October 2009 and October 2010, with Korean Air the market leader, currently having a 34 per cent share of this traffic, though Emirates hives off 11 per cent share of traffic via Dubai.

FlyDubai targets Chittagong FLYDUBAI BEGAN FOUR FLIGHTS PER WEEK to the western Bangladeshi city of Chittagong on January 17. This will become a daily service from March 27. The route is currently served by the national airline of Bangladesh, Biman Bangladesh, four-times a week and there are in total 36 ﬂights per week between Dubai and Bangladesh, with Dhaka, the capital of Bangladesh accounting for 28 of these. Emirates, Biman, GMG Airlines, United Airways and China Eastern all operate between the two countries. The wider Middle EastBangladesh market saw nearly 2.5 million passengers travel between October 2009 and October 2010, with Biman handling 32 per cent of this traffic; Saudi Arabian Airlines 14 per cent; and Emirates 13 per cent.

Norwegian to begin Swedish domestic service LOW-COST OPERATOR NORWEGIAN has announced that it will begin scheduled services from Stockholm Arlanda to Gothenburg effective February 17. The route will be operated 17 times a weekly and will compete with SAS, which operates over 40 weekly flights, while JAT Airways and B+H Airlines also operate a weekly fifthfreedom flight. The route has seen over 340,000 passengers fly the route between October 2009 and October 2010.

Alitalia expands in Florence SKYTEAM MEMBER ALITALIA will expand its scheduled service from Florence in Summer 2011 with two new routes. It currently only operates Florence from its Rome hub, but will add routes to Catania and Amsterdam from March 27. Catania will be operated on a ﬁve-times weekly basis, a route currently served on a daily basis by Meridiana. Amsterdam will be served twice-daily with A319 equipment, a route also served by Meridiana, eleven-times weekly.

Brussels Airlines boosts Prague flights EFFECTIVE MARCH 27, STAR ALLIANCE member Brussels Airlines will add a fourth daily route from its Brussels hub to the Czech capital of Prague, using a mix of Avro regional jet equipment and narrowbody A319s. It competes on the sector with Skyteam member Czech Airlines, which during the winter season is offering 19 weekly ﬂights. IATA BSP data shows that over 158,000 passengers travelled between the two cities between October 2009 and October 2010, 55 per cent of whom ﬂew with Brussels Airlines.

Ryanair bolsters Girona base RYANAIR HAS ANNOUNCED a further expansion of its Girona, Spain base with eight new routes to be added in summer 2011. This will mean that Ryanair will base up to 10 737-800 aircraft at the airport, where it is the dominant carrier. At Girona, Ryanair operates 187 weekly ﬂights of the scheduled 190 weekly departures according to January Flightbase data, while it also continues to expand in Catalonia at Barcelona’s main El Prat Airport, where it currently operates 194 weekly departures, making it the fourth largest scheduled operator there.

Aires cuts international flights COLOMBIAN OPERATOR AIRES, recently acquired by Chile’s LAN, has announced that it will discontinue a number of international routes. Effective January 18, three routes to Fort Lauderdale from Barranquilla, Cali and Cartagena will be stopped, while it will also drop Bogota-JFK and Pereira-Panama City. The only route not to be dropped will be Bogota-Fort Lauderdale, where Aires is the third-largest operator with a 22 per cent market share, behind Spirit, which has a 30 per cent share, and the 44 per cent of leader Avianca.

ROUND-UP

Copa reveals Toronto service Star Alliance member to be, Copa Airlines, will open new scheduled services from Panama City to Toronto from June 16. The route will be operated four-times weekly with 737 equipment. American Airlines currently has a 41 per cent share of this indirect market via Miami as there is no existing non-stop service.

Starflyer reveals launch plans

After announcing late in 2010 that it would begin international flights in 2012, Japan’s StarFlyer has said that from July that year it will operate a twice-daily Kitakyushu-Busan-Kitakyushu service onboard A320 aircraft.

ANZ ups West Coast connections Star Alliance member, Air New Zealand has announced that it will add new scheduled services from Auckland to San Francisco, effective December 1, 2011. The route has seen over 50,000 passengers travelling annually, though others have flown via Los Angeles with Qantas.

ANA reinstates Shanghai service

Star Alliance member All Nippon Airways (ANA) will resume services from Nagoya to Shanghai Pudong. From March 27, ANA will return to the sector on a daily basis after cancelling due to slot issues. It will compete with Air China, China Southern and JAL, which operate a daily service each. China Eastern operates a thrice-daily service. The route has seen over 460,000 passengers travel between October 2009 and October 2010 with China Eastern holding a 37 per cent share.

Asiana boosts US capacity Star Alliance member Asiana will increase capacity into the US from May. Effective May 24, it will operate the Seoul IncheonSan Francisco route on a daily basis with 777 equipment. It competes with Korean Air which operates the sector four-times weekly, United Airlines which operates the service daily and Singapore Airlines which also provides a daily flight. Over 321,000 passengers flew between the cities from October 2009 to October 2010. Also from late May, Asiana will boost scheduled services to Seattle, using A330s, from five to seven flights per week.

Canada opens skies with Jamaica, Trinidad and Tobago

Canada has finalised Open Skies agreements with Jamaica and Trinidad and Tobago. This will allow greater flexibility on frequency, Canada origin point and prices.

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12 | AFM • ISSUE 71 January-February 2011

FOCUS: START-UP AIRLINES Launching an airline and ensuring its profitability is not easy, as many failed start-ups have shown. Chris Kjelgaard investigates Allegiant Air, Feel Air and Porter Airlines to examine the factors that new airlines should take into account when trying to ensure survival.

START-UP AIRLINES

CLEARING FOR TAKE-OFF VIATION FASCINATES MANY ENTREPRENEURS – THIS IS despite it being a notoriously difficult sector in which to succeed commercially and one in which failure is common. The industry’s high profile, its glamorous image and the large amounts of cash sloshing around continue to lure would-be airline tycoons.

When start-up airlines succeed, they can do so spectacularly, even if they experience a few hiccups along the way. Consider JetBlue Airways, Ryanair, Emirates, Air Asia, WestJet and Virgin Blue. All are household names in their respective parts of the world and yet none of them existed before 1985 – and four of them launched much later than that. Many other start-ups have performed respectably. In the past 15 years, most have used a version of the low-cost model pioneered by Southwest Airlines in 1971. Southwest held the title of the most successful start-up and is now morphing into one of the world’s three largest airlines with its takeover of AirTran Airways. Today, carriers such as GOL, Spirit Airlines, Volaris, easyJet, Norwegian, Air Arabia, Aegean Airlines and flydubai typify a growing group of thriving young airlines throughout the world. But for every successful start-up, there is at least one failure. Where are Zoom Airlines, Flyglobespan, SkyEurope, Canada 3000, Air Littoral, myair.com, Air Comet and Blue Wings now? The European Regions Airline Association (ERAA) calculated in August 2009 that some 85 airlines had failed worldwide since January 2008 and expected another 20 to fail by April 2010. Since April, other carriers – including Cyprus Turkish Airlines, Ghana International Airlines, Viking Air and Hamburg International – have stopped operating. At the time of writing, the jury was still out as to whether Mexicana, one of the world’s oldest and most famous airlines, would begin flying again after ceasing operations in August.

“marketmake sure You have to

the

opportunities.

We’re not fooling ourselves. If you

try to create something that’s not there, it’s very dangerous.

”

– Kai Holberg, CEO, FEEL Air

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FOCUS: START-UP AIRLINES

FEEL Air's COO, Otto Lagarhus and CEO Kai Holmberg

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FOCUS: START-UP AIRLINES

“Decisions

dry-lease,wet-lease or purchase and whether to acquire new or used aircraft can vary depending on aircraft availability, rental levels, planned utilisation and service frequency… It can often make sense for a start-up to wet-lease aircraft until it’s cheaper to operate its own aircraft using its own crews. such as whether to

”

So start-up magnates have to think hard about the business they are entering. Several challenges must be met head-on if a new airline is to be successful in the long-term.

Know your market and competitors “Probably the most fundamental thing is to understand the competition and the market – and not to underestimate the competition,” says Mark Diamond, a principal with the airline consulting firm SH&E. Start-ups should ask themselves; “Can you find an opportunity where you can take advantage of the weakness of the competition, and exploit it?” Such opportunities might arise in finding routes that are underserved or not served at all, or by taking advantage of a newly liberalised market. Competing at a lower price against existing airlines can establish market presence as will offering a better standard of service to that previously provided. But Diamond says that, whatever the opportunity, it is important for the start-up to differentiate its product from those of market incumbents, unless the incumbents are very weak.

Robert Deluce, CEO, Porter Airlines

“Do not underestimate what the competition is capable of,” cautions Diamond. At a time when most legacy carriers have managed to trim their costs, learn how to use ancillary fees as a powerful revenue tool and forge strong marketing relationships with other airlines; it ill-suits a start-up carrier not to position itself differently to those existing airlines which will be its competitors. For a start-up, “Doing the same thing [as an incumbent] on a smaller scale is, in many or most cases, a recipe for disaster. In most cases the incumbents have lots of advantages.” These can include brand recognition; operational scale and scope; frequent-flyer programmes and networks which offer consumers lots of attractive redemption possibilities; and membership of a global alliance, which magnifies all the other potential advantages that are already enjoyed. Additionally, says Diamond, “If you go in with the same product or service as the competition, you court a serious risk of fare wars.” Nevertheless, some start-ups have entered markets already loaded with many airlines and have succeeded beautifully because they offered enough differentiation to ensure their survival. AirTran took on Delta Air Lines in Atlanta where Delta operated the world’s biggest passenger hub and was able to establish itself because it brought much lower costs and fares to the market. Virgin America, which offers competitive fares but primarily differentiates itself by offering slick inflight services based on the latest IFE technology, appears to be holding its own against United at San Francisco.

Allegiant Air, Porter Airlines and Feel Air Others have adopted different strategies to thrive. In the US domestic market Allegiant Air has used strategies pioneered by Ryanair to become one of the US’s most envied carriers. Ultralow-cost Allegiant is designed as a unified travel company that not only charges ancillary fees for everything from booking to checking-in but also offers (on its website) a variety of dynamicpackaging options for travel services such as hotels, car rental, cancellation insurance, show tickets and golf-course bookings. Allegiant operates a large fleet of low-capital-cost, second-hand MD-80s and has concentrated on markets abandoned by highercost legacy airlines during their massive downsizings in the past decade. Allegiant’s strategy has been to link secondary and even tertiary US airports with primary domestic-tourism destinations such as Las Vegas. At several major destinations (such as Orlando and Phoenix) the airports Allegiant serves have never even seen a legacy carrier. Market research is critical for any start-up, says Diamond. Only by exploring fully the nature and circumstances of the markets will a new entrant understand where its opportunities might lie. For instance, although a competitor may use a particular airport as a connecting hub, its banks of connecting flights might not be well-timed to suit locally originating business traffic. A startup might be able to establish itself at the airport by offering high-frequency, suitably timed flights to and from certain business destinations. Being adequately capitalised is also important in order to weather unexpected operational circumstances and to meet flexibly with competitive responses. A case in point is Porter Airlines, recognised as one of the most impressive North American startups of the past decade. Boasting a respected record as a Canadian airline entrepreneur and extensive connections with institutional investors, Robert Deluce saw an opportunity to revitalise a business-travel market which he felt had become vastly under-served through the neglect of Air Canada. Using C$121m ($121.5m) belonging to himself and four investors, Deluce set up a company in 2006 to buy the terminal at Toronto City Airport, kicked Air Canada Jazz out (the lawsuits continue to this day) and then formed Porter Airlines to operate high-frequency services on short-haul routes to Canadian and US business destinations using a fleet of Bombardier Q400 turboprops. Ironically, banishing Air Canada Jazz from Toronto City completed a 20-year chapter for Deluce: Air Canada had created Jazz from Air Ontario, which Deluce and his family sold to Air Canada in 1986 as Canada’s then-largest regional airline. Jazz was later floated as a stand-alone company but retained its close operational ties to Air Canada.

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AFM71_Start up airline_AFM 68 B&B 28/01/2011 13:33 Page 16

16 | AFM • ISSUE 71 January-February 2011

FOCUS: START-UP AIRLINES

Deluce had seen Air Canada neglect Toronto City Airport – which lies on Toronto Island less than a 10 minute drive from Toronto’s financial district – in favour of increasing flights from the distant Pearson International Airport to the point at which passenger numbers at tiny Toronto City had fallen from 400,000 a year to just 26,000. Deluce thought a business-oriented carrier offering high-quality service could turn Toronto City Airport into a vibrant market. By no means a low-fare carrier, Porter Airlines nevertheless saw traffic boom as it launched more routes and kept adding flights in its biggest markets. Porter now operates 20 flights a day from Toronto to Montreal, 19 to Ottawa and 11 to Newark and plans to go higher. Toronto City Airport became the preferred short-haul airport for Toronto business people, fed up with the long, trafficjam-prone drive to Pearson 17 miles away. In 2010, Porter Airlines saw 1.4 million passengers travel through Toronto City Airport and it expects to board 1.9 million there in 2011. Now, Porter is building networks from Montréal, Ottawa and Halifax too. So confident was Deluce in Porter’s ability to sustain operations that, when it started achieving operating profitability in 2007, Deluce immediately began a major round of expansion to take advantage of competitors’ weakness, even though the expansion set Porter’s break-even point back three years. (The carrier’s break-even load factor is just 49 per cent, says Deluce.) Porter Airlines grew rapidly throughout the 2008-2010 recession. Deluce demonstrated his confidence in Porter Airlines’ viability again in June 2010, when he and Porter’s four core investors scrapped the airline’s planned initial public offering (IPO) after they decided the share price required by the market for the flotation was not high enough. “It was absolutely the right thing to do,” says Deluce. “As we look back at it now, the markets were in turmoil: timing just wasn’t good. Putting it aside and just continuing to focus on our shortterm requirements and our growth and expansion, utilising an internal equity raise as opposed to the public markets – that was the right thing to do. And the capital we raised internally was more than enough to cover our short-term requirements …

When we do come back [to the market], if we do an IPO it’ll be with some assurance in terms of market stability. If we decide to wait on the IPO and do a private placement, then that’ll work as well.” Intelligent business planning is vital to any new airline. “You don’t go in just based on wishful thinking – the devil is in the details, to a certain extent,” says Diamond. Start-ups must ensure their contracts with credit-card companies, fuel suppliers, ground-handling providers and caterers are reasonably priced and contain competitive terms and conditions; and make sure their safety and security arrangements are of high quality. One proposed start-up which has planned extensively is Oslobased FEEL Air. As of January, FEEL Air had yet to announce its planned entry into service (EIS) date – mainly because, says the CEO, Kai Holberg, the company postponed it in order to mitigate commercial and market risks, however, FEEL Air does expect to begin service in 2011. FEEL Air plans to offer a low-fare, leisure-oriented, à la carte-fee service with two-class, 300-seat Airbus A330-200s in underserved long-haul markets from Scandinavia. The start-up has developed a five-year business plan which calls for it to launch services on 16 long- and medium-haul routes to (probably) eight or nine destinations, with a fleet gradually rising from two to nine aircraft. Holmberg has 12 years as a senior travel industry executive and has assembled an experienced management team which includes former Vueling CEO Lars Nyggard as chairman; Otto Lagarhus, former SAS Group’s COO and director general of civil aviation at Norway’s Civil Aviation Authority, as COO and accountable manager under FEEL Air’s aircraft operating certificate (AOC); and Lane Zirnhelt, formerly of SkyEurope, as CFO. During FEEL Air’s initial planning, the company “only did market research,” says Holmberg. “You have to make sure of the market opportunities. We’re not fooling ourselves. If you try to create something that’s not there, it’s very dangerous.”

AFM71_Start up airline_AFM 68 B&B 28/01/2011 13:33 Page 17

January-February 2011 AFM • ISSUE 71 | 17

FOCUS: START-UP AIRLINES

FEEL Air found that nearly three-quarters of Scandinavians travelling long-haul have to fly via hubs elsewhere in Europe, indicating that the Scandinavian market is greatly under-served by direct long-haul flights. After examining potential long-haul markets to ascertain the largest city-pairs, expected traffic growth, and market demographics, FEEL Air applied the analysis to its business and operational models to see how this would interact with its operational planning. “What we found was that New York and Bangkok are not only the largest city-pairs [from Scandinavia], but also that they give a tremendous leisure share – and if we combined both routes with the same aircraft we could get a record high utilisation without having to depart during the night,” says Holmberg.

brand, but also to take into account “how we as a company relate to the destinations we fly to”.

The aircraft-acquisition decision Aircraft acquisition is a primary issue for all start-ups. Decisions such as whether to dry-lease, wet-lease or purchase and whether to acquire new or used aircraft can vary depending on aircraft availability, rental levels, planned utilisation and service frequency. It can often make sense (as in FEEL Air’s case, says Holmberg) for a start-up to wet-lease aircraft until it’s cheaper to operate its own aircraft using its own crews. To ensure its brand is properly represented when wet-leasing, the start-up can supply the backoffice functions and flight attendants, who are the only crew members the public sees and who are more quickly and cheaply trained than pilots.

As a result, FEEL Air plans to begin operations by flying from Oslo and Stockholm to New York and Bangkok, which represent “If someone is starting an airline, in our opinion it’s not worth his Scandinavians’ two favourite long-haul markets. According to while getting his own AOC [air operators certificate] until he has Holmberg, both destinations are under-served from Scandinavia three aircraft,” says Shaun Monnery, chief commercial officer and in terms of leisure-traffic capacity and will remain so even director of aircraft leasing for wet-lease specialist Astraeus. UKthough SAS is due in March to launch a daily Oslo-New York based Astraeus has assisted three start-up airlines in the past and service with an A330-300 to complement Star Alliance partner now operates on its own AOC all flights for sister company Continental’s 757 flight, and although Thai Airways serves Iceland Express. “From four aircraft onwards, you’re better doing Bangkok from Oslo. it yourself, and we’ll help you.” These three carriers’ flights from Scandinavia are very much focused on business traffic and some 75 per cent of Continental’s traffic to Newark travels on to other US destinations, as will most of SAS’ traffic, says Holmberg. “FEEL Air … focuses on point-topoint, cost-conscious leisure travellers, and thus we believe this will be a healthy market balance,” he argues.

Astraeus offers both an AOC-preparation service and type-ratingtraining service for start-up clients. Accordingly, a start-up contracting with Astraeus does not have to wait to begin operations until it has hired pilots, trained them for its aircraft and completed the regulatory work needed to obtain its AOC. Astraeus can assist with this at the same time that it is operating flights on the new carrier’s behalf. It can also provide and train cabin crews: Astraeus employs three full crews of attendants, most of whom are qualified to train new flight attendants hired by clients.

Holmberg recognises that during its start-up phase, a new airline is completely dependent on external factors such as economic cycles and availability of the right aircraft and crews. However, he says, as the start-up becomes established it must create a culture, brand and operational set-up that can allow it to sustain itself “But you need to know the demand,” for the service you are through the peaks and troughs of economic cycles. FEEL Air aims planning, says Monnery. “It is the most important thing – if you to be a “simple, feel-good brand … with a rock-and-roll element” haven’t got the seats filled, you’ve got nothing. You get that bit positioned not only to resonate with the public as a fun, lifestyle right first and we’ll give you branding.”

AFM71_ATM_AFM 68 B&B 28/01/2011 13:15 Page 18

18 | AFM â&#x20AC;˘ ISSUE 71 January-February 2011

FLEET OPERATIONS: ATM The next generation of air traffic management systems will need to support more efficient airline operations while coping with the doubling of air traffic. Bernard Fitzsimons examines the situation.

AIR TRAFFIC MANAGEMENT:

MOVING FORWARD T

HE TRANSITION TO A NEW GENERATION OF SATELLITE-BASED AIR TRAFFIC Management (ATM) systems has been in the planning and development stage for nearly two decades, since an ICAO air navigation conference endorsed the Future Air Navigation System (FANS) concept and the associated Communications Navigation and Surveillance (CNS) systems for ATM in 1991. There have been advances in many areas since then, but most of the worldâ&#x20AC;&#x2122;s air traffic is still routed along airways defined by ground-based beacons using Very High Frequency (VHF) voice communications with ground-based air traffic controllers monitoring displays generated by ground-based radars. For years, the system has been creaking under the strain of traffic growth, but a projected doubling of traffic by 2025 has inspired both Europe and the US, the two most congested areas, to embark on ambitious rebuilds of their systems. As envisaged by FANS, the idea is to replace much of the ground-based infrastructure with satellite-based CNS technologies, including data communications, Global Positioning System (GPS) navigation and Automatic Dependent Surveillance Broadcast (ADS-B). The concept has evolved to focus on trajectory-based operations, in which aircraft and ATM computers negotiate the optimum trajectory all the way from departure to arrival gate, based on the availability of system-wide information.

AFM71_ATM_AFM 68 B&B 28/01/2011 13:16 Page 19

January-February 2011 AFM • ISSUE 71 | 19

FLEET OPERATIONS: ATM

“Defining requirements

and engineering solutions is one thing:

equipping dozens of aircraft control centres, hundreds of airports and tens of thousands of aircraft is another.

”

That is the goal of Europe’s Single European Sky ATM Research (SESAR) and the US NextGen programmes. But defining requirements and engineering solutions is one thing: equipping dozens of aircraft control centres, hundreds of airports and tens of thousands of aircraft is another.

Mandates and incentives The basic task of Air Traffic Control (ATC) is to ensure the safe separation of aircraft, and the fundamental aim of FANS was to make it possible to reduce minimum separation distances in order to make better use of finite airspace. There has been progress in some areas. By a painstaking process of measuring every individual aircraft’s ability to maintain a specified altitude accurately, and forcing any that could not to either improve their capability or stay out of upper airspace, the vertical separation minimum has been reduced, region by region, from the traditional 2,000ft to just half that. There have also been delays and diversions. ICAO, for example, had mandated the Microwave Landing System (MLS) as the replacement for the 50-year-old Instrument Landing System (ILS). But, dazzled by the promise of GPS when it was made available to civil users in the 1980s, US airlines baulked at the cost involved: they were going to fit GPS anyway because of the vastly improved positioning information it provided, and it was believed that a simple ground station to broadcast corrections to the GPS satellite signals would enable it to act as the new precision approach aid.

AFM71_ATM_AFM 68 B&B 28/01/2011 13:17 Page 20

20 | AFM • ISSUE 71 January-February 2011

FLEET OPERATIONS: ATM

“

investment well worth making, just not one that should be borne by the airlines because there are a lot of other benefits – reduced carbon, increased jobs, other things – that should be funded by people

It’s [NextGen ATM is] an

”

other than airline customers. – Doug Parker, CEO, US Airways It was found that using GPS to land aircraft reliably was not so simple. After nearly 20 years of effort, Honeywell certified its SmartPath landing system: like MLS, it supports multiple approach paths rather than the straight-line, fixed-angle descent of an ILS. But SmartPath is not certified for the most stringent Category III operations, in which aircraft can descend below 100ft before they need to see the runway, and there are just a handful of SmartPath installations around the world. There is just one commercial MLS, installed by Thales at London Heathrow and certified to Category IIIb, where it supports the low-visibility operations of British Airways’ single-aisle Airbuses. ILS has been improved, and it seems likely to remain in service indefinitely. After its experience with the introduction of radios capable of 8.33kHz channel spacing to avoid running out of frequencies in the late 1990s, Eurocontrol looked at alternatives to the traditional mandate to support the introduction of Controller Pilot Data Link (CPDLC) communications, seen as the next step in reducing frequency congestion and improving the efficiency of ATC, and ADS-B. The Link 2000+ and Cristal programmes offered subsidised equipment to pioneer airlines, enabling operators and controllers to gain operational experience, refine the operating procedures and pave the way for full-scale implementation.

NextGen, next steps In the latest version of its NextGen implementation plan, the Federal Aviation Administration (FAA) outlined its aims for 2018. They include common weather and system status information to improve flight planning, allied to ADS-B surveillance, data communications and Performance Based Navigation (PBN). Anticipated benefits are a 21 per cent reduction in total flight delays and cumulative benefits to the travelling public, aircraft operators and the FAA, worth $22bn. The principal challenges listed are complexity (because systems in various stages of development and maturity are inter-dependent and would be implemented in a variety of timeframes), and the reliance on operators to equip as the system moves to aircraft-centric capabilities. So far, the agency can point to such programmes as the use of ADS-B to control traffic since December 2009 in the Gulf of Mexico, where radar coverage is unavailable. But there is a big difference between an investment in a limited area that provides surveillance (and the associated safety benefits where there was none) and its application on a national basis (where the perceived benefits are minimal in comparison to the expense). So the big question remains, who will pay for it? Not airlines, if they can help it. “We are huge proponents of NextGen,” said US Airways’ CEO, Doug Parker, last May. “It’s a fantastic project that has enormous benefits to airlines and to the general public. Our point is that we just can’t pay for it. It’s an investment well worth making, just not one that should be borne by the airlines because there are a lot of other benefits – reduced carbon, increased jobs, other things – that should be funded by people other than airline customers.” Parker points out that 20 per cent of the price of the average consumer ticket already covers taxes and fees. And current proposals in Washington threaten to add annual costs of $2bn each for Passenger Facility Charge (PFC) increases and security fees: $1bn for fire-fighting services; $5bn for carbon cap-andtrade; $3.5bn for the US visit and exit programmes. In the specific case of ADS-B, the Department of Transportation’s (DOT) inspector general found in October that the greatest risks to the programme were airspace users’ reluctance to equip their aircraft and the FAA’s ability to define requirements for more advanced capabilities. The users, according to the FAA’s estimates, face costs somewhere between $2.5bn and $6.2bn to equip for an ADS-B ‘out service’ that essentially replicates existing radar coverage and provides them with few new benefits. Requirements for the ADS-B ‘in service’, which will provide users with a cockpit display of traffic information and other benefits, remain undefined, while problems encountered with integrating ADS-B information on existing controller displays suggest that modifying ground systems may also represent a major challenge.

Powerturbine 2011 mod_ATEM 11/01/2011 09:54 Page 3

AFM71_ATM_AFM 68 B&B 28/01/2011 13:17 Page 22

22 | AFM • ISSUE 71 January-February 2011

FLEET OPERATIONS: ATM Under the FAAC’s scheme, the form and structure of the financial options depend on the appropriateness of the incentive for the technology and capability being funded, the aviation operators involved, the costs and benefits associated with the particular technology or operational capability, and the shared responsibility between the public and private partners. Such a partnership would be consistent with previous federal funding of groundbased infrastructure, as that infrastructure is now being replaced by an integrated system with both ground and airborne components.

“

cost-benefit analyses are not considered adequate to support airline financial commitments running into the hundreds of millions of dollars… So the [NextGen Equipage] fund aims to use a combination of private sector capital, supply chain investment and The government’s

commercial operating and management practices to

bridge the gap.

”

The inspector general’s report quotes estimates for aircraft equipage ranging from a low of $32,000 for ADS-B ‘out’ and $162,500 for ADS-B ‘in’ to respective highs of $174,640 and $670,000. It suggests a range of possible incentives to encourage operators to equip. They include buying equipment for operators, an investment tax credit, an adjustment to current excise taxes for ADS-B equipped aircraft, and research and development tax credits specifically for avionics manufacturers. In 2008, the report recalls, the FAA’s Government Aviation Rulemaking Committee (ARC) called for the agency to establish agreements with operators, subsidise the purchase and installation of new avionics, and accelerate ADS-B deployment at designated locations. But while the FAA has since established several agreements with airlines and avionics manufacturers and purchased equipment for some airspace users, it has never managed such a large task to equip commercial aircraft. So there needs to be a clear understanding of what the incentives would be used for as well as their strengths and weakness, timing and potential impacts. Cost-sharing mechanisms have merit because they help share risks between the Government and air space users. The report says: “If FAA does use equipage incentives, it must properly design them to achieve objectives at minimal cost to taxpayers.” The DOT’s Future of Aviation Advisory Committee (FAAC) followed up in December with a report recommending that the federal government make a “significant financial investment” to accelerate NextGen equipage in exchange for a financial or operational commitment by operators, such as a reduction in carbon dioxide emissions. An envisaged public-private partnership would focus on equipping aircraft and training staff to use the new technologies, and the FAAC suggests a menu of financial options, including grants, loans, leases and loan guarantees.

As it happened, September saw US president Obama unveil a $50bn scheme for investment in transport infrastructure that would include public funding for accelerated equipage of aircraft to accelerate NextGen benefits. Preliminary indications, according to the FAAC report, are that the value of benefits moved forward in time will exceed the cost of the funding required to pay for the accelerated equipage. Unfortunately, the fate of the FAA budget reauthorisation legislation, still in limbo after three years, does not bode well for an approach that would depend on the approval of the US congress.

Charting the progress The FAA has at least been spending money. In 2007, it signed a contract with a team backed by ITT, the technology engineering and manufacturing company, for the construction of a national ADS-B ground network worth $1.8bn over 18 years. Another $6m went to Aviation Communication and Surveillance Systems (ACSS) to equip 20 US Airways’ A330s and carry out demonstrations at Philadelphia, while Honeywell was awarded $3m for concept evaluation and demonstrations with JetBlue and Alaska Airlines. Last year, following the introduction of ADSB at Philadelphia, the FAA awarded a series of system engineering 2020 contracts to Boeing ($1.7bn), ITT ($1.4bn), General Dynamics ($1.2bn), Metron Aviation ($1.15bn), TASC Aviation ($827m), Booz Allen Hamilton ($711m) and CSSI, the engineering, IT and research company, ($280m). The SE2020 programme involves concept development, evaluation and demonstration through 2018, and each contract involves a large team: Boeing’s, for example, includes Airbus, Cessna, Honeywell and Lockheed Martin along with several smaller companies, consultants and academic institutions. But it does nothing to address the cost of implementing the resulting technologies and concepts. There is another possible approach. At the US Air Traffic Control Association’s annual conference in October, ADS-B prime contractor ITT and NEXA Capital Partners, a Washington-based financial advisory firm, launched the NextGen Equipage Fund to help bridge the gap. The government’s cost-benefit analyses are not considered adequate to support airline financial commitments running into the hundreds of millions of dollars, the fund says. In the past, moreover, airlines last to equip with new avionics reaped the highest benefit, while early adopters paid a higher price and ran greater risks from programme delays, deployment uncertainties and version creep. So the fund aims to use a combination of private sector capital, supply chain investment and commercial operating and management practices to bridge the gap. As outlined so far, the fund aims to raise equity investment from equipment manufacturers and borrow additional funds commercially. It would then buy the equipment needed to implement ADS-B, data communications and other services and lease it to operators, that would not have to start paying for the equipment until the FAA provided the service. And, the fund says, it could begin equipping aircraft fleets as early as 2013.

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AFM71_LCC_AFM 68 B&B 28/01/2011 11:13 Page 24

24 | AFM • ISSUE 71 January-February 2011

FLEET OPERATIONS: Low-cost cargo Most European low-cost carriers (LCCs) view cargo as a distraction from their core business of moving passengers as cheaply and efficiently as possible, but as Martin Roebuck discovers the case for low-cost cargo is still strong.

THE RISE AND SUSTAINABILITY OF

airBaltic regards itself as a hybrid carrier

LOW-COST CARGO JetBlue inaugurates its service to Washington DC

LTHOUGH LCCS ARE FINDING IT HARD TO PUSH yet more ancillary products, many believe it is more practical to extract additional cash from passengers than to add a new tier of complexity and cost. While cargo would usefully fill available belly space, it is seen as potentially harmful to turnaround times that are as fast as 25 minutes. And the need to compete with trucking on intra-European routes would inevitably curb the kilo rate and the potential additional income.

A case in point No official word has yet emerged on the success or otherwise of easyJet’s cargo trial last year. The six-month test, based on carrying small-dimension shipments on selected routes out of its second-string UK hub at London Gatwick, was designed to show whether easyJet could develop cargo as a viable ancillary revenue stream. The carrier is not ready to talk to the media about it, but apparently will have more to say later this year.

Ryanair is not thought to have given serious consideration to cargo. An additional complication is that it serves mostly secondary airports that can be more difficult to reach by truck, with little local commercial traffic and limited freight forwarding or ground handling facilities. Other European LCCs, such as Wizz Air, Vueling and Norwegian, limit themselves to mail or small quantities of highrevenue, urgent freight. This has left the way clear for carriers with a different business model, such as long-haul leisure specialists and hybrid operators. Latvia’s national airline, airBaltic, regards itself as one such hybrid, “integrating some of the best features of network carriers and low-cost airlines” in the words of its CEO, Bertolt Flick.

EasyJet operates more than 500 routes to 29 countries, a density of European network that the carrier’s then director of operations, Cor Vrieswijk, said at the launch of the project would appeal to shippers. Although “very confident of success”, he admitted he was conscious of cargo’s potential impact on service reliability, and stressed that passengers must be the overriding concern.

The carrier has exploited its geographical position to tap into east-west trade flows. Twelve new routes for the winter season took airBaltic up to 80 destinations in Europe, Scandinavia, Russia, the CIS countries and the Middle East. Transit cargo over its Riga hub represents 60 per cent of the carrier’s traffic. Bombardier Q400 aircraft has replaced Fokker-50s on short-haul services, increasing capacity and allowing larger-dimension cargo to be carried, while 737s and 757s serve the longer routes.

Vrieswijk resigned in October as delayed and cancelled flights continued to plague easyJet. The new CEO, Carolyn McCall, promoted the carrier’s procurement director, Warwick Brady – a former director at rival, Ryanair – in Vrieswijk’s place in what was interpreted as a statement of intent about improving future ontime performance.

Cargo is an independent business unit. Sales are outsourced to forwarders in the Baltic countries and to more than 40 online and offline general service agents (GSAs) worldwide. “We carried over 9,000 tonnes of cargo and mail in 2010, 13 per cent more than in 2009,” says Toms Andersons, head of airBaltic Cargo.

AFM71_LCC_AFM 68 B&B 28/01/2011 11:13 Page 25

January-February 2011 AFM • ISSUE 71 | 25

FLEET OPERATIONS: Low-cost cargo

Sathis Manoharen, regional head of cargo, AirAsia

European LCCs, such as Wizz Air, Vueling and Norwegian, limit themselves to mail or small quantities of high-revenue, urgent freight. This has left the way clear for carriers with a different business model, such as long-haul leisure specialists and hybrid operators. Other

“There is plenty of competition and we have to stay sharp with product and pricing. Volume has doubled since 2007, reflecting both the increase in our network and development and investment in the cargo department itself. Last year we completed several projects aimed at improving product and processes. We introduced the MailSuite management system from CDA IT Systems and the CHAMP e-booking portal, and moved to realtime rate distribution in co-operation with CargoXL.” The online portal allows forwarders to view schedule availability in real-time and make bookings outside normal office hours for the first time. “Turnarounds are 30-50 minutes and I don’t see issues with this at all,” Andersons says. AirBaltic transferred its handling to North Hub Services in Riga from January 1. Cargo transit time has been AirBaltic sells to 26 postal operators. Mail represents 40 per cent reduced from four hours to three and the carrier is now of its cargo traffic, though airfreight began improving its share last benefiting from fully covered cargo trolleys, “which has made life year as the market recovered. much easier considering our climate,” he adds. Loading cargo at Riga

Toms Andersons, head of airBaltic Cargo

AFM71_LCC_AFM 68 B&B 28/01/2011 11:14 Page 26

26 | AFM • ISSUE 71 January-February 2011

FLEET OPERATIONS: Low-cost cargo After acquiring the loss-making German charter carrier, LTU, in March 2007, airberlin also entered the hybrid arena. The buyout made it the second largest German airline and the sixth in Europe, adding long-haul services to its existing European portfolio. As well as traditional holiday destinations such as Malaga, Alicante and Palma, airberlin serves main airports in commercial locations including Vienna, Zurich, Rome, Naples, Basel, St. Petersburg and, as of February 2011, London Gatwick.

The ‘virtual’ model This growing European network has provided opportunities for Düsseldorf-based Leisure Cargo, which entered the market in 2000 in a unique niche providing cargo sales and marketing for primarily tourist carriers. Christian Weidener, director of operations, describes Leisure Cargo as a “virtual airline” now representing 17 carriers worldwide. “Airberlin came onboard in 2005 and is not a typical LCC. It operates various business models, combining business travel and the tourism market, and is to become a member of the oneworld alliance. “Even to the tourist resorts, there are always food products and newspapers to be transported, and there is always space available on the flight,” Weidener says. “Other LCCs seem afraid of 30- to 40- minute ground times, but I think they have not really looked at the possibility. It’s a lot easier to load 500kg of news-papers – let’s say 10 parcels – than the same weight of bags, which will be 10 times the volume.” Return airberlin flights from Bangkok, a key transit airport for long-haul holidaymakers, enable Leisure Cargo to compete with traditional network operators. Its westbound flights are full with conventional Asia-Europe cargo such as electronic components, textiles and medical supplies.

“

Other LCCs seem afraid of 30- to 40- minute think they have not

ground times, but I

really looked at the possibility. It’s a lot easier

to load 500kg of newspapers – let’s say 10 parcels – than the same weight of bags, which will be

10 times the volume.

– Christian Weidener, director of operations, Leisure Cargo

unloading cargo

Weidener claims the company is even positioned to follow manufacturers as they migrate from Thailand to neighbouring countries in search of cheaper labour as it can provide road feeder services into Bangkok from locations such as Cambodia and Laos. Meanwhile Leisure Cargo picked up its first Middle East contract last year, from Saudi carrier nasair. “They weren’t selling cargo at all before, but it works well for us because they fly to Dubai, from which airberlin connects to Europe,” Weidener says. Asia’s strongest example of a cargo-carrying LCC is Kuala Lumpur-based AirAsia, which operates A320s across south-east Asia. Sathis Manoharen, regional head of cargo, says: “It took us two years to get where we are now. Before that we were doing maybe a couple of boxes, 50-100kg. To build this to two or three tonnes and become serious about cargo, we talked with freight forwarders and also directly to manufacturers such as Dell and Intel about what they expected in terms of security and reliability,

”

and how far ahead we should cut-off so as not to conflict with the passenger business.” The cut-offs were set at four hours for the narrowbodies and three hours for the A330s and A340s operated by the group’s long-haul arm, AirAsia X. Loading has been streamlined to fit tight turnaround times averaging 25 minutes for AirAsia and 60 minutes for AirAsia X, and the services are proving reliable for cargo customers. AirAsia’s flown-as-booked record was 90 per cent in November, compared with an average for the Asia region of 87 per cent. The carrier treats cargo as part of its ancillary revenue. “It’s the second highest contributor after excess baggage, accounting for between 3.5 and 4.5 per cent of total revenue,” Manoharen says. AirAsia is responsible for its own sales in Malaysia but appoints GSAs, or “business partners” as it describes them, elsewhere. Cargo volumes grew by 55 per cent last year. “Revenue growth

AFM71_LCC_AFM 68 B&B 28/01/2011 11:14 Page 27

January-February 2011 AFM • ISSUE 71 | 27

FLEET OPERATIONS: Low-cost cargo

“

competition and we have to stay sharp with product and pricing. Volume has doubled since 2007, reflecting both the increase in our network and development and investment in the cargo department itself. There is plenty of

– Toms Andersons, head of airBaltic Cargo.

”

was even higher because we saw yields improve as the market “We transfer cargo just like we transfer passenger baggage, so recovered,” Manoharen says. This is despite a low-cost strategy cargo connections are often completed in as little as 30 minutes, for cargo that mirrors passenger fares, consciously under-cutting though larger shipments can take longer. We try to mitigate the possible negative effects of these quick turns on our ramp agents Singapore Airlines, Malaysia Airlines and Korean Air. by effectively managing our capacity, restricting certain types of AirAsia X is achieving 12- to 15-tonne payloads on new routes commodities, and limiting the weight limit per piece to no more such as Incheon, launched in November, and Tokyo Haneda, in than 200lbs [91kg].” December. “We’re building our reputation and credibility in the market and the new services give us better connectivity to Southwest’s recent order for 737-800s “should have a very positive effect on our cargo business,” Devereaux says. “It offers markets such as India,” Manoharen says. significant cargo capacity that could be particularly helpful on Cargo has become an integral part of SpiceJet’s ancillary strategy longer-haul flights and in slot-controlled airports where we have in India, and now makes up 3.5 per cent of overall revenue. The a limited amount of lift. It also could provide us with the LCC typically carries two to 3.5 tonnes of cargo on its short- and opportunity to serve new markets.” medium-haul domestic services using 737-800 and 737-900ER aircraft. As is typical in Asia, SpiceJet serves main airports and Southwest currently serves four Canadian destinations on an carries all types of cargo, excluding only valuable cargo and export basis only under an interline programme with WestJet. “The reach is somewhat limited. However, the service quality has dangerous goods, with a maximum package weight of 100kg. been very good, so we’ve attracted quite a few loyal shippers. We Cebu Pacific, the number two airline in the Philippines, doubled have aspirations of expanding the agreement in the future,” capacity in a recent re-fleeting. It now operates 24 A320 family Devereaux says. Cargo usually makes up a little over one per cent tail in new livery aircraft and eight ATR 72-500s, serving 14 destinations across of Southwest’s gross revenue, but he reports that 2010 volumes were flat. south-east Asia as well as domestic routes. Ancillary revenues, which Cebu classifies separately from cargo, fell by five per cent to PHP245 ($5.59) per passenger in the 3Q of 2010 and were 12 per cent down for the first nine months due to more stringent travel regulations and “changing consumer behaviour”, the carrier says.

JetBlue Cargo by contrast, saw growth of “close to 50 per cent in both volume and revenue terms” in 2010, one of the best performances seen in North America last year, says system cargo manager, Ed McDonald. “Despite the economic downturn we have experienced double-digit cargo growth over the last three years.”

Cargo more than compensated for the ancillary shortfall with a 22 per cent year-on-year revenue increase in Q3, and 32 per cent for the year to September. Cargo revenue reached 8.2 per cent of Cebu’s total revenue in the quarter – a share most network carriers would be proud of.

The carrier offers cargo to 29 cities across its network, focusing mainly on the domestic US market to date. It has been encouraged by its success to the Dominican Republic, however, and “will likely expand in the near future to other countries,” McDonald says.

Cargo in the US

JetBlue averages payloads of 1.5 to two tonnes of loose-loaded cargo on its A320s and carries up to one tonne on its E190s. It outsources the majority of sales to GSAs and likewise most cargo handling is carried out by third parties, with JetBlue looking after its own handling only at Newark and Long Beach.

While cargo has grown into a valuable sideline for a number of North American LCCs, Wally Devereaux, director of sales and marketing for Southwest Airlines Cargo, refutes the much touted argument that longer distances and limited direct competition on many point-to-point routes somehow makes for an easier operating environment than in Europe. Wally Devereaux “Some of our circumstances are similar to those our European LCC counterparts contend with. Southwest serves many secondary airports, although most do have an infrastructure in place to handle cargo effectively. We also face significant competition from trucking, integrators, and other commercial airlines,” Devereaux says.

Pressure on pricing has become less intense as the economy has begun recovering, McDonald says. “We provide an all-in pricing plan and we do not charge fuel and security surcharges. Our prices change no more than a few times a year based on economic challenges and market fluctuations. We are able to accomplish this because of our variable-cost model. We do our best to keep fixed costs out of the equation as much as possible. “Cargo should not disrupt the core business of customer service above the wings,” McDonald concludes. “We have kept the cargo business relatively simple and we continue to add necessary automation to ensure efficiency.”

AFM71_alternative fuel_AFM 68 B&B 28/01/2011 13:27 Page 28

28 | AFM • ISSUE 71 January-February 2011

FLEET OPERATIONS: Alternative fuels They were the unsexy stepsisters of nature’s bounty. Their flavours were unappealing, their nutritional content low and their commercial value limited. Throughout history they have been ignored, derided and often treated as pests – until now. Paul Steele, director of Aviation Environment, IATA, reports.

UDDENLY ALGAE, JATROPHA, CAMELINA and other scorned plants and organisms are hot. Researchers around the world are discovering how to turn their oily content into green biofuels that could soon power aircraft and reduce the environmental impact of air travel. Over the past three years, biofuels have been added to traditional jet fuel on successful test flights using commercial aircraft in New Zealand, the US, Japan and the Netherlands. Biofuels still emit carbon. But as they grow, the source crops for biofuels absorb in advance the carbon that they will eventually emit. The net impact is impressive – a reduction of up to 80 per cent over traditional carbon-based fuels.

Pressure for an alternative The quest for alternate fuels got underway in the early 1970s after some oil-producing nations put an embargo on exports. Gas ran out at pumps in industrialised nations and prices soared for the limited quantities available. To this day, airlines continue to be frustrated by radical fuel-cost fluctuations that regularly force them to raise fares or add surcharges. They also worry about supplies being restricted by unforeseen events or about traditional fuel supplies eventually running out. More recently, climate change has been the biggest spur to new developments in alternative fuels. With concerns over greenhouse gasses rising, airlines have put themselves in the vanguard of new research into biofuels.

AFM71_alternative fuel_AFM 68 B&B 28/01/2011 13:27 Page 29

January-February 2011 AFM • ISSUE 71 | 29

FLEET OPERATIONS: Alternative fuels

BIOFUELS: THE CLIMATE-FRIENDLY FUELS OF THE FUTURE

AFM71_alternative fuel_AFM 68 B&B 28/01/2011 13:28 Page 30

30 | AFM • ISSUE 71 January-February 2011

FLEET OPERATIONS: Alternative fuels

“aviation’s In

green

biofuel vision, the

feedstock of choice in a given region will be

processed into an oil

– often referred to

as bio-crude – which looks not unlike

cooking oil. It will then be refined into biofuel in much the same way crude oil is turned into

kerosene.

”

Although the climate experts at the United Nations agree that airlines currently produce only two per cent of man-made CO2 emissions, the potential aviation growth in emerging markets means that overall emissions are set to grow. So the industry is taking a lead. It has already improved its efficiency by 20 per cent in the past decade – thanks to new aircraft and smarter operating procedures – but recently the industry went further still, pledging to halve carbon emissions by 2050. And it plans to do so in a sustainable manner.

of biofuel in the fuel mix, and moving to next-generation bio-mass sources that would not compete with food or water sources.

That means not using ‘first generation’ biofuels such as corn and sugar cane, which were criticised as a threat to food supplies and water resources. Instead, the search is on for crops (referred to as feedstocks in the fuel industry) that do not compete with food and water supplies, and that, in the process, help local people and economies around the world. Ideally, the new crops will bloom in unfarmed areas – arid land, deserts and salty water.

However, substantial hurdles are yet to be overcome before massproduction of aviation biofuel can begin.

But no single feedstock will provide the magic bullet. What’s grown and where will depend on local variables such as soil, weather and indigenous flora. In aviation’s green biofuel vision, the feedstock of choice in a given region will be processed into an oil – often referred to as bio-crude – which looks not unlike cooking oil. It will then be refined into biofuel in much the same way crude oil is turned into kerosene. For aviation use, a number of criteria must be met, including a freeze point that withstands the low operating temperatures at high-altitude. But no matter what plant or organism is initially used, the end product will have characteristics the same as traditional aviation fuel. It can be transported and stored using existing airport facilities and can be mixed with traditional jet fuel in the tanks of existing aircraft without any modifications to the aircraft engines or fuel system.

Aviation Biofuels – the past and the future Although the possibility of deriving fuel from biomass has been understood for many years, it was long thought that it lacked the energy density or low freeze point to be a viable alternative to JetA1. As recently as 2006, the UK Sustainable Aviation group reported that kerosene was likely to remain the fuel of choice ‘for the foreseeable future’. But the pace of change in aviation is remarkable, and just two years later, the first trials of biofuel had begun. A Virgin Atlantic 747 flew with a 50-50 mix of biofuel in one engine on a London-Amsterdam flight in January 2008. Although the choice of biofuel – coconut and babassu oil – drew criticism for its sustainability, it proved a valuable first step in proving that biofuel could work. The focus then moved to increasing the share

Subsequent trials with Air New Zealand and KLM showed the increasing viability of different biofuels, and in January 2009, a Continental Airlines’ algae and jatropha flight reported a decrease in fuel consumption in the biofuel engine compared with the one running conventional jet fuel. In other words, the energy density of the biofuel was higher than kerosene.

Unlike petroleum, which can be shipped in large volumes, biofuels need to be locally produced to ensure maximum efficiency. The challenges presented by local biomass production will require an entirely new distribution, business model and approach to distribution – but this could have a number of advantages, particularly for a nation’s energy security. Local production also creates the possibility of other innovative sources of fuel, beyond jatropha or even algae. British Airways (BA) has announced an initiative to produce fuel from municipal solid waste. A plant built by the Solena Group will convert 500,000 tonnes of waste into 16 million gallons of green jet fuel every year. BA estimates CO2 savings of up to 95 per cent compared with normal fuel services. This is equivalent to taking 48,000 cars off the road. The project will also generate 1,200 jobs, and cut another greenhouse gas, methane, by reducing landfill. In the US, marine algae – another strong contender for biomass material – has no realistic geographical boundaries. The SeaGreen project, being run by the Sustainable Use of Renewable Fuels (SURF) group, will work to further progress this particular fuel source in the short-term. There are concerns that areas of Africa particularly suitable for biomass crops may not have the financial and logistical capability necessary for local production. But the potential of a new industry, bringing with it new jobs and new hope for the future, is a strong argument in favour of support where necessary.

Kick-starting demand Energy security and new jobs are strong incentives for biofuels development. In the current economic environment, however, these goals must be accompanied by a balancing of the books. In short, there needs to be a demand for biofuels.

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AFM71_alternative fuel_AFM 68 B&B 28/01/2011 13:29 Page 32

32 | AFM • ISSUE 71 January-February 2011

FLEET OPERATIONS: Alternative fuels

“

not cellphones… It’s not a single product that just gets repeated everywhere the same way. Bankers will have to be persuaded to finance an industry without a track record, and that can only be done with government support. This is

– Darrin Morgan, director of sustainable biofuel strategy at Boeing.

Thanks to the aviation industry’s tough target to reduce carbon emissions by 50 per cent by 2050, demand for biofuels is expected to be strong. That, in turn will bring down the price. With an expansion in production volumes, costs are certain to fall. The International Energy Agency (IEA) suggests every doubling of the scale of capacity for new energy technologies delivers a 10-20 per cent reduction in unit costs. On top of this, carbon will become increasingly expensive. Fuel costs are expected to remain in a stable band around the $80$90 per barrel mark for 2011, but the IEA and others anticipate an inevitable long-term increase in price. Added to this will be the increasing cost of carbon once Emissions Trading Schemes (ETS) come into play. Aviation’s involvement in the European Union ETS starts in 2012 and this, and any other proposed market-based solutions, will put carbon prices up. Although forecasts predict aviation biofuels will become economical in around 20 years, it is government support for the fledgling industry that will make all the difference. For example, the IEA estimates that biofuels will make up about 30 per cent of aviation fuel supplies by 2050. But an E4tech report commissioned by the UK Committee on Climate Change last year projected a significant improvement on this figure if governments back biofuels and new technologies come into play. Its central estimate for aviation biofuels usage in 2050 was 85 per cent.

”

At the recent Air Transport Action Group Environment Summit in Geneva, Doris Schröcker, policy officer at the Directorate General for Mobility and Transport, European Commission, intimated that while there may not be specific aviation policies regarding biofuels, discussions on a more general bio-energy policy are advanced. And the US Department of Agriculture (USDA) and the Federal Aviation Administration (FAA) have stated they will team up with the airline industry to work on developing renewable jet fuel. There is also the potential for collaboration with the automotive industry, which can use some aviation fuel by-products. Automotive biofuels already receive support worth almost $1 a gallon in some countries. “With certification expected within months, distribution and commercialisation are the challenge,” says IATA’s Bisignani. “It is in the self-interest of every government to get much more involved and support the commercialisation of biofuels with incentives to facilitate the needed investments.” Regional approaches are likely in the first instance. Biofuel development may proceed better this way and, in any case, a global approach is already there in the stringent technical and sustainability criteria a fuel must meet. Only by meeting these specifications will a biofuel meet the needs of the global market. Local production being ramped up to meet the needs of a local hub would seem a good starting point. So how soon will airlines be filling their tanks with jatropha or algae? “What we want is to have approximately 30 per cent biofuel usage in aviation by 2030,” says Christian Dumas, VP of environmental affairs at Airbus. As a first step, biofuels must be certified as safe for use. Aviation experts say that should happen by the end of the 1Q of 2011. Flights powered at least partly by biofuels will soon be a reality; Lufthansa, for example, has announced it will operate a commercial service between Frankfurt–Hamburg using a 50-50 mix, starting in 2011. The hard part will be kick-starting a biofuel industry from scratch, says Darrin Morgan, director of sustainable biofuel strategy at Boeing. Around the world the industry will need producers to grow the plants or algae, processors to turn them into oils and refiners to turn that green crude into finished fuels. “This is a supply chain that doesn’t exist today,” says Morgan. “This is not cellphones,” he says. “It’s not a single product that just gets repeated everywhere the same way.” Bankers will have to be persuaded to finance an industry without a track record, and that can only be done with government support, says Morgan. But then the same was once true of the wind energy industry, he says. And look where that is today.

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AFM71_Start up lessor_AFM71 28/01/2011 13:51 Page 34

34 | AFM • ISSUE 71 January-February 2011

TRADING, LEGAL & FINANCE: Start-up lessor The recent spate of new aircraft leasing companies has surprised some people, given the instability faced by established lessors and the depth of the industry’s downturn. After the well-reported woes of CIT, RBS, Babcock and Brown and ILFC, a string of new lessors, including Steven Udvar-Hazy’s Air Lease Corp, Avolon, Jackson Square Aviation and KV Aviation, have materialised. Mary-Anne Baldwin reports on the trend.

THE NEW GENERATION OF AIRCRAFT LESSORS:

IS THIS A REVOLUTION?

T Richard Wiley, CEO, JSA

HE STEADY FLOW OF PRIVATE EQUITY-BACKED aircraft leasing companies entering the market over the last 18 months has surprised many, but fears of a flooded market may be premature. A report by market analysts Frost & Sullivan suggests that the number of aircraft owned by leasing companies is expected to increase from 6,180 in 2009 to 8,646 in 2015, and the proportion of leased aircraft compared to those owned by airlines is increasing steadily. Richard Wiley, president and CEO of the start-up leasing company, Jackson Square Aviation (JSA), says: “The lessor market is probably 30-35 per cent of an airline’s fleet today and that’s growing as the airlines look for more flexibility… We expect the market to hit 40 per cent and continue to increase.” Indeed, we may even witness more new lessors enter the market. Supporting its report, Frost & Sullivan’s financial analyst, R. Madusudanan, said: “As the leasing cycle has already bottomed out, the market is poised for growth with attractive returns. Hence, many new participants are likely to enter the market.” He added: “The rentals and market values of the aircraft are expected to start rising after Q1 2011. Better fleet utilisation and stronger deals with good underlying credit are likely to be the major factors for sustaining profitability in the long-term.”

AFM71_Start up lessor_AFM71 28/01/2011 13:51 Page 35

January-February 2011 AFM • ISSUE 71 | 35

TRADING, LEGAL & FINANCE: Start-up lessor

“

distress in the market there is normally an opportunity for those with the capital to deploy… With asset values being low and existing players being to some degree constrained, then you have a compelling At a point of

market opportunity.

”

– John Higgins, president and chief commercial officer of Avolon

AFM71_Start up lessor_AFM71 28/01/2011 13:52 Page 36

36 | AFM • ISSUE 71 January-February 2011

TRADING, LEGAL & FINANCE: Start-up lessor

“

[lessors] have said explicitly that they’re not going to place any orders. That to me says that their strategy is to be nimble in the market, to take advantage of asset recovery so they can sell their business. People

– John Higgins, president and chief commercial officer of Avolon

”

But if established leasing companies were recently battling for survival, why are new lessors braving the market? John Higgins, president and chief commercial officer of Avolon, which entered in May 2010, explains it simply: “At a point of distress in the market there is normally an opportunity for those with the capital to deploy.” He points out that older lessors suffered from the financial instability of their parent companies, and were therefore unable to do business at the level they had once been used to. “With asset values being low and existing players being to some degree constrained, then you have a compelling market opportunity,” he says. Higgins explains that it is normal for new companies to start up in a depressed market and that this has occurred in previous downturns, not least within aircraft leasing. “The aircraft leasing space is generally characterised by people who are traders by nature and traders normally want to react to a change in market dynamics.”

A new breed of lessors? Also on the minds of those within the aviation community is why so many leasing executives have left their roles at established companies to start their own. Are we in the midst of a revolution in aircraft leasing and an uprising against the old way of trading? A number of the start-ups have arisen due to dissatisfaction with former employers. Steven Udvar-Hazy, the proclaimed ‘godfather’ of the industry and former head of ILFC, left after disputes with the company and with the belief that he could do better. Another start-up, KV Aviation, was formed after a meltdown in relations. David Veal, CEO of KV Aviation, together with John Kinghorn, both former executives at Allco, claimed legal ownership of 60 aircraft traded by Allco. The unusual move sought to fend off bidders in Allco. Although the $140m sale was delayed, the company was sold to Hong Kong Aviation Company (HKAC), backed by the Chinese consortium, HNA, in January 2010. Veal left to start KV Aviation and continued a legal battle with Allco. But according to Avolon’s Higgins, there is no revolution and there will be no fundamental change to the way the industry does business. Indeed, he believes the flow of employees from existing companies to new ones is part of a natural progression. “It’s less about having disregard for established lessors and more the normal evolution of things, people become more experienced and on an individual and collective basis have an interest to branch out and do something by themselves.” Many of Avolon’s executive staff moved in this way and were involved in the sale or creation of businesses during market distress. Denis Nayden, Avolon’s chairman and former president and CEO of GE Captial, was involved in the deal that formed GE in the early 90s. Domhnal Slattery, CEO of Avolon, sold his advisory business in 2001 to RBS, which then became RBS Aviation Capital.

John Higgins, president and chief commercial officer of Avolon

But, Higgins explains, the reasons people have moved on to form new companies vary.

Orders and equity: The acid test Avolon, which started trading in May 2010 with an initial capital raise of $1.4bn (including $750m in equity from Cinven, CVC and Oak Hill Capital; $215m debt financing from DVB Bank and a warehouse debt facility of $400m), was built for the longterm, says Higgins. “Other companies have located an asset play and will attempt to build a portfolio quickly at distressed levels and then sell it.” Not giving names, he suggests that some of the current start-up lessors will only be in the market for two to three years. Which lessors are here to trade assets and which are here for long-term sustainability? The size of capital and debt agreements and the size of aircraft orders may each be a fair indicator of sustainability and future success. Avolon has secured its second capital raising of $650m, including $250m in equity and $400m in debt finance. Higgins explained that the second round of financing was the ‘acid test’ for the company. The fact that equity sponsors and debt providers agreed to supply additional funds “validates the fact that Avolon has gone from being a start-up business to an established business,” says Higgins.

AFM71_Start up lessor_AFM71 28/01/2011 13:52 Page 37

January-February 2011 AFM • ISSUE 71 | 37

TRADING, LEGAL & FINANCE: Start-up lessor Air Lease Corp is another new leasing company that has walked the bridge from being a start-up to a young, but secure company. ALC came to the market with $3bn in capital; $250m of which was from private equity firm Leonard Green, $1bn from investors and $1.5bn through an unsecured debt facility with RBS. At the time of writing it was seeking a $100m initial public offering (IPO) to more than double its portfolio of aircraft. It is thought that The Commonwealth Bank may invest in the ‘godfather’s’ project and it was reported in The Sydney Morning Herald that ALC had issued a warrant to the bank for the sale of 268,125 shares for $125m at $20 a share, under a seven-year term. This was despite the company filing a net loss of $49.4m on revenue of $21.5m for the period of February to September, 2010. But it seems few doubt Hazy’s ability or ambition. The company currently has 40 aircraft and has a further 148, valued at $6.2bn, due to be delivered through to 2017. The lessor plans to have a fleet of 100 aircraft by year-end and up to 500 within the next five years. JSA entered the market in March 2010 with $500m in private equity from Oaktree Capital. The company is led by Richard Wiley, Toby Bright and Scott Weiss, the management team that previously headed Pegasus Aviation, which was built in 2004 and sold to AWAS three years later, in 2007. In December 2010 it announced a $400m long-term debt facility underwritten by DVB Bank, Credit Agricole, BNP Paribas and KfW IPEX-Bank. The company said half of the debt will be used to finance existing aircraft and the rest for future narrowbody deliveries. The company has closed or committed to close before the end of February, over 48 aircraft with a value in excess of $2bn. Its

forecast, separate to any additional equity or bond issuance, is about 60 aircraft. The fleet consists of 65 per cent narrowbody aircraft; 20 per cent widebody and 15 per cent cargo and mid-life aircraft and it currently has about 20 airlines in its fleet. However, other start-ups are yet to firm their second round of financing. Indeed it is thought that Greenstone Aviation, a concept of John Slattery, brother of Avolon’s Domhnal Slattery, was unable to obtain the $100m equity, which was to be supplied by Jeffries, and has yet to secure either any aircraft assets or customers. In April 2010, RPK announced that it was to form a new entity, RPK Capital Partners, with $600m in equity from Carlyle, but it appears the leasing arm is yet to start trading and it has been suggested that the promise of an equity investment did not come to fruition. Aircraft orders are another indication of the durability of new entrant lessors, says Higgins. Avolon has ordered aircraft with deliveries of up to five years ahead. “Other people have said explicitly that they’re not going to place any orders. That to me says that their strategy is to be nimble in the market, to take advantage of asset recovery so they can sell their business.” JSA’s Wiley has a different take on orders: “We’re a capital provider to the airlines… We consider our orderbook to be the airline’s orderbook – and they have the largest backlog ever.” With the “unprecedented” delivery schedules of Boeing and Airbus, business for JSA is expected to be good. JSA says it plans to finance $2bn worth of Boeing and Airbus passenger and cargo aircraft each year.

AFM71_Start up lessor_AFM71 28/01/2011 13:53 Page 38

38 | AFM • ISSUE 71 January-February 2011

TRADING, LEGAL & FINANCE: Start-up lessor He explains that during the downturn, the established lessors “Pegasus had a pipeline for 25 new aircraft and 125 aircraft in its were focused on tending their existing orderbooks, which gave fleet when it was sold,” says Wiley. “When we started Pegasus in JSA a greater opportunity to secure sale and leaseback deals. 2004, deliveries were about 550 aircraft a year. Between 2004 “Even though you may have a field of 10 to 12 major operating and 2007 we were able to build a fleet of 125 aircraft within a lease companies, probably more than 50 per cent of that is three-year period of time on a lower delivery schedule from the focused on their orderbook and the other 50 per cent is split manufacturers… the market for our sale and leaseback business between having an orderbook and providing capital on sale and today is double what it was in our cycle in 2004 to 2007.” leaseback transactions.” Unlike most new entrant lessors, fixated on new-build aircraft, JSA will trade in mid-life aircraft, although its average aircraft age is under two years. “In order to address fleet planning solutions for our customers, it is important to have a window to purchase mid-life aircraft that the airline may wish to have exist their fleet in the next three to four years.” Wiley explains. “Our intention is not to go out and look for a mid-life asset, but if a package to solve their financing needs means that we take on one or two mid-life aircraft as well as getting new aircraft, we will do that.” Toby Bright, JSA’s head of marketing corroborates Wiley’s sentiments: “We’ve won some deals in part because we’re willing to negotiate on a package.”

Equity: red, green or amber?

…lessors Which

Wiley says he is “not surprised at the number of new entrant lessors over the last 18 months,” adding that there is “plenty of room for other participants to deploy their capital and offer their services to the airlines”.

are here to

trade

assets and which are here for long-term sustainability? The size of capital and debt agreements and the size of aircraft orders may each be a fair indicator of sustainability and future success.

…

Even Higgins agrees that “there is plenty of scope to build longterm sustainable businesses”. He adds: “There is every reason to believe these businesses will survive in the medium to long-term. How these businesses survive relative to each other, we will have to see.” Higgins believes there will be the finance needed to fund this growth. “There is more capital available to companies that have demonstrated their ability to deploy it within stringent and pretty aggressive lending criteria,” he says. During the downturn support from export credit agencies (ECAs) provided essential funding and restored confidence in a volatile market. Now, though, lessors are asking for ECAs to lessen their financial input and the Organisation for Economic Co-operation and Development (OECD) plans to wean airlines off ECA funding by increasing the cost of financing under a new Aircraft Sector Understanding (ASU), which is to be firmed and announced shortly after going to press. To compensate, Higgins believes that commercial bank lending will increase this year if there are no further shocks to the lending market. “The sector has performed very well through what has been a global economic and financial crisis and there have been very few cases of banks losing money, so the rationale for banks participating in this space is actually very strong.” But he adds that there will not be a free flow of equity or the ability for new leasing companies to continue to enter the sector. “It’s not a homogenous picture of equity: green light or red light… For the companies with equity return expectations that were very high, I think the window of opportunity has probably passed.” Additionally, he says that equity will continue to be available to those who are willing to take a reasonable risk-adjusted return. “But I don’t think there will continue to be equity available for start-ups. I think the market generally recognises that with some of the existing players becoming active again and some of the businesses that started last year becoming established… there will not be much equity there for [additional] start-ups.”

AFM71_Deals reset_AF&NM Special Feature 28/01/2011 15:03 Page 40

40 | AFM • ISSUE 71 January-February 2011

AIRCRAFT DEALS REPORT

FLEET FINANCE – Deals report Aircraft transactions December 10 2010 to January 25 2011 Equipment Model

New Owner/ Operator

Previous Owner/ Operator

Boeing 717-2cm 737-247 737-2x6c 737-33a 737-33a 737-33a 737-3y5 737-31s 737-484 737-484 737-484 737-484 737-484 737-484 737-4b6 737-484 737-4m0 737-4m0 737-4m0 737-790(W) 737-790(W) 737-790(W) 737-8k2(W) 737-85f 737-85f 737-85f 737-86n(W) 737-8u3(W) 737-8u3(W) 737-8as(W) 737-8bk(W) 737-9bker(W) 747-341 747-446 747-446 757-23a(Etops) 757-236(Etops) 757-236 757-236 767-381er

Blue1 Northrop Grumman Esperanza Aviation Viva Aerobus Viva Aerobus CIT Aerospace Int BCC Leasing Deutsche Finance Aersale Aersale Aersale Aersale Aersale Aersale Buraq Air Transport Aersale Sailplane Leasing Aercap Ireland Nok A/Lines Lucky Air Ethiopian A/Lines Asky A/Lines Jet2 Macquarie Calima De Aviacion Enter Air Neos RBS Aerospace Garuda Ryanair CIT Leasing CIT Leasing Air Atlanta Icelandic Aersale Wells Fargo Astraeus A/Lines Santa Barbara A/Lines Federal Express Thomas Cook All Nippon

SAS Northrop Grumman Aloha Air Cargo Ansett Ansett Norwegian Air Norwegian Air Nouvelair Tunisie Olympic A/Lines Olympic A/Lines Olympic A/Lines Olympic A/Lines Olympic A/Lines Olympic A/Lines Wells Fargo Olympic A/Lines Garuda Sailplane Leasing Aercap Ireland ILFC CIT Group Ethiopian A/Lines Transavia A/Lines Air Berlin Macquarie Macquarie Celestial Boeing RBS Aerospace Boeing Boeing Boeing Saudi Arabian A/Lines JAL JAL Saudi Arabian A/Lines Pegasus Aviation British Airways Wells Fargo Boeing

Airbus A319-112 A320-214 A320-214 A320-232 A320-214 A320-214 A320-214 A320-214 A321-231 A321-231 A321-231 A330-343e A330-343e A380-842 A380-842 A380-800

Brussels A/Lines Sky Airline Air Arabia British Airways Easyjet Easyjet Lift LB Spain Senegal A/Lines Asiana A/Lines Air Busan Lufthansa Aerolinea Principal Chile Saudi Arabian A/Lines Qantas Qantas Asiana A/Lines

Wells Fargo Air Malta Airbus Airbus Airbus Airbus Spring A/Lines Lift LB Spain AWAS AWAS Airbus Iberworld A/Lines Airbus Airbus Unknown Airbus

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

Engine Model

Date of Manf or First Exp Deliv

55060 19605 23124 25010 25032 25033 25613 29116 25313 25314 25361 25362 25417 25430 26531 27149 29204 29204 29204 30663 33012 33012 28375 28821 28821 28823 34257 39920 39920 40300 (23) (15) 24108 25260 26362 24292 24370 25806 29945 40566

Br715a1-30 JT8d-9a JT8d-17a CFM56-3c1 CFM56-3c1 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 CFM56-7b24 CFM56-7b24 CFM56-7b24 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b24 CFM56-7b26 CFM56-7b27 CF6-80c2b1 CF6-80c2b1f CF6-80c2b1f RB211-535e4 RB211-535e4 RB211-535e4 RB211-535e4 CF6-80c2b6f

2000-06 1968-07 1984-07 1991-02 1991-02 1991-03 1993-02 1998-02 1991-07 1991-08 1991-08 1991-09 1991-10 1991-10 1993-03 1993-04 1998-06 1998-06 1998-06 2003-09 2003-03 2003-03 1998-07 1998-10 1998-10 1998-11 2006-07 2010-12 2010-12 2010-12 2013-05 2014-02 1988-04 1991-08 1999-01 1989-02 1989-02 1994-01 1999-05 2010-11

Sub-Leased Transferred Returned Leased Leased Returned Returned Returned Sold Sold Sold Sold Sold Sold Leased Sold Returned Sold Leased Leased Leased Sub-Leased Sub-Leased Returned Leased Leased Leased Delivered Leased Delivered Ordered Ordered Returned Sold Sold Returned Leased Sold Leased Delivered

2011.01.01 2011.01.06 2011.01.11 2011.01.01 2011.01.01 2011.01.05 2011.01.14 2011.01.10 2011.01.05 2011.01.05 2011.01.05 2011.01.05 2011.01.05 2011.01.05 2011.01.11 2011.01.05 2011.01.01 2011.01.15 2011.01.15 2011.01.01 2011.01.09 2011.01.10 2011.01.05 2011.01.14 2011.01.14 2011.01.17 2011.01.07 2011.01.14 2011.01.14 2011.01.13 2011.01.01 2011.01.01 2011.01.03 2011.01.07 2011.01.01 2011.01.12 2011.01.04 2011.01.12 2011.01.17 2011.01.18

4275 2665 4539 4551 4554 4556 879 879 1970 1970 4560 1097 1189 055 055 (8)

CFM56-5b6/3 CFM56-5b4/P CFM56-5b4/3 V2527-A5 CFM56-5b4/3 CFM56-5b4/3 CFM56-5b4/P CFM6-5b4/P V2533-A5 V2533-A5 V2533-A5 Trent772b-60 Trent772b-60 Trent972-84 Trent972-84

2010-04 2005-12 2010-12 2010-12 2010-12 2010-12 1998-08 1998-08 2003-05 2003-05 2011-01 2010-02 2010-12 2010-07 2010-07 2014-04

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

2011.01.13 2011.01.03 2011.01.06 2011.01.01 2011.01.06 2011.01.01 2011.01.01 2011.01.02 2011.01.07 2011.01.07 2011.01.14 2011.01.05 2011.01.01 2011.01.01 2011.01.02 2011.01.06

22945 22946 22947 23497 23497 23625 23862 24326 24538 24962 27267 24314

CFM56-3b1 CFM56-3b1 CFM56-3b1 CFM56-3b1 CFM56-3b1 CFM56-3b1 CFM56-3b2 CFM56-3b2 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1

1985-07 1985-08 1985-09 1986-04 1986-04 1986-08 1988-06 1989-02 1989-08 1991-09 1994-03 1989-01

Sold Sold Sold Transferred Leased Returned Sold Returned Sold Sold Leased Leased

2010.12.22 2010.12.22 2010.12.28 2010.12.29 2010.12.29 2010.12.16 2010.12.22 2010.12.12 2010.12.22 2010.12.14 2010.12.16 2010.12.18

Equipment

Date

Detailed Transactions December 10th - 31st 737-3h4 737-3h4 737-3h4 737-3y0 737-3y0 737-33a 737-3b7 737-3k2 737-322 737-3q8 737-33a 737-4y0

OH Capital Assets OH Capital Assets Wells Fargo Bank Of Nyork Mellon Southwest A/Lines Aergo Leasing Aurora Leasing BCC Mafolie Hill Wells Fargo ILFC Webjet Linhas Aereas Blue Air-Transport Aerian

Wells Fargo Wells Fargo Southwest A/Lines Mellon Trust Bank Of Nyork Mellon Safair Merlin One Aircraft Norwegian Air Wilmington Trust Celestial AWMS Dinglewood

AFM71_Deals reset_AF&NM Special Feature 28/01/2011 15:03 Page 41

January-February 2011 AFM â&#x20AC;˘ ISSUE 71 | 41

AIRCRAFT DEALS REPORT Equipment Model

New Owner/ Operator

Previous Owner/ Operator

737-4b7 737-4c9 737-429 737-429 737-48e 737-4y0 737-4q8 737-4q8 737-430 737-430 737-430 737-430 737-430 737-46j 737-529 737-505 737-524(W) 737-524(W) 737-524(W) 737-524(W) 737-524(W) 737-524(W) 737-790(W) 737-7bx(W) 737-790(W) 737-790(W) 737-7h4(W) 737-76j(W) 737-7bc(W) 737-7bc(W) 737-7bc(W) 737-7ei(W) 737-7ei(W) 737-8k5(W) 737-8k2(W) 737-86n 737-86n 737-823(W) 737-823(W) 737-823(W) 737-823(W) 737-823(W) 737-823(W) 737-8q8 737-823(W) 737-824 737-8fz(W) 737-8fz(W) 737-8fz(W) 737-86n(W) 737-8q8(W) 737-8as(W) 737-8as(W) 737-8as(W) 737-881(W) 737-86n(W) 737-8k5(W) 737-8eh(W) 737-86n(W) 737-86n(W) 737-8k5(W) 737-8k5(W) 737-8gj(W) 737-8gj(W) 737-8gj(W) 737-8k2(W) 737-8k2(W) 737-8ho(W) 737-8ho(W) 737-8ho(W) 737-8ho(W) 737-8jp(W) 737-8jp(W) 737-8jp(W) 737-8kg(W) 737-8kg(W) 737-8kg(W) 737-8h6(W) 737-846(W)

Aviation Technologies Enter Air V37x-737 Xtra Airways Yamal A/Lines Nok A/Lines Castle Blue Panorama A/Lines ACS Leasing German Op Aircraft Leasing Blue Air-Transport Aerian German Op Aircraft Leasing Blue Air-Transport Aerian Jordan Aviation Nok A/Lines Air North Charter Continental A/Lines Continental A/Lines Wells Fargo Continental A/Lines Wells Fargo Transaero A/Lines Lucky Air Southwest A/Lines CIT Leasing CIT Group Southwest A/Lines Air Berlin Boeing Boeing Boeing Banc of America Metrojet Orenburg A/Lines Sun Country A/Lines Aercap Ireland Orenburg A/Lines American A/Lines American A/Lines Wilmington Trust American A/Lines Wilmington Trust American A/Lines Caribbean A/Lines American A/Lines Continental A/Lines Delta Air Lines Babcock & Brown Malaysian Airline System Celestial Midwest A/Lines Okay Airways Jet Airways Jet Lite All Nippon Celestial Sunwing A/Lines GOL GECAS Garuda Tui Travel Tuifly Spicejet Nbb Dunlin Spicejet CIT Leasing KLM ALAFCO Okay Airways ALAFCO Okay Airways Norwegian Air DY1 Leasing Norwegian Air Dubai Aerospace Gate Capital One Virgin Blue Malaysian Airline System JAL

CIT Leasing Volito Aviation TEM Enterprises V37x-737 Unknown Airplanes Finance Air One Castle Air One Air One Challey Air One Challey Constitution Leasing Southern Aircraft Consult Aerco Wells Fargo Continental A/Lines Continental A/Lines Continental A/Lines Continental A/Lines Wells Fargo ILFC ACG Georgian Airways CIT Leasing Boeing Boeing Wells Fargo Wells Fargo Wells Fargo Silverblatt Banc of America BIL Leasing Transavia A/Lines Wells Fargo Aercap Boeing Wilmington Trust Wilmington Trust Wilmington Trust Wilmington Trust Wilmington Trust ILFC Wilmington Trust Boeing Boeing Delta Air Lines Babcock & Brown AMC A/Lines ILFC RBS Aerospace RBS Aerospace RBS Aerospace Boeing AMC A/Lines Thomson Airways Boeing Boeing GECAS Boeing Tui Travel Boeing Boeing NBB Dunlin Boeing CIT Leasing Boeing ALAFCO Boeing ALAFCO Boeing Boeing DY1 Leasing Boeing Boeing Gate Capital One Boeing Boeing

Serial No. or No. of (Orders)/(Options) 24551 25429 25729 25729 25773 26081 26300 26300 27001 27002 27002 27005 27005 27826 25218 27153 28905 28905 28905 28916 28916 28916 30662 30744 33012 33012 36668 36873 30327 30572 30756 34683 34683 27992 28379 28645 28645 29554 29554 29565 29565 29577 29577 30645 31111 31652 31793 31793 31793 32669 32841 33554 33556 33556 33903 34257 35138 35838 36808 36808 37247 37247 37361 37361 37361 37820 37820 37932 37932 37934 37934 39165 39165 39165 39450 39450 39450 40130 40349

Engine Model

Date of Manf or First Exp Deliv

Equipment

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 CFM56-3b1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-7b24 CFM56-7b20 CFM56-7b24 CFM56-7b24 CFM56-7b24 CFM56-7b24 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b27 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 CFM56-7b27 CFM56-7b24 CFM56-7b24 CFM56-7b24 CFM56-7b26 CFM56-7b26 CFM56-7b27b1 CFM56-7b27 CFM56-7b26 CFM56-7b26 CFM56-7b27b1 CFM56-7b27b1 CFM56-7b24 CFM56-7b24 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 CFM56-7b26 CFM56-7b26

1989-09 1992-01 1992-01 1992-01 1997-06 1993-02 1994-03 1994-03 1992-06 1992-06 1992-06 1992-08 1992-08 1995-01 1991-08 1993-08 1997-08 1997-08 1997-08 1998-01 1998-01 1998-01 2003-08 2001-10 2003-03 2003-03 2010-12 2010-11 1999-08 2000-01 2000-05 2006-01 2006-01 2000-03 2000-02 2001-04 2001-04 2010-11 2010-11 2009-06 2009-06 2010-04 2010-04 2002-04 2010-11 2010-11 2010-12 2010-12 2010-12 2006-02 2005-04 2003-11 2003-12 2003-12 2010-11 2006-07 2008-01 2010-12 2010-12 2010-12 2010-11 2010-11 2010-12 2010-12 2010-12 2010-11 2010-11 2010-11 2010-11 2010-11 2010-11 2010-12 2010-12 2010-12 2010-11 2010-11 2010-11 2010-11 2010-11

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

Date 2010.12.14 2010.12.22 2010.12.22 2010.12.22 2010.12.21 2010.12.22 2010.12.22 2010.12.22 2010.12.24 2010.12.22 2010.12.22 2010.12.22 2010.12.22 2010.12.21 2010.12.16 2010.12.31 2010.12.14 2010.12.21 2010.12.21 2010.12.13 2010.12.13 2010.12.13 2010.12.21 2010.12.14 2010.12.23 2010.12.23 2010.12.23 2010.12.20 2010.12.29 2010.12.15 2010.12.15 2010.12.13 2010.12.13 2010.12.20 2010.12.16 2010.12.27 2010.12.27 2010.12.16 2010.12.17 2010.12.15 2010.12.15 2010.12.15 2010.12.15 2010.12.17 2010.12.13 2010.12.29 2010.12.22 2010.12.22 2010.12.22 2010.12.22 2010.12.17 2010.12.24 2010.12.13 2010.12.13 2010.12.20 2010.12.22 2010.12.15 2010.12.21 2010.12.22 2010.12.22 2010.12.17 2010.12.17 2010.12.23 2010.12.23 2010.12.23 2010.12.20 2010.12.20 2010.12.16 2010.12.16 2010.12.13 2010.12.13 2010.12.21 2010.12.21 2010.12.21 2010.12.15 2010.12.15 2010.12.15 2010.12.17 2010.12.12

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42 | AFM â&#x20AC;˘ ISSUE 71 January-February 2011

AIRCRAFT DEALS REPORT Equipment Model

New Owner/ Operator

Previous Owner/ Operator

737-8v3(W) 737-823(W) 737-823(W) 737-82y(W) 737-82y(W) 737-866(W) 737-89m(W) 737-89m(W) 737-89m(W) 737-89m(W) 737-89m(W) 737-89m(W) 737-924er(W) 737-924er(W) 737-9jaer(W) 737-9bqer(W) 737-9bqer(W) 747-446d 747-446 747-446 747-4f6 747-4f6 747-4b5 757-28a 757-2q8 757-2q8(Etops) 757-256 757-256 757-2q8 757-2g5 757-204 757-258(Etops) 757-28a(Etops) 757-256(Etops) 757-256(Etops) 757-256(Etops) 757-28a 767-246 767-3y0er 767-33aer 767-306er(W) 767-306er(W) 767-306er(W) 767-306er(W) 767-304er 767-33aer 767-341er 767-346er 777-222er 777-260lr 777-3dzer 777-36ner 777-36ner 777-319er 777-319er 777-3f2er

Copa A/Lines American A/Lines American A/Lines MC Aviation Skymark A/Lines Egyptair Air Austral Chiara Bail Gie Air Austral Air Austral Unknown Air Austral Continental A/Lines Continental A/Lines Adex Boeing Business Jets Kuwait Government Wells Fargo Aersale GE Engine Leasing Babcock & Brown Transaero A/Lines Boeing Aerolinea Principal Chile Federal Express Astraeus A/Lines Privilege Style Aerolinea Principal Chile Federal Express Jazz Air Abbey National Astraeus A/Lines Jazz Air Atlasjet Atlasjet RAK Airways US Airways AU7 Aerousa Aerosvit A/Lines ILFC Neos ILFC Neos Air Italy Ansett Nordwind A/Lines JAL U.S. Bank Ethiopian A/Lines Qatar Airways GECAS Egyptair Air New Zealand Air New Zealand Turk Hava Yollari

Boeing Boeing Wilmington Trust Boeing MC Aviation Boeing Boeing Boeing Chiara Bail Gie Boeing Boeing Caroline Boeing Boeing Wells Fargo Boeing Boeing JAL JAL Aersale South African Airways Babcock & Brown Korean Air Lines Mint Airways BCC Leasing Saudi Arabian A/Lines Safi Airways Privilege Style BCC Leasing Thomas Cook Thomson Airways Saudi Arabian A/Lines Thomas Cook Saudi Arabian A/Lines Saudi Arabian A/Lines Sun Air North American A/Lines JAL Avianca Royal Brunei A/Lines ILFC ILFC ILFC ILFC Saudi Arabian A/Lines Cameroon A/Lines GE Capital Boeing Air India Boeing Boeing Boeing GECAS Boeing Dubai Aerospace Boeing

Airbus A300b4-605r A300b4-622r A300b4-622r A319-111 A319-111 A319-100(W) A319-100 A320-232 A320-232 A320-232 A320-232 A320-214 A320-214 A320-214 A320-212 A320-212 A320-231 A320-231 A320-214 A320-231 A320-216

Wells Fargo Wells Fargo Wells Fargo Airblue Airblue LAN A/Lines Unknown Jetblue Airways Nomura Babcock & Brown Zest Airways Cyprus Airways Chengdu A/Lines Azerbaijan A/Lines Azerbaijan A/Lines Wells Fargo Wells Fargo Wells Fargo Wells Fargo Airblue Sky Airline Avolon

American A/Lines JAL JAL PAFCO PAFCO Airbus Airbus Wells Fargo Easyjet Nomura Babcock & Brown CIT Aerospace Int Air Berlin Air Berlin Air Berlin Gaif Ii Ireland Nine Wells Fargo AERCO Wells Fargo Airbus Wells Fargo Airbus

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

Engine Model

Date of Manf or First Exp Deliv

Equipment

40361 40584 40584 40713 40713 40760 40910 40910 40910 40911 40911 40911 31643 31655 37560 37632 37632 26352 26355 26355 28960 28960 24619 24544 25131 25621 26241 26252 26270 26278 26967 27622 28203 29307 29308 29311 32448 23213 24948 25536 27610 27610 27958 27958 28039 28138 30342 40365 26935 40771 38247 38289 38289 38405 38405 40709

CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b27 CFM56-7b27 CFM56-7b27 CFM56-7b27 CFM56-7b27 CFM56-7b27 CFM56-7b27 CFM56-7b27 CFM56-7b27 CFM56-7b27 CFM56-7b27 CF6-80c2b1f CF6-80c2b1f CF6-80c2b1f CF6-80c2b1f CF6-80c2b1f PW4056 RB211-535e4 PW2040 RB211-535e4 RB211-535e4 RB211-535e4 PW2040 RB211-535e4 RB211-535e4 RB211-535e4 RB211-535e4 RB211-535e4 RB211-535e4 RB211-535e4 RB211-535e4 JT9d-7r4d PW4060 PW4056 CF6-80c2b6f CF6-80c2b6f CF6-80c2b6f CF6-80c2b6f CF6-80c2b7f PW4060 CF6-80c2b6f CF6-80c2b7f PW4090 GE90-110b1l GE90-115b GE90-115b GE90-115b GE90-115b GE90-115b GE90-115b

2010-11 2010-11 2010-11 2010-11 2010-11 2010-11 2010-11 2010-11 2010-11 2010-12 2010-12 2010-12 2010-09 2010-08 2008-06 2009-06 2009-06 1993-04 1994-02 1994-02 1998-06 1998-06 1990-05 1990-03 1992-04 1992-04 1993-07 1999-10 1993-05 1995-03 1993-01 1997-02 1998-04 2000-04 2000-06 2000-08 2001-05 1985-04 1991-06 1993-06 1996-02 1996-02 1995-07 1995-07 1996-03 2000-12 1999-10 2010-11 1997-07 2010-11 2010-12 2010-11 2010-11 2010-10 2010-10 2010-11

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

2010.12.20 2010.12.23 2010.12.27 2010.12.21 2010.12.21 2010.12.15 2010.12.17 2010.12.17 2010.12.17 2010.12.21 2010.12.21 2010.12.21 2010.12.20 2010.12.20 2010.12.23 2010.12.22 2010.12.22 2010.12.15 2010.12.13 2010.12.30 2010.12.20 2010.12.20 2010.12.14 2010.12.29 2010.12.22 2010.12.22 2010.12.23 2010.12.28 2010.12.22 2010.12.15 2010.12.18 2010.12.22 2010.12.13 2010.12.23 2010.12.23 2010.12.15 2010.12.22 2010.12.20 2010.12.20 2010.12.17 2010.12.13 2010.12.13 2010.12.13 2010.12.13 2010.12.19 2010.12.23 2010.12.27 2010.12.14 2010.12.24 2010.12.14 2010.12.22 2010.12.14 2010.12.14 2010.12.20 2010.12.20 2010.12.22

606 637 711 3364 3403 (6) (1) 1257 2137 2137 2275 2820 2846 2853 325 325 362 362 3974 406 4075

CF6-80c2a5 PW4158 PW4158 CFM56-5b5/3 CFM56-5b5/3

1991-03 1992-04 1993-09 2008-01 2008-02 2017-05 2017-10 2000-05 2003-10 2003-10 2004-08 2006-06 2006-07 2006-07 1992-04 1992-04 1992-09 1992-09 2009-07 1993-01 2009-10

Sold Sold Sold Leased Leased Ordered Ordered Leased Returned Leased Leased Sold Leased Leased Sold Sold Sold Sold Delivered Leased Sold

2010.12.22 2010.12.15 2010.12.16 2010.12.27 2010.12.27 2010.12.21 2010.12.20 2010.12.17 2010.12.22 2010.12.22 2010.12.17 2010.12.29 2010.12.24 2010.12.24 2010.12.21 2010.12.21 2010.12.16 2010.12.23 2010.12.15 2010.12.29 2010.12.21

V2527-A5 V2527-A5 V2527-A5 V2527-A5 CFM56-5b4/P CFM56-5b4/P CFM56-5b4/P CFM56-5a3 CFM56-5a3 V2500-A1 V2500-A1 CFM56-5b4/3 V2500-A1 CFM56-5b6/3

Date

AFM71_Deals reset_AF&NM Special Feature 28/01/2011 15:04 Page 43

January-February 2011 AFM â&#x20AC;˘ ISSUE 71 | 43

AIRCRAFT DEALS REPORT Equipment Model

New Owner/ Operator

Previous Owner/ Operator

A320-216 A320-216 A320-216 A320-214 A320-232 A320-214 A320-214 A320-214 A320-214 A320-214 A320-214 A320-214 A320-214 A320-214 A320-214 A320-214 A320-214 A320-232 A320-232 A320-214 A320-214 A320-232 A320-232 A320-232 A320-232 A320-232 A320-216 A320-216 A320-214 A320-214 A320-214 A320-233 A320-233 A320-214 A320-214 A320-214 A320-233 A320-233 A320-232 A320-232 A320-214 A320-200 A320-200 A320-214 A320-200(W) A320-200(W) A320-200(W) A320-200neo(W) A321-231 A321-211 A321-231 A321-211 A321-212 A321-213 A321-231 A321-231 A321-200(W) A330-243 A330-202 A330-202 A330-203 A330-243 A330-243 A330-243 A330-223 A330-243 A330-343e A330-343x A330-343x A330-343x A330-343x A330-343e A330-343e A330-343e A330-343e A330-300 A350-900xwb A380-842 A380-842

Alitalia Avolon Alitalia Uzbekistan Airways China Eastern A/Lines Uzbekistan Airways Uzbekistan Airways GECAS Saudi Arabian A/Lines Gulf Air GECAS Saudi Arabian A/Lines ALAFCO Saudi Arabian A/Lines Afriqiyah Airways Air Arabia Libyan A/Lines Qantas Jetstar Airways Uzbekistan Airways Uzbekistan Government Shenzhen A/Lines Tiger Airways Zest Airways Indigo Indigo Aircraft Purchase Fleet Alitalia Cebu Pacific Air Gulf Air TAM Linhas Aereas LAN A/Lines LAN A/Lines Avianca Avianca Aerolineas Galapagos LAN A/Lines LAN A/Lines Indigo Indigo Unknown China Aviation Supplies Aercap Aviation Solutions Easyjet LAN A/Lines Avolon Virgin America Virgin America Donbassaero Turkuaz A/Lines Mihin Lanka Aeroflot Swiss Intair Lines Air China Lufthansa Atlasjet Int LAN A/Lines Hi Fly CIT Leasing Qantas MTAD CIT Leasing Garuda Monarch A/Lines Atlasjet Int Thomas Cook Swiss Intair Lines Thomas Cook Thomas Cook Thomas Cook Iberworld A/Lines Iberworld A/Lines ILFC Orbest Xl Airways China Aviation Supplies Air China Qantas Qantas

Avolon Airbus Avolon Airbus Airbus Airbus Airbus Airbus GECAS Airbus Airbus GECAS Airbus ALAFCO Airbus Airbus Airbus Airbus Qantas Airbus Uzbekistan Airways Airbus Airbus Airbus Airbus White Skye Leasing Airbus Aircraft Purchase Fleet Airbus Airbus Airbus Airbus Torcaza Leasing Airbus GECAS Avianca Airbus Torcaza Leasing Airbus Crescent Leasing Air Jamaica Airbus Airbus Airbus Airbus Airbus Airbus Airbus Easyjet Alwafeer Air Easyjet Airbus Airbus Airbus Airbus Saudi Arabian A/Lines Airbus Garuda Airbus CIT Leasing Airbus Airbus CIT Leasing Garuda Saudi Arabian A/Lines Thomas Cook Airbus Garuda Garuda Garuda Garuda Garuda Iberworld A/Lines ILFC Iberworld A/Lines Airbus Airbus Airbus Unknown

Serial No. or No. of (Orders)/(Options) 4075 4108 4108 4417 4423 4485 4492 4501 4501 4502 4517 4517 4519 4519 4521 4524 4526 4527 4527 4528 4528 4531 4532 4533 4535 4535 4536 4536 4537 4541 4544 4546 4546 4547 4547 4547 4549 4549 4552 4552 624 (50) (2) (15) (34) (8) (29) (31) 1869 1905 3106 4500 4534 4538 4545 968 (10) 1008 1174 1174 1183 1184 1184 261 343 456 1181 349 356 357 670 833 833 833 833 (6) (10) 047 047

Engine Model CFM56-5b6/3 CFM56-5b6/3 CFM56-5b6/3 CFM56-5b4/3 V2527-A5 CFM56-5b4/3 CFM56-5b4/3 CFM56-5b4/3 CFM56-5b4/3 CFM56-5b4/3 CFM56-5b4/3 CFM56-5b4/3 CFM56-5b4/3 CFM56-5b4/3 CFM56-5b4/3 CFM56-5b4/3 CFM56-5b4/3 V2527-A5 V2527-A5 CFM56-5b4/3 CFM56-5b4/3 V2527-A5 V2527-A5 V2527-A5 V2527-A5 V2527-A5 CFM56-5b6/3 CFM56-5b6/3 CFM56-5b4/3 CFM56-5b4/3 CFM56-5b4/3 V2527e-A5 V2527e-A5 CFM56-5b4/3 CFM56-5b4/3 CFM56-5b4/3 V2527e-A5 V2527e-A5 V2527-A5 V2527-A5 CFM56-5b4/P

CFM56-5b4/3

V2533-A5 CFM56-5b3/P V2533-A5 CFM56-5b3/3 CFM56-5b1/3 CFM56-5b2/3 V2533-A5 V2533-A5 Trent772b-60 CF6-80e1a4b CF6-80e1a4b CF6-80e1a3 Trent772b-60 Trent772b-60 Trent772b-60 PW4168a Trent772b-60 Trent772b-60 Trent772b-60 Trent772b-60 Trent772b-60 Trent772b-60 Trent772b-60 Trent772b-60 Trent772b-60 Trent772b-60 Trentxwb-83 Trent972-84 Trent972-84

Date of Manf or First Exp Deliv

Equipment

2009-10 2009-10 2009-10 2010-09 2010-11 2010-10 2010-10 2010-11 2010-11 2010-11 2010-11 2010-11 2010-12 2010-12 2010-11 2010-12 2010-12 2010-12 2010-12 2010-11 2010-11 2010-12 2010-12 2010-12 2010-12 2010-12 2010-12 2010-12 2010-12 2010-12 2010-12 2010-12 2010-12 2010-12 2010-12 2010-12 2010-12 2010-12 2010-12 2010-12 1996-11 2015-04 2014-07 2012-06 2017-01 2014-07 2013-03 2016-07 2002-11 2003-01 2007-05 2010-12 2010-11 2010-12 2010-12 1999-02 2016-03 2009-03 2010-11 2010-11 2010-11 2010-11 2010-11 1999-03 2000-05 2002-02 2010-11 2000-06 2000-07 2000-08 2005-06 2007-03 2007-03 2007-03 2007-03 2014-07 2018-08 2009-08 2009-08

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

Date 2010.12.21 2010.12.22 2010.12.22 2010.12.21 2010.12.21 2010.12.21 2010.12.21 2010.12.13 2010.12.13 2010.12.21 2010.12.23 2010.12.23 2010.12.22 2010.12.22 2010.12.17 2010.12.15 2010.12.22 2010.12.18 2010.12.18 2010.12.31 2010.12.31 2010.12.20 2010.12.21 2010.12.15 2010.12.23 2010.12.23 2010.12.20 2010.12.20 2010.12.22 2010.12.22 2010.12.16 2010.12.21 2010.12.21 2010.12.22 2010.12.22 2010.12.22 2010.12.22 2010.12.22 2010.12.23 2010.12.23 2010.12.29 2010.12.29 2010.12.21 2010.12.31 2010.12.21 2010.12.16 2010.12.29 2010.12.29 2010.12.24 2010.12.14 2010.12.13 2010.12.21 2010.12.14 2010.12.22 2010.12.21 2010.12.21 2010.12.21 2010.12.20 2010.12.14 2010.12.14 2010.12.15 2010.12.15 2010.12.15 2010.12.20 2010.12.22 2010.12.21 2010.12.16 2010.12.20 2010.12.20 2010.12.21 2010.12.21 2010.12.19 2010.12.23 2010.12.23 2010.12.23 2010.12.29 2010.12.29 2010.12.16 2010.12.16

Source: OAG Fleet iNET, 2011

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44 | AFM • ISSUE 71 January-February 2011

AIRPORTS & ROUTES: Airport development In the next two decades up to $1tn must be spent on airports worldwide to accommodate a two-fold increase in air traffic. But where that money comes from and how it is spent remains a complex matter, with conﬂicting priorities on land use, sustainability and security all requiring compromise. Alex Derber indentiﬁes the major issues and takes a look at Istanbul’s second airport, Sabiha Gökçen, only a decade old but already a success.

WO DAYS AFTER HE WAS EXPECTING TO BE IN Dallas holding his new granddaughter, Colin Turner found himself in the unusual position of being interviewed by the BBC on the relative merits of sleeping in Heathrow terminals three or five. Like thousands of other unfortunates, Turner was caught in the chaos caused by heavy snowfall in December, which led to the closure of Heathrow and days of cancellations and delays.

Far from singling Brazil out, Schimm is cautious about Europe’s prospects, too. “If we look five or 10 years ahead at the growth we are expecting, it’s a certainty that the situation is not going to improve; it’s going to get worse, meaning that the infrastructure on the ground will not be able to keep up with demand. Europe is a very sensitive system; it only takes a handful of congested hubs to cause severe knock-on effects.” he says.

For the record, he declared the airport’s sparkling Terminal 5 the better choice for discerning airport lodgers, but what he probably did not realise was that his unwelcome sojourn might have been avoided had Heathrow’s prized new passenger gateway been matched with developments airside, namely a third runway.

Of key importance, according to Schimm, is the development of airside infrastructure, such as new runways. Well-designed runways, taxiways, and ramps avoid aircraft holding in the air and idling on the ground, maximising throughput and lowering emissions and noise. In 2010, Tokyo Haneda opened its fourth runway and Shenzhen in China will invest $3.6bn in a second runway and third terminal. Of others, Brisbane, Australia, is pumping more than $1bn into doubling terminal capacity and a new runway.

Graham Bolton is a director at Arup, one of the world’s foremost airport consultancies. Reflecting on the disruption at Heathrow, the world’s second-busiest airport, he says: “If you have two runways, or for that matter any other assets that you have to use to its full capacity, then as soon as you have fog, or snow, or anything else, your flexibility to respond is very limited.” A third runway at Heathrow has been ruled out by the UK government due to environmental concerns and vociferous campaigning from local residents, but as passenger demand resumes its inexorable rise in Europe and around the world, this has come under review again. Worldwide, airport development is critical, raising issues and conflicts over land ownership, planning, noise and the environment.

Meeting demand in the 21st century With air traffic set to double in the next 20 years, worldwide airport capacity will need to increase proportionally. Yet while regions like the Middle East have poured huge sums into their air infrastructure – investing, say some critics, even beyond their requirements – other future traffic hot-spots lag behind. “We have countries like Brazil where growth is extraordinary and the infrastructure is not fit for that at all,” says Andreas Schimm, director of economics at industry body Airports Council International (ACI). “Even if Brazil had average growth its infrastructure wouldn’t be up to date. But with growth of up to 40 per cent at some airports it’s obviously getting worse and with the World Cup in 2014 and Olympics in 2016 it’s a worry how they will cope. Traffic is already spilling over from the large hubs into secondary, peripheral airports. For domestic point-topoint traffic that might work temporarily, but for international traffic it poses a massive problem.”

However, airport design is always a compromise, requiring a balance of sometimes conflicting objectives, and it is rarely possible to simply lay down the ideal runway and taxiing network. For instance, a hub like Hong Kong uses its vast single terminal to speed passenger transfers, but that design does not allow for the most efficient airfield layout.

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AIRPORTS & ROUTES: Airport development

AIRPORT DEVELOPMENT:

SABIHA GÖKÇEN AND 21ST CENTURY SUCCESS

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AIRPORTS & ROUTES: Airport development

“

crisis has put a stop to private investment in airports pretty much. And so far I don’t see any case which would give that a new impetus. Many governments say they need to involve the private sector but I don’t yet see clear and tangible action for that. The [global economic]

”

terminal capacity in Istanbul. The Asian population of Istanbul is six or seven million people so even if there is a third airport on the European side, Sabiha still possesses a significant catchment area. Also, looking at the Turkish transport strategy the expansion of Sabiha is independent of whether or not one builds a third airport,” he says. Along with plans to link Sabiha to Istanbul’s metro network, the airport is designed for further expansion, through enlargement of the new terminal and development of the old terminals. Once that is complete, along with the airport’s second runway, Sabiha could match Ataturk’s present passenger volumes of 35 million per year. With current facilities, it is expected to reach its 25 million capacity by 2023. With Turkey boasting average flight traffic growth of 10 per cent annually over the past seven years, Sabiha’s expansion does appear to be a matter of when, not if.

Sabiha Gökçen As a symbol of successful airport development in the 21st century, there are few better examples than Istanbul’s Sabiha Gökçen airport. Originally opened in 2001 on the Asian side of Istanbul as an alternative to ‘European’ Ataturk Airport, Sabiha grew slowly until a boom in 2005 that saw it handle four million passengers. Spotting potential, the Turkish government opened a build-operate tender for a new terminal. This was won by a private consortium of India’s GMR, Turkey’s Limak and Malaysia Airport Holding Berhad, which opened the new, 25 million passenger capacity terminal in 2009. Airside infrastructure is owned by the Turkish state, which is currently planning a second runway for the airport. Arup is working on the new runway and was the engineer for the new terminal, which due to Turkey’s propensity for earthquakes, is the largest seismically-isolated building in the world. Another challenge for designers was the speed with which the Turkish government and operating consortium expected to close the project – only 18 months from planning to completion – about half the time usually taken for a project of a similar scale. “Sabiha Gökçen is a great story,” comments Schimm. “They have grown leaps and bounds and not necessarily at the expense of Ataturk [airport]. It will probably reach its capacity sooner rather than later and planning for a third airport in Istanbul appears to be underway. The majority of Istanbul is on the Asian side and not on the European, so it probably has its own market which doesn’t have as much overlap with Ataturk as one might think. It is also a different business model of point-to-point traffic.” Whether or not a third airport is built in Istanbul, Bolton believes further expansion of Sabiha will happen. “If you look at the scale of Istanbul, its airport capacity compared with a city like London is actually remarkably small, so there is a massive need for air

But not only passengers are gravitating towards Sabiha. Turkish Technic is nearing completion of its $400m HABOM maintenance facility, which will eventually comprise hangar space for 12 narrowbody and three widebody aircraft. The first part of the project opened in November 2010: a joint venture between Turkish Technic and Pratt & Whitney, Turkish Engine Center offers complete MRO services for CFM56 and V2500 engines and has the capacity to overhaul 250 engines per year. Also already operating at the airport is MyTechnic, which focuses on A300, 737 and MD-80 maintenance, as well as on the CF6 engine.

Footing the bill Returning to worldwide development, to increase capacity, most upcoming projects will be developments of existing infrastructure rather than all-new airports. ACI estimates that capital expenditure by airports worldwide in 2010 was $38.5bn, but it forecasts that close to $1tn will be spent on airport infrastructure over the next two decades. Often part of national infrastructure projects, airport development is overwhelmingly funded by governments. However, as austerity programmes begin to bite in certain parts of the world, the private sector will need to take part of the strain. Yet Schimm doubts that it will be able to: “The [global economic] crisis has put a stop to private investment in airports pretty much. And so far I don’t see any case which would give that a new impetus. Many governments say they need to involve the private sector but I don’t yet see clear and tangible action for that.” Lack of access to credit, competition regulation and, in some cases, antagonistic government policy towards airports are all factors that deter private investment. Spain is attempting a €9bn ($12bn) privatisation of a 30 per cent stake in state-run AENA, the world’s largest airport operator, but has encountered little interest. Of concern to potential investors are losses totalling roughly €600m ($800m) in 2010, militant air traffic controllers, public sector opposition to the move and the fact that only nine of AENA’s 47 airports were profitable in 2009.

We shape a better world

Sabiha Gökçen International Airport, Istanbul, Turkey © Cemal Emden/Tekeli-Sisa Mimarlık

Arup has been involved in aviation development for more than 50 years, working on a wide range of assignments at more than 100 airports worldwide. Through strong internal networks we capture and share the learning from our aviation and other sector experience to deliver better solutions for our clients. We are committed to delivering costeffective and high-quality professional service consistently worldwide.

www.arup.com

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48 | AFM • ISSUE 71 January-February 2011

AIRPORTS & ROUTES: Airport development But there is also cause to hope. Pension funds increasingly recognise that the steady long-term returns of airports suit their portfolio requirements (provided those airports are correctly managed) and some airlines, often low-cost operators, are exploring the potential to develop their own terminals and sometimes even airports. Bolton is fairly upbeat about private sector involvement. “It’s dependent on a regulatory regime that provides an environment into which someone would intelligently invest,” he says. “You need some degree of certainty or understanding of the risks so you can make a sensible business case.” He continues: “A large part of UK aviation capacity is private. In Turkey the majority of terminal development is privately funded. And there’s some successful private development in India so there are clear examples of how it’s possible to do it.”

Sustainability and security The priorities of any given airport development will differ: a new terminal in the Middle East may strive for unmatched levels of service, while a low-cost hub in Kuala Lumpur will look to maximise passenger throughput. A necessity of all projects, however, is to ensure a safe and sustainable environment. The past decade has witnessed a slew of new security regulations, some unwelcome according to Schimm. “Security is a challenge but it’s a constant companion. As with many other factors it’s not in the hands of the airport to decide. If it was, it would be a different system. Airlines and airports alike are a little frustrated with the way things get responded to. When there’s a new threat there’s always a new measure just for the sake of responding to the threat – it’s always reactive and never proactive,” he says. Bolton agrees that airports must be designed with a degree of flexibility to respond to emerging threats, but warns: “If you were to build in every response to every possible threat you’d build something that would be more like a prison rather than something that works for the passenger.”

Although he feels security regulation is closer to a common standard than ever before, the Arup director also notes how different approaches are taken around the world. He says: “Ten years ago in Europe we already had systems that screened every bag that went into the hold and we started that in the mid-90s. At the time of 9/11 some US airports were looking at adopting some of the baggage screening technologies that we were using in the UK, but the US regulatory regime developed solutions that were different from the approach we were using in the UK, Europe and in other parts of the world.” In the case of sustainability however, a global approach is essential. But although sustainability is a major concern for airport planners, they do not view it as a simple environmental calculation. Bolton says: “Sustainability is about the balance between social, environmental and economic factors and the combination of the three. It’s been important in airport design for an awfully long time because of the impact of airports, because of the impact of land use, and because a sustainable design makes good economic sense for the developer as well as the community.” The layout of a runway demonstrates how airport planners can address all aspects of sustainability. Allowing aircraft to make continuous descent approaches reduces emissions, lowers noise pollution, shortens journey times and limits fuel costs. Terminal design is also important. Exploiting natural features can generate ventilation, while intelligent building controls can reduce energy loads in areas less used during off-peak periods, such as baggage systems. Streamlining surface access to an airport through metro and rail connections benefits people living near an airport, lowering traffic congestion and noise, while also reducing carbon emissions. Bolton sums up his approach to sustainability and airport planning: “It’s about understanding and responding to the needs of the stakeholders and that means stakeholders in the wider sense: the local community, the airlines and the large number of people who both work at the airport and are economically dependent on it.”

Modern airport developments, such as Heathrow Terminal 5, can feature innovative passenger transport solutions.

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AFM71_Low cost long haul_AFM71 28/01/2011 13:21 Page 50

50 | AFM • ISSUE 71 January-February 2011

AIRPORTS & ROUTES: Low-cost long-haul

LOW-COST LONG-HAUL:

SQUARE PEG…

AirAsia X CEO Azram Osman-Rani is flanked by Malaysian transport minister Dato’ Ong Te Keat and Airbus CEO Tom Enders at the delivery ceremony for the airline’s first A330-300 in October 2008.

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January-February 2011 AFM â&#x20AC;˘ ISSUE 71 | 51

AIRPORTS & ROUTES: Low-cost long-haul The conventional view that low-cost and long-haul are mutually exclusive has been reinforced by recent failures, but some low-cost carriers have not given up the task of proving it can work. Bernard Fitzsimons reports.

HE LOW-COST MODEL FOR SHORT-HAUL AIRLINE operations has been established in the US for decades and following the European Unionâ&#x20AC;&#x2122;s removal of restrictions on cross-border operations it transplanted readily to the other side of the Atlantic. More recently, it has taken root in Australia and south east Asia, using local affiliates and joint ventures to avoid restrictions that would hamper single-nationality operators. But can it be applied successfully to long-haul operations?

ROUND HOLE? AirAsia X cites high density seating aboard its A330-300s and rapid turnaround as principal factors in achieving its low-cost base.

When the UK Civil Aviation Authority (CAA) examined the concept in 2007 (CAP 771, Connecting the Continents) it found that the sort of high frequency, economy-only operation typical of no-frills carriers was unlikely to be successful on all but the thickest of long-haul routes. Elsewhere, the scope for costcutting is simply too limited to compensate for the reduced yield. Long-haul airlines have the same opportunities as their short-haul counterparts to reduce passenger costs such as baggage transfers and free meals, and to reduce distribution costs by selling non-flexible tickets directly to passengers. Those activities, though, account for only about five per cent and 10 per cent (respectively) of the typical total cost. User charges typically account for 30 per cent of costs, but runway length requirements and restrictions imposed by air service agreements (ASAs) make it harder for long-haul carriers to reduce them by using the secondary airports favoured by their short-haul counterparts. At the same time, smaller fleets and strong demand for long range twins means there is less scope for discounted aircraft acquisitions to reduce the 15 per cent of costs represented by ownership costs. The yield management systems applied by low-cost airlines, which reward early bookers and penalise those buying tickets close to departure, can be used for long-haul operations. But premium class passengers typically contribute a much higher proportion of revenue on long than on short routes. And without connecting traffic there are a limited number of routes that could generate the necessary volume of point-to-point traffic. The lowcost operators currently pursuing long-haul expansion seem to have arrived at the same conclusion.

AFM71_Low cost long haul_AFM71 28/01/2011 13:22 Page 52

52 | AFM • ISSUE 71 January-February 2011

AIRPORTS & ROUTES: Low-cost long-haul

Jetstar hopes to start replacing its A330s with Boeing 787s in 2012.

proved unprofitable and are due to be dropped from February. In its last financial year, ending June 2010, V Australia lost A$42.8m on revenue of A$324.3; the load factor was 80.3 per cent.

Upstairs, downstairs Qantas’ low-cost subsidiary, Jetstar, started operations in 2004. By the end of 2005, Qantas was planning to add long-haul services starting with four A330-200s as interim equipment; at that stage they were due to be replaced by 787s from 2008. A330 services started in November 2006, initially from Melbourne to Bangkok and Phuket, and Sydney to Ho Chi Minh City. By December 2010, Jetstar International was operating seven A330s from Melbourne to Bali and Bangkok, from Sydney to Bali, Honolulu and Phuket, and from Cairns and Gold Coast to Osaka and Tokyo Narita. In that month, the airline launched its first long-haul services from Singapore’s Changi airport, with daily flights to Melbourne and Auckland and twice weekly flights between Melbourne and Queenstown, New Zealand. Planned additions in the first few months of 2011 include AucklandSingapore, Cairns-Auckland and Darwin-Manila. Jetstar is currently due to take the first of 15 787-8s in mid-2012, but will use the 787-9, expected in 2014-15, to expand its international operation. Qantas’ CEO, Alan Joyce, says the aircraft will be used on medium-density routes and will enable the subsidiary to move into southern Europe while building on its Asian network. The new aircraft will replace Jetstar’s A330-200s, which in turn will replace Qantas’ 767-300ERs. The A330s are configured to carry 303 passengers in two classes; the StarClass international business class product is based on the Qantas domestic business class product, offering wide leather seats and other perks, but no beds. Qantas says the 787-8s will seat 313 passengers, 38 of them in StarClass. Local rival, Virgin Blue, formed its own long-haul subsidiary following the February 2008 US-Australia Open Skies agreement. V Australia launched flights between Sydney and Los Angeles in February 2009 using the first of seven new 777-300ERs. Its current network extends from Brisbane and Melbourne to Phuket, Fiji and Johannesburg, though those destinations have V Australia started operations with its first Boeing 777-300ER in February 2009.

Instead, the airline plans to consolidate its strategic hubs in Los Angeles and Abu Dhabi and develop a “virtual global network” through alliances with Delta Air Lines, Etihad and Air New Zealand. The last two were approved by the Australian Competition and Consumer Commission in December: Virgin Blue’s CEO and MD, John Borghetti, says the Abu Dhabi hub will enable V Australia to offer a one-stop alternative to more than 14 destinations in Europe, plus the Middle East and Africa, without backtracking or going via Heathrow. Three weekly flights between Sydney and Abu Dhabi are due to start in February this year, with a similar frequency from Brisbane to be added within 12 months. V Australia’s 777s are configured with 33 lie-flat beds in business class plus 40 premium economy and 288 economy seats at respective pitches of 38in and 32in. They feature bars, ladies-only lavatories with piped music and the same top-of-the-range inflight entertainment system as Virgin America. Ryanair’s CEO, Michael O’Leary, who has been blowing hot and cold about the possibility of starting his own long-haul operation since the EU-US Open Skies agreement came into effect in 2008, is equally emphatic that business class is a requirement. While suggesting transatlantic economy fares could be as little as €10 ($13.5), he has insisted that the business class would be very expensive: “I don’t believe just long-haul, low-fares works. Because there will always be 10 or 15 per cent of the market in long-haul who will pay whatever it costs for business class service, a wide seat, all that kind of stuff.” Inability to source competitively priced aircraft has seen the scheme recede into the future.

All-economy A380s Just over the horizon, meanwhile, are the pair of 826-seat alleconomy A380s that Réunion-based Air Austral plans to introduce in 2014. The airline’s CEO, Gérard Ethève, says the aircraft will be used to link the Indian Ocean island, an administrative region of France and consequently part of the Eurozone, with Paris. “I think I convinced Airbus that the A380 was not just designed to let passengers take showers on board, but that a majority of passengers would choose this aircraft if it would offer a high density configuration,” Ethève said at the last Dubai Air Show, where the order was confirmed. “They were a bit surprised but finally they joined our project and with Airbus we now think the A380 is a cost-saving answer to the need for a democratic means of transportation.”

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January-February 2011 AFM • ISSUE 71 | 53

AIRPORTS & ROUTES: Low-cost long-haul

Australia’ s Jetstar started operating A330-200s from its new Singapore base in December 2010.

Réunion has a population of around 850,000 but annual traffic on what is classed as a domestic route amounts to one million passengers. “Future traffic growth on such segments will be directly related to airlines’ ability to offer lower priced tickets, responding to customer demand for cheaper travel,” Ethève said. “The lowering of prices necessitates the use of lower cost tools. We are very proud to be first to launch a high-density A380, and we are convinced that we will not be the last.” Ethève predicts that Air Austral’s lower-cost A380 operations will draw feed traffic to the airline’s hub at Réunion from other destinations throughout the southwest Indian Ocean: “I am convinced the A380 will play an important role on other highdensity routes as well, and I believe that in co-operation with my French airline industry colleagues it could also be used on flights between Paris and the French Antilles in the Caribbean.”

X factor Perhaps the most dynamic of the current crop of low-costers in long-haul is AirAsia X. The offshoot of AirAsia ordered its first 15 A330-300s in June 2007; by the time the first was delivered in October 2008 it had added another 10, and in June 2009 it signed for 10 A350-900s. By the end of 2010, the airline had nine A330s operating to destinations in Australia, China, India, South Korea and Taiwan, plus two A340s used for the Kuala LumpurLondon route. It was due to add a four-times weekly service to Paris Orly in February. In 2009, despite the global economic crisis and the AH1N1 flu outbreak, AirAsia X made a net profit of $28m on revenues of $234m. CEO, Azran Osman-Rani, says that success – achieved on the back of a barely there seat-mile cost of just 2.8 US cents per seat-kilometre (that compares favourably even with AirAsia’s own impressively skinny three cents) – is due largely to “the innovativeness of a team of Malaysians [which he led] to construct a completely new business model for long-haul aviation instead of just adjusting the existing model.” ‘Completely new’ may be pushing it slightly, but there is no denying the claim to innovation. To achieve the 60 per cent reduction in established carriers’ operating costs seen as necessary for a sustainable operation, Azran says, the airline operates its A330s in high-density configuration, with nine-abreast economy seating and 30 per cent more seats in total, and it turns them round quickly to increase utilisation by 35 per cent. Neither AirAsia nor AirAsia X hedges against fuel price or currency movements, Azran adds: “We burn 2.5 litres of fuel per seat per 100 km. By contrast, a legacy carrier in the region burns five litres.

A big part of that is seat density. So that to us is a much bigger cushion.” As well as licensing the brand, the long-haul operation shares AirAsia’s pilots, cabin crew, guest services staff, website, IT platform, marketing and distribution, while the short- and longhaul networks also feed each other. That is set to change in the wake of an initial public offering (IPO) planned for later this year or 2012, following which AirAsia X will employ its own widebody aircraft pilots, cabin crew, ground staff and commercial and marketing team, while continuing to use the AirAsia brand and website. In the meantime, AirAsia X has not hesitated to revise its onboard product, replacing the problematic fixed-back shell seats and black leather upholstery originally specified with a new design in grey and red. The seats are pitched at 31in on the A330s and 32in on the A340s. At the same time, it scrapped the 28 38in pitch premium economy seats in favour of 12 lie-flat beds. And to eliminate the cost of equipment and content, and the weight and wiring complexity of the original seat-back IFE system, it has opted to switch to portable entertainment systems.

Is it viable? So, are long-haul and low-cost a viable combination? The projected AirAsia X IPO, aimed at raising funds to pay for the new aircraft on order, and freeing AirAsia of the need to continue funding its offspring’s growth, may represent the acid test. Azran pointed out when the IPO was announced last June it will be looking to international institutional investors for the estimated $500m-plus it aims to raise. While AirAsia is reaching the stage of maturity when it should start returning cash to investors, he said; “We have a more exciting growth story for investors with a different appetite.” For the future, continuing globalisation looks likely to keep fuelling labour mobility and the accompanying growth in people travelling to visit friends and relatives. Such traffic has grown particularly robustly in Europe since the enlargement of the European Union in 2004 and is the main component of the Paris traffic that has encouraged Air Austral to invest in A380s. The principal barriers continue to be ASAs and the shortage of long-range aircraft. Both seem likely to diminish in the mediumterm with the spread of Open Skies agreements and 787 deliveries increasing the supply of equipment. But the lowest possible cost base will be needed to survive the sort of challenges that have seen Oasis Hong Kong, Flyglobespan and Zoom Airlines fail in recent years.

AFM71_MRO_AFM 68 B&B 28/01/2011 13:42 Page 54

54 | AFM • ISSUE 71 January-February 2011

MAINTENANCE OPERATIONS: OEMs

OEMs: CHASING PROFIT IN A CROWDED MRO MARKET

AFM71_MRO_AFM 68 B&B 28/01/2011 13:43 Page 55

January-February 2011 AFM • ISSUE 71 | 55

MAINTENANCE OPERATIONS: OEMs Original equipment manufacturers (OEMs) are chasing profits in the increasingly crowded MRO field. Why have the big OEMs entered the field? It is for profits, pure and simple. Scott Hamilton asks how far they can and will go for the extra buck.

“This is actually an unusual way for us to show our market,” Piasecki said of a recent board presentation. “I don’t recall when we actually combined both the airplane and the services marketplace together in one pie, or one description, but we did for the board and we did it for a very important reason and that is because our airline customers are changing their business models. In order to reduce cost, they are outsourcing as much as they can of the infrastructure. “[It’s] not just things like IT services, or financial services, or payroll, they are actually looking to outsource the maintenance and the engineering of the airline… and it’s accelerating. They are coming to Boeing and they are saying, ‘Our core business as an airline is to take a passenger from A to B, it is not to manage this airplane. Please, Boeing, help us do this part of it and give us ways that we can focus on our core business and we can look for even more efficiencies in managing the operations of the airline’.” “Boeing in our CAS business is acquiring new capabilities to be able to respond to airlines to do that,” she continued. “The market is actually quite large. We don’t have 50 per cent of the services market. It is very, very crowded and in some cases we’re competing against customers like Lufthansa and Delta TechOps, so it’s a delicate strategy for us to move into this marketplace. But it is absolutely where we feel we need to go over the next 20 years.”

IRBUS, BOEING, GE AVIATION AND ROLLS-ROYCE Engines are among the OEMs with major business efforts in MRO, competing with legacy companies such as Timco and Aviation Technical Services (the former Goodrich operation) and airline-affiliated MROs such as Lufthansa Technik and Delta TechOps.

Well before the emerging competitors arose in China, Russia and Canada, Airbus and Boeing started providing MRO services; indeed the engine companies have long been in the market. For the engine makers, the reason is simple: there’s money in MRO. The billions of dollars spent on research and development (R&D) to bring a new engine to market as well the as pressure to be competitive can mean the return on investment from the sale of an engine is nil-to-negative. The profit is made in the sale of parts, servicing and overhaul. For the airframers, the provision of aftermarket services is a form of customer support, but it is also lucrative and has less need for capital investment than is the case for the R&D and manufacture of aircraft, which require about a decade before the return on investment (ROI) is realised.

Boeing: servicing is part of the pie Some years ago, Boeing purchased MRO Aviall and the company has an active Customer Aviation Services (CAS) unit to support maintenance requirements. It has also put together GoldCare for the 787 programme, which offers a suite of options. So far, only Britain’s TUI has signed up for GoldCare, but the low level of investment is a result of interminable delays to the 787, not the maintenance programme itself. Nicole Piasecki, VP for business development and strategic integration for Boeing, told an employees group in November that Boeing Commercial Airplanes now regards production and servicing in one “pie” when making presentations to the company’s board of directors.

The ‘mega-lessor’, GECAS, recently asked for Boeing’s help in making aircraft transitions simpler and faster. Sean Flannery, a GECAS EVP, told CAS managers that aircraft transitions are vital. “Simplification and speed are key,” Flannery said. “The faster the transition time, and the lower the cost, the greater the value of the aircraft.” Lou Mancini, SVP for CAS, said his team members “will continue stretching ourselves to provide our valued partners the support they need.”

“ airline customers models reduce cost Our

business

are changing their

. In order to

they are outsourcing as much as they can of the

infrastructure… They are coming to Boeing and they are saying, ‘Our core business as an airline is to take a passenger from A to B, it is not to manage this airplane. Please, Boeing,

help us do this part of it.

”

Nicole Piasecki, VP for business development and strategic integration, Boeing.

AFM71_MRO_AFM 68 B&B 28/01/2011 13:44 Page 56

56 | AFM • ISSUE 71 January-February 2011

MAINTENANCE OPERATIONS: OEMs duration. It can be based on their number of flight hours. It can include everything such as on-wing support, LLP [life-limited parts], hot sections, or it can be customised downward. This reduces one significant source of risk for them.” “The main competitive battleground remains between the OEMs and component O&R [overhaul and repair] integrators,” AeroStrategy said during a European conference in September 2010. “Component OEMs are adopting an ‘authorised service centre model’ to protect aftermarket and spares flow,” the consultancy said. A US aerospace financial analyst, speaking with anonymity because his employer does not allow press interviews, said OEMs across the board are interested in MRO and spares.

“

AeroStrategy sees engine OEMs

capturing 50 per

cent of the market by 2020, from 44 per cent in 2009, with airline third party (ATP) and

independents

market share from 34 per cent to 40 per cent. The share of MRO by the airlines will shrink from 22 per cent to just 10 per cent, increasing

according to the forecast.

”

Boeing has a component support programme with Air France KLM for the 777 and 737NG and a component management contract with Spicejet and Norwegian AS, according to AeroStrategy, a consulting firm that specialises in MRO. Airbus has taken a somewhat different approach to Boeing, creating a network of 16 MROs and support based on flight hours and a tailored support programme. The latter have A330 contracts with Singapore, Vietnam and Sichuan airlines.

OEMs claim their piece GE Aviation, Rolls-Royce and Pratt & Whitney (as well as joint venture companies International Aero Engines and CFM International through their primary partners) have long offered full MRO and power-by-the-hour contracts. Selling engines can be such cut-throat competition that OEMs have been known to give the engines, free of charge, to airlines in return for the spares and maintenance contracts. Sole-source engine suppliers, of course, do not have to resort to this extreme. GE, which has sole-source supplier status on the 737 Classic and NG and the 777-200LR and 777-300ER, and which powers 90 per cent of the entire Boeing product line, has a vast engine MRO operation. For the CF6, for example, which powers everything from the first McDonnell Douglas DC-10 through to the current A330 family, GE provides a menu of MRO services. GE Aviation’s Chuck Williams, CF6 product line manager, says that the OnPoint Solutions MRO programme is highly flexible. “We allow for virtually unlimited customisation,” he says. “It can be an agreed upon (cost) the rate the airline can count on going forward. It can be quite long-term – 10, 15 or 20 years in

“Most of the money they make is in the aftermarket. The margins are much, much higher,” the analyst commented. Although the big airframe and engine OEMs are most known in this context, the analyst cited Honeywell and Rockwell Collins as examples of other OEM suppliers that seek aftermarket business. “The business model [for OEMs] is a 10 per cent margin on original equipment and 30 to 40 per cent on the spare parts. The margins are huge on engine spare parts,” the analyst said. “This is all about the aftermarket. It’s up to 40-50 years, and if that means giving the engines away, so be it. “For the rest of the supply chain, I don’t think it’s that extreme, but it’s the same model. There’s not a lot of margin on the original equipment but there are a ton of dollars in spare parts and services,” the analyst said.

Dividing the portions AeroStrategy created a breakdown of the MRO market in 2009, the most recent full-year data available. According to its findings, 15 per cent of the market covered airframes, seven per cent modifications, 36 per cent engines, 22 per cent for components and 20 per cent for line maintenance. This represents a $42.7bn market. Excluded from this analysis are maintenance control, technical services and inventory carrying costs, representing another $13bn. The $42.7bn in market worth is $2.3bn below the 2007 peak since 2003 and clearly reflects the global recession. Looking forward through to 2019, AeroStrategy forecasts a total compound annual growth rate (CAGR) of 3.2 per cent, with modifications growing at 7.2 CAGR and engines at four per cent. Airframe MRO will have the lowest growth rate, of just 1.2 per cent, as old aircraft are retired. The Asia-Pacific regions, and notably China and India, will drive the growth. AeroStrategy sees engine OEMs capturing 50 per cent of the market by 2020, from 44 per cent in 2009, with airline third party (ATP) and independents increasing market share from 34 per cent to 40 per cent. The share of MRO by the airlines will shrink from 22 per cent to just 10 per cent, according to the forecast. “The recession resulted in a 10 to 20 per cent drop in revenue for many in the MRO supply chain,” AeroStrategy said at a European conference in September. “However, MRO is set for long-term growth,” the result of increased outsourcing, more OEM-centric MRO supply chain and a growing presence of the airframe OEMs. Even so, airframe OEMs will represent a miniscule portion of the market share in coming years. They covered less than one per cent of the market in 2009 and will only account for around three per cent in 2020, AeroStrategy forecasts.

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58 | AFM • ISSUE 71 January-February 2011

INDUSTRY DATA: FLEET FINANCE, FIRM ORDERS, AIRCRAFT TRANSACTIONS, LIST PRICES AND LEASE RATES AIRCRAFT TRANSACTIONS – Boeing, Airbus, ATR, and Bombardier. 21 Oct 2010 to 18 Jan 2011 Contract Date 21/10/2010 21/10/2010 21/10/2010 21/10/2010 22/10/2010 22/10/2010 22/10/2010 22/10/2010 22/10/2010 24/10/2010 25/10/2010 25/10/2010 25/10/2010 26/10/2010 26/10/2010 26/10/2010 26/10/2010 27/10/2010 27/10/2010 27/10/2010 27/10/2010 27/10/2010 28/10/2010 28/10/2010 28/10/2010 28/10/2010 28/10/2010 28/10/2010 28/10/2010 28/10/2010 28/10/2010 28/10/2010 29/10/2010 29/10/2010 29/10/2010 29/10/2010 29/10/2010 29/10/2010 29/10/2010 29/10/2010 29/10/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010

S/N 25213 24774 25060 26154 675 724 4476 378 34263 626 30907 33748 27144 363 33556 7394 10314 24273 24959 40237 24426 8057 2236 24649 30904 31743 31743 24797 7002 387 4235 4235 0421 1240 4480 4488 007 919 924 23749 23749 920 30389 740 4481 4495 0434 1171 39109 24036 35816 568 0495 2074 21467 21929 29555 40239 24528 568 568 1332 398 401 401 401 2037 2043 2050 2053 2057 2062 1856 1909 1996 3293 038 043 016 543 24413 28915 21839 30746 33015 35215 40348 27204 4256 4264

A/C Model Boeing 747 Boeing 757 Boeing 757 Boeing 757 Airbus A300 Airbus A300 Airbus A320 Airbus A340 Boeing 737 (NG) ATR ATR 72 Boeing 737 (NG) Boeing 747 Boeing 757 Airbus A340 Boeing 737 (NG) Bombardier (Canadair) CRJ RJ Bombardier (Canadair) CRJ700 RJ Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 737 (NG) Boeing 747 Bombardier (Canadair) CRJ RJ Airbus A319 Boeing 737 (CFMI) Boeing 737 (NG) Boeing 737 (NG) Boeing 737 (NG) Boeing 767 Bombardier (Canadair) CRJ RJ Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A340 ATR ATR 72 ATR ATR 72 Boeing 737 (CFMI) Boeing 737 (CFMI) ATR ATR 72 Boeing 737 (NG) Airbus A300 Airbus A320 Airbus A320 Airbus A321 Airbus A330 Boeing 737 (NG) Boeing 767 Boeing 767 Bombardier (de Havilland) Dash 8 Airbus A321 Airbus A319 Boeing 737 (JT8D) Boeing 737 (JT8D) Boeing 737 (NG) Boeing 737 (NG) Boeing 757 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Airbus A320 Airbus A300 Airbus A300 Airbus A300 Airbus A300 Airbus A319 Airbus A319 Airbus A319 Airbus A319 Airbus A319 Airbus A319 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A340 Airbus A340 Airbus A380 ATR ATR 72 Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 737 (JT8D) Boeing 737 (NG) Boeing 737 (NG) Boeing 737 (NG) Boeing 737 (NG) Boeing 757 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8

Variant Reg No 400D (GE) N894DB 200 (RR) N802PG 200 (RR) N949FD 200 (RR) N763CA 600R (GE) N80084 620R (P&W) N1724 230 (IAE) CC-BAD 310 (CFM) ZS-SXG 700 Winglets N426HZ 500 XY-AIS 800 Winglets N857NN 400F (GE) JA401J 200SF (RR) N904FD 310 (CFM) CC-CQC 800 Winglets EI-DAW 200LR C-GGDR Challenger 870 NG N870DC 500 LN-BRJ 400 N959PR 800 Winglets A6-FDJ 400 (GE) N264AS Challenger 850 EW-301PJ 110 (CFM) N928FR 500 M-AZIZ 800 Winglets N858NN 800 Winglets N 800 Winglets JA73NC 300 (GE) N789AS 100ER XA100 N824EX 400 NextGen N721AL 400 NextGen N721AL 210 (CFM) EI-DNP 230 (IAE) N507JT 210 (CFM) N836VA 230 (IAE) VT-IGU 310 (CFM) EI-ELH 500 VT-JCS 500 VT-JCT 300 N373PA 300 N373PA 500 VT-JCR 800 Winglets PH-HZJ 620R (P&W) EI-EOT 230 (IAE) VT-IGV 230 (IAE) VH-VGH 110 (CFM) EI-IXU 240 (RR) N382HA BBJ1 N1TS 300ER (GE) N355AA 300ERF (GE) N524LA 300 N568AW 110 (CFM) EI-IXO 110 (CFM) EI-IMD 200C Advanced C-GMAI 200QC Adv (Stg3Hk)C800 Winglets N859NN 800 Winglets A6-FDL 200 (RR) N549AX 300 N568AW 300 N568AW 230 (IAE) LV-BSJ 600 (GE) EK-30098 600 (GE) D-AIAK 600 (GE) EX600 (GE) EX110 (CFM) G-EZAM 110 (CFM) G-EZDC 110 (CFM) G-EZNC 110 (CFM) G-EZMH 110 (CFM) EI-IMC 110 (CFM) G-EZSM 230 (IAE) TC-JLJ 230 (IAE) TC-JLK 230 (IAE) TC-JLL 210 (CFM) EC-KKT 210 (CFM) JY-AIA 210 (CFM) JY-AIB 860 (EA) A6-EDC 500 I-ADLM 300 PK-TXJ 500 N14654 200 Adv (Stg 3 Hk) 700 Winglets N554WN 700 Winglets VH-VBV 800 Winglets B-5345 800 Winglets JA333J 200 (P&W) N410JR 400 D-ABQH 400 D-ABQI

Owner Name Aircraft Solutions Airframe 2010 LLC FedEx FedEx National Air Cargo Group Inc Squadron Leasing II LLC Aircraft Solutions (Offshore) LLC Torcaza Leasing Ltd South African Airways San Nicolas Leasing LLC Air Bagan NAS Investments 2 Inc Aircastle Advisor LLC Federal Express Canada Ltd LAN Airlines RBS Aerospace Ltd Bombardier Inc RBS Asset Finance Inc SAS Global Jet Ltd BBAM LLC AerSale Belavia MSN 2236 Trust Azizi Group NAS Investments 2 Inc BBAM LLC NBB Humming Bird AerSale Nacional Aeronautica de Queretaro Frontier Alaska Aviation Trust Aerographics Inc US Department of Justice Aerlift Leasing Ireland MSN 421 Ltd AFS Investments 54 LLC AFS Investments 52 LLC Crescent Leasing 10 Limited Magellan Aviation Services Ltd Injet Leasing Company Ltd Injet Leasing Company Ltd Qwest Air Parts Inc AeroUSA Inc Injet Leasing Company Ltd VGS Aircraft Holding (Ireland) Ltd GA Telesis Ireland Ltd RBS Aerospace Ireland Leasing 2 Ltd Arcu Aircraft Leasing Ltd Aircraft Purchase Comp No.12 Ltd AWAS Leasing Two LLC Undisclosed Bank / Broker / Lessor AirTrust OP LLC Celestial Aviation Trading 47 Ltd Bombardier Services Corp Aircraft Purchase Comp No.12 Ltd Aircraft Purchase Comp No.12 Ltd Air Inuit Unconfirmed Canadian Operator NAS Investments 7 Inc General Electric Capital Corp FedEx TKC Aerospace US Department of State - Florida LAN Airlines Vertir Airlines Cyrrus Air Kyrgyz Trans Avia Bukovyna Airlines HSH Global Aircraft Fund 1 HSH Global Aircraft Fund 1 HSH Global Aircraft Fund 1 HSH Global Aircraft Fund 1 Aircraft Purchase Comp No.12 Ltd HSH Global Aircraft Fund 1 Archway Aviation Archway Aviation Archway Aviation Undisclosed Bank / Broker / Lessor Gladiator Leasing Ltd Gladiator Leasing Ltd Doric Nimrod Air One Nordic Aviation Capital Aero North International Ltd Continental Airlines Undisclosed Bank / Broker / Lessor ALC Aircraft Holdings I LLC ALC Aircraft Holdings I LLC Undisclosed Bank / Broker / Lessor SMFL A/c Capital Corp Boeing Capital Corp Nordic Aviation Capital Nordic Aviation Capital

Operator Name Universal Asset Mgmt Inc FedEx FedEx National Air Cargo Apollo Aviation Group Universal Asset Mgmt Inc LAN Airlines South African Airways San Nicolas Leasing Trust Air Bagan American Airlines Aircastle Advisor LLC FedEx LAN Airlines RBS Aviation Capital Bombardier Inc Dow Chemical Co SAS Global Jet Ltd FlyDubai AerSale Belavia Frontier Airlines Azizi Group American Airlines BBAM LLC Skymark Airlines AerSale Nacional Aeronautica de Queretaro Frontier Alaska Aviation Trust Aerographics Inc US Department of Justice Wind Jet GECAS Virgin America IndiGo Airlines Magellan Aviation Services Ltd Jet Airways Jet Airways Qwest Air Parts Inc AeroUSA Inc Jet Airways Transavia Airlines GA Telesis LLC IndiGo Airlines Jetstar Alitalia Hawaiian Airlines First Virtual Air II LLC American Airlines GECAS Bombardier Services Corp Alitalia Alitalia Air Inuit Unconfirmed Canadian Operator American Airlines FlyDubai FedEx TKC Aerospace US Dept of State - Florida LAN Argentina Vertir Airlines Cyrrus Air Kyrgyz Trans Avia Bukovyna Airlines easyJet easyJet easyJet easyJet Alitalia easyJet Turkish Airlines (THY) Turkish Airlines (THY) Turkish Airlines (THY) Vueling Airlines Royal Jordanian Royal Jordanian Emirates Airline Nordic Aviation Capital Aero Nusantara Indonesia (ANI) Continental Airlines Undisclosed Bank / Broker / Lessor Air Lease Corporation Virgin Blue Airlines Shenzhen Airlines Japan Airlines Intl Boeing Capital Corp LGW - Luftfahrtgesellschaft Walter LGW - Luftfahrtgesellschaft Walter

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

AFM71_Data_AFNM 28/01/2011 13:35 Page 59

January-February 2011 AFM • ISSUE 71 | 59

INDUSTRY DATA: FLEET FINANCE, FIRM ORDERS, AIRCRAFT TRANSACTIONS, LIST PRICES AND LEASE RATES AIRCRAFT TRANSACTIONS – Boeing, Airbus, ATR, and Bombardier. 21 Oct 2010 to 18 Jan 2011 Contract Date 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 1/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 2/11/2010 3/11/2010 3/11/2010 3/11/2010 3/11/2010 3/11/2010 3/11/2010 3/11/2010 3/11/2010 3/11/2010 4/11/2010 4/11/2010 4/11/2010 4/11/2010 5/11/2010 5/11/2010 5/11/2010 7/11/2010 8/11/2010 8/11/2010 8/11/2010 8/11/2010

S/N 4274 535 1489 4506 0494 21691 21692 7394 7394 0526 26350 24039 27619 28111 7367 0524 674 679 681 928 28915 33440 33440 26360 29435 37943 2086 24539 24539 24637 24637 40583 33749 22911 7318 4327 2033 4509 31109 7137 0532 22944 23292 29093 24523 27250 27251 7266 0537 4497 0516 627 1745 24885 1770 0661 1173 197 4321 4337 1779 4516 34263 447 1217 28477 28477 26345 7361 643 2101 1257 4518 28478 24870 24875 610 1226 4487 240 23862 38287 0515 40238 35817 29729 2083 654 654 26345

A/C Model Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Airbus A320 Airbus A320 Airbus A321 Boeing 727 Boeing 727 Bombardier (Canadair) CRJ Regional Jet Bombardier (Canadair) CRJ Regional Jet Airbus A321 Boeing 747 Boeing 767 Boeing 767 Boeing 767 Bombardier (Canadair) CRJ RJ Airbus A321 ATR ATR 72 ATR ATR 72 ATR ATR 72 ATR ATR 72 Boeing 737 (CFMI) Boeing 737 (NG) Boeing 737 (NG) Boeing 747 Boeing 767 Boeing 777 Airbus A319 Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 737 (NG) Boeing 747 Boeing 757 Bombardier (Canadair) CRJ RJ Bombardier (de Havilland) Dash 8 Airbus A319 Airbus A320 Boeing 737 (NG) Bombardier (Canadair) CRJ RJ Airbus A321 Boeing 737 (CFMI) Boeing 737 (JT8D) Boeing 737 (NG) Boeing 757 Boeing 777 Boeing 777 Bombardier (Canadair) CRJ RJ Airbus A320 Airbus A320 Airbus A321 Airbus A330 Airbus A319 Boeing 747 Airbus A319 Airbus A320 Airbus A330 Airbus A340 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Airbus A319 Airbus A320 Boeing 737 (NG) Bombardier (de Havilland) Dash 8 Airbus A320 Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 747 Bombardier (Canadair) CRJ RJ Airbus A300 Airbus A319 Airbus A320 Airbus A320 Boeing 737 (CFMI) Boeing 747 Boeing 767 Airbus A300 Airbus A320 Airbus A320 Airbus A330 Boeing 737 (CFMI) Boeing 777 Airbus A321 Boeing 737 (NG) Boeing 767 Boeing 747 Airbus A319 ATR ATR 72 ATR ATR 72 Boeing 747

Variant 400 300 210 (CFM) 230 (IAE) 110 (CFM) 200F(M) Adv (Stg3 Hk) 200F(M) Adv (Stg3 Hk) 200LR 200LR 110 (CFM) 400BCF (GE) 300ER (GE) 300ER (P&W) 300ER (P&W) 200ER 110 (CFM) 500 500 500 500 500 800 Winglets 800 Winglets 400 (GE) 300ER (P&W) 300ER (GE) 110 (CFM) 300 300 300 300 800 Winglets 400F (GE) 200 (P&W) 200LR 400 NextGen 110 (CFM) 230 (IAE) 800 Winglets 200LR 110 (CFM) 300 200C Advanced 700 200 Winglets (RR) 200ER (RR) 200ER (RR) 200LR 210 (CFM) 230 (IAE) 110 (CFM) 240 (RR) 110 (CFM) 400 (GE) 110 (CFM) 230 (IAE) 300HGW (GE) 310 (CFM) 400 NextGen 400 NextGen 110 (CFM) 230 (IAE) 700 Winglets 200 210 (CFM) 400 400 400D (GE) 200ER 600R (GE) 110 (CFM) 230 (IAE) 230 (IAE) 400 400 (GE) 300ER (GE) 600R (GE) 210 (CFM) 210 (CFM) 220 (P&W) 300 300ER (GE) 110 (CFM) 800 Winglets 300ERF (GE) 400F (RR) 110 (CFM) 500 500 400D (GE)

Reg No D-ABQJ LN-WFS EI-IKL VT-IGW EI-IXI N785AT N786AT VQ-BGX VQ-BGX EI-IXC N743CK N358AA EI-EED EI-CXO N75994 EI-IXB VT-JCF VT-JCG VT-JCH VT-JCU VP-BVQ N JA73ND N914UN EI-CZH VH-VPH EI-IMG N370UA N370UA N372UA N372UA N860NN N402AL N621DL N27318 G-PTHH EI-IMB CC-BAE N861NN N650ML EI-IXD N304SW ZS-IAD LN-TUH N910AW A6-EMI A6-EMH C-GGDQ JY-PTB VH-VGF EI-IXG 7O-ADX EI-IMI N805AS EI-IMO EI-EEI OH-LTU ZS-SXH G-PTHG LN-WDK EI-IMJ CC-BAF N426HZ N447YV EI-IKU VQ-BID VQ-BID N895DB N75995 N7082A EI-IMH N508JL VT-IGX VQ-BIC N248AS N875AW N7076A EI-IKB HC-CJW F-ZWUG N527AU G-STBC EI-IXF A6-FDK N526LA 4K-800 EI-IMF F-HAPL F-HAPL N895DB

Owner Name Nordic Aviation Capital Wideroe Aircraft Purchase Comp No.12 Ltd Crescent Leasing 7 Ltd Aircraft Purchase Comp No.12 Ltd Rio Airlines USA Inc Rio Airlines USA Inc PL Panorama Leasing Limited UTair Aircraft Purchase Comp No.12 Ltd Kalitta Air AirTrust OP LLC ILFC Aircraft 76B-27619 Limited ILFC Aircraft 76B-28111 Limited Squadron Leasing V LLC Aircraft Purchase Comp No.12 Ltd ASL Aviation ASL Aviation ASL Aviation Injet Leasing Company Ltd Airfield Investments Ltd BBAM LLC NBB Ostrich VEBL-767-300 Ltd ILFC Aircraft 76B-29435 Limited VB LH 2008 No 2 Pty Ltd Aircraft Purchase Comp No.12 Ltd Brickell Asset Mgmt X LLC Q737 Aircraft Ltd Brickell Asset Mgmt IX LLC Q737 Aircraft Ltd NAS Investments 7 Inc Aircastle Advisor LLC FedEx Squadron Leasing V LLC MIG Aviation (UK) Ltd Aircraft Purchase Comp No.12 Ltd Torcaza Leasing Ltd NAS Investments 7 Inc Squadron Leasing XI LLC Aircraft Purchase Comp No.12 Ltd AeroTurbine Inc Outsourcing for Africa CC Xylodell Ltd US Airways Veling Ltd Veling Ltd Bombardier Inc Petra Airlines Arcu Aircraft Leasing Ltd Aircraft Purchase Comp No.12 Ltd Whitney Leasing Ltd Aircraft Purchase Comp No.12 Ltd AerSale Aircraft Purchase Comp No.12 Ltd ILFC Aircraft 32A-661 Ltd Finnair Aircraft Finance Ltd South African Airways MIG Aviation (UK) Ltd SAS Norge AS Aircraft Purchase Comp No.12 Ltd Torcaza Leasing Ltd Aviation Capital Group Avmax Aircraft Leasing Inc Aircraft Purchase Comp No.12 Ltd UTair Sberbank Leasing CF6-80 Parts Ltd Squadron Leasing V LLC Global Aviation Services FZE Aircraft Purchase Comp No.12 Ltd AFS Investments 54 LLC Crescent Leasing 7 Limited UTair AerSale Omni Aviation Leasing LLC Squadron Leasing II LLC Aircraft Purchase Comp No.12 Ltd General Electric Capital Corp French Air Force Merlin One Aircraft LLC British Airways Aircraft Purchase Comp No.12 Ltd BBAIR 2007-1 Celestial Aviation Trading 51 Ltd Silk Way Airlines Aircraft Purchase Comp No.12 Ltd Air Corsica Air Vendee Investissements Aircraft Solutions Airframe 2010 LLC

Operator Name LGW - Luftfahrtgesellschaft Walter Wideroe Alitalia IndiGo Airlines Alitalia Rio Linhas Aereas Rio Linhas Aereas UTair UTair Alitalia Kalitta Air American Airlines Blue Panorama Airlines Blue Panorama Airlines Apollo Aviation Group Alitalia Jet Airways Jet Airways Jet Airways Konnect Jet Airways Airfield Investments Ltd BBAM LLC Skymark Airlines VEB-Leasing JSC Blue Panorama Airlines V Australia Alitalia Brickell Asset Mgmt X LLC Q737 Aircraft Ltd Brickell Asset Mgmt IX LLC Q737 Aircraft Ltd American Airlines Aircastle Advisor LLC FedEx Apollo Aviation Group Olympic Air Alitalia LAN Airlines American Airlines Apollo Aviation Group Alitalia AeroTurbine Inc Africa Charter Airline SAS US Airways Emirates Airline Emirates Airline Bombardier Inc Petra Airlines Jetstar Alitalia Yemenia Alitalia AerSale Alitalia AviaNova Finnair South African Airways Olympic Air Wideroe Alitalia LAN Airlines Aviation Capital Group Avmax Aircraft Leasing Inc Alitalia UTair UTair Universal Asset Mgmt Inc Apollo Aviation Group Rus Aviation Alitalia GECAS IndiGo Airlines UTair AerSale Omni Aviation Leasing LLC Apollo Aviation Group Volare S.p.A. Aerogal French Air Force Merlin One Aircraft LLC British Airways Alitalia FlyDubai GECAS Silk Way Airlines Alitalia Air Corsica Air Corsica Universal Asset Mgmt Inc

Event Remarks Purchased - sale & lease-back Purch’d off lease / fin term comp Purchased - sale & lease-back Purch’d - sale & lease-back on del Purchased - sale & lease-back Purchased - parked Purchased - parked Purch’d - sale & lease-back - pkd Purchased - parked Purchased - sale & lease-back Purchased - parked Purch’d - sub to existing lease Purch’d - sub to existing lease Purch’d - sub to existing lease Purch’d - pkd Purch’d - sale & lease-back Purch’d - sub to existing lease Purch’d - sub to existing lease Purch’d - sub to existing lease Purch’d - sale & lease-back on del Purchased - parked Purchased Purch’d - sub to existing lease Purchased - parked Purch’d - sub to existing lease Purch’d - sale & lease-back on del Purchased - sale & lease-back Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purch’d - sale & lease-back on del Purchased - parked Purchased - parked Purchased - parked Purch’d-sale & lease-back on del - pkd Purchased - sale & lease-back Purch’d - sale & lease-back on del Purch’d - sale & lease-back on del Purchased - parked Purch’d - sale & lease-back Purchased - parked Purchased Purch’d - sub to existing lease Purch’d off lease / fin term com Purchased - sale & lease-back Purchased - sale & lease-back Purchased - parked Purchased Purcha’d - by lessor on delivery Purchased - sale & lease-back Purch’d - sub to existing lease Purchased - sale & lease-back Purchased - parked Purchased - sale & lease-back Purch’d - sub to existing lease Purch’d - sale & lease-back on del Purchased Purch’d - sale&lease-back on del - pkd Purch’d - sale&lease-back on del Purch’d - sale & lease-back Purch’d - sale & lease-back on del Purch’d off lease / fin term comp - pkd Purchased - parked Purchased - sale & lease-back Purchased Purchased - sale & lease-back Purchased - parked Purchased - parked Purchased - parked Purchased - sale & lease-back Purchased - parked Purch’d - sale & lease-back on del Purchased Purchased - parked Purchased - parked Purchased - parked Purchased - sale & lease-back Purch’d - sale & lease-back on del Purch’d off lease / fin term comp Purchased - parked Purch’d off lease / fin term comp Purchased - sale & lease-back Purch’d - sale & lease-back on del Purchased - parked Purchased Purchased - sale & lease-back Purchased Purchased - sale & lease-back Purch’d - sub to existing lease - pkd

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60 | AFM • ISSUE 71 January-February 2011

INDUSTRY DATA: FLEET FINANCE, FIRM ORDERS, AIRCRAFT TRANSACTIONS, LIST PRICES AND LEASE RATES AIRCRAFT TRANSACTIONS – Boeing, Airbus, ATR, and Bombardier. 21 Oct 2010 to 18 Jan 2011 Contract Date 9/11/2010 9/11/2010 9/11/2010 1/12/2010 1/12/2010 1/12/2010 1/12/2010 1/12/2010 1/12/2010 1/12/2010 1/12/2010 1/12/2010 1/12/2010 1/12/2010 1/12/2010 1/12/2010 1/12/2010 1/12/2010 2/12/2010 2/12/2010 2/12/2010 2/12/2010 3/12/2010 3/12/2010 3/12/2010 3/12/2010 3/12/2010 3/12/2010 6/12/2010 6/12/2010 6/12/2010 6/12/2010 6/12/2010 7/12/2010 7/12/2010 7/12/2010 7/12/2010 7/12/2010 8/12/2010 8/12/2010 8/12/2010 8/12/2010 8/12/2010 9/12/2010 9/12/2010 9/12/2010 9/12/2010 9/12/2010 9/12/2010 10/12/2010 10/12/2010 10/12/2010 10/12/2010 10/12/2010 13/12/2010 13/12/2010 13/12/2010 13/12/2010 13/12/2010 13/12/2010 14/12/2010 14/12/2010 14/12/2010 14/12/2010 14/12/2010 14/12/2010 14/12/2010 15/12/2010 15/12/2010 15/12/2010 15/12/2010 15/12/2010 15/12/2010 15/12/2010 15/12/2010 15/12/2010 15/12/2010 15/12/2010 15/12/2010 15/12/2010 16/12/2010 16/12/2010 16/12/2010 16/12/2010 16/12/2010 16/12/2010 16/12/2010 16/12/2010

S/N 1740 21710 442 2127 1351 25040 24044 24496 343 4289 4293 4296 4302 4309 4313 4324 4331 448 24834 28318 30469 30905 401 3684 3686 423 20551 25133 932 26531 20536 30903 26353 316 40240 22379 35544 15258 28322 7266 7266 244 437 468 39004 21705 25207 25212 7139 547 1355 934 23153 23158 0184 28916 28916 31111 26355 19004 24551 28905 24619 7345 7393 7434 8097 637 1173 29565 29577 30572 30756 39450 26352 26361 256 286 311 485 711 0362 047 25218 27002 27005 27610 27958

A/C Model Airbus A319 Boeing 737 (JT8D) Bombardier (de Havilland) Dash 8 Airbus A319 Airbus A320 Boeing 737 (CFMI) Boeing 767 Boeing 767 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Boeing 737 (CFMI) Boeing 737 (NG) Boeing 737 (NG) Boeing 737 (NG) Airbus A300 Airbus A319 Airbus A319 ATR ATR 72 Boeing 727 Boeing 757 ATR ATR 72 Boeing 737 (CFMI) Boeing 737 (JT8D) Boeing 737 (NG) Boeing 747 ATR ATR 72 Boeing 737 (NG) Boeing 747 Boeing 777 Bombardier (Canadair) CRJ900 RJ Boeing 737 (NG) Bombardier (Canadair) CRJ RJ Bombardier (Canadair) CRJ RJ Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 ATR ATR 72 Boeing 737 (NG) Boeing 747 Boeing 747 Boeing 747 Bombardier (Canadair) CRJ RJ Airbus A310 Airbus A320 ATR ATR 72 Boeing 737 (JT8D) Boeing 737 (JT8D) Airbus A320 Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 737 (NG) Boeing 747 Bombardier (Canadair) CRJ1000 RJ Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 747 Bombardier (Canadair) CRJ RJ Bombardier (Canadair) CRJ RJ Bombardier (Canadair) CRJ RJ Bombardier (Canadair) CRJ RJ Airbus A300 Airbus A330 Boeing 737 (NG) Boeing 737 (NG) Boeing 737 (NG) Boeing 737 (NG) Boeing 737 (NG) Boeing 747 Boeing 747 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) Dash 8 Airbus A300 Airbus A320 Airbus A380 Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 767 Boeing 767

Variant 110 (CFM) 200C Advanced 300 110 (CFM) 230 (IAE) 300 300ER (GE) 300ER (GE) 100 400 NextGen 400 NextGen 400 NextGen 400 NextGen 400 NextGen 400 NextGen 400 NextGen 400 NextGen 200 300 800 800 800 Winglets 600 (GE) 110 (CFM) 110 (CFM) 210

Reg No EI-IME 5N-BMS C-GMWT EI-IML LV-BRY LN-KKP N363AA 8Q-MEG N851EX YL-BAE YL-BAF YL-BAH YL-BAI YL-BAJ YL-BAQ YL-BAX YL-BAY N448YV N919GF LN-RCN LN-RPL N862NN EP-MNG N529VA N530VA C-GLHR 200F(M)Adv(D.AirStg3Sys) N251FL 200 (RR) N522NA 500 VT-JCV 400 N563MS 200C Advanced N808TA 800 Winglets N863NN 400BCF (GE) N744CK 200 F-WKVF 800 Winglets A6-FDM 200B (SUD) (GE) N729SA 300ER (GE) F-GZNH 900ER NextGen 5A-LAN 600 OY-KKS 200LR VQ-BGT 200LR VQ-BGT 300 PH-ABQ 200 N437YV 500 OY-CIM 800 Winglets LN-DYF 200B (P&W) N623US 400 (GE) N599MS 400 (GE) N151AS 200LR N651ML 300 (GE) EK230 (IAE) CC-COF 500 9M-FYH 200Adv(Stg 3 Hk) N126EA 200 Adv(Stg 3 Hk) N127EA 210 (CFM) F-GHQI 500 N14655 500 N14655 800 Winglets N864NN 400 (GE) N356AS 1000ER NextGen F-HMLA 400 N429US 500 Winglets N17644 400 Combi (P&W) N790BA 200ER C-GIXU 200ER C-GIXT 200ER C-GIXR Challenger 850 C-FVPF 620R (P&W) N3740 300HGW (GE) OH-LTU 800 Winglets N801NN 800 Winglets N835NN BBJ1 N835BA BBJ1 N836BA 800 Winglets VH-VUY 400D (GE) N896DB 400BCF (GE) N745CK 300 G-WOWE 300 G-WOWD 300 G-WOWC 300 C-FIAI 620R (P&W) N7151 230 (IAE) N362BV 840 (RR) VH-OQG 500 PK400 EI-COI 400 EI-COJ 300ER Winglets (GE) I-NDOF 300ER Winglets (GE) I-NDMJ

Owner Operator Name Name Aircraft Purchase Comp No.12 Ltd Alitalia Unconfirmed Nigerian Airline Unconfirmed Nigerian Airline Goldcorp Canada Ltd Wasaya Airways Aircraft Purchase Comp No.12 Ltd Alitalia LAN Airlines LAN Argentina Tag Aviation (Stansted) Ltd Tag Aviation (Stansted) Ltd AirTrust OP LLC American Airlines Mega Global Air Services (Maldives) Pvt Ltd Mega Maldives Airlines Avmax Aircraft Leasing Inc Avmax Aircraft Leasing Inc Nordic Aviation Capital airBaltic Nordic Aviation Capital airBaltic Nordic Aviation Capital airBaltic Nordic Aviation Capital airBaltic Nordic Aviation Capital airBaltic Nordic Aviation Capital airBaltic Nordic Aviation Capital airBaltic Nordic Aviation Capital airBaltic Undisclosed Bank / Broker / Lessor Avmax Aircraft Leasing Inc Aurora Leasing Inc Aurora Leasing Inc SAS SAS SAS SAS NAS Investments 7 Inc American Airlines Mahan Air Mahan Air JSA Aircraft 3684 LLC Virgin America JSA Aircraft 3686 LLC Virgin America First Air First Air Intl Trad Comp of Yukon Inc Intl Trad Comp of Yukon Inc FedEx FedEx Injet Leasing Company Ltd Jet Airways Celestial Aviation Trading 63 Ltd GECAS Trans Air Trans Air NAS Investments 7 Inc American Airlines Kalitta Air Kalitta Air ATRiam Capital Ltd ATR BBAIR 2007-1 FlyDubai Commercial A/c Services Inc Commercial A/c Services Inc ALC B773 35544 LLC Air France Libyan Airlines Libyan Airlines SAS SAS UTair UTair PL Panorama Leasing Limited UTair Capital Aviation Services BV CHC Airways Undisclosed Bank / Broker / Lessor Undisclosed Bank / Broker / Lessor Danske Aviation Group Ltd Cimber Sterling DY1 Leasing LLC Norwegian Baltia Air Lines Baltia Air Lines Undisclosed Bank / Broker / Lessor Deucalion Aviation Funds AerSale AerSale Squadron Leasing XI LLC Mesa Airlines Unconfirmed Armenian Airline Unconfirmed Armenian Airline LAN Airlines LAN Airlines Showa Leasing FireFly Airlines Engage Helicopters LLC Engage Aviation LLC Engage Helicopters LLC Engage Aviation LLC Undisclosed Bank / Broker / Lessor Undisclosed Bank / Broker / Lessor Airfield Investments Ltd Airfield Investments Ltd Continental Airlines Continental Airlines NAS Investments 8 Inc American Airlines AerSale AerSale Brit Air Brit Air Aviation Technologies Inc Aviation Technologies Inc Continental Airlines Continental Airlines Boeing Aircraft Holding Co Boeing Aircraft Holding Co Bombardier Inc Bombardier Capital Inc Bombardier Inc Bombardier Capital Inc Bombardier Inc Bombardier Capital Inc ACASS Canada Ltd ACASS Canada Ltd Aircraft Solutions (Offshore) LLC Universal Asset Mgmt Inc NBB Pintail Co. Ltd Finnair MSN 29565 Trust American Airlines MSN 29577 Trust American Airlines Boeing ShareJet Boeing Boeing Gate Capital (Delaware) One LLC Virgin Blue Airlines CF6-80 Parts Ltd Universal Asset Mgmt Inc Kalitta Air Kalitta Air Undisclosed Bank / Broker / Lessor Air Southwest Undisclosed Bank / Broker / Lessor Air Southwest Undisclosed Bank / Broker / Lessor Air Southwest Bombardier Inc Bombardier Inc Aircraft Solutions (Offshore) LLC Universal Asset Mgmt Inc AeroTurbine Inc AeroTurbine Inc QF ECA 2010 No.2 Pty Ltd Qantas Aero North International Ltd Aero North International Ltd Challey Ltd Pembroke Group Challey Ltd Pembroke Group ILFC NEOS ILFC NEOS

Event Remarks Purch’d - sale & lease-back Purchased Purchased - sale & lease-back Purchased - sale & lease-back Purch’d off lease / fin term comp Purchased - parked Purch’d - sub to existing lease Purchased - parked Purchased - parked Purchased - sale & lease-back Purchased - sale & lease-back Purchased - sale & lease-back On order-sale & lease back arranged On order-sale & lease back arranged On order-sale & lease back arranged On order-sale & lease back arranged On order-sale & lease back arranged Purchased - parked Purchased - parked Purch’d off lease / fin term comp Purch’d off lease / fin term comp Purch’d - sale & lease-back on del Purchased Purchased - sale & lease-back Purchased - sale & lease-back Purchased - parked Purchased - parked Purchased - parked Purch’d - sale & lease-back on del Purchased - parked Purchased - parked Purch’d - sale & lease-back on del Purchased - parked Purchased - parked Purch’d - sale & lease-back on del Purch’d - parked Purch’d - sale & lease-back on del Del - purchase of used / demo. a/c Purch’d off lease / fin term comp Purchased - parked Purchased - parked Purch’d - sub to existing lease - pkd Purchased - parked Purchased - sale & lease-back Purch’d - sale & lease-back on del Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purch’d off lease / fin term comp Purch’d - sale & lease-back on del Purch’d - sale & lease-back - pkd Purch’d - sale & lease-back - pkd Purchased - parked Purchased - parked Purchased - parked Purch’d - sale & lease-back on del Purchased - parked Del - purchase of used / demo. a/c Purchased - parked Purch’d off lease/fin term comp - pkd Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purch’d - sub to existing lease Purch’d - sub to existing lease Purch’d - sub to existing lease Purch’d off lease / fin term comp Purch’d off lease / fin term comp Purch’d - sale & lease-back on del Purchased - parked Purchased - parked Purchased - sale & lease-back Purchased - sale & lease-back Purchased - sale & lease-back Purchased - parked Purchased - parked Purchased - parked Purch’d - sale & lease-back on del Purchased - parked Purch’d off leasefin term comp - pkd Purch’d off leas/fin term comp - pkd Purch’d - sub to existing lease Purch’d - sub to existing lease

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January-February 2011 AFM • ISSUE 71 | 61

INDUSTRY DATA: FLEET FINANCE, FIRM ORDERS, AIRCRAFT TRANSACTIONS, LIST PRICES AND LEASE RATES AIRCRAFT TRANSACTIONS – Boeing, Airbus, ATR, and Bombardier. 21 Oct 2010 to 18 Jan 2011 Contract Date 16/12/2010 16/12/2010 17/12/2010 17/12/2010 17/12/2010 17/12/2010 17/12/2010 17/12/2010 18/12/2010 20/12/2010 20/12/2010 20/12/2010 20/12/2010 20/12/2010 20/12/2010 20/12/2010 20/12/2010 20/12/2010 21/12/2010 21/12/2010 21/12/2010 21/12/2010 21/12/2010 21/12/2010 21/12/2010 21/12/2010 22/12/2010 22/12/2010 22/12/2010 22/12/2010 22/12/2010 22/12/2010 22/12/2010 23/12/2010 23/12/2010 23/12/2010 23/12/2010 24/12/2010 27/12/2010 27/12/2010 27/12/2010 28/12/2010 28/12/2010 28/12/2010 28/12/2010 28/12/2010 29/12/2010 3/01/2011 3/01/2011 3/01/2011 3/01/2011 4/01/2011 4/01/2011 4/01/2011 4/01/2011 4/01/2011 4/01/2011 4/01/2011 4/01/2011 4/01/2011 4/01/2011 4/01/2011 4/01/2011 4/01/2011 4/01/2011 5/01/2011 5/01/2011 5/01/2011 5/01/2011 5/01/2011 5/01/2011 5/01/2011 6/01/2011 6/01/2011 6/01/2011 7/01/2011 9/01/2011 10/01/2011 10/01/2011 11/01/2011 11/01/2011 11/01/2011 12/01/2011 12/01/2011 14/01/2011 14/01/2011 15/01/2011

S/N 7165 449 21255 27252 27253 7034 7034 7154 921 805 806 1248 1266 1272 1282 1343 29554 26352 0325 4075 309 28905 28905 30746 39165 19004 0585 0782 4108 4547 933 24538 31793 37560 26356 23213 564 1869 40584 22221 22226 22947 23076 23081 23095 33214 30327 2820 939 23497 22213 20665 21290 21393 21954 21958 21998 22001 22006 22008 22013 22253 22440 22468 22982 22466 25314 25361 25362 25417 25430 27149 21999 25131 26270 25260 27733 27102 24258 0987 29119 19006 25806 4021 055 29945 1171

A/C Model Bombardier (Canadair) CRJ RJ Bombardier (de Havilland) Dash 8 Boeing 747 Boeing 777 Boeing 777 Bombardier (Canadair) CRJ RJ Bombardier (Canadair) CRJ RJ Bombardier (Canadair) CRJ RJ ATR ATR 72 Airbus A300 Airbus A300 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Airbus A320 Boeing 737 (NG) Boeing 747 Airbus A320 Airbus A320 Airbus A330 Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 737 (NG) Boeing 737 (NG) Bombardier (Canadair) CRJ1000 RJ Airbus A320 Airbus A320 Airbus A320 Airbus A320 ATR ATR 72 Boeing 737 (CFMI) Boeing 737 (NG) Boeing 737 (NG) Boeing 747 Boeing 767 Bombardier (de Havilland) Dash 8 Airbus A321 Boeing 737 (NG) Boeing 767 Boeing 767 Boeing 737 (CFMI) Boeing 737 (JT8D) Boeing 737 (JT8D) Boeing 737 (JT8D) Boeing 737 (NG) Boeing 737 (NG) Airbus A320 ATR ATR 72 Boeing 737 (CFMI) Boeing 767 Boeing 727 Boeing 727 Boeing 727 Boeing 727 Boeing 727 Boeing 727 Boeing 727 Boeing 727 Boeing 727 Boeing 727 Boeing 727 Boeing 727 Boeing 727 Boeing 727 Boeing 727 Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 727 Boeing 757 Boeing 757 Boeing 747 Boeing 777 Boeing 737 (CFMI) Boeing 767 Airbus A321 Boeing 747 Bombardier (Canadair) CRJ1000 RJt Boeing 757 Bombardier (de Havilland) Dash 8 Airbus A380 Boeing 757 Airbus A320

Variant Reg No 200LR C-GGDO 200 N449YV 200F (SCD) (GE) N752SA 200ER (RR) A6-EMG 200ER (RR) A6-EMJ 200LR N407SW 200LR N407SW 100ER N154SF 500 3B-NBN 620R Freighter (P&W) N120UP 620R Freighter (P&W) N121UP 230 (IAE) N460UA 230 (IAE) N461UA 230 (IAE) N462UA 230 (IAE) N463UA 230 (IAE) N466UA 800 Winglets N865NN 400D (GE) N896DB 210 (CFM) N223AT 210 (CFM) EI-DTK 240 (RR) OY-VKF 500 Winglets N17644 500 Winglets N17644 700 Winglets N554WN 800 Winglets LN-DYG 1000ER NextGen F-HMLA 210 (CFM) HB-IJJ 210 (CFM) HB-IJS 210 (CFM) EI-DTL 210 (CFM) HC-CJV 500 VT-JCW 300 N369UA 800 Winglets N BBJ3 HZ400BCF (GE) N356NA 200 (P&W) N767DA 300MPA JA726A 230 (IAE) UR-DAF 800 Winglets N866NN 200SF (GE) N744AX 200SF (GE) N749AX 300 N307SW 200 Adv (Stg3 Hk) N304DL 200 Adv (Stg 3 Hk) N309DL 200 Adv (Stg 3 Hk) N323DL 800 Winglets N854NN BBJ1 N796BA 210 (CFM) B-6729 500 VN-B240 300 N665WN 200SF (GE) N740AX 200F(M)Adv(Stg3Hk) N745DH 200F(M)Adv(Stg3Hk) N742DH 200F(M)Adv(Stg3Hk) N793DH 200F(M)Adv(Stg3Hk) N760AT 200F(M)Adv(Stg3Hk) N788AT 200F(M)Adv(Stg3Hk) N782DH 200F(M)Adv(Stg3Hk) N784DH 200F(M)Adv(Stg3Hk) N780DH 200F(M)Adv(Stg3Hk) N754DH 200F(M)Adv(Stg3Hk) N749DH 200F(M)Adv(Stg3Hk) N747DH 200F(M)Adv(RbkStg3Sys)N748DH 200F(M)Adv(Stg3Hk) N753DH 200F(M)Adv(Stg3Hk) N751DH 200F(M)Adv(Stg3Hk) N752DH 400 N134AS 400 N761AS 400 N362AS 400 N741AS 400 N304AS 400 N148AS 200F(M)Adv(Stg3Hk) N783DH 200 (P&W) N594BC 200 (P&W) N595BC 400 (GE) N269AS 200 (RR) HS-TJH 400 N197SF 300ER (P&W) N584HA 110 (CFM) HB-IOK 400 (RR) ZS-SAZ 1000ER NextGen F-HMLC 200 (RR) N950FD 400 G-ECOW 840 (RR) VH-OQI 200 (RR) G-TCBB 210 (CFM) RP-C3230

Owner Name Bombardier Inc Undisclosed Bank / Broker / Lessor Look San Chee Veling Ltd Veling Ltd Wells Fargo Equipment Finance Inc Wells Fargo Bank NA Universal Asset Management Inc Nordic Aviation Capital UPS Airlines UPS Airlines United Airlines United Airlines United Airlines United Airlines United Airlines NAS Investments 7 Inc Aircraft Solutions Airframe 2010 LLC AeroTurbine Inc Avolon Aerospace (Ireland) AOE 1 Ltd Mermaid Aircraft Leasing Ltd Continental Airlines Undisclosed Bank / Broker / Lessor ALC B377 30746 LLC DY1 Leasing LLC Constellation Finance Ltd 32A-585 Aircraft Inc 32A-782 Aircraft Inc Avolon Aerospace (Ireland) AOE 1 Ltd General Electric Capital Corp Injet Leasing Company Ltd Undisclosed Bank / Broker / Lessor BBAM LLC Adex Holding Group B26356 LLC AU7 LLC Japan Coast Guard Donbassaero NAS Investments 8 Inc Cargo Aircraft Management Inc Cargo Aircraft Management Inc AeroTurbine Inc Adv European Technologies Ltd Adv European Technologies Ltd Adv European Technologies Ltd The Fifth Third Leasing Co Boeing China Aircraft Leasing (HK) Comp Ltd Vietnam Aircraft Leasing Comp The Bank of New York Mellon Cargo Aircraft Mgmt Inc Astar Air Cargo Holdings LLC Astar Air Cargo Holdings LLC Astar Air Cargo Holdings LLC Astar Air Cargo Holdings LLC Astar Air Cargo Holdings LLC Astar Air Cargo Holdings LLC Astar Air Cargo Holdings LLC Astar Air Cargo Holdings LLC Astar Air Cargo Holdings LLC Astar Air Cargo Holdings LLC Astar Air Cargo Holdings LLC Astar Air Cargo Holdings LLC Astar Air Cargo Holdings LLC Astar Air Cargo Holdings LLC Astar Air Cargo Holdings LLC AerSale AerSale AerSale AerSale AerSale AerSale Astar Air Cargo Holdings LLC FedEx FedEx AerSale Thai Airways International Undisclosed Bank / Broker / Lessor Flying Fortress US Leasing Inc Aircraft 32A-987 Inc South African Airways Constellation Finance Limited FedEx Undisclosed Bank / Broker / Lessor QF ECA 2010 No.4 Pty Limited Thomas Cook Airlines Celestial Aviation Trading 68 Ltd

Operator Name Bombardier Inc Undisclosed Bank / Broker / Lessor Look San Chee Emirates Airline Emirates Airline SkyWest Airlines SkyWest Airlines Universal Asset Mgmt Inc Air Mauritius UPS Airlines UPS Airlines United Airlines United Airlines United Airlines United Airlines United Airlines American Airlines Universal Asset Mgmt Inc AeroTurbine Inc Alitalia Thomas Cook Airlines Scandinavia Continental Airlines Undisclosed Bank / Broker / Lessor Air Lease Corporation Norwegian Brit Air Swiss Swiss Alitalia Aerogal Jet Airways Undisclosed Bank / Broker / Lessor BBAM LLC Adex Holding Group B26356 LLC AU7 LLC Japan Coast Guard Donbassaero American Airlines ABX Air ABX Air AeroTurbine Inc Adv European Technologies Ltd Adv European Technologies Ltd Adv European Technologies Ltd American Airlines Boeing Chengdu Airlines Vietnam Airlines Southwest Airlines ABX Air Astar Air Cargo Astar Air Cargo Astar Air Cargo Astar Air Cargo Astar Air Cargo Astar Air Cargo Astar Air Cargo Astar Air Cargo Astar Air Cargo Astar Air Cargo Astar Air Cargo Astar Air Cargo Astar Air Cargo Astar Air Cargo Astar Air Cargo AerSale AerSale AerSale AerSale AerSale AerSale Astar Air Cargo FedEx FedEx AerSale Thai Airways International Undisclosed Bank / Broker / Lessor Hawaiian Airlines Swiss South African Airways Brit Air FedEx 1314401 Alberta Inc Qantas Thomas Cook Airlines GECAS

Event Remarks Purchased - parked Purchased - parked Purchased - parked Purchased - sale & lease-back Purch’d - sub to existing lease Purch’d - sub to existing lease Purch’d - sub to existing lease Purchased - parked Purch’d - sale & lease-back on del Purch’d off lease / fin term comp Purch’d off lease / fin term comp Purch’d off lease / fin term comp Purch’d off lease / fin term comp Purch’d off lease / fin term comp Purch’d off lease / fin term comp Purch’d off lease / fin term comp Purch’d - sale & lease-back on del Purch’d - sub to existing lease - pkd Purchased - parked Purch’d - sub to existing lease Purch’d - sub to existing lease Purch’d - parked Purchased - parked Purchased - parked Purch’d - sale & lease-back on del Purch’d - sale & lease-back on del Purch’d - sub to existing lease Purch’d - sub to existing lease Purch’d - sub to existing lease Purch’d - sale & lease-back on del Purch’d - sale & lease-back on del Purchased - parked Purch’d - sale & lease-back on del Purchased - parked Purchased - parked Purchased - parked Purchased Purchased Purch’d - sale & lease-back on del Purchased - sale & lease-back Purchased - sale & lease-back Purchased - parked Purch’d - pkd Purch’d - pkd Purch’d - pkd Purch’d - sub to existing lease Purch’d off lease / fin term comp Purchased Purch’d - sale & lease-back on del Purch’d - sub to existing lease Purchased - sale & lease-back Purch’d - sale & lease-back - parked Purch’d - sale & lease-back - parked Purch’d - sale & lease-back - parked Purch’d - sale & lease-back - parked Purch’d - sale & lease-back - parked Purch’d - sale & lease-back - parked Purch’d - sale & lease-back - parked Purch’d - sale & lease-back - parked Purch’d - sale & lease-back - parked Purch’d - sale & lease-back - parked Purch’d - sale & lease-back - parked Purch’d - sale & lease-back - pkd Purch’d - sale & lease-back - parked Purch’d - sale & lease-back - parked Purch’d - sale & lease-back - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purch’d - sale & lease-back - pkd Purchased - parked Purchased - parked Purchased - parked Purch’d off lease / fin term comp Purchased - parked Purch’d - sub to existing lease Purch’d - sub to existing lease Purch’d off lease / fin term comp Purch’d - sale & lease-back on del Purchased - parked Purchased - parked Purch’d - sale & lease-back on del Purchased - parked Purchased - parked

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

AFM71_Data_AFNM 28/01/2011 13:37 Page 62

62 | AFM • ISSUE 71 January-February 2011

INDUSTRY DATA: FLEET FINANCE, FIRM ORDERS, AIRCRAFT TRANSACTIONS, LIST PRICES AND LEASE RATES FIRM ORDERS – 21st October 2010 – 18th January 2011 Mfr & Type

Variant

Customer

Airbus A319 130 (IAE) Sharklets LAN Airlines Airbus A319 CJ (Engines Unannounced) Unannounced non-commercial customer Airbus A319 110 (CFM) Aircraft Purchase Fleet Ltd Airbus A320 210 (CFM) easyJet Airbus A320 210 (CFM) easyJet Airbus A320 200 neo (Engines Unannounced) Virgin America Airbus A320 200 (Engines Unannounced) AerCap Airbus A320 210 (CFM) Sharklets LAN Airlines Airbus A320 200 (Engines Unannounced) Sharklets Avolon Aerospace Leasing Ltd Airbus A320 200 (Engines Unannounced) Unannounced commercial customer Airbus A320 230 (IAE) Volaris Airbus A320 210 (CFM) Aircraft Purchase Fleet Ltd Airbus A320 200 Prestige (Engines Unannounced)Unannounced non-commercial customer Airbus A320 230 (IAE) Volaris Airbus A320 210 (CFM) Iberia Airbus A320 200 (Engines Unannounced) BOC Aviation Airbus A320 200 (Engines Unannounced) BOC Aviation Airbus A320 230 (IAE) BOC Aviation Airbus A321 210 (CFM) LAN Airlines Airbus A321 200 (Engines Unannounced) RBS Aviation Capital Airbus A321 200 (Engines Unannounced) Unannounced commercial customer Airbus A321 200 (Engines Unannounced) TransAsia Airways Airbus A330 200 (Engines Unannounced) Hawaiian Airlines Airbus A330 300HGW (Engines Unannounced) TransAsia Airways Airbus A380 800 (Engines Unannounced) Asiana Airlines ATR ATR 72 500 Air Mauritius Boeing 737 (NG) 800 Winglets CIT Aerospace Boeing 737 (NG) 900ER CIT Aerospace Boeing 737 (NG) BBJ2 Unannounced non-commercial customer Boeing 737 (NG) 800 Winglets AerCap Boeing 737 (NG) 900ER Unannounced commercial customer Boeing 737 (NG) 800 Winglets Unannounced commercial customer Boeing 737 (NG) 800 Winglets Unannounced commercial customer Boeing 737 (NG) 700 Winglets Unannounced commercial customer Boeing 777 200LRF (GE) LAN Airlines Boeing 777 300ER (GE) BOC Aviation Boeing 787 8 (Engines Unannounced) Unannounced commercial customer Boeing 787 9 (Engines Unannounced) Saudi Arabian Airlines Bombardier (Canadair) CRJ700 RJ701ER NextGen SkyWest Airlines Bombardier (Canadair) CRJ900 RJ900ER NextGen Estonian Air Bombardier (de Havilland) Dash 8400 NextGen SpiceJet CASA C-295 Egyptian Air Force Embraer 170 LR ARAMCO Associated Co Embraer 190 CDB Leasing Company Embraer 190 AR Republic Airlines Embraer 195 LR Lufthansa CityLine Kawasaki Heavy Industries P-1 Japan Maritime SDF Lockheed Hercules C-130J-30 Republic of Korea Air Force Viking Air DHC-6 TO 400 Peruvian Air Force

Order date 21/12/2010 20/12/2010 15/12/2010 31/12/2010 31/12/2010 29/12/2010 21/12/2010 21/12/2010 16/12/2010 15/12/2010 15/12/2010 07/12/2010 01/12/2010 15/11/2010 08/11/2010 29/10/2010 29/10/2010 29/10/2010 21/12/2010 15/12/2010 15/12/2010 16/11/2010 29/11/2010 16/11/2010 06/01/2011 15/12/2010 29/12/2010 29/12/2010 29/12/2010 22/12/2010 08/12/2010 02/12/2010 30/11/2010 08/11/2010 11/11/2010 29/10/2010 17/12/2010 04/11/2010 04/01/2011 29/10/2010 09/12/2010 29/10/2010 15/11/2010 10/01/2011 04/11/2010 09/12/2010 15/11/2010 02/12/2010 29/11/2010

Order/ Number TypeSwap Order 6 Order 1 Type Swap 5 Order 15 Type Swap 20 Order 30 Order 2 Order 34 Order 8 Type Swap 1 Type Swap 2 Order 1 Order 1 Type Swap 2 Order 5 Order 25 Order 4 Order 1 Order 10 Type Swap 1 Type Swap 6 Order 6 Order 6 Order 2 Order 6 Order 1 Order 23 Order 15 Order 1 Order 10 Order 4 Order 1 Order 5 Order 3 Order 1 Order 8 Order 1 Order 8 Order 4 Order 3 Order 15 Order 3 Order 3 Order 10 Order 6 Order 8 Order 10 Order 4 Order 12

Engines at Order

Variant at delivery

Engines at delivery

V2500-2524-A5SelectOne 130 (IAE) Sharklets Unannounced-Unannounced CJ (Engines Unannounced) CFM56-5B6/3 110 (CFM) CFM56-5B4/3 210 (CFM) CFM56-5B4/3 210 (CFM) Unannounced-Unannounced 200 neo (Engines Unannounced) Unannounced-Unannounced 200 (Engines Unannounced) CFM56-5B4/3 210 (CFM) Sharklets Unannounced-Unannounced 200 (Engines Unannounced) Sharklets Unannounced-Unannounced 200 (Engines Unannounced) V2500-2527E-A5SelectOne 230 (IAE) CFM56-5B6/3 210 (CFM) Unannounced-Unannounced 200 Prestige (Engines Unannounced) V2500-2527E-A5SelectOne 230 (IAE) CFM56-5B4/3 210 (CFM) Unannounced-Unannounced 230 (IAE) Unannounced-Unannounced 200 (Engines Unannounced) V2500-2527-A5SelectOne 230 (IAE) CFM56-5B3/3 210 (CFM) Unannounced-Unannounced 200 (Engines Unannounced) Unannounced-Unannounced 200 (Engines Unannounced) Unannounced-Unannounced 200 (Engines Unannounced) Unannounced-Unannounced 240 (RR) Unannounced-Unannounced 300HGW (Engines Unannounced) Unannounced-Unannounced 800 (Engines Unannounced) PW100-127M 500 CFM56-7B26/3 800 Winglets CFM56-7B26/3 900ER CFM56-7B27/3 BBJ2 CFM56-7B26/3 800 Winglets CFM56-7B26/3 900ER CFM56-7B26/3 800 Winglets CFM56-7B26/3 800 Winglets CFM56-7B22/3 700 Winglets GE90-110B1L 200LRF (GE) GE90-115BL 300ER (GE) Unannounced-Unannounced 8 (Engines Unannounced) Unannounced-Unannounced 9 (Engines Unannounced) CF34-8C5B1 701ER NextGen CF34-8C5 900ER NextGen PW100-150A 400 NextGen PW100-127G CF34-8E5 LR CF34-10E5 CF34-10E6 AR CF34-10E5A1 LR XF7--10 AE 2100-D3 C-130J-30 PT6A-34 400

V2500-2524-A5SelectOne Unannounced-Unannounced CFM56-5B6/3 CFM56-5B4/3 CFM56-5B4/3 Unannounced-Unannounced Unannounced-Unannounced CFM56-5B4/3 Unannounced-Unannounced Unannounced-Unannounced V2500-2527E-A5SelectOne CFM56-5B6/3 Unannounced-Unannounced V2500-2527E-A5SelectOne CFM56-5B4/3 V2500-2527-A5SelectOne Unannounced-Unannounced V2500-2527-A5SelectOne CFM56-5B3/3 Unannounced-Unannounced Unannounced-Unannounced Unannounced-Unannounced Trent-772B-60EP Unannounced-Unannounced Unannounced-Unannounced PW100-127M CFM56-7B26/3 CFM56-7B26/3 CFM56-7B27/3 CFM56-7B26/3 CFM56-7B26/3 CFM56-7B26/3 CFM56-7B26/3 CFM56-7B22/3 GE90-110B1L GE90-115BL Unannounced-Unannounced Unannounced-Unannounced CF34-8C5B1 CF34-8C5 PW100-150A PW100-127G CF34-8E5 CF34-10E5 CF34-10E6 CF34-10E5A1 XF7--10 AE 2100-D3 PT6A-34

Data supplied courtesy of Ascend Online

ENGINE DATA CHANGES 20th October 2010 to 18th January 2011 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

20 Oct 2010 18 Jan 2011 Full-life value Full-life value % mkt value mkt value change

20 Oct 2010 Current half-life rate

18 Jan 2011 Current half-life % rate change

20 Oct 2010 Mkt lease rate

$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 $1.40m $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

$0.80m $1.00m $1.40m $6.20m $4.50m $5.00m $5.05m $5.60m $6.05m $6.50m $1.50m $2.20m $2.68m $1.50m $3.75m $4.40m $9.35m $20.70m $5.20m $0.60m $3.75m $4.10m $2.80m $3.90m $1.40m $8.14m $8.60m $14.00m $1.40m $2.00m

$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

$2.33m $2.53m $2.93m $8.19m $6.49m $7.25m $6.96m $7.51m $8.01m $8.46m $2.55m $3.85m $4.33m $4.69m $7.13m $7.91m $14.07m $26.77m $7.32m $1.70m $7.34m $7.69m $6.84m $7.52m $2.50m $13.38m $13.78m $20.29m $2.50m $3.33m

0.0% 0.0% 0.0% -2.4% -3.0% -6.5% 0.0% 0.0% 0.0% 0.0% -3.0% 8.5% 6.7% 2.4% -0.3% -0.3% 0.6% 1.2% -6.4% 0.0% 0.0% 0.0% 0.0% 0.0% -1.2% 0.0% 0.0% 0.0% -3.8% 0.0%

0.0% 0.0% 0.0% -3.1% -4.3% -9.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -8.8% 0.0% 0.0% 0.0% 0.0% 0.0% -6.7% 0.0% 0.0% 0.0% -6.7% 0.0%

18 Jan 2011 Mkt lease rate $0.030m $0.032m $0.035m $0.075m $0.055m $0.058m $0.059m $0.062m $0.065m $0.067m $0.020m $0.027m $0.033m n/a n/a $0.070m n/a $0.210m $0.058m $0.023m $0.060m $0.065m $0.055m $0.050m $0.026m $0.110m $0.120m $0.155m $0.030m $0.045m

% change 0.0% 0.0% 0.0% -6.3% -8.3% -14.7% -7.8% -7.5% -7.1% -6.9% 0.0% 0.0% -5.7% -17.6% 0.0% -27.5% 0.0% -7.7% -7.1% -8.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

AFM71_Data_AFNM 28/01/2011 13:38 Page 63

January-February 2011 AFM â&#x20AC;˘ ISSUE 71 | 63

INDUSTRY DATA: FLEET FINANCE, FIRM ORDERS, AIRCRAFT TRANSACTIONS, LIST PRICES AND LEASE RATES STORED AIRCRAFT 18th January 2011 Mfr & type

Fleet Stored

Total Fleet

Fleet Stored %

Seats Stored

Total Seats

Seats Stored%

ATR ATR 42 ATR ATR 72 Aerospatiale 262 Airbus A300 Airbus A310 Airbus A318 Airbus A319 Airbus A320 Airbus A321 Airbus A330 Airbus A340 Airbus A380 Avcraft 328JET 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 (HP/Scottish) BAE SYSTEMS (Jetstream) Jetstream 31 BAE SYSTEMS (Jetstream) Jetstream 41 Boeing 707 Boeing 717 Boeing 720 Boeing 727 Boeing 737 (CFMI) Boeing 737 (JT8D) Boeing 737 (NG) Boeing 747 Boeing 757 Boeing 767 Boeing 777 Boeing (McDonnell-Douglas) C-17 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 Bombardier (Canadair) 580 Bombardier (Canadair) CL-415 Bombardier (Canadair) CL-44 Bombardier (Canadair) CRJ Regional Jet Bombardier (Canadair) CRJ700 Regional Jet Bombardier (Canadair) CRJ900 Regional Jet Bombardier (Shorts) 330 Bombardier (Shorts) 360 Bombardier (Shorts) SC.5 Belfast Bombardier (Shorts) SC.7 Skyvan Bombardier (de Havilland) DHC-5 Buffalo Bombardier (de Havilland) DHC-6 Twin Otter Bombardier (de Havilland) Dash 7 Bombardier (de Havilland) Dash 8 CASA 212 CASA C-295 CASA CN-235 Carstedt Aviation CJ600 Embraer 170 Embraer 190 Embraer 195 Embraer EMB-110 Bandeirante Embraer EMB-120 Brasilia Embraer ERJ-135 Embraer ERJ-145 Fairchild F-27 Fairchild (Swearingen) Metro Fairchild/Dornier 228 Fairchild/Dornier 328 Fairchild/Dornier 328JET Fokker 100 Fokker 50 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

32 34 15 74 41 14 42 99 13 23 22 3 2 37 3 71 19 17 1 77 29 45 32 1 160 266 224 64 180 96 88 11 1 38 15 57 176 7 277 29 1 20 1 143 3 2 4 14 1 11 15 50 6 68 59 1 7 1 3 6 1 53 69 56 34 4 52 27 21 47 67 41 4 39 52 15 18 1 1 48 9 11 8 15 2 208 17 6 14 4 97 1

355 491 18 372 192 71 1270 2459 625 748 370 45 2 163 13 167 67 54 8 251 93 196 155 1 445 1769 500 3496 948 1009 929 908 226 206 75 100 305 192 940 108 2 70 1 1036 333 243 47 105 1 61 51 550 57 944 249 71 187 1 186 334 65 264 268 305 683 4 491 175 100 109 240 188 47 132 93 71 49 4 38 620 146 69 48 73 111 1560 34 19 40 58 406 1

9.01% 6.92% 83.33% 19.89% 21.35% 19.72% 3.31% 4.03% 2.08% 3.07% 5.95% 6.67% 100.00% 22.70% 23.08% 42.51% 28.36% 31.48% 12.50% 30.68% 31.18% 22.96% 20.65% 100.00% 35.96% 15.04% 44.80% 1.83% 18.99% 9.51% 9.47% 1.21% 0.44% 18.45% 20.00% 57.00% 57.70% 3.65% 29.47% 26.85% 50.00% 28.57% 100.00% 13.80% 0.90% 0.82% 8.51% 13.33% 100.00% 18.03% 29.41% 9.09% 10.53% 7.20% 23.69% 1.41% 3.74% 100.00% 1.61% 1.80% 1.54% 20.08% 25.75% 18.36% 4.98% 100.00% 10.59% 15.43% 21.00% 43.12% 27.92% 21.81% 8.51% 29.55% 55.91% 21.13% 36.73% 25.00% 2.63% 7.74% 6.16% 15.94% 16.67% 20.55% 1.80% 13.33% 50.00% 31.58% 35.00% 6.90% 23.89% 100.00%

1416 2226 53 13724 5409 1261 4033 15429 2659 6254 4542 1374 20 3413 65 6489 264 456 0 1280 834 1943 3239 0 8870 34115 23455 6712 40230 16395 14085 2566 0 3277 522 68 10606 100 39705 4137 0 0 0 6506 210 176 0 346 0 73 0 867 248 3592 990

13685 30307 53 41093 23451 6595 163775 390490 117735 203441 98310 21178 20 14878 330 12124 713 716 0 4338 2583 5584 17716 0 16644 224071 49553 537063 209010 156782 177290 267379 0 7430 2745 165 21129 5143 135026 15934 0 0 0 48444 22609 19742 60 1001 0 129 38 8262 2364 49527 3272 0 382 0 13490 32319 7555 1753 7186 6991 33390 87 5170 2025 3070 3029 23551 8416 3577 3473 5878 437 366 18 1900 9791 321 847 406 116 0 274 7057 89 399 2706 11781 19

10.35% 7.34% 100.00% 33.40% 23.07% 19.12% 2.46% 3.95% 2.26% 3.07% 4.62% 6.49% 100.00% 22.94% 19.70% 53.52% 37.03% 63.69% % 29.51% 32.29% 34.80% 18.28% % 53.29% 15.23% 47.33% 1.25% 19.25% 10.46% 7.94% 0.96% % 44.10% 19.02% 41.21% 50.20% 1.94% 29.41% 25.96% % % % 13.43% 0.93% 0.89% 0.00% 34.57% % 56.59% 0.00% 10.49% 10.49% 7.25% 30.26% % 20.94% % 1.14% 1.83% 1.43% 42.27% 27.94% 26.10% 5.03% 100.00% 12.24% 22.72% 20.55% 42.95% 27.50% 23.17% 7.66% 33.11% 56.14% 9.84% 34.70% 100.00% 2.63% 9.09% 13.40% 26.09% 62.56% 16.38% % 0.00% 58.47% 100.00% 83.96% 7.39% 27.15% 100.00%

80 0 154 592 108 741 2008 1825 1679 87 633 460 631 1301 6477 1950 274 1150 3300 43 127 18 50 890 43 221 254 19 0 0 4126 89 335 200 3198 19

Data supplied courtesy of Ascend Online Fleets / Ascend V1 database

AFM71_Data_AFNM 28/01/2011 13:38 Page 64

64 | AFM • ISSUE 71 January-February 2011

INDUSTRY DATA: FLEET FINANCE, FIRM ORDERS, AIRCRAFT TRANSACTIONS, LIST PRICES AND LEASE RATES LIST PRICES AND LEASE RATES Average List Price

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

$62.50m $74.40m $81.40m $95.50m $191.40m $212.40m $228.00m $250.80m $263.80m $225.20m $254.50m $346.30m

$56.90m $67.90m $80.80m $85.80m $317.50m

$164.30m $232.30m $262.40m $284.10m $185.20m

$35.57m $40.81m

$28.85m

$34.18m $34.20m $38.00m $40.10m

$16.90m $20.50m

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 B737-600 B737-700 B737-800 B737-900 B737-900ER B747-400 B747-8 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 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

$7.00m $2.00m $4.50m $14.00m $11.80m $5.40m $11.95m $19.20m $43.00m $27.00m $18.00m $20.00m $56.00m $61.00m

$13.50m $2.00m $8.00m $27.10m $31.10m $38.90m $18.75m $43.10m $84.00m $92.75m $18.00m $59.75m $79.50m $91.00m

-4.0% -9.1% -15.0% -3.4% -1.4% -3.1% -7.9% -1.9% 2.4% 1.0% -23.4% -17.8% -5.0% -4.7%

$0.140m $0.070m $0.120m $0.155m $0.130m $0.090m $0.150m $0.195m $0.420m $0.330m $0.340m $0.350m $0.550m $0.600m

$0.180m $0.070m $0.160m $0.245m $0.260m $0.315m $0.185m $0.365m $0.725m $0.790m $0.340m $0.715m $0.800m $0.915m

0.0% 0.0% 0.0% 0.0% -4.6% 0.0% 0.0% 0.0% 0.0% 4.9% 0.0% 0.0% 0.0% 0.0%

$146.00m $7.90m $2.50m $4.00m $2.70m $11.00m $15.30m $19.50m $18.90m $32.90m $19.00m

$185.00m $11.45m $6.45m $7.55m $5.50m $19.50m $32.10m $40.50m $26.25m $44.40m $59.25m

0.1% -4.7% -3.9% -10.3% -5.1% -7.8% -1.3% 1.3% 0.3% 0.4% -1.9%

$1.450m $0.110m $0.055m $0.090m $0.060m $0.150m $0.165m $0.235m $0.200m $0.330m $0.380m

$1.700m $0.150m $0.090m $0.120m $0.080m $0.200m $0.280m $0.340m $0.235m $0.385m $0.675m

0.0% 0.0% -9.2% -6.5% -6.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

$6.00m $4.50m $9.50m $22.00m $47.50m $90.00m $44.00m $82.00m

$20.60m $14.50m $54.90m $38.25m $117.75m $135.00m $65.50m $140.00m

0.0% -1.7% -3.8% -6.9% 1.0% 0.4% -2.2% -0.5%

$0.120m $0.160m $0.200m $0.375m $0.580m $0.820m $0.600m $0.850m

$0.230m $0.250m $0.500m $0.465m $0.995m $1.035m $0.750m $1.250m

6.9% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

$11.70m $0.50m $1.00m $1.60m $2.00m $1.70m $5.50m $3.00m $10.80m $14.30m $3.70m $3.70m $8.50m $4.00m $4.80m $13.80m $15.90m $19.50m $21.10m $3.50m $3.15m $5.20m $5.20m

$13.10m $1.00m $2.30m $3.40m $2.00m $2.95m $5.50m $8.65m $19.80m $25.55m $8.50m $15.40m $18.80m $4.50m $8.70m $23.05m $24.75m $29.00m $30.60m $3.50m $4.00m $13.10m $18.25m

0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -3.0% -6.9% -0.4% -1.1% 2.5% 3.0% -12.2% -7.6% -2.0% -0.5% 0.3% 0.3% -5.4% -11.5% -6.4% 2.1%

$0.190m $0.025m $0.025m $0.040m $0.030m $0.040m $0.090m $0.040m $0.120m $0.150m $0.055m $0.055m $0.120m $0.045m $0.050m $0.150m $0.165m $0.210m $0.225m $0.055m $0.060m $0.070m $0.070m

$0.190m $0.030m $0.045m $0.060m $0.030m $0.050m $0.090m $0.085m $0.220m $0.240m $0.085m $0.130m $0.190m $0.045m $0.105m $0.225m $0.230m $0.250m $0.270m $0.055m $0.070m $0.125m $0.170m

0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 11.1% 7.0% 4.5% -12.5% 0.0% 0.0% 0.0% 4.6% 6.8% 0.0% -11.1% 0.0% 0.0%

%Change

Dry Lease Rate Oldest Newest

Seating* %Change (Typical C+Y)

Type

267 210 210 108 124 150 185 185 250 300 280 295 280 350 270 314 525 117 134 144 104 103 134 160 180 215 412 467 188 158 190 313 313 313 382 350 243 285 144 144 144 109 144 144 50 70 86 37 50 70 37 50 70 82 98 108 79 108 48 70

Data supplied courtesy of Ascend Online

WORLDWIDE FLEET SUMMARY BY REGION — October 2010 to January 2011 Region Undisclosed orders Africa Asia-Pacific Central America Europe Middle East North America South America

Net Orders 11 NA 158 NA 50 8 153 63

Delivered new

Leased

Purchased 2nd hand

2 18 84 7 61 37 107 20

NA 21 93 15 127 22 110 33

17 32 18 4 119 14 528 29

Fleet as of 3rd November 2010 21 2556 7308 1274 7945 2001 17581 3095 Source: OAG Fleet iNET, january 2011

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Client: Pratt & Whitney Commercial Engines Ad Title: PurePower - Compromise Publication: Airline Fleet Management Trim: 210 x 278 mm • Bleed: 216 x 284 mm