AFM74

The business and financing of airline operations

BOEING SPECIAL: PROGRAMME UPDATE

PLUS: n LESSORS RANKED BY VALUE AND QUIZZED ON THE MARKET n AIRLINE FINANCE UNRAVELLED n STREAMLINING GROUND OPERATIONS n THE 737NG’S ROLE IN ROUTE DEVELOPMENT

July-August 2011 Issue 74

www.ubmaviationnews.com

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FINANCING THE WORLD'S FLEET, ONE AIRLINE AT A TIME Over $3 billion of committed aircraft purchases since 2010

Sale/leaseback of one 2011 Boeing 777-300ER delivery and three 2011 Airbus A320-200 deliveries

Sale/leaseback of two 2011 Airbus A330-300 deliveries

Sale/leaseback of five 2011 Boeing 737-800 deliveries

Sale/leaseback of three 2011 Boeing B777-300ER deliveries

Acquisition of three Boeing 737-800’s

Sale/leaseback of two 2010 Airbus A319-100’s

Sale/leaseback of seven 2011-2012 Airbus A320-200 deliveries with PDP funding

Sale/leaseback of two 2011 Boeing 737-800 deliveries

Sale/leaseback of one 2010 Airbus A320-200 delivery and one 2010 A319-100 delivery

Sale/leaseback of four Boeing 737-800 deliveries and one 2008 Airbus 319-100

PDP funding of four 2011 Airbus A320-200 deliveries and sale/ leaseback of two 2008 Airbus A319-100’s

Sale/leaseback of three 2011 Airbus A320-200 deliveries with PDP funding

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Jackson Square Aviation is one of the world's fastest growing privately-held aviation capital provider, with a fleet of over 70 new and committed next generation aircaft, serving multiple airlines throughout the world.

Operating leases · Finance leases Engine finance · Pre-delivery payments

AFM74 TOC _TOC 12/07/2011 17:08 Page 2

C O N T E N T S

The business and financing of airline operations

July-August 2011 • Issue 74 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, Neil Duffy, Peter Morrell and Kee Keat Ong.

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 2 The latest on deals, mergers appointments and more.

FOCUS: 12 Boeing: Programme update Despite being weighed down by long-running programme difficulties with the 787 and 747-8, Boeing Commercial Airplanes (BCA) is immersed in seven programme developments including those for the 787-9; 787-10; 737 (re-engine or new aircraft); and a 777 study for an enhanced aircraft.

Scott Hamilton investigates.

GROUP PUBLISHER & SALES

34 State of the nation: Lessors assess the market at Paris Air show Paris orders, the sale of RBS, market saturation and the introduction of Basel III – aircraft lessors have much to contend with. New and market-leading lessors spoke to Mary-Anne Baldwin at the Paris Air Show on these and other subjects. Plus, we give you the low-down on who is moving and who is losing with portfolio value data from Ascend.

40 Deals News Catch up on the last month of aircraft deals.

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

AIRPORTS AND ROUTES:

AIRLINE FLEET MANAGEMENT

44 Charge of the Flight Brigade

(ISSN 1757-8833) – Online: 1757-8841 (USPS 022-324) is published bi-monthly by UBM Aviation Publications Ltd and distributed in the USA by SPP, 95 Aberdeen Road, Emigsville PA. Periodicals postage paid at Emigsville, PA. POSTMASTER: send address changes to AIRLINE FLEET MANAGEMENT, c/o PO Box 437, Emigsville PA 17318.

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Hardly a week goes by in Europe without a spat erupting between airport operators and airlines. In December 2010, it was weather-related disruption that hit the headlines, but the usual factor is charges.

Alex Derber investigates how they are implemented.

UK annual subscription cost is £150.

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

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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.

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Cover image: Jonathan Zaninger

FLEET OPERATIONS: 16 Flight planning and crew schedules Flight and crew scheduling systems constantly add new functionality in response to the evolving operational environment and merging user requirements.

Bernard Fitzsimons examines the market.

20 Streamlining ground operations One of the biggest challenges for an airline is to make its ground operations efficient and its aircraft turn-arounds fast without compromising customer satisfaction.

Chris Kjelgaard reports on best practices and possible future improvements.

24 An Update on EU ETS: Are we confident?

Now that the first year of the European Union Emissions Trading Scheme (EU ETS) has passed, Neil Duffy technical manager at ICM ETS, which specialises in the verification of aircraft operators, looks at the scheme, the concerns it has raised and the strategies that can be employed to overcome them.

TRADING, LEGAL AND FINANCE: 28 Airline finance unravelled Finance has been readily available to the majority of airlines despite the cyclical nature of airline earnings and a worse record of profitability than most other industries.

Peter Morrell, visiting professor at Cranfield University, explains the aviation finance market and examines the opportunities it offers.

48 The route to traffic growth: Single-aisle NGs and Asian route development With more than 200 seats, widebody aircraft have proven too large for some secondary markets. In some cases, these markets have suffered from weak passenger load factors, thus making the services commercially unviable. The Next Generation single-aisle aircraft, boosted with a better operating range than the Classic models, is becoming a popular option for operations into secondary markets. Kee Keat Ong, senior consultant at ASM, investigates.

MAINTENANCE OPERATIONS: 52 Maintaining the next generation The introduction of new aircraft always means a flurry of work behind the scenes, as maintenance organisations, training centres and parts suppliers gear up to support new products. Though lessons learned on older aircraft prove useful, new technology means that innovative strategies and techniques must be developed, particularly in the field of maintenance.

Alex Derber finds out just how much all this new business is going to be worth.

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

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2 | AFM • ISSUE 74 July-August 2011

NEWS ROUND-UP The latest on deals, mergers, appointments and more MAS mulls privatisation plans Malaysia Airlines (MAS) is considering a de-listing, its chairman Tan Sri Munir Majid has told local news sources. In its report to the airline, investment bank, Maybank, has said: “There are merits to a privatisation, it provides a shelter away from further downside volatility in the share price, while the company re-shapes itself up for a re-listing in the future years.’’ It also suggested that MAS list its subsidiaries: Firefly, MAS Engineering and MASKargo.

NEWS HIGHLIGHTS

Paris Air Show tallies are in: A320neo orders too large to ignore

A319neo deal establishes new Frontier

Regional air group Republic has signed a memorandum of understanding for 40 A320 neos and 40 A319 neos, becoming the launch customer for the latter type in the process. The aircraft will be delivered to subsidiary Frontier, the low-cost carrier that – unlike most of the group’s airlines – flies independently of agreements with US majors.

Frontier already operates 58 A320family aircraft. Republic has selected CFM’s LEAP-X engine for its order.

China threatens A380 order in response to ETS Airbus was unable to announce an order for 10 A380s from Hong Kong Airlines at the Paris Air Show due to Chinese government intervention in a row over the European emissions trading scheme (ETS), according to Reuters. Though it was initially thought that the customer would merely remain unidentified, Chinese news sources have since said that the order, worth $3.8bn at list prices, has been “delayed”. China claims the ETS will cost Chinese airlines $800m in 2012, when it comes into effect. Hong Kong Airlines is a subsidiary of Hainan Airlines.

CSeries wins second order in a week An anonymous airline has placed a firm order with Bombardier Aerospace for three CSeries (CS100) aircraft, with options on three more. The manufacturer said deliveries of the aircraft would start in 2014. Based on list prices, the firm order is valued at $186m, which could increase to $385m should all three options be converted.

Photo: C.Verrier

Boeing likes to jest about the media’s obsession with air show order tallies, but – regardless of whether Airbus has ‘saved up’ announcements for Paris – behind closed doors few will have been laughing in Boeing’s Paris chalet. As the trade-day doors at the Paris Air Show (PAS) closed on June 22, the count was 300 orders to Airbus, 72 to Boeing. Dollar for dollar, the score was $57bn to $22bn.

In the first two days of the show the best news for the US manufacturer involved orders for about 50 aircraft from low-cost carrier Norwegian and new lessor ALC, the creation of ex-ILFC boss Steven UdvarHazy. Orders and commitments for 17 747-8 Intercontinentals from two undisclosed customers were also announced Those signatures, however, were eclipsed by significant orders for Airbus’ new A320 neo from other airlines and lessors. Even ALC’s debut widebody order, for five 777-300ERs, was overshadowed as the lessor then signed MoUs for 50 A320 neos and firm orders for 11 A330s. Then, AirAsia announced a headspinning $17bn order for 200 of the A320 neo, plus options for a further 100. AirAsia said it also plans to take the 86 standard A320s already on order with Airbus, rather than convert them as some had speculated. The airline is now Airbus’ largest customer, topping Indigo’s $16bn order for 180 aircraft, made a day earlier.

Collectively, the success of PAS marks the return to a stable but growing market; the largest orders highlight both the burgeoning Asian and healthy

low-cost segments. But most evident was that Airbus’ re-engined offering stole the show - and the business.

Yet, not to be overlooked was the success of regional aircraft manufacturers. Like two flyweights contesting the undercard of a heavyweight title fight, the battle between regional jet manufacturers Bombardier and Embraer tends to be pushed to one side. Nonetheless, it was an encouraging few days for the Canadian and Brazilian companies.

By June 22, Bombardier had picked up 40 muchneeded orders for its forthcoming CSeries, 30 from Korean Air and 10 from an anonymous buyer. In total, the Montreal-based manufacturer recorded a respectable 56 orders during the first two days of the Paris Air Show (June 20, 21). Vistajet penned a deal for 10 Global 8000 jets worth $650m at list prices; Avwest announced orders for six bizjets including four Global 7000s and two Global 8000s, two of which were ordered earlier this year; and the CSeries accounted for the rest.

Embraer, meanwhile had great success with its 100seat E190. Jakarta, Indonesia-based Sriwijaya Air signed a purchase agreement for 20 E190s plus 10 options; Kenya Airways signed a letter of intent to buy 10 of the same type plus 10 options; Kazakh flag carrier Air Astana placed two firm orders and two options; and lessor ALC added five more E190s to previous orders for 20 of the type. The Brazilian manufacturer’s E-Jets line, ranging from 70 to 120 seats through the E170, E175, E190 and E195, has now taken 1,000 orders since the first E-Jet was delivered in 2004.

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July-August 2011 AFM • ISSUE 74 | 3

The latest on deals, mergers, appointments and more NEWS

ROUND-UP

NEWS HIGHLIGHTS American shops for full fleet renewal deal American Airlines is pursuing hard-nosed discussions to replace its fleet of Boeing aircraft with an order for 250 aircraft. The US carrier, which has lost revenue, market share and credit rating, would need heavy financing and a competitive deal from the manufacturer and, if media reports are to be believed, it will go to great lengths to find it.

According to the Wall Street Journal, Airbus has already offered the carrier a deal worth $15bn, which includes hefty discounts, creative financing terms and other incentives such as training. And – so says a leaked and unsubstantiated report – American has gone to Boeing, asking what it can offer.

Losing the deal would be a blow for either

manufacturer: Airbus would lose an important and substantial order from a new customer, whereas Boeing would lose a long-standing customer and a slice of its favoured American market. To add insult, it would no doubt lose it to the A320neo – orders for which have dwarfed those for Boeing aircraft in recent months.

American’s entire fleet comprises old Boeing aircraft.

It is likely American would retire 220 of its oldest aircraft, including MD-80s aged about 20 years and 30 of its 757s, aged about 15 years. The cost to modernise and renovate them would be vast. Added to that are concerns over the safety and fatigue of older Boeing aircraft following recent damage to the skins of ageing models.

Jet promises European growth Jet Airways is eyeing European expansion as it seeks to turn its hubs in Delhi and Mumbai into launch-pads for Western passengers travelling to Asia. Jet plans to use A330s, to be delivered by 2014, to add destinations such as Rome, Amsterdam and Paris. “We are looking at some of the European expansion and we have applied for some of the traffic rights to the civil aviation ministry. I hope those clearances will come, so that we as an Indian carrier can get India’s market share to what we deserve,” Jet Airways chairman Naresh Goyal told Indian media. However, Goyal promised shareholders that the airline would only pursue sustainable expansion.

Present targets for Jet are 11 to 12 per cent growth for domestic traffic and 12 to 15 per cent for international.

Scrapping payment charges The United Kingdom’s Office of Fair Trading (OFT) has recommended the government ban surcharges for debit card payments and bring credit card charges in line with actual processing costs.

“The growth of internet retailing has brought massive benefits, but the increasing use of card surcharges is not one of them. You can’t buy online with cash and people are frustrated about being asked to pay for paying,” said Cavendish Elithorn, senior director of the OFT’s goods and consumer group.

The OFT singled out airlines as particularly gross

offenders, noting that British passengers spent £300m ($480m) on card surcharges in 2009. It also criticised ‘drip pricing’, where card surcharges were only revealed after a lengthy payment process. EasyJet customers, for instance, discover an £8 ($13) charge only after completing eight booking pages, while Ryanair adds £6 ($10) after four pages. The airlines’ stock response to this is that customers can avoid charges by using a certain card. But the OFT pointed out that such cards are often “only available to a small proportion of consumers, making a surcharge effectively compulsory”.

United-Air Canada venture opposed A planned joint venture on US-Canada flights between United Continental and Air Canada has stalled after the Canadian competition regulator criticised the plan. “If allowed to proceed, consumers will face higher prices and even less choice on key, high-demand air passenger routes,” said commissioner of competition Melanie Aitken. She added that the venture would create a monopoly on 10 routes, including Calgary-Houston, Montreal-Washington, Ottawa-New York and Toronto-San Francisco. United and Air Canada already co-operate to some extent in the trans-border market, of which they control 55 per cent. “Making matters worse, they now want to fully merge their operations,” Aitken said.

Czech, Etihad reach codeshare agreement

Czech Airlines and Etihad Airways have signed a codeshare agreement. The Czech Republic flag carrier will launch direct flights between Abu Dhabi and Prague, and offer onward global connections through Etihad’s network. The connections include Middle East cities such as Abu Dhabi, Muscat, Bahrain and Kuwait. The agreement will also allow Etihad passengers to book flights straight through to Prague and beyond to other Czech Airlines-serviced routes.

A320neo rides JetBlue avenue into US low-cost market

JetBlue has signed a memorandum of understanding (MOU) for 40 A320neos. The airline has not yet announced its engine selection. In addition, the MOU will convert 30 of JetBlue‘s current orders for A320 aircraft to the larger A321 model with enhanced wingtip devices called Sharklets. Prior to the June 21 order, JetBlue had ordered 173 A320 aircraft.

Another US low-cost carrier, Virgin America, has also ordered the A320neo.

LEAP-X1A takes $11bn in orders thanks to the neo CFM International raked in $11bn for orders of the LEAP-X1A engines in June, largely thanks to those announced at the Paris Air Show. The manufacturer sold 910 of the engines to power 455 Airbus A320 neo aircraft. AirAsia placed the single largest order on record for engines to power 200 A320 neo aircraft; CIT Aerospace placed an order to power 15 A320 neos; GECAS to power 60 A320 neos; ILFC to power 40 A320s; Republic Airways (parent of Frontier Airlines) to power 40 A319 neo and 40 A320 neo aircraft; and SAS for 30 A320 neos. Virgin America launched the LEAP engine on June 15 with an order for engines to power 30 A320 neo aircraft.

Bombardier closes two financial agreements

Bombardier has closed both a letter of credit and revolver facility agreement totalling $1.35bn with a syndicate of first quality financial institutions, mainly North America-based. The $600m letter of credit and $750m unsecured revolving credit facilities, which mature in June 2014, are to be used to support Bombardier Aerospace’s operations. They replace two financial agreements: the $600m letter of credit facility which was to expire in December 2011 and the $500m unsecured revolving credit facility scheduled to mature in August 2011. National Bank Financial, Citigroup Global Markets, and RBC Capital Markets jointly arranged the facilities as mandated lead arrangers and joint bookrunners; BNP Paribas and UBS Securities also acted as joint bookrunners.

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4 | AFM • ISSUE 74 July-August 2011

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

NEWS HIGHLIGHTS ANI signs for five MRJs, considers 20 more Hong Kong-based lessor, ANI, has signed a pre-contract for five Mitsubishi Regional Jets (MRJs), becoming the first Asian customer for the aircraft outside Japan. A subsidiary of Aero Nusantara Indonesia, an Indonesia MRO, ANI leases aircraft to five Indonesian airlines. “Indonesia is a rapidly developing market. Since this country is formed by more than 17,000 islands, has a population of more than 240 million people, and has a rapidly growing economy, airplane travel from city to city will undoubtedly increase as time goes on. Regional jets will therefore be essential for Indonesia,” ANI’s management said in a statement. It is unknown what size variant of the MRJ ANI has ordered, but management also stated: “We are considering an additional order of 20 when the MRJ family is expanded to cover the 100-seat class.”

Sixth airport for London EasyJet, Europe’s second-largest low-cost carrier, is to launch flights from Southend Airport. The decision to base three aircraft at the coastal airport, offering flights to Spanish and Portuguese destinations such as Barcelona, Ibiza and Faro, effectively gives London a sixth international airport – after Heathrow, Gatwick, Stansted, Luton and London City. It is thought that Southend could handle two million passengers per year by 2019 from its enviable position on the east coast, which allows aircraft to avoid congested London flight paths, potentially cutting journey times by 20 minutes. It is roughly the same distance from central London as Stansted, which handled 18.6 million passengers in 2010.

Airbus beefs up A350-1000

Airbus will increase payload and range on its A350-1000 after Rolls-Royce agreed to increase the thrust of the Trent XWB engine from 93,000lbs to 97,000lbs. The greater power positions the A350-1000 as a competitive threat to the 365-seat 777-300ER. Airbus’ decision will add 400nm to the range of the 350-seat A350-1000 and 4.5 tonnes to its payload, but will push back its entry into service by 18 months, to 2017. In addition entry of the smaller A350-800 will drift two years to 2016, though late 2013 remains the planned entry date for the A350-900. Rolls-Royce has been granted exclusivity to power the A350-1000.

Bizjet Superjet 100 announced, stretch on hold Sukhoi has revealed plans for a bizjet version of its Superjet 100. The manufacturer announced broad plans at the Paris Air Show but said more detail would be announced in October. Suggestions were that the aircraft would include a master bedroom, shower and business suite to be priced at around $50m.

Vladimir Prisyazhnuk, CEO, said the company had received numerous requests from people who “appreciated” the regional aircraft. Plans for a stretched version of the aircraft are now on hold.

ST Aero forms new engine lessor

CFM takes record orders for CFM56-5B and -7Bs

Singapore’s ST Aerospace and Japanese trading company Marubeni are to set up an equally owned engine leasing company. The 50:50 joint venture, which will be called Total Engine Asset Management (TEAM), will initially stock CFM56 engines for narrowbodies. The company’s two investors said TEAM will spend $100m on assets over its first two years. It plans to begin operations in 2H 2011.

“Marubeni has an extensive track record in the investment of engine development programmes and aircraft leasing, as well as in providing sales agency services for commercial aircraft, engines, business jets and various other services,” said Gentaro Toya, senior operating officer at Marubeni’s transportation machinery division.

CFM International has topped its own records by booking firm orders for 420 CFM56-5B and CFM56-7B engines during the Paris Air Show – the largest weekly total ever taken. Customers of the CFM56-5B included Air Lease Corporation (ALC), which ordered engines for 20 A320 family aircraft; Hainan Airlines for 42 A320 family aircraft; Jazeera Airways for four A320s; National Air Services (NAS) for 20 A320 family aircraft; Shenzhen Airlines for 10 A320 family aircraft; Tibet Airlines for three A319s; and Virgin America for 30 A320s. With the CFM56-7B, ALC will power 14 737-800s and Malaysia Airlines will power 10 737-800 aircraft.

MIAT Mongolian Airlines ordered the engines for two 737-800s; Norwegian Air Shuttle for 15 737-800s; and UTair Aviation for 33 737-800s and seven 737-900ERs.

Airbus reveals 2050 concept aircraft Airbus has unveiled its Concept Cabin, which hints at what air travel might be like in 2050. Instead of traditional cabins, Airbus has devised personalised zones. A ‘vitalising zone’ delivers vitamin and antioxidant enriched air, mood lighting, aromatherapy and acupressure treatments. An ‘interactive zone’ features holographic gaming, advance in-flight communication, interactive shopping and changeable virtual rooms.

Airbus also revealed concepts including seats that morph to your body shape and self-cleaning materials made from sustainable plant fibres, which would also harvest passengers’ body heat to power cabin features.

“Such technologies are already being developed and, while they may not be seen in the exact same manner as in the Airbus Concept Plane and Cabin, some of them could feature in future Airbus aircraft programmes,” the manufacturer said in a statement.

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July-August 2011 AFM • ISSUE 74 | 5

The latest on deals, mergers, appointments and more NEWS

NEWS HIGHLIGHTS

ROUND-UP

GoAir places monster A320 order Indian budget carrier GoAir has ordered 72 A320 neos for delivery from 2015 through 2020. The airline will also add 10 current generation A320s to its fleet, which presently numbers only 10 aircraft, from next year. The neo order is worth $7.2bn at list prices. No engine selection has yet been made. GoAir is part of the Wadia conglomerate; in a statement managing director, Jeh Wadia, said: “In terms of aircraft, we see tremendous potential in India, which has barely six airlines with 350 aircraft catering to a billion people, compared to China’s present 1,100 aircraft.” Rival Indian budget carrier IndiGo ordered 180 A320s, which included the launch order for the A320 neo.

Brave new world for commercial biofuel flights The first commercial flight to operate on biofuel has successfully taken place. The KLM Royal Dutch Airlines 737-800, with a 50/50 blend of conventional jet fuel and renewable jet fuel in both engines, carried 171 passengers from Schiphol, Amsterdam and flew to Charles de Gaulle, Paris on June 29.

The flight was operated on biokerosene – a hydroprocessed esters and fatty acids (HEFA) fuel produced from used cooking oil – and was a preview of a series of more than 200 flights the airline has scheduled for September. The same raw material will be used in these flights, which will also be carried out on the Amsterdam-Paris route. The fuel was supplied

by Dynamic Fuels via SkyNRG, the consortium co-

founded by KLM in 2009 with the North Sea Group and Spring Associates.

Meanwhile, Thomson Airways has announced that it is to become the UK’s first airline to operate a commercial flight using biofuel. Subject to final safety clearance being received, the flight will take off from Birmingham, England on July 28 and land in Palma, Spain. Thomson will use the same used cooking oil/ conventional jet fuel mix as KLM in both of the aircraft’s engines. Weekly flights to Spain using the biofuel will then commence in September and run for one year, the airline said. The same route will be used initially, switching to Birmingham-Alicante during the winter schedule.

India’s oil companies told to help Air India

US airlines take $5.7bn in fees

India’s state-run oil companies have been told to continue to provide aviation fuel to the flag carrier, Air India, despite its mounting fuel debts. The ‘cash and carry’ form of payment put in place by the oil companies since December has been halted and Vayalar Ravi, minister of India’s Civil Aviation Authority, requested that fuel be provided to the airline for the next three months. Air India will continue to pay INR16.5 crore per day in keeping with its previous agreement. The airline will be allowed to take additional fuel worth INR1 crore in the next three months. ($1=44.7INR. Crore =10m)

US airlines took almost $5.7bn in baggage and reservation fees during 2010, according to the US Department of Transportation’s (DOT) Bureau of Transportation Statistics (BTS). American passenger airlines took more than $2.1bn profit from fees in the same year with baggage and reservation fees bringing $906m and $646m respectively. “Airfares today remain an unmatched bargain – in real terms when adjusted for inflation, it still costs far less to fly, even with ancillary fees included, than it did during the 1970s,” the ATA said in a statement.

Virgin to swap MAS for SIA Virgin Australia has applied to Australian anti-trust authorities for an alliance with Singapore Airlines (SIA), in a move that would see it abandon its codeshare with Malaysia Airlines (MAS). Virgin and SIA want to co-operate on pricing, scheduling, marketing and frequent flyer programmes. Though no specific routes were revealed in the application, Virgin said it would not let any part of an SIA codeshare overlap with that in place with Etihad. MAS, meanwhile has applied to join the oneworld alliance and is pursuing closer ties to Qantas, in itself sufficient reason for Virgin to wind down its relationship.

Cebu bets on A321 neo

Philippine low-cost carrier Cebu Pacific has ordered 30 A321 neos and converted seven A320 options into firm contracts. Cebu has also placed options for 10 more 220-seat A321 neos. The contract takes Cebu’s firm order backlog with Airbus to 55 aircraft, comprising 25 A320s and 30 A321 neos. The latest aircraft to be signed for, worth $3.8bn at list prices, will be delivered between 2015 and 2021; 18 previously ordered A320 are scheduled for delivery through to 2014. Cebu’s deal for the A321 neo represents the biggest single order to date for the largest of Airbus’ forthcoming narrowbody line. The airline is still to make an engine choice for the aircraft.

Boeing weighs potential for breakthrough engine in 2020s A little more light has been shed on Boeing’s plans for a successor to the 737.

Randy Tinseth, VP marketing at Boeing Commercial Airplanes, said that any decision to produce for an all-new aircraft by 2020 would assume that no new ‘disruptive’ engine technology emerged in the years up to 2030. However, Tinseth did add that Boeing would prefer to produce a new airframe rather than reengine current models. His comments coincided with the release of Boeing’s latest market outlook, which predicted demand for 33,500 aircraft of more than 100 seats over the next 20 years.

ALAFCO firms deal for 30 A320 neos

ALAFCO, the Kuwait-based leasing and finance company, has firmed its order for 30 A320 neo aircraft at the Paris Air Show. A preliminary contract had already been announced at the show.

ALAFCO had already penned a deal for six A350-900 aircraft; its total order backlog is now 56 aircraft.

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6 | AFM • ISSUE 74 July-August 2011

NEWS ROUND-UP The latest on deals, mergers, appointments and more Thai plots fleet renewal

Thai Airways will add 37 new aircraft to its fleet between 2011 and 2017.

The airline’s board has approved the purchase of six 777-300ERs and five A320s, to be delivered from 2014 to 2015; the purchase of four A350 aircraft and the 12-year lease of an additional eight, with delivery between 2016 and 2017; a 12-year operating lease for eight 787 aircraft, with delivery between 2014 and 2017; and a 12-year lease for six A320s, to be received from 2012 to 2013. Thai has also outlined plans to add a further 38 aircraft to its fleet from 2018 to 2022, though that strategy awaits board approval at a later date.

Air Mauritius out of the red Air Mauritius has swung to a $15m profit for the 2010/11 financial year after losing $6m the year before. “Over the last year, we have grown capacity to pre-crisis levels” said Andre Viljoen, the airline’s acting chief executive. Air Mauritius said it would continue growth and open new routes to China this year.

NEWS HIGHLIGHTS ‘Most Wanted’ safety issues revealed The US’ National Transportation Safety Board (NTSB) has unveiled its annual list of the top 10 most critical transport safety issues that need to be addressed.

Aviation concerns feature heavily on the organisation’s ‘most wanted list’. These are: to promote pilot and air traffic controller professionalism; address human fatigue; require safety management systems; improve runway safety; require image and onboard data recorders; and improve general aviation safety.

“The NTSB’s ability to influence transportation safety depends on our ability to communicate and advocate for changes,” said NTSB chairman Deborah Hersman in a statement. “The most wanted list is the most powerful tool we have to highlight our priorities.”

The organisation says numerous accident investigations have shown that a safety management system (SMS) or system safety programmes could have prevented loss of life and injuries. It says aviation

organisations should establish a SMS to help “predict and correct problems to prevent accidents” and that they “are also a natural complement to investigations when accidents do occur”. The NTSB also thinks SMS and system safety programmes can be effective in all organisations, regardless of their size.

Also highlighted in the list was the “disturbing number of individual incidents of non-compliant behaviour, intentional misconduct, or lack of commitment to essential tasks” that has demonstrated “an erosion of pilot and air traffic controller professionalism”. The NTSB believes the industry can provide better guidance on expected standards of performance and professional behaviour, while monitoring performance and holding pilots and air traffic controllers accountable will reinforce the “absolute importance of maintaining the highest level of professionalism”.

AWAS re-prices term loan facility Dublin-based aircraft lessor, AWAS, says it has favourably re-priced its May 2010 $530m term loan facility to achieve a 250 basis points advantage over the previous terms. The company says the revised terms will give it increased flexibility to acquire attractive new and used aircraft. Goldman Sachs Lending Partners and Morgan Stanley Senior Funding, acting as joint lead arrangers, closed the transaction.

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July-August 2011 AFM • ISSUE 74 | 7

The latest on deals, mergers, appointments and more NEWS

Qantas cancels orders as it reduces expenditure

Boeing increases production Signalling that the aviation industry is on the up, Boeing is to increase its production rate for the 737 to 42 a month in 1H 2014 – that’s two every working day.

“Customers are demanding our Next-Generation 737 at an unprecedented rate,” Jim Albaugh, CEO for Boeing Commercial Airplanes (BCA), said in a statement. “New performance improvements and enhanced passenger comfort features have driven home the value equation for our customers.”

The production rate will match Airbus for its competing A320, though Airbus is to churn out 42 of these per month as soon as 4Q 2012. The European manufacturer now builds 36 A320s a month and will boost this to 38 in August and 40 early next year.

Speaking at Boeing’s annual investor conference in Seattle Albaugh said: “We need to move our production rates up in response to market demand… In my mind, seven years of backlog is too much.” He added that there would be demand for 33,000 new commercial aircraft, worth almost $4tn, over the next 20 years and that BCA would increase its production rate by 40 per cent in the next three years.

Virgin strike could shake investor relations Virgin Atlantic’s pilots have voted in favour of a strike which head, Sir Richard Branson, has said would leave “an indelible scar on the company”. Members of the airline’s union, Balpa, voted in protest of a four per cent pay rise after several years of pay freezes.

Branson said that the threat of strike would dissolve passengers’ and investors’ trust in the company. “It will affect jobs and it will make it very difficult for the company to afford the current offer on the table,” he claimed. “They have also played into the hands of our larger rivals.”

ROUND-UP

Last year, Virgin hired Deutsche Bank to find investment partners. Etihad and Delta Air Lines both declared an interest, though Etihad’s CEO, James Hogan, told reporters recently that the airline’s priorities have changed.

Virgin’s future seems dependant on Branson and how much control he is willing to relinquish.

Branson has said he would prefer for Singapore Airlines to sell some of its 49 per cent stake and describes Virgin with the steely protectiveness: “Virgin Atlantic was very much my baby and now she’s a very beautiful young lady,” he told the press recently. “I will always remain a major shareholder in this airline.”

Qantas has cancelled nine aircraft orders as it scales back its growth and spending in 2011. The airline will reduce its outgoings by A$400m ($426m) in the year ahead and will lower aircraft leasing costs by A$300m.

Orders for 12 narrowbodies have been deferred or cancelled, three of which were due in 2H 2011. Furthermore, the airline will reduce domestic capacity growth for 2011 to 2012 from eight to 5.5 per cent. Qantas has already announced that it will slash jobs, most of which are expected to be managerial.

The carrier said its cuts were a result of high fuel prices and natural disasters.

IndiGo confirms mammoth A320 neo deal Indian budget carrier IndiGo has finalised a deal, first announced in January 2011, for 150 A320 neos and 30 standard A320s. The order adds to one for 100 A320s placed in June 2005. Almost half the aircraft from that have now been delivered. No engine selection for the new A320 neos has yet been made.

For an ultra quiet aircraft, it’s making a lot of noise The noise and emission levels of the new Sukhoi Superjet 100 are substantially better than the ICAO rules require. The noise and excitement comes from regional operators around the world who recognise that the Sukhoi Superjet 100 family has the combination of state of the art technology, reliability – plus lower fuel consumption and operating costs – they need to build networks and profitability. Sound good?

Find out more at www.superjetinternational.com

We know where the world’s going

AFM74 News_AFM News 12/07/2011 09:44 Page 8

8 | AFM • ISSUE 74 July-August 2011

NEWS ROUND-UP The latest on deals, mergers, appointments and more United merger with Continental “on track”

NEWS HIGHLIGHTS

The merger of United Airlines and Continental Airlines is on track and set to be completed by the end of the year, according to multiple reports.

United Continental Holdings CEO Jeff Smisek told shareholders the company should receive a single operator designation from the Federal Aviation Administration (FAA) in that time. The companies closed the $3.17bn merger last October; it is expected to create $1bn in annual benefits and savings by 2013. However, the Air Line Pilots Association (ALPA) was critical of Smisek’s optimism, saying that a bargaining agreement to unite the airlines’ pilots was “nowhere near on schedule”.

Frontier fined for not posting performance data The US Department of Transportation (DOT) has fined Frontier Airlines $40,000 for failing to display on-time performance for its flights on its website. “Air travellers have a right to know whether the flight they are buying is chronically delayed or cancelled,” said US transportation secretary Ray LaHood. DOT rules state that the 16 largest US carriers must post information such as the percentage of arrivals that were more than 30 minutes late, with special highlighting if these flights were late more than 50 per cent of the time; and the percentage of cancellations if more than five per cent of the flight’s operations were cancelled.

Cargolux welcomes Qatar as strategic investor

Qatar Airways has finalised the purchase of 35 per cent of Luxembourg freight carrier Cargolux. Qatar bought the stake from Luxembourg’s government and other investors who picked up Swissair’s one-third share of Cargolux in 2009. Analysts have valued the stake at between $220m and $300m. “[Qatar Airways] want to become a major player in air cargo so we clearly view them as being a strategic long-term partner,” a Cargolux spokeswoman told Reuters.

A380 out of the woods The A380 could break-even in the 2014-2015 period, seven years after its entry into service. Speaking ahead of the Paris Air Show, EADS CEO Louis Gallois said that favourable dollar-euro exchange rates and new production efficiencies had hauled back a breakeven date that some analysts had put as far out as 2020. Ten years ago Airbus said it would only need to sell 270 A380s to break-even. Cost overruns, production delays and a cool reception from airlines had seen that figure slip to 420 airframes by 2006.

Current orders for the aircraft stand at 234.

Last year, though, Airbus speculated that it could break-even by 2015 if dollar exchange rates remained favourable. Gallois has since said that €1.35 to the dollar is the required rate. There is, of course, no guarantee of that. Moreover, depending on accounting practice, break-even does not necessarily mean that an aircraft has recouped all of its costs.

Nonetheless, the end of a fraught beginning is in sight for Airbus’ poster aircraft.

Alaska Air to repurchase $50m of common stock

Alaska Air Group’s board of directors have approved a stock repurchase programme authorising the company to buy up to $50m of its common stock. The decision is “consistent with the company’s practice of repurchasing shares opportunistically and underscores our commitment to providing a reasonable return to investors while preserving our strong cash balance,” commented Bill Ayer, Air Group chairman and CEO. Alaska Air has repurchased approximately 7.5 million shares of its common stock for nearly $21m over the past four years.

Minneapolis closures force Delta repayment of Northwest loan Minneapolis-St. Paul International Airport has demanded that Delta Air Lines repay $175m of government-backed loans related to the bailout of Northwest Airlines, with which Delta is now merged.

Delta has said that it will close training centres at Minneapolis, Northwest’s former base, negating a prior condition of the loan that Northwest maintain its headquarters at the airport. The loan had been due for repayment in 2016, but that date has now been brought forward to early 2012.

African volcano cancels flights

Flights within Ethiopia, southern Egypt and the Sudan were cancelled and delayed in June due to the eruption of the Nabro volcano in Eritrea, which started on June 12. The last known eruption of Nabro was in 1861; the latest eruption was thought to be due to earthquakes in the region. Meanwhile, the eruption of Puyehue in Chile, which began on June 4, continued to affect flights in Australia throughout the month. Virgin Australia suspended flights to Perth. Qantas and its subsidiary Jetstar cancelled flights to Perth, New Zealand, the southern island of Tasmania and the Argentinean capital Buenos Aires.

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The latest on deals, mergers, appointments and more NEWS

PEOPLE IN THE NEWS

Latin America joins EU ETS protests

Patrick Murphy to advise Peach Aviation

Edwards to leave Jet Aviation

Ryanair’s former chairman, Patrick Murphy, is to join Peach Aviation – Japan’s first low-cost carrier – as its corporate advisor. Murphy was appointed chairman of Ryanair in 1991, leaving in 1994 to become a consultant and advisor to a number of airlines. “It is our great pleasure to welcome Mr Murphy on board as our corporate advisor. To become a completely new type of airline that links destinations in Japan and Japan with Asia, I believe his advice and recommendations will be very valuable to the team,” commented Shinichi Inoue, CEO of Peach Aviation.

Peter Edwards has announced his departure as president of Jet Aviation, effective August 31, 2011. He initiated a transition of leadership from July 4, with Joe Lombardo, EVP of General Dynamics Aerospace Group, taking the role of president in the interim.

Edwards has led the company since May 2007.

BAA announces new chief operating officer for Heathrow Normand Boivin is to join BAA as its chief operating officer for Heathrow, effective August 29. Normand, who has been in the industry for almost 30 years, will leave his post as operations director for Aéroports de Montréal for the new role. “Normand’s immediate mission is to accelerate the improvement of Heathrow by developing our security processes, implementing the recommendations of the Heathrow Winter Resilience Enquiry, and preparing operations for the Olympics and Paralympics in 2012,” said Colin Matthews, BAA CEO.

Frank Pray to head Intrepid Aviation Frank Pray has been hired as president and CEO of lessor Intrepid Aviation. Pray was president and CEO of AWAS from 2006 to 2010. Before that, he served as SVP of sales at CIT Aerospace for nine years, and as a director at CIT Aerospace International. On his team will be Volker Fabian, who has been appointed chief commercial officer. Fabian was formerly co-MD at Amentum Capital. Prior to that, he was with HSH Nordbank and CIT Aerospace.

GoAir appoints De Roni as CEO Giorgio De Roni, the former chief revenue officer at Italian carrier Air One, is to head GoAir as its new CEO. De Roni will manage the foreign expansion of the low-cost Indian airline. He was selected by GoAir’s MD, Jeh Wadia.

Solem joins Bombardier sales team Anders Solem has been appointed as VP sales, China at Bombardier’s commercial aircraft division. Solem will lead the newly established China Sales region and report to Chet Fuller, SVP sales, marketing and asset management. Solem has more than 25 years of aviation experience; before joining Bombardier he worked at Lockheed Martin as corporate VP, new business initiatives and has also served in many roles at GE.

Isle of Man aviation director leaves post Brian Johnson has decided to step down as director of civil aviation on the Isle of Man, effective August 26. Johnson was instrumental in the establishment of Isle of Man aircraft registry, which has grown to be the eighth-largest register of business aircraft in the world.

Hogan joins IATA board James Hogan, CEO of Etihad Airways, has been elected to the board of the International Air Transport Association (IATA). Hogan began his career at Ansett Airlines and went on to hold positions with bmi and Gulf Air, taking the top job at Etihad in 2006.

Bombardier’s James Hoblyn passes away James Hoblyn, president of Bombardier customer services and specialised and amphibious aircraft passed away on July 3.

In a statement, Bombardier said Hoblyn’s “boundless passion for our industry and his unrelenting focus on customer experience will leave a lasting imprint on us all. His contributions, kind spirit and quick wit will be deeply missed”. Bombardier held a minute of silence in honour of Hoblyn on July 7. Michael McQuay will oversee all areas of the Bombardier customer services team in the interim, while retaining his current role as president of Aircraft Service Centres.

Christie joins Pinnacle Airlines Pinnacle Airlines has named Edward Christie as its new VP and CFO. He joins from Frontier Airlines where he served as SVP and CFO. Christie, a partner at Vista Strategic Group, succeeds Peter Hunt, and is expected to assume his new role at Pinnacle by July 25, 2011.

FAA cements Grizzle in ATC role The Federal Aviation Authority (FAA) has named David Grizzle chief operating officer of its air traffic organisation. Grizzle had previously occupied the role on an interim basis when former head Hank Krakowski stepped down following the scandal involving air traffic control workers falling asleep on duty.

Tiger Airways undergoes rapid reshuffle Gurassa takes non-executive directorship with easyJet Charles Gurassa has been appointed as a nonexecutive director at easyJet, effective June 27, 2011.

He will also become deputy chairman of the board and senior independent director from September 1, 2011.

ROUND-UP

Chin Yau Seng, former CEO of SilkAir, is to take control of Tiger Airways Holdings as acting CEO following the grounding of the airline’s A320 fleet on July 2, 2011, due to safety concerns. Tony Davis, president and CEO of the holding company, will lead Tiger Airways Australiain place of Crawford Rix. Davis will continue to serve as a director of Tiger Airways Holdings.

The Latin America and Caribbean Air Transport Association (ALTA) has become the latest body to criticise the inclusion of international aviation in the European Union’s Emissions Trading Scheme (EU ETS). Calling on governments, its members and its industry partners to reject the scheme, it said it considered the EU ETS to be “an illegal, flawed and unjust attempt to force the aviation industry to concede to unilateral and biased measures to the benefit of European carriers”. ALTA said the scheme threatens to negatively affect its carriers and “cost them hundreds of millions of dollars over the first few years of implementation”.

ATR bags major lessor Aircraft lessor GE Capital Aviation Services (GECAS) has placed its first-ever order with French turboprop manufacturer ATR. GECAS ordered 15 ATR72-600s and took 15 options on the type in a deal valued at $680m at list prices. “This deal underlines the increasing interest of leasing companies for ATR aircraft, as they eye the success of our aircraft and, particularly, the increasing business opportunities they provide,” said Filippo Bagnato, CEO of ATR.

Disaster averted as aircraft lands on runway undergoing maintenance

A Thai AirAsia A320 mistakenly landed on a runway undergoing maintenance work at Kolkata airport, according to the Times of India. A disaster was narrowly avoided when one of the workers spotted the aircraft approaching and alerted his colleagues, who were all able to get off the runway in time. The aircraft, which was carrying 141 passengers, landed about 500m from the spot where they were working. The pilot had been told by air traffic control to land on the airport’s secondary runway, but only realised his error a few seconds before touchdown.

ALC pens lease agreements for 25 aircraft Air Lease Corporation (ALC) has signed lease agreements for 25 additional aircraft. TRIP Linhas Aereas has entered into long-term lease agreements for six ATR 72-600s and six E190LRs to be delivered between July 2011 and October 2012.

Bulgaria Air is leasing four E190s due for March, April, June, and November 2012.

Asiana Airlines is taking a new A330-300 in September 2012. Garuda Indonesia Airlines has signed a 12-year lease agreement for an A330-200.

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

ROUTES NEWS Thai Airways selects Brussels for European growth

Blue Panorama orders Superjet 100s Blue Panorama Airlines has ordered 12 Sukhoi Superjet 100s at the Paris Air Show.

President of the Italian airline, Franco Pecci, said the aircraft would be used to “offer new routes into markets that are not often connected today”. President of SuperJet International, Carmelo Cosentino, commented that “Blue Panorama is a dynamic and aggressive airline” and is expanding its fleet in the regional market.

LAN places South America’s first A320 neo order

Chile’s LAN Airlines has become the first South American carrier to sign a firm order for the A320 neo. The airline has ordered 20 of the type. Brazil’s largest airline, TAM – with which LAN plans to merge – has already signed a pre-contract for 22 A320 neos. LAN has not yet made an engine choice.

A380 orders edge up Skymark Airlines has ordered two more A380s. The Japanese carrier will now take delivery of six of the type for use on routes between Tokyo Narita and Europe and the US. A380 orders now total 236 from 18 customers.

UTair updates 737 fleet

Russian airline UTair Aviation has ordered seven 737-900ERs and 33 737-800s. The company’s current fleet includes 21 737-500s, seven 737-400s, four 757-200s and two 737-800s.

AviancaTaca agrees MoU for 33 A320 neos Established A320 operator AviancaTaca has signed a memorandum of understanding for 33 A320 neos and 18 current model A320s. The newly merged Latin American operator already operates 78 A320-family aircraft. If confirmed, its A320 neo order would be the largest in the region.

No new Etihad bonds

Etihad has financing for aircraft this year and does not intend to issue bonds, the Abu Dhabi airline has said.

Etihad secured a 10-year financing plan when it placed an order for 205 aircraft at Farnborough in 2008. The airline said it is likely to secure $13.3bn to triple its fleet in the next decade.

THAI AIRWAYS INTERNATIONAL IS TO INAUGURATE FLIGHTS between Bangkok and Brussels, its eleventh destination in Europe. The airport has been negotiating the new route for a number of years but discussions intensified in 2011 after Brussels Airport executives learnt that the Thai national carrier had the capacity to introduce a new three-times weekly link to Europe this year during a special Route Exchange briefing at the Routes Asia forum in Incheon, South Korea in March.

“We have been in talks with Thai Airways for several years to add to the growing Star Alliance hub at Brussels,” said Leon Verhallen, head of aviation marketing, Brussels Airport. “At Routes Asia, Thai Airways announced during their Route Exchange briefing that three weekly frequencies had become available for Europe. We saw many airports competing for this but are very pleased that our relationship with Thai Airways, with frequent meetings at Routes events, has resulted in today’s announcement”.

Thai Airways will offer a three-times weekly schedule on the route from November 17, becoming the only carrier to offer non-stop scheduled flights between the two countries. An estimated 103,000 passengers travelled between Brussels and Bangkok in the past year, the greatest share flying via Abu Dhabi with Etihad Airways (26 per cent), followed by Copenhagen with SAS Scandinavian Airlines (16 per cent) and Cairo International with EgyptAir (nine per cent).

The airline will use a Boeing 777-200ER with 30 Business Class and 262 Economy seats and will offer a schedule that will deliver onward connections throughout Asia and Australasia from Bangkok. Thai Airways already operates services to the European destinations of Athens, Copenhagen, Frankfurt, London, Moscow, Munich, Oslo, Paris, Stockholm and Zurich.

Turkish delight for China Southern CHINA SOUTHERN AIRLINES IS TO LAUNCH A NEW FLIGHT TO ISTANBUL, its first service to Turkey. The Asian carrier is to offer a thrice weekly Beijing-Urumqi-Istanbul Ataturk link from September 2. It will use a 757-200 on the route and will compete with Hainan Airlines on the Urumqi-Istanbul sector; the latter is due to inaugurate a twice weekly link that originates in Shanghai on July 11.

China Southern currently offers flights to two other European destinations outside of the Russian and Commonwealth of Independent States markets, with links to Amsterdam from Beijing and Guangzhou and Paris Charles de Gaulle from Guangzhou. An estimated 198,000 passengers travelled between Turkey and China in the past year, up 13.3 per cent on the previous 12-month period. Turkish Airlines (THY) currently dominates this market with a 79.8 per cent share.

AeroGal descends into Peruvian market ECUADORIAN CARRIER AEROLÍNEAS GALÁPAGOS (AEROGAL) has introduced flights to Peru with new links to its capital Lima from Quito and Guayaquil. The airline and now serves three international destinations, adding to existing links to Bogota and Medellin in Colombia. AeroGal is offering a three-times-weekly service from Guayaquil and eleven flights per week from Quito. It will face tough competition from TACA and LAN Airlines in both these markets. TACA offers 10 and 13 weekly frequencies to Guayaquil and Quito, respectively, while LAN has seven and 10 flights per week. An estimated 121,000 passengers travelled to the Peruvian capital from Guayaquil in the past year with around 88,000 making the journey from Quito.

Malaysia Airlines inaugurates Saudi link ASIAN CARRIER MALAYSIA AIRLINES (MAS) WILL OPERATE A SERIES OF 15 FLIGHTS between Kuala Lumpur and Riyadh. The national carrier inaugurated the link on June 24 and will offer three flights per week until July 27 to cater for the growing interest by Saudi Arabians to spend their summer holidays in Malaysia.

“Malaysia is a value for money and convenient destination for the Saudi nationals as they do not need visas to visit Malaysia,” said Abu Tahir, regional SVP for Middle East, Africa and South America, MAS. “We thank the Saudi authorities for their timely assistance for us to mount these flights.”

MAS has had a long presence in Saudi Arabia with the commencement of annual Hajj services between Kuala Lumpur and Jeddah on April 1, 1974. By June 4, 1978, Jeddah was added to the airline’s network of scheduled services.

Virgin Atlantic to drop Kingston flight VIRGIN ATLANTIC AIRWAYS IS TO SUSPEND ITS TWICE-WEEKLY SERVICE between London Gatwick and Kingston from the start of the 2012 Northern Summer season but will continue to serve Montego Bay on a twice-weekly basis. The UK carrier is no longer offering capacity to Kingston from March 25, 2012, a route that is also flown by British Airways and is expected to be operated by Air Jamaica when it returns to the long-haul market.

Around 243,000 passengers travelled between the UK and Jamaica on scheduled flights last year, a market that is much larger when you also incorporate charter traffic. Virgin Atlantic handled 60.1 per cent of these passengers with its main rival British Airways flying 35.2 per cent. An analysis of this traffic data by destination shows that the London Gatwick-Kingston market is more popular than London Gatwick-Montego Bay. An estimated 114,000 passengers travelled to or from Kingston with slightly less, 112,000, making the journey to or from Montego Bay, although the yield to the latter is slightly stronger.

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13/06/2011 14:25

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12 | AFM • ISSUE 74 July-August 2011

FOCUS: Boeing Despite being weighed down by long-running programme difficulties with the 787 and 747-8, Boeing Commercial Airplanes (BCA) is immersed in seven programme developments including those for the 7879; 787-10; 737 (re-engine or new aircraft); and a 777 study for an enhanced aircraft. There are also noncommercial programmes for the 737-based P-8A Poseidon Navy sub-hunter and the 767-based KC-46A tanker. Scott Hamilton investigates.

BOEING: PROGRAMME UPDATE T

HE FUTURE OF THE 737 IS HITTING HEADLINES WITH the 787-10 beginning to draw major attention. Earlier this year, there were widespread expectations that Boeing would reveal its plans for the 737 at the Paris Air Show. Sadly, this was not the case though officials at Boeing gave hints during earnings calls, an investors day and in presentations.

Boeing executives are beginning to talk up the 787-10 as the anticipated “killer” of the A330-300. However, the 787 programme was mooted to ‘kill’ the A330, which proved to have remarkable resilience.

New aircraft development Industry observers talk about a 737 replacement, but Mike Bair, VP of advanced 737 product development at Boeing, prefers just to say “new airplane”. According to Bair, a new aircraft would complement the current 737NG, which he and other officials predict will be sold until at least 2026 – even if a new aircraft enters service in 2019 or 2020.

There has been a lot of talk about Boeing proceeding this with a new light twin (NLT) of 180- to 240-seats. It appears Boeing may be settling on a single-aisle aircraft with company officials labeling the proposed aircraft a ‘new small airplane’, or NSA. However, officials also told reporters in a pre-Paris Air Show briefing that the size has not been decided, nor had it confirmed whether the new offering would be a single- or twin-aisle.

A new 160- to 220-seat aircraft would be incrementally larger than the 135- to195-seat two-class 737-700/900 family aircraft and is in keeping with the view that all market segments are shifting towards a slightly larger aircraft size.

The 737 programme It appears Boeing may abandon the lower-than 150-seat market with a new aircraft, but this does not mean it will abandon the smaller market segment altogether. Boeing’s current vision to continue the production of the 737NG until at least 2026 nominally means it will continue to offer the 135-seat 737-700.

Sales of this aircraft have been slow, perhaps surprisingly as even Boeing has touted the 737-800 against it, highlighting that it carries more passengers for roughly the same operating costs.

Nonetheless, BCA will pit the -700 against Bombardier’s CSeries and Airbus’ A319.

Tied closely to the NSA discussion is Boeing’s choice of whether to re-engine the 737 or merely continue with product improvement programmes (PIPs) in order to deflect the competition of the A320neo.

The amount of re-work on a 737 required to produce a reengined variant is fairly extensive. On a technical level, Boeing knows how to re-engine the aircraft – but clearly, it is not enthusiastic. Bair, the VP of advanced 737 product development, has repeatedly said that Boeing does not see the value proposition in a re-engined 737 (nor, for that matter, in the neo, which gained considerable orders at the Paris Air Show).

Despite Boeing’s claims that its customers would prefer a new aircraft to a re-engined one, sales of the A320neo suggest the idea of a re-engined 737NG is still very much alive.

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FOCUS: Boeing

Part of the challenge is that the CFM Leap-X engine has a 70in diameter fan (compared with 61in on the CFM 56 engine, which is used on the 737). This requires the nose gear to be extended by six to eight inches. The heavier Leap-X means some structural changes are required to the wing, wingbox and surrounding structure, adding to the complexity and cost.

But as recently as May 24, Jim McNerney, CEO of Boeing, said at Boeing’s investors meeting that the 737 re-engine programme has not been definitively ruled out. The investment bank, UBS wrote in a research note: “Boeing commented that it would take a defection by a current 737 customer to get it to think more seriously about re-engining. Boeing sees this as unlikely.”

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FOCUS: Boeing In February, a long lifeline was thrown to the programme when the US Air Force chose to award Boeing the tanker contract over EADS which had battled for a decade to pitch its A330-based KC-30. The initial Boeing contract is for 179 KC-46As as the tanker is known; this extends the 767 production line to least 12 years at the rates currently announced.

Since then it has been reported that Boeing’s long-standing customer, American Airlines, has been in discussions with Airbus for it to provide 250 A320neos to fulfill the carrier’s fleet renewal programme. It has also been reported, following a leaked conversation with those close to the airline, that American has also courted Boeing with the prospect of it providing the aircraft. Boeing has not yet lost a customer but there is little doubt it would have to offer an extremely good deal, or a reengined aircraft to beat Airbus.

At the air show media briefing, Nicole Piasecki, VP of Boeing’s business development and strategic integration, argued that a reengined 737 would – in Boeing’s view – be eight per cent more economical than the A320neo and would be available until around 2016. The NSA, which is riskier and costlier, would be twice as economical as a re-engined 737and should enter service by 2019.

John Hamilton, who heads the 737 engineering programme, said studies are now underway for a 737 re-engined with a Leap-X that has a smaller fan diameter, which could still fit on the lowslung 737 but which would eliminate the need for nose gear work. The trade-off might be reduced fuel efficiency, he said.

And there is reduced efficiency, the expectation is that the cost would be comparable.

At the very least, Boeing will continue to undertake PIPs, with a goal of shaving a few more percentage points off fuel burn by the time Airbus’ neo enters service.

An off-shoot of the 737 commercial platform is the US Navy’s P8A Poseidon. Development of this aircraft is largely complete, with flight testing now in progress. Boeing is developing a minor derivative of the P-8 for India and is offering the aircraft to other countries that operate the ageing Lockheed P-3 Orion. The Poseidon and Orion are mainly sub-hunters but the Orion is increasingly used in maritime patrol, notably in the Indian Ocean looking for pirates.

The 747-8 is two years late and delivery of the freighter version has been scheduled for 3Q this year, though some believe it might slip to the beginning of 4Q. Troubled by a lack of engineering resources (which were diverted to the premier 787 programme longer than intended) and aerodynamic issues (resolutions for which the Federal Aviation Administration (FAA) still had to approve by late June), the 747-8 remains a developmental programme even as it steps toward entry into service (EIS).

Because the GEnx-2B engines fall short of the fuel burn target, a GEnx PIP is due in about 18 months and Boeing is working to reduce the weight of the aircraft.

The commercial 767 has been on borrowed time since 2001 and since the launch of the 787 programme in December 2003, but delays to the 787 breathed new life in the aircraft as some customers ordered the aircraft to fill in capacity.

At Boeing’s media briefing during the Paris Air Show, it became clear that the tanker is receiving the focus of the engineering talent and that PIPs for the commercial 767 are unlikely until the tanker is designed and flying. By this time, the current backlog of the 767 will have fallen and the commercial product may have died its natural death. Kim Pastega, VP and GM of the 767 programme, claims there is good commercial interest in the 767, but it is equally clear that (at least for now), Boeing will not enhance this ageing aircraft.

The 777 programme At one point, Boeing reasoned that prioritising the 777 over the 737 was a good plan but it is now convinced Airbus will be as much as five years late with the A350-1000, which competes with the best-selling 777-300ER. The A350-900, which competes with the slow-selling 777-200 series, will be at least a year late.

The A350-900 is scheduled for EIS at the end of 2013, a slight slip from the advertised EIS of 1H. Airbus officials re-iterated this timeline at its air show media briefing, but there is a mounting rumour that there will be a delay of at least six months. The ACAS database still shows a total of eight aircraft set for delivery in 2013, with the first going to Qatar in August. Airbus officials said in May that there is a “reasonable chance” the EIS will be at the end of 2013.

During the Paris Air Show, Airbus was expected to announce that Rolls-Royce would increase the thrust of the -1000 by 5,000lbs in order to add about 30 passengers and another 50nm. Emirates Airlines, Qatar and Korean Air have each hoped for a larger -1000. EIS with these changes has moved from 2014 to late 2016.

Boeing’s options are to continue with routine PIPs, add a significant upgrade or wait until mid-2020 to produce an entirely new aircraft.

The 2015 upgrade being considered includes enhancement of the GE-90 engines and a larger wingspan, according to Nicole Piasecki, VP of business development and strategic integration.

The 787 programme Boeing is confident it will deliver the first 787-8 to its launch customer, All Nippon Airways, in August or September but others in the industry believe it is likely to be later.

Boeing is putting the finishing touches to the 787-8 but it takes years of production before a programme can be considered to be running smoothly, yet engineers are already designing the 787-9 and starting work on the 787-10. The 787-10 was put on hold while the difficulties of the787-8 were resolved, but now officials are openly touting the 787-10 as the aircraft that will ‘kill’ the A330-300. The 787-10 is to be roughly the same size as the A330-300 and at about 6,800nm will have a longer range than the 5,850nm Airbus. With 300 passengers, the seat mile cost of the 787-10 would be outstanding, says Scott Fancher, head of the 787 programme. If the aircraft were offered today, Boeing would have orders, he said.

The A330 proved difficult to kill. Indeed, sales have increased since the launch of the 787 due to its delay. Evaluating the A330, airlines found that the more conventional aircraft proved more economical than had been realised. The A330-300 in particular, with its 6,000nm range, proved well-suited for intra-Asian routes and now also operates on US West Coast-European services.

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AFM74_Crew schedule_AFM73 12/07/2011 10:04 Page 16

16 | AFM • ISSUE 74 July-August 2011

FLEET OPERATIONS: Scheduling systems Flight and crew scheduling systems constantly add new functionality in response to the evolving operational environment and merging user requirements. Bernard Fitzsimons examines the market.

FLIGHT PLANNING AND CREW SCHEDULES T

HE FUNDAMENTAL AIM OF FLIGHT PLANNING systems is to make the most efficient use of aircraft, pilots and flight attendants within each airline’s own regulatory and commercial constraints.

Some of the latest enhancements are designed not just to achieve those goals but to illuminate the financial implications of operational choices. The systems are also becoming easier to use as developers increase the level of automation and reduce the workload for airline staff. And while they typically make their systems able to interface with rivals’ products, vendors tend to emphasise the benefits of more integrated solutions.

Rule-based systems Scheduling and crewing are closely related, says SITA’s director of flight operations, Toby Tucker. “Obviously the aircraft has to have a crew and they have to be qualified to operate that aircraft.” Six years ago SITA launched CrewWatch, a crew rostering and tracking extension to its FleetWatch operations control system.

Since then, he says, further modules have been added to automate pairing and rostering.

“CrewWatch is a very rule-based system,” he says. “When we take on board a new customer, the first thing we do is document both the rules of their regulatory authority and their in-house rules and union agreements.” The rules are then encoded into the system so that processes (such as automatic rostering introduced last year) can use them to create a roster that requires very little manual adjustment.

“It should have a good balance of work,” Tucker elaborates. “If the airline’s policy is to never have four days off in a row, for example, it will adhere to that. Essentially it cuts down what was manually intensive tweaking of a roster and makes it almost fully automatic.”

To provide crew with access to data when they are on the road, views of rosters, personal information and flight schedules can be made available via CrewWatch Mobile. “That can be accessed through the crew member’s mobile phone,” Tucker says.

Developed in association with Cyprus Airways, it enables crew members to access the information using their own mobiles via a website that is aware of the device being used.

“It will present it correctly on an iPhone or Android device, and it will not display information to any other type of device,” he says.

“When the crew are down route they don’t have to take a printed copy of the roster, they can go in, have a look, chat with the people they’re working with on that particular flight, know where they’re working next and deal with any queries.”

New this year is a bid line enhancement developed in association with Caribbean Airlines. “A lot of North American carriers and some of the major carriers in Europe use a process so crews can bid for lines of work for the month,” explains Ian Wooldridge, head of scheduling and crewing. “Some of them use seniority but others just use a bidding process. So we provided a portal through another module of CrewWatch, CrewConnex, which is a web browser whereby they can access the different lines of flying and bid for them for their next month’s work.”

CrewWatch then receives their bids and allocates the lines of flying. “It gives a better work-life balance for the crews,” he says.

“It also cuts down the work on the crew scheduler’s side because the system generates these lines of flying based on the automatic rostering process.

Legality is an over-riding concern. “We’re always looking at rest periods, training status, whether one of their qualifications is about to expire so they need to be trained. When it comes to operating that roster we’re tracking all the hours that have

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July-August 2011 AFM • ISSUE 74 | 17

FLEET OPERATIONS: Scheduling systems A further module within FleetPlan Max is a market model to address what-if scenarios 18 months or two years ahead. “We have an agreement with OAG [an aviation data and analytics provider] to provide us with the worldwide airline schedules of around 800 airlines. So we can provide the airline with a view on seat capacity and routes that are currently being offered by competitors, and then you can model your schedule around avoiding those other schedules or tying in with them in terms of alliances.”

Service providing New Cameroon’s national airline Camair-Co, which started operations in April, is supported by the first implementation of Lufthansa Systems’ NetLine service providing (SP) planning and control solution. Designed specifically for small- and medium-sized airlines, the new SP option runs in the Lufthansa Systems data centre so that operators do not have to worry about investing in host infrastructure or operating the system.

Bernd Jurisch, head of aircraft planning and control solutions, says the standard NetLine SP package includes the NetLine/Sched and NetLine/Crew schedule and crew management applications, along with the NetLine/Ops operations control system. It is open to customisation though: a small airline might not need the scheduling module to start with, but could add it later, along with options such as maintenance control, slot management and slot monitoring.

Similarly, the core NetLine/Sched product is the same for all airlines, but some modules would not be appropriate for the small operators SP is designed to support: “For example, very small airlines don’t need a fleet assigner,” he explains.

“Nevertheless, if an airline is growing over time and needs a fleet assigner later on we are able to handle that.” actually been flown by that crew, and any variation is tracked so we can adjust the hours against that particular crew member, making sure their rest has happened.”

Both FleetWatch and CrewWatch work from the same database, Tucker adds. “If an aircraft goes ‘tech’ and operations control swaps in a different type, the system would flag to him that the crew who were going to operate that sector now can’t because they may not be cross-trained on that new type of aircraft.”

The operations control side also supports decision-making: “We would map certain assets and dollar rates for people or equipment, and when you’re swapping that aircraft it will show the quickest or the cheapest way to get back to the schedule.

And it will stop you doing things like putting an aircraft into an airport where you don’t have a ground power unit for that particular aircraft.”

Best practice demands that the operations side and the crewing side be integrated, he stresses, “not interfaced but truly integrated. Changing something in one area always has a knockon effect in another area and the guy that’s making that change or dealing with that issue should have that view at all times.”

On the fleet scheduling side, SITA’s FleetPlan handles general schedule creation and management along with runway slot management. “On top of that we have an application called FleetPlan Max,” says Wooldridge. FleetPlan Max looks at the schedule in terms of profitability: “We feed the application with the planned schedule, or a what-if schedule if you’re thinking further ahead, then we connect it to various cost and revenue drivers within the airline so that the fleet scheduler and senior management can see how profitable the schedule is planned to be. Nearer the time, they can see how profitable it is in terms of demand and forecast data.”

The three modules are very integrated, he says. “The airline does not have to worry about different systems using different data.

Everything is based on the same data.” And the fact that the same basic modules are used by airlines of all sizes means “we have best practice implemented within our product. If an airline starts to work with our system with 10 aircraft and they grow to 50 or so we don’t come to a point where we say, ‘now you have to change from our small system to a big one.’ They can always stay with the main basic system.”

The Camair-Co NetLine SP implementation took around six months from contract signature last November, but the timescale can be as little as six weeks, Jurisch says. “There was a lot of work to be done on Camair-Co’s side, that was the main reason why it took so long. If everything is well prepared, we can make it faster.”

The cost is largely a function of airline fleet size: there is usually an initial fee to cover project costs such as hardware set-up, then a monthly fee calculated on the basis of the number of aircraft.

Compared with an in-house solution, he says, the SP model can cost as much as 30 per cent less than an in-house solution. “That usually means we have quite a quick return on investment.”

At the other end of the operational scale from Camair-Co and its two-aircraft fleet, Lufthansa recently renewed its agreement covering NetLine/Plan, which handles network planning, NetLine/Sched for medium- and short-term scheduling and SchedConnect for codeshare management and schedule distribution.

In terms of best practice, Jurisch says Lufthansa Systems has sold NetLine licences as well as operating the systems itself. “NetLine Sched, for example, has run on HP Unix, IBM, Sun, Linux and so on. So we have a lot of experience in different environments, and for SP we have chosen one that allows us very efficient implementation and operation, the highest speed and so on.”

AFM74_Crew schedule_AFM73 12/07/2011 10:05 Page 18

18 | AFM • ISSUE 74 July-August 2011

FLEET OPERATIONS: Scheduling systems It also benefits from customer feedback stretching 15 years or more. “We have gathered a lot of experiences from different airline customers and found the best way to support the users in crew management, schedule management and so on.” The systems are developed constantly in response to customers’ needs and “quite often we find that our customers learn from each other. We bring all our customers together once a year to exchange ideas and experience with the system, and of course we listen very carefully to what the customers want and bring what they need into our product.”

Although SchedConnect was developed in partnership with the airline, Jurisch says, “We decided from the beginning that we were not going to develop a pure Lufthansa system but one that could be used by other airlines.” Now in use with around 15 airlines, including Austrian and Egypt Air, the system handles a staggering 40 million schedule changes every month by the 15 users and their 150 codeshare partners.

Enhancements to the NetLine systems are planned in response to customer requirements. Codeshare management, for example, typically involves the operating carrier scheduling flights which are then promoted by the marketing partner. “But there are airlines working a different way,” he says. “Sometimes the marketing carrier sets out how the flight should look and the operating carrier follows. This is something we are currently implementing in SchedConnect.”

NetLine modules can be interfaced with other systems, Jurisch adds: “From our point of view this is not the best solution, but if an airline wants to do that for specific reasons they can.” But integration has its own benefits, such as checking whether it is possible to find a good crew solution to accompany schedule changes: “This is a question we can easily solve running our products.”

Tailored software Users of Acrobatico’s crew management and operations control software, Acrobat, range through Monarch Airlines, Royal Brunei, the bizjet operator VistaJet and operators of single business aircraft. Operations manager, Dean Stewart, says the company goes to great lengths to adapt its software to the operation.

“We make the software work for you,” he says. “We are much more tailored than most of the other systems available, we will design different modules for different customers and we’ll run different versions of the same module for different customers. So we believe in making the system easy to use, quick to pick up, but we make sure the functionality remains rich and detailed in the background.”

Ease of use is a principal focus. “We have the complicated functionality behind the scenes and we do all the legality checking, the crew training checking, but we try to present a very simple user interface and we try to produce a roster-generating tool that does most of the work for the user.”

Affordability is important, and Acrobatico also aims to be fast.

“The last customer we put in contacted us in November and they were live before Christmas,” Stewart says. “That was VistaJet in Austria, they have a fleet of 51 business jets. We integrated our crewing system with their operations system and got the crewing up and live in about six weeks. A smaller operator we’d do faster than that, but that’s a typical response.”

The company also prides itself on customer support, he says: “If you contact us with a problem we’ll fix the problem rather than giving you a reference number and putting you in the queue and giving you a service level agreement. If there’s a problem we’ll just fix it. That’s been our philosophy the whole way through.”

The network planning tool, NetLine/Plan, has benefited from a new graphical user interface and current efforts focus on making it easier for smaller airlines to use. “It’s a network planning tool and currently more suited to the needs of bigger airlines,” Jurisch explains. It requires extensive data calibration ahead of each schedule season, so the company is working to make it usable with standard data to make it more attractive to smaller airlines.

NetLine/Crew is updated constantly in line with new and evolving regulations, and Lufthansa Systems is working on the issue of fatigue risk management, an issue “which has becomes quite interesting here in Europe and will become more interesting during the coming years.” It is also working on capacity management methods for crew management such as manpower planning and vacation planning, and will soon add a crew training module.

Another project is an interface to a hotel broker. “One of our customers (and others are very interested) wanted to make use of a hotel broker rather than doing the bookings themselves,” Jurisch explains. An improved graphical user interface is also on the agenda. NetLine/Sched, meanwhile, will have improved short-term slot management and will be better integrated with revenue management, so that schedulers can see the revenue impact of schedule changes.

During the 10 years he spent as a rostering crew manager, Stewart says he found the users were becoming less experienced and skilled. “The last wave of recruitment I did was really looking for people who could use simple computer systems and be trained to actually use computers rather than learning how the crewing world works,” he comments. “Acrobat is the ideal system for that, because you can pick it up very quickly and it will do all the technical checks for you. It will produce a basic roster and make sure it’s legal, all the communication with the crew can be automated, it does most of the work, it really needs someone just to supervise it.”

A web-based system should be available in the next year or so, Stewart adds: “I think everyone’s looking at the next generation, but at the moment I think most of the systems are pretty similar.”

In the meantime, he would like to see operators making more use of the data and reports available.

“We produce an awful lot of good data and a lot of good reports and the operators could make better use of that,” he says. “A very simple example: if the system can tell you quite clearly that your flight to Tenerife on Tuesday was late last week – the week before, and the week before – because of catering, talk to the caterers before next Tuesday and stop the flight being late.” We have an awful lot of data and we and the airlines are still struggling to find the best way of delivering it so that they will act on it. It’s still a very retroactive industry.”

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AFM74_Ground Ops_AFM74 12/07/2011 10:02 Page 20

20 | AFM • ISSUE 74 July-August 2011

FLEET OPERATIONS: Ground Ops One of the biggest challenges for an airline is to make its ground operations efficient and its aircraft turnarounds fast without compromising customer satisfaction. Chris Kjelgaard reports on best practices and possible future improvements.

Photos: Southwest

I

T IS IMPORTANT FOR AIRLINES TO THINK CAREFULLY about how best to streamline its ground operations to keep aircraft grounded as little as possible. The logic of doing so is compelling: for a short-haul operator flying its aircraft on sectors averaging one to two hours and on eight to 10 sectors each day, trimming five to 10 minutes from each ground stop could create a time-saving that would allow the airline to schedule an extra daily one-hour sector flight.

If a long-haul intercontinental carrier cuts 20 minutes from each of the two or three turn-arounds its widebodies typically make each day, it could gain an entire seven-hour sector for each of its aircraft during the course of a week. Across a fleet of a dozen widebodies, that could mean an airline gains enough aircraftutilisation time to add a new destination to its network.

Nevertheless, while it is important for airlines to keep their turnaround times to a minimum, carriers must ensure their customer service does not suffer. Highly served routes will be price competitive and customers are unlikely to be loyal to a brand.

STREAMLINING GROUND OPERATIONS When to be flexible and when to standardise Payne’s team also works on achieving “dynamically selectable” staffing levels for daily operations at each station. The airline matches its staffing levels to daily traffic, schedule and weather/ATC conditions while ensuring its operations remain safe and in accordance to union rules (Southwest is the US’s mostunionised airline and its most profitable – showing the two are not mutually exclusive).

Many factors create a successfully streamlined ground operation.

Few carriers can turn an aircraft around faster than Southwest Airlines. Ground operations experts cite the Dallas carrier – the world’s first and biggest low-cost, low-fare airline – as a proud example of good ground operation practices.

Standardising equipment and processes and aligning staff are all-important factors in keeping turn-around times down, according to Barry Payne, Southwest Airlines’ director of airport performance improvements. Payne leads Southwest’s airport operations performance improvement team, which focuses both on how Southwest can keep its ground operations simple and on how all stations can achieve optimum efficiency each day. It takes into account factors such as varying schedules, varying traffic loads, weather delays and the local air traffic control situation.

According to Payne, one example of Southwest’s improvements is its switch from a previously complex ground operations process to an express bag-drop service. “It’s a one-button transaction,” says Payne.

Rolf Hartleb, CCO SkyWork Airlines

For instance, if a schedule has run smoothly through the first shift and the rest of the day’s traffic is forecast to be normal or light, supervisors may instruct some staff members to end their shift early. Payne says that in abnormal situations such as clearing a major backlog of delays, it can roster extra staff – as long as it follows union rules.

This can be very important. Andreas Britz, a principal with aviation consultancy, SH&E, and formerly with Lufthansa Technik, says local managers need to be involved in decision-making regarding staff-resource allocation. When an airline faces a difficult and urgent situation – such as having to turn around a 747-400 in an hour and 20 minutes (as Lufthansa has achieved) – it does not pay to have only a skeleton staff at the gate.

AFM74_Ground Ops_AFM74 12/07/2011 10:02 Page 21

July-August 2011 AFM • ISSUE 74 | 21

FLEET OPERATIONS: Ground Ops De-planing and boarding are some of most critical processes in which an airline can save time turning around an aircraft. Britz believes that boarding by row-numbers from back to front is as good a method as any. According to Ahasic, studies show that random boarding – allowing everybody to board at the same time – is the quickest method, but it is “chaotic.” Boarding by zone (window, middle and aisle seat) is difficult, particularly when a family occupies an entire row.

Simplifying of equipment and processes is also important in streamlining ground operations. “We have an airport-by-airport and gate-by-gate plan for the ideal staging of ground equipment for the shortest distance to the aircraft,” says Payne. Southwest calls this its ‘equipment parking plan’ and has one for each of the airports it serves. Each plan also takes into account differing gate configurations – Southwest may use one equipment parking plan for one set of gates at an airport, but might use a different plan for another set.

Alex Cruz, CEO of Vueling says that in his experience it depends on the mix of business and leisure travellers. “Passengers tend to take different things on board. In general, any segregation of passengers and any implementation of duel queues for boarding tend to have a positive effect.” He adds that pre-boarding document checks and jet bridge boarding prior to flight boarding – both standard for most airlines – can also lower turn-around times.

‘Pre-staging’ equipment and staff resources is highly important for any airline intent on streamlining its ground operations, says Rolf Hartleb, chief commercial officer of the Bern-Belp airportbased regional carrier, SkyWork Airlines. The Swiss operator of Q400s and Fairchild Dornier 328s outsources its ground handling, but says Hartleb, it makes sure contractors know “the most important thing is that everything has to be ready in advance.”

“The ground crew really has to be in place when the aircraft arrives – if you arrange things after the aircraft is in position, it’s too late,” says Hartleb. “It all costs money, but in order to maintain passenger satisfaction, you have to do that.” Using jet ways attached to the airport terminal creates fewer operationaldelay risks than parking at outlying stands, he believes. Buses, ground crew, air stairs, fuelling and other service vehicles need to be in position before the aircraft parks at the stand in order to avoid delay. “Where there are jet ways, we use them – it’s expensive, but it reduces the problems of communication,” says Hartleb.

Andreas Britz, principal SH&E

Payne says Southwest has always used its “first-come, first-served” model, with people assigned to numbered groups of 15 passengers depending on when they check in. Group ‘A’ boards first, and as Southwest has never offered assigned seats, they get the best choice of where to sit in the aircraft. Nowadays Southwest has modified the boarding process with two paid-for services, one called ‘early bird’ (passengers pay Southwest to automatically check them in 24-hours in advance) and ‘business select’ (this guarantees that the passenger will be among the first 15 passengers to board).

Communication, team spirit and flexible work-rules Southwest Airlines illustrates other important factors that could help an airline streamline its ground operations, according to Mark Ahasic, senior airport planner with engineering and design consulting firm, Arup. For example, Southwest excels in providing good communication between the ‘below-wing’ staff (such as baggage-handlers, fuellers and catering-service workers) and the ‘above-wing’ staff (gate agents, dispatchers and pilots).

When an aircraft is at the gate good communication is vital in getting the aircraft away quickly. Ahasic says Southwest achieves this by having an operation manager serve as a “quarterback for communications.” The manager co-ordinates workers servicing the aircraft and those boarding the passengers. Southwest’s Payne says the carrier also uses coded radio communications during the process to keep exchanges clear and simple.

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Southwest’s closely co-ordinated ground process is an example of strong team spirit. “The key is [that] their unions work together and understand there’s benefit in efficiency,” says Ahasic. This team spirit, says Ahasic, “has been in Southwest’s DNA since the early days.”

It is common for a Southwest Airlines captain to carry a mother’s baby-stroller down aircraft steps; or for a gate agent to close overhead stowage bins. In some airlines, says Ahasic, “a flight attendant can file a union grievance if a gate agent touches an overhead bin.” Southwest also has flight attendants (and even its pilots) put on blue plastic gloves and pick up rubbish in the cabin, helping the cleaning crews who come through the aircraft after the passengers have disembarked.

Like their colleagues at Southwest, SkyWork Airlines’ flight attendants go through the cabins of its aircraft before landing to pick up passengers’ rubbish, but they do it with Swiss flair.

Instead of flight attendants dragging big plastic bags with them, as is the practice in the US, SkyWork’s cabin crews wheel a trolley.

“It’s more discreet,” says Hartleb.

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AFM74_Ground Ops_AFM74 12/07/2011 10:03 Page 22

22 | AFM • ISSUE 74 July-August 2011

FLEET OPERATIONS: Ground Ops

Photo: SkyWork

One thing airline’s reach a consensus on is that sorting and prepositioning passengers by boarding group in queues close to the gate shortens the boarding time. The second thing, says Payne, is that “educating” the customers prior to boarding helps ensure they board with the proper group.

marshalling. Frankfurt airport uses neon lights which, from the pilots’ perspective, converge into a single light when the aircraft reaches the stopping point for the gate. Meanwhile, pushbacks without tow bars are increasingly employed to reduce turnaround times.

Britz notes that United Airlines makes particularly educative initial announcements about its boarding process. Accordingly, its passengers are usually aware of what will be involved and will board easily and quickly. Britz also points out that, for years, Lufthansa has pre-staged passengers in queues near the gate to help speed up boarding international flights.

A technology used widely at major US hub airports to help airlines stay on schedule is the use of ramp information display systems (RIDS) on or near the exterior of each gate. RIDS are programmed to display the flight number, destination, number of passengers and the departure time, in some cases with a clock counting down until the scheduled push-back. Britz suggests other information should also be programmed into RIDS displays for the benefit of ground staff, such as the number of passengers not yet on board.

What often slows the boarding process, remarks Hartleb, are passengers who stand in the aisle and block other people getting to their seats. “I’m not telling the passenger to rush,” he says; the slow passenger is something airlines will have to deal with.

Nevertheless, there are other design steps and process adjustments that airports and airlines can make to speed up turnaround times and improve ground-operation efficiency, says Britz.

One is to use two jet ways and two boarding doors on the aircraft rather than one, particularly when disembarking and boarding a widebody aircraft. This has been found to reduce boarding time by as much as a third, he says.

At Frankfurt, where Lufthansa has to park some aircraft at remote stands and transport passengers to and from them, the German carrier has found that using three sets of air stairs (one for first-class and business-class and two for economy-class passengers) achieves a 40 per cent saving in boarding time.

Ahasic points out that many European low-cost airlines routinely board using two doors, usually a jet way at the front and an air stair – which passengers reach by a cone-demarcated pathway across the ramp – at the rear of the aircraft.

Technologies and techniques Lufthansa, a leader in boarding technology, also uses automated boarding gates. Passengers insert their boarding passes or show 2D barcodes on their smartphones in order to open a barrier and gain access to the jet way. Several US carriers have trialled similar systems though they are not in general use in the US yet, says Ahasic.

Meanwhile, says Britz, various Asian airports have adopted automated aircraft-guidance systems similar to one that Frankfurt Airport has been using for years. Such systems guide aircraft to the gate and tell it when to stop without the need for human

Mark Ahasic, senior airport planner, Arup

Ahasic suggests that, to hasten turn-arounds, airlines may wish to start refuelling as soon as passengers disembark. Some airlines already do this although many others do not allow it. Whatever the airline’s risk assessment of the practice, fuelling a narrowbody aircraft at 800 gallons a minute throughout the de-planing process almost certainly ensures the aircraft will be fully refuelled by the time the next passengers begin boarding. Britz says airports should consider providing fuel hydrants on each side of the aircraft, rather than just one. Fuel-pump carts can be attached quickly to each hydrant and moved a few feet to an optimal position by the aircraft. Not only will this ensure the aircraft is refuelled twice as fast but it will also be better balanced during (and probably after) refuelling. Meanwhile, providing a stationary water supply at each gate prevents the need for a water truck.

Wherever possible, airports should provide double-width taxiways on the aprons between concourses. Almost invariably, this will prevent aircraft that are taxiing towards the gate from being obstructed by aircraft that have just pushed back and are not yet moving. At some US airports – New York LaGuardia and Newark are two – the concourse layouts make some gates difficult to reach; some gates are so constrained for space that aircraft must be towed in by tugs.

Vueling’s Cruz believes that “only by significant airport and aircraft re-design – not expected over the next 30 to 40 years – will we achieve a significant scale of efficiency gains. Until then, it’s about flexible processes that adapt themselves to the type of passenger traffic and facilities at each airport.”

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AFM74_EUETS_AFM74 12/07/2011 09:57 Page 24

24 | AFM • ISSUE 74 July-August 2011

FLEET OPERATIONS: EU ETS Now that the first year of the European Union Emissions Trading Scheme (EU ETS) has passed, Neil Duffy technical manager at ICM ETS, which specialises in the verification of aircraft operators, takes a look at the scheme, the concerns it has raised and the strategies that can be employed to overcome them.

AN UPDATE ON EU ETS:

ARE WE CONFIDENT? HE EU ETS IS THE MAIN TOOL ADOPTED BY THE EU TO combat climate change. It has been running since 2005 for static installations (power plants, factories etc.) with aviation joining in 2010 (under legislation signed in 2008) after the International Civil Aviation Organisation (ICAO) failed to implement the mandated global scheme for aviation.

T

The scheme works on a ‘cap and trade’ basis. This cap is on the total level of emissions per year for the European industry and operators must surrender an allowance for each tonne they emit. These allowances can be bought and sold freely and there are investors who buy allowances purely for speculation – i.e. the ‘trade’ part. This allows the free market to dictate the price of emissions and means that reductions in emissions occur where they are most cost effective.

For aviation, 2010 and 2011 are monitoring years – operators will not have to surrender allowances until 2012, but the regulators still require them to report their verified emissions figures. These introductory years give operators experience in the monitoring requirements of the scheme, how the verification process works and how to avoid costly mistakes when the surrendering of allowances begins.

In practise: Costs and considerations Operators are required to monitor the amount of fuel they burn on eligible flights and multiply this by a standard emissions factor – 3.15 for Jet A1; 3.10 for Jet B and Avgas; and 0 for biofuel – to calculate the CO2. The exact requirements for monitoring fuel usage are set out in the Monitoring and Reporting Guidelines (MRG) (which, while

called ‘guidelines’, are in fact legislation and carry the full weight of the law).

Other issues, such as fleet lists, need to be documented carefully. For static installations, the boundaries are easier to define but as fleets of aircraft regularly change, it can be harder to establish who is operating an aircraft for any given flight. This is something to be taken into consideration when drawing up lease agreements, management contracts and during flights that form part of the change of ownership of aircraft.

…

As free

allowances are awarded on the basis of tonne-km data but surrendered based on the amount of CO2 emitted, the scheme presents opportunities for an airline to raise capital and reduce long-term costs.

…

AFM74_EUETS_AFM74 12/07/2011 09:57 Page 25

July-August 2011 AFM • ISSUE 74 | 25

FLEET OPERATIONS: EU ETS Compliance costs must also be considered. The UK, for example, does not ring-fence any of the funds raised through the ETS so the regulators must cover their costs in other ways – such as annual subsistence charges and by charging for the submission of a plan. In extreme cases business aircraft taking a single flight into Europe can have higher annual administration fees than the cost of allowances however, these are not charged in all countries. The staff costs for monitoring and preparing reports should also be considered.

In addition to the administration costs, which everyone must bear, operators that fail to comply with the scheme face penalties. The EU has mandated a €100 charge for every allowance an operator fails to surrender by April 30 of the year following the reporting period. The requirement to surrender an allowance also carries over to the next period. Failure to pay can result in an EU-wide operating ban.

As each member state is free to choose how they transpose the directive into national legislation there are also different penalties at national levels. For example, the UK has various penalties, the highest of which is up to £33,750 ($53,760) for failing to report emissions. Failure to pay the UK fines can result in the aircraft being seized and sold to recover the costs.

A market of third-party traders behind the scheme requires information on demand for allowances; there are strict rules that govern how the data is collected and how accuracy and consistency across the industry is ensured. To achieve this, all procedures must be documented and controlled and all quality assurance records must be kept for 10 years from the time at which the reports are submitted.

Many operators – not used to scrutiny of their processes at this level – have found compliance to these requirements a challenge. Therefore, the control environment is often more suited to quickly compiling reasonably accurate figures. The best way for an airline to ensure procedures are up to the requirements of the scheme is to follow the MRG. The cost of the scheme is something all operators need to consider. With fuel prices around €700 per tonne ($1=€0.7) and allowances trading at just over €13 per tonne (remember 3.15 tonnes of CO2 per tonne of fuel), the cost of allowances alone is about six per cent of an airline’s fuel bill, ignoring free allowances.

As the price of allowances is controlled by the market, it could rise or fall in the long-term, in fact, while writing this article, the value of allowances dropped from €17 to €13. It is generally accepted that the current price is too low to motivate investment; indeed several proposals to artificially raise the price have been mooted. Many operators are therefore already considering how to hedge their costs.

Opportunities and strategies for airlines As free allowances are awarded on the basis of tonne-km data but surrendered based on the amount of CO2 emitted, the scheme presents opportunities for an airline to raise capital and reduce long-term costs.

If an airline that emits 100,000 tonnes of CO2 gets 80 per cent of its allowances for free it will be required to purchase 20,000 allowances each year, however in practice, free allowances are given more than a year in advance so when an operator has to surrender them it will be one year ahead. Scenario one (see the table over page) indicates what happens if an airline never buys or sells allowances until it has to. By 2017, it would have to purchase 20,000 allowances annually and by 2020 it would have purchased a total of 80,000 allowances.

AFM74_EUETS_AFM74 12/07/2011 09:59 Page 26

26 | AFM • ISSUE 74 July-August 2011

FLEET OPERATIONS: EU ETS

It should also be noted that if an airline relies on the next year’s allowances during the early years (as in both of these scenarios) but is not allowed to borrow allowances in the later stage from 2021, it would have to buy 100 per cent of its allowances. As such, hedging options should also be seriously considered.

In practice, the European Commission has acknowledged this will not work for a significant number of airlines for the reasons mentioned above however, the aviation sector is expected to purchase allowances from other industries. This will drive up the price of allowances, increasing the incentives for other industries to make reductions in this way. As such, aviation’s role within the scheme should be viewed as being part of the broader ambitions to reduce emissions across all industries.

Scenario 1 2012 2013 Feb Mar Feb Mar Free Allowances 80 80

2014 Feb Mar

2015 Feb Mar

2016 Feb Mar

2017 Feb Mar

2018 Feb Mar

2019 2020 Feb Mar Feb Mar

80

80

80

80

80

80

Surrendered 0 -100

-100

-100

-100

80

-100

-100

-100

-100

20

20

20

20

Purchased/Sold

Total 80 80

160 60

140 40

120 20

100

0

80

0

80

0

80

0

80

0

2014 Feb Mar

2015 Feb Mar

2016 Feb Mar

2017 Feb Mar

2018 Feb Mar

2019 2020 Feb Mar Feb Mar

80

80

80

80

80

80

Scenario 2 2012 2013 Feb Mar Feb Mar Free Allowances 80 80 Surrendered 0

-90

-90

-90

-90

-90

Purchased/Sold -30 Total 50 50

130 40

120 30

110 20

100

10

90

0

80

80

-90

-90

90

10

10

10

0

80

0

80

0

If, however, the airline sells 30,000 of its allowances when it first receives them, then invests that into technology that reduces its emissions by 10 per cent every year, it would only have to purchase 10,000 allowances annually (see Scenario 2). But as the airline would have the following year’s allowances it would have more than is required so would not have to purchase any additional credits until 2018.

Even then it would only have to buy 10,000 each year (half of what it would had it not invested) and by 2020 (when free allowances will be re-calculated), it would only have had to purchase a total of 30,000 to 50,000 less than in scenario one – which is over €600,000 at today’s price (June 29. Or €800,000 in the week preceding).

Although this is a simplistic example, allowances be a relatively inexpensive way to generate capital. In practice, probably only the largest low-cost carriers will see true benefits as most operators will not receive enough free allowances and because there is not yet the technology to offer this sort of return on investment. However, as emissions are directly proportional to fuel, any saving in emissions also saves in fuel costs. While this might not be the main driver for investment it could certainly be part of the cost benefit analysis when considering investments.

International response Backed by the Air Transport Association (ATA), American Airlines, Continental Airlines and United Airlines have taken their legal case to the European Court of Justice with hearings due to start on July 5. The airlines claim that the EU ETS cannot be applied to international flights as most of the emissions occur outside European airspace. A verdict to the case is not expected for over a year.

Although the dispute has been brewing since the scheme was first announced, it has grown in recent weeks with various other operators, nations and bodies (such as IATA) raising public objections. The most noticeable development is the threat that China might start a trade war, imposing punitive taxes on EU carriers. It has also threatened to boycott the European manufacturer, Airbus, and there are reports that an order for 10 A380’s has been delayed due to this. China’s main aviation body said it will back airlines taking legal action against the ETS, such as American, Continental and United are doing.

In response, it has been suggested that if China (or any other country) makes the same commitment to emission reductions then its airlines could be exempt from the scheme. The suggestion is in keeping with the general philosophy of climate change being a global issue. Provisions were included in the original directive to allow co-operation with other nations that implement similar schemes where possible. Negotiations have already begun with Switzerland and with schemes either in place or starting in South Korea, New Zealand and several US States, there are also debates occurring in several other countries around the world and there is ample room for expansion of the scheme.

The EU is currently drafting a new regulation for the scheme that will come into force from January 2013. Wholesale changes are not expected but it should take into account the lessons learnt from our experience so far.

There is still an uncertain future regarding the legal status of the scheme but the concept of cap and trade is well established. Even if international flights become exempt under the EU ETS due to political pressure the scheme will most likely remain in force for intra-EU flights and this might lead to a bigger problem in the form of a global patchwork of regional schemes. ICAO could solve many of the issues under a global scheme, as they were mandated to create under the Kyoto Protocol, however it is unclear when, or even if such a scheme could be created.

The ETS has had a bumpy road to get to where it is today and while it is not perfect, there are reasons to be confident.

Regulators, operators and verifiers are all learning and with new draft regulations in the pipeline, plus two years’ of experience by the time trading starts in 2012, hopefully today’s lessons will make it easier for operators in the future.

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AFM74_Air finance_AFM74 12/07/2011 10:13 Page 28

28 | AFM • ISSUE 74 July-August 2011

TRADING, LEGAL & FINANCE: Air finance Finance has been readily available to the majority of airlines despite the cyclical nature of airline earnings and a worse record of profitability than most other industries. The strength of aircraft as assets and the might of the aviation financing industry has withstood economic ups and downs. Peter Morrell explains the aviation finance market and examines the opportunities it offers. Morrell is a visiting professor at Cranfield University, a faculty board member at Krems Donau University, Austria and an air transport consultant.

M

ANY OF THE LARGER INTERNATIONAL BANKS HAVE traditionally been involved in aerospace and aircraft financing and often have specialist departments within this industry. Until 1990, the big US banks such as Citibank and Chase Manhattan Bank headed the table of top loan providers for aircraft transactions. By 1990, however, these two names had disappeared from the top 20 and were largely replaced by Japanese banks, such as Fuji Bank, Sumitomo Bank and the Mitsubishi Trust and Banking Corporation. More recently, the position has been reversed with Japanese banks being replaced by large US and European banks including some new entrants from the UK such as Halifax and Abbey National (both formerly building societies). An indication of the banks most involved in aircraft financing can be noted by analysing export credit deals.

In 2010, the CrĂŠdit Agricole Group, BNP Paribas, Citi and HSBC were the most involved. Barclays, which was a main player in the early 2000s, slipped back and JP Morgan and Credit Suisse moved to take its place.

Emirates: A case study in aircraft finance Airline capital expenditure can be financed internally with cash or retained earnings, or externally by lenders or lessors using a variety of financial instruments. It is difficult to obtain comprehensive data on the sources of finance for aircraft deliveries however, we do know that the total value of all commercial jet deliveries in 2009 was around $70bn and Boeing estimates a need for $77bn in 2011, a quarter of which will be from cash (Figure 1).

Figure 1:

Global financing forecast for 2011 2% 5% 25%

10%

Commercial banks Export credit agencies Cash Lessors Tax equity

25% 33% Source: Boeing Commercial www.boeing.com

Capital markets Singapore Airlines has said it will lease 15 more A330-300s

AFM74_Air finance_AFM74 12/07/2011 10:13 Page 29

July-August 2011 AFM • ISSUE 74 | 29

TRADING, LEGAL & FINANCE: Air finance

AIRLINE FINANCE UNRAVELLED

Figure 2:

Emirates fleet financing over the past 14 years Figure 2 shows how the fast growing hub carrier, Emirates, has financed its aircraft from external sources with operating leases taking a sizeable share. The US and EU export credit agencies (ECAs) together accounted for 23 per cent of finance, but this source has recently been made less attractive as will be described later. Islamic finance is a relatively new source but needs to comply with Sharia law; deals completed so far have been in the form of a lease.

Figure 2 does not include internal cash-generated funds or net profits. Deferred taxes and the profits from the sale of assets will also be internal sources of finance. For many airlines, depreciation is the largest single internal source; some carriers, such as Singapore Airlines, have also generated substantial cash from aircraft sales. More recently, Ryanair has sold relatively new 737-800s obtained from the manufacturer at a large discount. Few major airlines pay dividends given the need to find finance for capital expenditure and to provide a cushion for these sudden downturns.

5% 10% 42% 10%

Operating lease Commercial loans US Ex-lm EU ECAs

13%

Bonds Islamic finance

20% Source: The myths and facts about Emirates and our industry, www.emirates.com

AFM74_Air finance_AFM74 12/07/2011 10:14 Page 30

30 | AFM • ISSUE 74 July-August 2011

TRADING, LEGAL & FINANCE: Air finance

Sources of external finance Most airline finance is long-term as although it may be more expensive than short-term it is better suited to the economic life of an aircraft and therefore a rate of finance can be locked down for the large part of the asset’s life. It also avoids frequent refinancing of short-term finance, which may be difficult when credit is not widely available. Of course, airlines may have the use of aircraft on a short-term operating lease but such aircraft will be financed by the lessor.

Airline owners can provide equity and preference share capital to help fund an airline. Outside North America and the European Union (EU), many of the world’s scheduled airlines are still more than 50 per cent owned by their governments. Other shareholders include other airlines (usually minority interests so as not to affect traffic rights); financial institutions (investment and insurance companies, hedge funds, private equity and pension funds); and employees (individually or through a trust).

In 2005, Lufthansa’s shareholding was comprised of 30 per cent private and 70 per cent institutional investors. Employees or other individuals do not generally hold shares unless they can be traded either on a stock market or through a special arrangement.

United Airlines in the US used to be 55 per cent owned by three labour unions that held shares on behalf of their members. The employees of Air France-KLM held 11.8 per cent of the share capital at the end of March 2010, with the French government retaining a further 15.7 per cent. Just under two-thirds of its shares are held by French interests.

Financing assets by raising additional equity has the advantage of improving the relationship between equity and both output and existing debt, and it permits further borrowing. It may however, dilute the control of existing owners and facilitate a take-over by another company. Thus, private companies do not often use share issues to fund equipment purchases.

Preference share capital is similar to equity capital but there is a maximum return or fixed dividend payable (as long as the airline makes a profit) and no voting rights are attached. It ranks before equity shares for the payment of dividend and distribution in the event of bankruptcy and is therefore less risky. Preference shares can either be redeemable (whereby the company can buy them back from shareholders at a future date), or perpetual (in the same way as ordinary shares). Other features can be: cumulative (where any unpaid dividends are carried forward to the next financial year) or non-cumulative; and participating (when a basic dividend is paid, plus an additional variable mount depending on how much is left for distribution after paying a dividend to ordinary shareholders).

In 2011, the Indian airline, Kingfisher, issued cumulative redeemable preference shares with a coupon of eight per cent (the proceeds going to pay debt). In this case, the non-voting nature of the shares meant that the family holding in Kingfisher was not diluted. Preference shares can also be convertible in the same way as bonds – Malaysian Airlines (MAS) used this type of financing in 2007.

Bonds, debenture and unsecured loan stock are financial securities or long-term promissory notes that pay a fixed or variable rate of interest and a have a fixed term. They are negotiable, which means that the public can hold, buy or sell them in the same way as shares. Bonds can sometimes be traded on the Eurobond or US bond markets. They are re-paid or redeemed at par on the due date. In the case of debentures, they can be secured by a fixed or floating charge on the airline’s assets.

A mortgage debenture is secured on specific land or buildings. A fixed charge is on specific assets, a floating charge is a general charge on all assets owned.

Convertibles give the holder the option to convert to ordinary shares within a certain period. They allow finance to be raised, often at a time when the share price is weak, on a fixed interest basis but with rights attached to convert to ordinary shares at a future date and at a given conversion rate. In addition, they can usually be traded on a stock market. The coupon or interest rate is lower than would be the case for loan stock without the conversion rights.

Lufthansa issued convertible bonds totalling €750m ($1=€0.69) in January 2002, with the relatively low interest rate of 1.25 per cent per annum maturing in 2012. The conversion price was €19.86 per ordinary share. These were quoted on the Luxembourg stock exchange. In January 2006, the Lufthansa ordinary share price was well below the conversion price; the interest paid was also by then unattractive, as such around €700m worth of bondholders exercised an option they were granted to redeem the bonds.

Equipment Trust Certificates (ETCs) are similar to a secured bond but arranged in the form of a lease. The airline sells the certificates to investors to pay for aircraft, which is then owned by a trust on behalf of the investors. This can be done for single aircraft or multiple aircraft, and certificates issued to finance new aircraft can be secured against aircraft already in an airline’s fleet.

Lease payments are made to the investors through the trustee.

On maturity, title to the aircraft passes to the airline. This form of finance was largely restricted to the US market in the 1990s because of the protection it affords investors when the airline lessee enters Chapter 11 (a form of bankruptcy administration unique to the US).

A modified version of the ETC is the Enhanced Equipment Trust Certificate (EETC). Rather than selling one type of certificate or bond, the EETC divides these into different categories, each of which has a different risk or reward profile in terms of security and access to lease rental cash flows. A structure of this type will give the senior (lower risk) certificates a much higher credit rating than under the ETC. The EETC was developed in the US in the 1990s as a means for non-investment grade airlines to source funds using investment grade ratings, with the added advantage of giving more protection to the owner of the aircraft in the event of Chapter 11 bankruptcy. Outside the US, EETCs are still rare with only Korean Air, Qantas, Air France-KLM and Iberia using them, the latter denominated in Euros.

Term loans are generally negotiated from banks or insurance companies and are easier and cheaper to arrange than bonds.

They can be arranged on a bilateral basis for smaller amounts, or on a syndicated basis for larger loans. For the latter, a lead bank will organise a number of banks to participate in the loan and form a closer relationship with the airline. They will need to be satisfied that the equity base is adequate, the borrower has a long-term commitment to the business, and financial contingencies are in place for possible business downturns.

Covenants are frequently applied in the form of ratios that must be satisfied: if airlines do not meet these ratios default may follow. One advantage of term loans is the ability to match the financing to the expected life of aircraft. However, the economic lives of aircraft have been increasing to the extent that this rarely happens now. The loan period could be between 10 to 15 years, depending on airline creditworthiness. The nominal interest rate depends on general economic conditions, as well as the airline’s creditworthiness.

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AFM74_Air finance_AFM74 12/07/2011 10:14 Page 32

32 | AFM • ISSUE 74 July-August 2011

TRADING, LEGAL & FINANCE: Air finance

The London Inter-Bank Offered Rate (LIBOR) or the US Prime Rate may be used as benchmarks for the loan and a floating or fixed rate may be adopted. LIBOR has fallen significantly from the beginning of 2006 to 2011 but lenders have imposed higher margins so airlines have not benefited much from the lower interbank rates.

Term loans can be combined with an export credit guarantee, which reduces the bank’s risk and lowers the interest rate paid on the part of the overall loan that is guaranteed (85 per cent of the net price of the aircraft). The terms and rates were originally laid down in the Large Aircraft Sector Understanding (LASU), an agreement between aircraft-exporting countries to prevent unfair competition. In 2011, new rules were introduced under the Aircraft Sector Understanding (ASU). The new rules make ECAbacked finance much more expensive and closer to market rates.

They are a response to a campaign made by airlines that could not access this finance because of the Home Country Rule (under which airlines in the US, France, Germany, the UK and Spain – the countries in which Airbus and Boeing aircraft are manufactured – can not use the same attractively priced finance other airlines can).

Where export of an aircraft from one country incorporates a substantial share of airframe or components from another country, two or more ECAs would be involved. This is essential for Airbus aircraft. Financial support is generally proportionate to each ECAs national manufacturer’s share in the production of the aircraft (e.g. for an A320 with IAE engines: UK 32 per cent, France 32 per cent, and Germany 36 per cent; or an A321 with CFM engines 17 per cent, 52 per cent and 31 per cent respectively). Another example is the involvement of both the US’s Ex-Im Bank and the UK’s Export Credit Guarantee Department (ECGD) in financing a 757 with Rolls-Royce engines.

The export credit volume varies significantly from year to year, with just under $8bn of deals reported in 2007 for the US and EU agencies, this compares to almost $18bn in 2009. In 2009, Ex-Im supported finance for 143 aircraft to 17 airlines in 18 countries.

For the financial year 2009 to 2010, ECGB guaranteed around £2bn ($1=£0.62) worth of Airbus aircraft exports, of which 46 per cent was for operating lessors.

Term loans may also involve support from the manufacturer(s) whose aircraft is being financed. This is usually from deficiency guarantees on the aircraft on a first loss basis. This would be activated in cases where a default occurs on a secured loan: the aircraft is repossessed and sold by the bank(s) and the sale proceeds are insufficient to cover the outstanding debt. The manufacturer would then cover the loss up to an agreed maximum. The part paid by the manufacturer could be a preagreed amount of the unamortised loan principal, or a preagreed share of the sale loss.

Manufacturers occasionally provide loans to airlines to assist in a large sale, but they would be short-term or would allow exit through conversion to the airline’s equity and subsequent share sale. For example, Boeing financed United Airlines in the 1980s and more recently AirTran for the purchase of 717s. Airbus provided a $250m loan to US Airways for its order of A320 family aircraft in 2001. By 2006, $89m was outstanding when it was written off against a new aircraft order.

Leases A finance lease involves the acquisition and ownership of the aircraft by a company set up solely for owning the aircraft (Special Purpose Vehicle or SPV). The company purchases the aircraft from equity and bank debt, and is usually highly geared.

The airline itself may have a minority stake in the SPV through converting the advance payments that it has paid to the manufacturer prior to delivery into equity. Often the equity investors are able to take generous tax allowances that lowers the overall cost if this type of finance to the airline.

The best example of this was Japanese Leveraged Leases (JLLs), which until 1999, offered tax benefits in both lessor and lessee countries of domicile (known as double dipping), with equity provided by Japanese individuals and companies that were unable to use all their tax allowances. Debt was provided by Japanese banks and the net cost to airlines was very low.

However, they were only available to well-known airlines such as British Airways, Lufthansa or Cathay Pacific. British Airways used them for many of its aircraft financing in the 1990s.

An operating lease covers a shorter period (one to seven years) than a finance lease and is not placed on the balance sheet.

However, the dividing line between the two has become blurred.

The key features of an operating lease are that it allows airlines to respond rapidly to changes in market conditions and gain the use of an aircraft often with minimum delay and without the obligation to pay its full cost. The lessor expects to profit from either selling or re-leasing the aircraft, which it has bought from the manufacturer often in large numbers at large discounts. The lessee generally cannot choose the aircraft specification and the lessee is usually responsible for the maintenance of the aircraft and often has to pay the lessor a maintenance reserve.

Operating lease rentals vary quite significantly over the economic cycle with lessors often accepting a short-term drop in monthly rentals to avoid re-marketing or even parking aircraft.

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AFM74_lessor_AFM73 12/07/2011 10:15 Page 34

34 | AFM • ISSUE 74 July-August 2011

TRADING, LEGAL & FINANCE: Lessor ranking Paris orders, the sale of RBS, market saturation and the introduction of Basel III – aircraft lessors have much to contend with. New and market-leading lessors spoke to Mary-Anne Baldwin at the Paris Air Show on these and other subjects. Plus, we give you low-down on who is moving and who is losing with portfolio value data from Ascend.

STATE OF THE NATION:

LESSORS ASSESS THE MARKET AT THE PARIS AIR SHOW W

E’VE CLEARED THE APEX OF THE FINANCIAL GALE though we’ve yet to clear all the debris and wreckage.

The used aircraft market is yet to fully recover and bank lending has not returned to pre-crisis levels. However, much has been tided. ILFC was nationalised, CIT Aerospace entered and exited Chapter 11 and AerCap’s freefalling share price has risen.

“I know our balance sheet is growing and if we didn’t sell we’d be growing even faster,” says Liu. He adds that the company tries to invest $6.5bn in assets each year and it must invest $5.5bn just to stay flat “which is an enormous amount compared to other guys out there. The net growth is about $1bn in rough numbers but on a portfolio of $50bn that’s not a lot.”

Next Royal Bank of Scotland (RBS), which is 83 per cent owned by the UK government, is to sell its aviation arm, valued at $6bn, having waiting for the maelstrom of the downturn to clear.

Robert Martin, CEO of BOC Aviation told AirFinance Journal that BOC would consider buying RBS given the right economics.

However, he told AFM at the air show: “It’s up to the UK government… this is a nationalised bank (RBS, parent of RBS Aviation) where the state has taken majority shareholding, so the state must decide.” In terms of BOC’s clout, it ranks sixth – the same as in 2010 – however its combined portfolio value has risen by $783.7m.

But which lessor will be able to ingest a company the size of RBS Aviation? It seems too early to judge though it is clear the industry will be watching only the upper echelons. Speaking to Norman Liu, president and CEO of GECAS at the recent Paris Air Show, he said he had heard “rumblings” from leasing companies and financial firms interested in the purchase. He added: “I think we’ll look at it and if the economics make sense maybe we’ll do something.

“It’s of a size that you’d need pretty deep pockets. And remember that they have an orderbook of some 100 planes, so the manufacturer needs to be comfortable with whoever assumes those… Or else it would be some kind of piecemeal solution – that might make it more palatable.”

Guy Hands, founder of Terra Firma and former owner of EMI, has stated his intent to buy the division while other contenders are rumoured to include ICBC and HKAC. Perhaps in preparation, the latter hired former RBS head of aviation Donal Boylan last April.

According to data from Ascend which ranks lessors by their portfolio value, RBS slipped two places to fifth and its combined portfolio value (comprising both stored and in service managed aircraft) fell $173.3m year-on-year. GECAS and ILFC are the largest lessors remaining at first and second place respectively, however ILFC’s combined value fell by $5487.85m.

Looking at other lessors that feature high in the rankings, AerCap rose seven places to third, increasing its combined portfolio value by $1838.4m year-on-year. CIT held its place at fourth, Babcock & Brown dropped two place to seven and AWAS was up one to number eight.

Of particular note was Macquarie, which rose five places to 10 and saw its portfolio value climb by $1312.45m. Boeing Capital Corporation (BCC) dropped a significant seven places just making the top table at number 20. Its managed portfolio value fell $503.95m.

The new wave As the larger lessors have been re-couping or planning to sell, new entrants have come in to scavenge what deals they can but according to John Higgins, CEO of Avolon, there is room enough for both. “I don’t think there’s been a death of the mega-lessor [a subject talked about across the industry] just a lot of market opportunity and people like ourselves have been able to step in and satisfy that market demand.”

In late June, Infinity Aviation Capital announced itself to the market. The new finance and leasing company is a joint venture

AFM74_lessor_AFM73 12/07/2011 10:20 Page 35

July-August 2011 AFM • ISSUE 74 | 35

TRADING, LEGAL & FINANCE: Lessor ranking A converse criticism is that new lessors have been pricing up the sale and leaseback market. To this, Higgins responds: “I have the insight so I can say with certainty that we haven’t bid up, but clearly I can’t make that information public, we’re a private company.

What others believe is under-cutting, Higgins says is dexterous negotiations. “When airlines award a mandate they don’t award the mandate purely on the basis of economics… when I sit in front of an airline we trade off a number of things; our experience, low risk, the economics, our understanding of a particular operator and how they like to structure a lease in a particular way.

Robert Morin, VP Transport, US Ex-Im

between Perella Weinberg and three aviation industry veterans: Richard Baudouin, co-founder of Aviation Capital Group, and Khawer Ali and Jerrold Rosen, both principals at KJ Aviation Services.

Infinity has already acquired its first three aircraft, pre-owned 737NGs, which are currently leased to a major airline. It said in a statement that it intended to invest further in jet and turboprop aircraft, engines and other related assets as well as mezzanine loans.

David Schiff, Partner at Perella Weinberg, stated his reasons for joining the new venture. “Recent disruptions in the airline and aircraft leasing industries have resulted in significant opportunities to provide needed liquidity and financing solutions to airlines, leasing companies, and other owners of aircraft and equipment.”

Despite newcomers detecting ‘significant opportunities’, others – namely established lessors – have complained that there is not enough capacity in the market. However, the success of Avolon, and even more so of Air Lease Corporation (ALC), proves otherwise. ALC raised $802.5m in its initial public offering (IPO) in April. It sold 30.3 million at $27.56, four per cent higher than the IPO price. Avolon has raised $3bn in capital since May 2010, ordered 12 new 737-800NGs, eight new A320s and completed sale and leaseback and portfolio transactions for over 60 aircraft.

Its ‘base-case business plan’, says Higgins, is to build a portfolio of about $6bn over the next two years.”

“I’ve heard the commentary. But we are winning a small percentage of the deals we bid on because we are very disciplined... We don’t want to do whatever deal is on the market and then look back in a few years and say ‘how did we turn out to have 50 per cent of our book in this country?’.” However, he admits that when he sees a deal that fits his portfolio the gloves may come off, chosing to be more competitive if bidding for a deal in one region more consistent with its portfolio build-up.

As a lessor that has a low cost of funding, BOC Aviation has few concerns about what it’s CEO, Martin, sees as the natural rise of the new entrant leasing company. “When you’re a new company you have to rush to get critical mass and we’re very happy to help them do that, we’ll sell them aircraft with leases attached to get them going. We sold to ALC in the early days and to others, so we don’t see them as a threat… actually we need new players because no one party can do the amount of capital expenditure that is going in this cycle.”

Meeting commitments Despite airline bankruptcies and route cuts, the top lessors have generally kept their aircraft on lease. BOC boasts that it has not had an aircraft off lease for five years (it currently has 175 aircraft) and according to a report written by Goldman Sachs which was released in May, only three lessors had aircraft returned. ILFC had two of its 933 aircraft grounded when its Indonesian customer ceased operators, however one of the two aircraft was quickly released. Other early returns included Aircastle and AerCap, which had aircraft in the Middle East and Africa, both of which were affected by political unrest.

Lessor ranking by managed value Aircraft operating lessor

Est. value inservice aircraft ($m)

Est. value stored aircraft ($m)

Combined value ($m)

2010 Combined value [$m]

GECAS ILFC AerCap CIT Aerospace RBS Aviation Capital BOC Aviation Babcock & Brown Aircraft Management AWAS Aviation Capital Group Macquarie AirFinance Aircastle Advisor Doric Asset Finance & Verwaltungs ICBC Leasing MC Aviation Partners/Mitsubishi Corporation Amentum Capital CDB Leasing Hong Kong Aviation Capital DAE Capital SMFL Aircraft Capital Boeing Capital Corp

34,564.60 27,168.00 6,955.35 6,623.40 6,369.60 6,249.90 5,756.10 4,409.60 4,253.90 3,738.55 3,278.65 2,743.60 2,680.80 2,571.25 2,393.75 2,268.15 2,177.60 2,069.25 1,991.10 1,984.60

962.35 695.05 219.8 81.6 108 N/A 149.3 72 277.8 61.55 149.35 N/A 5.7 21 131.3 48.75 19.5 N/A 23.5 272.95

35,526.95 27,863.05 7,175.15 6,705.00 6,477.60 6,249.90 5,905.40 4,481.60 4,531.70 3,800.20 3,428.00 2,743.60 2,664.50 2,592.25 2,525.05 2,316.90 2,197 2,069.25 2,014.60 2,257.55

34,950.21 33,350.90 5,335.75 6,272.35 6,650.90 5,466.20 6,027.45 4,156.45 4,423.85 2,487.75 3,037.90 2,350.35 N/A 2,605.90 2,216.65 N/A 2,332.00 1,854.70 1,625.05 2,761.50

AFM74_lessor_AFM73 12/07/2011 10:20 Page 36

36 | AFM • ISSUE 74 July-August 2011

TRADING, LEGAL & FINANCE: Lessor ranking is = In Service s = Stored

Aircraft Lessors — Top 20 ranking list

Combined No of aircraft

Aircraft operating lessor

A300

A310

Family A320

A330/40

A380

(CFM) 737

(NG) 737

747

757

767

777

CRJs

ERJ 135-195 MDS

GECAS ILFC AerCap CIT Aerospace RBS Aviation Capital BOC Aviation Babcock & Brown AWAS Aviation Capital Group Macquarie Airfinance Aircastle Advisor Doric ICBC Leasing MC Aviation /Mitsubishi Amentum Capital CDB Leasing Hong Kong Aviation Capital

3s 5is,1s 1is 1s -

3is 3is,1s 1is 1is 1is 1is -

467is,13s 370is,16s 153is,11s 122is,2s 118is,2s 71is 81is,4s 49is,3s 75is,12s 72is,5s 25is,5s 61s 17is 21is,1s 13is,2s 15is 31is

46is,1s 121is,2s 28is 23is 2is 6is 8is 18is 3is 9is 20is 3is 8is 8is 7is,1s 14is 12is

77is,4s 1is 11is -

227is,21s 197is,6s 41is,3s 11is, 1is 37is,11s 52is,7s 37is,9s 12is,2s 15is,2s 2is,1s 5is -

397is,2s 14is,2s 25is 70is,2s 106is,2s 64is 111is 34is 76is,5s 51is 29is,1s 11is 19is 13is 11is 10is

26is 64is,1s 1is 5is 7is 1is 13is,1s 9is 4is 2is 1is,4s 4is,1s

22is,8s 53is,1s 7is,2s 11is 27is,1s 7is 3is,3s 4is,3s 10is -

70is,4s 70is,1s 6is 8is 6is,1s 19is,1s 7is,1s 1is 12is 17is 3is 2is

35is,1s 2is 1is 19is 7is 1is 4is 1is 6is 7is 2is 6is 2is 2is

233is,32s 5is 1is 2is 1is 2is -

149is,12s 8is,1s 9is,4s 2is 7is 4is 6is

34is,4s 6is,1s 8is,1s 11is,2s 9is,5s 2is 1is 9is 1is -

3is 5is 2is

DAE Capital SMFL Aircraft Capital Boeing Capital Corp

-

-

16is 22is -

11is 5is 1is

-

2is 17is,4s

16is 31is,1s 5is

1is

32is

2is 8is

5is -

-

4is -

28is,1s

48 77 101is,26s 224

Others 33is,2s

1845 1017 291 252 245 162 309 203 215 124 129 26 62 86 49 54 70

In a similar recent report by Goldman Sachs, this time on AWAS, it wrote: “AWAS took a large ($292.7m) write-down to its fleet book value in 2009 after it concluded that the financial crisis had permanently impaired the value of much of its fleet. Since then, it has made relatively small adjustments to its fleet, and the aircraft it has sold have been at prices close to or above book value. The current market value of the fleet with no leases attached is approximately $4.4bn, according to Ascend, which is about $1.1bn or 20 per cent below the book value of $5.5bn. We think this method of valuation probably understates the actual value of the fleet when leases are taken into account, and we do not expect significant write-downs in book value from AWAS in the future.”

“Going forward however, high fuel prices appear to be putting pressure on ILFC’s customers. There were 17 customers flying 77 ILFC aircraft that were two or more months late on their lease payments, up from 11 customers in 1Q 2010…While competitors have been able to re-lease aircraft quickly and for relatively little cost after accounting for security and maintenance deposits, more distressed customers could put pressure on lease rates in the next few quarters. ILFC had 49 scheduled lease maturities at the beginning of 2011and 137 in 2012,” the report also said.

ILFC, a wholly-owned subsidiary of American International Group (AIG), has so far entered into 114 lease commitments in 2011 and placed its first aircraft orders since 2007. It’s CEO, Henri Courpron said, “Airlines are acknowledging ILFC’s financial strength and the appeal of our portfolio and order book.”

In the year-to-date, ILFC ordered 100 A320 neo family aircraft and 33 737-800s and has raised considerable finance. It secured a term loan facility for $1.5bn and an unsecured bank revolver for $2bn. The company also raised $2.25bn in unsecured public debt and tendered for $1.75bn in bond maturities in 2012 and 2013.

ILFC is scheduled to take delivery of four new 737-800s worth an estimated $175m this year. It’s a “light” schedule, says Goldman Sachs’ report, and it will allow ILFC to direct more of its cash flow toward debt repayment.

The report estimated AWAS’ book value as being “closer to market value than that of some of its competitors – most notably ILFC”. ILFC wrote down 155 aircraft by $1.5bn in 2010 and it may take up to $300m per year in further impairments. Ascend’s valuation of AWAS’ fleet is approximately 26 per cent less than book value, says Goldman Sachs.

Burgeon or burst: Basel III and the ASU Martin admits he has renegade views on the market, as was evident from BOC’s lack of orders during the Paris Air Show.

While orders from other lessors were mounting, Martin asserted that the industry is in a bubble. “In 2007 we said there was a bubble and a year later the bubble burst,” he recalls. “We sat out and watched in 2007…we were the guys who at the bottom of the cycle picked up $2.5bn of equipment in the space of three months.” He plans to do this same this time.

“The reason why we’re seeing a bubble this time is the launch of the neo but frankly how people can say what the fleet is going to look like in eight years time when you consider what happened in the eight years from 2001 to 2009 – I’m amazed. In reality, these (the orders made at Paris) are just options because people put down a very small amount on them. These planes still need 95 per cent of their financing secured.

“We believe that having gone through the bottom of the cycle the amount of capital expenditure in dollar terms will go up dramatically over the next three years.” He cites a number of reasons for this, firstly the 787, which is soon to start delivery after a delay of three years. Then there is the roll-out of the 747800 and an increase in production rates for the A320 family, 737NG family and A330 family.

premier powerplant* management support at your fingertips

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Predictive financial exposure analysis Risk assessment Asset valuation Lease management (acceptance & return) Independent shop visit management Technical counsel Downturn planning Fleet health check R A Technical Ltd No.20 London Road, Horsham, W. Sussex, RH12 1AY, United Kingdom T: +44(0) 1403 720020 E: info@royalaero.com Royal Aero Technical is part of the Royal Aero Group GmbH

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AFM74_lessor_AFM73 12/07/2011 10:21 Page 38

38 | AFM • ISSUE 74 July-August 2011

TRADING, LEGAL & FINANCE: Lessor ranking He notes the disparity between this increase in capital expenditure and the low supply of money. On the latter side he lists the Greek crisis, the EU’s advice that European banks leave aviation financing, and the significantly higher cost of export credit pricing.

“Add a large amount of excess demand for money to a restricted supply of money, and why would you be placing large speculative orders? It’s better to wait and finance this large amount of capex that’s going to come through.”

But the higher cost of ECA loans should mean airlines will step back from purchasing and towards leasing aircraft, bringing an overall positive affect to the market. “If the market continues to evolve the way we see it evolving I think there will be increased demand for leasing as airlines will be looking for alternatives to the ASU structure,” says Higgins.

“Maybe they’ll do more debt financing and capital financing and I would expect the new ASU to drive demand in operating leasing… but who knows what broader macro environment we’ll be in. The new ASU may be a more expensive product than the previous version but it may be that there’s high demand for it at the time due to extraneous factors.”

Avolon’s Higgins however, is confident that airlines and lessors will continue to find financing though it may be a little harder. Of particular impact will be Basel III, a new regulation on the lending practises of banks, which will be gradually introduced from 2013, “It’s very simple,” asserts BOC’s Martin. “When you put the price of something up, the demand for it should fall but that doesn’t and the Aircraft sector Understanding (ASU), which from 2012 seem to tie with production. Most airlines order aircraft when will support wider lending by increasing the cost of export credit they see their revenue start to go up. They don’t think about the agencies (ECA) loans. financing side until the pre-delivery payments start two years ahead of delivery. People haven’t considered that the cost of “I think banks will continue to be very active in lending to both financing is going up.” airlines and lessors because fundamentally, aircraft are good assets. I think on the technical level of how Basel III is According to Higgins, manufacturer’s production rates are “the implemented there might be a slight shift down in the overall key driver of stability in the industry”. He says that despite tenor of lending (to below 10 years as opposed to 12) but I’m not hearing a variety of opinions of the matter he has faith the OEMs expecting a shock factor from Basel III.” will get it right. “Manufacturers, through this most recent cycle, have demonstrated ability and a discipline around production Liu of GECAS says: “I don’t think spreads will get much tighter rates which wasn’t the same in other down cycles… Whereas because of Basel III and return on equity. Bank equity levels are they make announcements – with real intent – about increased going up in general, which means pricing will have to go up. production rates and timelines, if the market circumstances were They (spreads) are not going to drop that much further because to change I think the manufacturers would change.” of the regulatory requirements of [the] ASU… there’s a lot of hullabaloo about it, but I’m like, ‘it’s relatively mild’.”

Martin’s view however, like much of his market analysis, differs from other lessors. “Boeing and Airbus are not necessarily lookThe ASU will affect lessors on varying levels. GECAS for example, ing at overall market supply and demand, they are just doing relies on its parent company for funding rather than ECA or Exwhat their shareholders want which is to produce the maximum Im support. “We tried an Ex-Im just to give it a whirl when number of aircraft,” he said. funding costs were different but now it doesn’t make a lot of sense,” says Liu. However, lessors like Avolon, which hopes to secure ECA and Ex-Im financing by the end of year – if only, says “Manufacturers sell aircraft to every customer who comes to buy aircraft, rather like selling cars… A lot of people who used to Higgins to diversify its funding sources – will be affected. lease aircraft are now buying them, and that’s not because they can afford them, because then they have to go back to a lessor to do a sale and leaseback. So the dynamics of the market are changing. We are seeing a lot of aircraft coming onto the market to replace aircraft that are coming off their first leases – so seven to 12 years old.

“Because the manufacturers didn’t cut their supply during the downturn there has been a relative excess of aircraft coming into the market compared to demand and at the same time we’ve had airline consolidation with very little start-up [airline] activity… the utilisation of aircraft has gone up and we’ve needed less aircraft. What that means is there’s been aircraft thrown out of the market at an earlier age – short-term unemployed if you like.”

In terms of leasing older used aircraft Higgins says: “I wouldn’t say there’s an absence of competition in that space.” He notes that other lessors, namely Aircastle, have stated their intent to buy older aircraft. In the case of Aircastle, eight- to 15-years-old.

While Avolon has a particularly young fleet, just 1.6-years-old on average, he says the company is not averse to buying older models. “We don’t have a binary policy of ‘we don’t do used airplanes’.” He adds that the company has bought aircraft as old as five years and because of its relationships with airlines it has had a number of opportunities to buy more. The decision will come down to risk adjusted returns and only after looking at the financial and maintenance risks and technological obsolescence will it make a decision.

AFM74_Deals _AF&NM Special Feature 12/07/2011 10:22 Page 40

40 | AFM • ISSUE 74 July-August 2011

AIRCRAFT DEALS REPORT

FLEET FINANCE – Deals report Aircraft Transactions June 1 – 30, 2011 Equipment Model

New Owner/ Operator

Previous Owner/ Operator

Boeing 737-291 737-217 737-291 737-2v6 737-2v6 737-247 737-3h4 737-3t0(W) 737-3t0(W) 737-3t0(W) 737-33a 737-3g7 737-3g7 737-3g7 737-382 737-3l9 737-3l9 737-31s 737-4k5 737-42c 737-42c 737-484 737-484 737-484 737-4q8 737-48e 737-548(W) 737-548(W) 737-55d 737-524(W) 737-524(W) 737-524(W) 737-76n 737-76n 737-76q(W) 737-76q(W) 737-76q(W) 737-73v 737-73v 737-7h4(W) 737-7eh(W) 737-7k2(W) 737-7bc(W) 737-7bc(W) 737-7afc(W) 737-86j(W) 737-8q8(W) 737-8q8(W) 737-8q8(W) 737-82r 737-8k5(W) 737-83n(WEtops) 737-83n(WEtops) 737-8q8(W) 737-86n(W) 737-8q8(W) 737-881(W) 737-838(W) 737-838(W) 737-838(W) 737-838(W) 737-838(W) 737-838(W) 737-838(W) 737-838(W) 737-838(W) 737-838(W) 737-838(W) 737-838(W) 737-8kn(W) 737-8eh(W) 737-8eh(W) 737-86j(W)

Jet Care Corporation Unknown Aircraft Guaranty Corp Sarab Jet Connections Bradley Air Services Frontiers Of Flight Museum Grandmax Group Orient Thai Airlines Orient Thai Airlines Alba Star Desert Rainier Wells Fargo Wells Fargo Airexplore Vista Georgia GE Capital Corp Small Planet Airlines Alba Star East Ireland Central Connect Airlines Aersale Blue Air-Transport Air Manas Tombo Aviation Blue Bird Airways Goiania Comercio Aerosvit Airlines Ukraine Intl Airlines Continental Airlines Wells Fargo Utair Aviation Hainan Airlines Hainan Airlines Boullioun Aircraft Yakutia Airlines Yakutia Airlines BOC Aviation Jet Lite Southwest Airlines Gol Transportes Aereos KLM F & L Aviation Frank & Victoria Fertitta United States Navy ACG ILFC Caribbean Airlines Air Jamaica Jeju Air Bil Aircraftleasing Unknown Aeromexico ILFC Xl Airways France RAK Airways ANA OAS Australia Qantas Airways OAS Australia Qantas Airways OAS Australia Qantas Airways OAS Australia Qantas Airways OAS Australia Qantas Airways Qantas Airways Jetconnect Corendon Airlines Gol Transportes Aereos Transavia Airlines Air Berlin

San Jose Sharks PALS Sindie, Christian Blair Investors Sarab Celtic Capital Southwest Airlines As & L Grandmax Group As & L RPK Capital Us Airways Wells Fargo Wells Fargo Triton Aviation Galaxy Aviation Norwegian Air Shuttle Small Planet Airlines Wells Fargo Wells Fargo East Ireland Aersale Aersale Bank Of Utah Merpati Nusantara ILFC Barkham Associates Goiania Comercio Celestial Aviation Wells Fargo Continental Airlines Wells Fargo Lucky Air Lucky Air Air Berlin Boullioun Aircraft Rain I BOC Aviation BOC Aviation Boeing Boeing Boeing Boeing F & L Aviation Boeing Saga Airlines Yemenia ILFC ILFC ILFC TUIfly ILFC Unknown Yemenia Celestial Aviation Midwest Airlines Boeing Macquarie OAS Australia Macquarie OAS Australia Macquarie OAS Australia Macquarie OAS Australia Macquarie OAS Australia Boeing Qantas Airways Flydubai Boeing Gol Transportes Aereos Boeing

Serial No. or No. of (Orders)/(Options) 21508 22256 22384 22431 22431 23521 22940 23371 23371 23375 23628 23776 23776 23777 24365 25125 27336 29055 24130 24813 24813 25314 25314 25361 26280 27632 24968 24968 27418 28900 28900 28913 28582 28585 30271 30271 30277 32426 32426 36674 37608 39256 30327 30327 40577 28068 28252 28252 28252 29344 30414 30706 30706 30730 32736 32841 33911 34180 34180 34181 34181 34182 34182 34183 34183 34184 34184 34190 34190 35794 35843 36596 36880

Engine Model

Date of Manf or First Exp Deliv

Equipment

JT8d-9a JT8d-17 JT8d-17 JT8d-15a JT8d-15a JT8d-15a CFM56-3b1 CFM56-3b1 CFM56-3b1 CFM56-3b1 CFM56-3b1 CFM56-3b1 CFM56-3b1 CFM56-3b1 CFM56-3b2 CFM56-3b2 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3b1 CFM56-3b1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-3c1 CFM56-7b24 CFM56-7b24 CFM56-7b24 CFM56-7b24 CFM56-7b24 CFM56-7b20 CFM56-7b20 CFM56-7b24 CFM56-7b24 CFM56-7b22/3 CFM56-7b26 CFM56-7b26 CFM56-7b20 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b27 CFM56-7b27b1 CFM56-7b27b1 CFM56-7b27 CFM56-7b26 CFM56-7b27 CFM56-7b26 CFM56-7b24 CFM56-7b24 CFM56-7b24 CFM56-7b24 CFM56-7b24 CFM56-7b24 CFM56-7b24 CFM56-7b24 CFM56-7b24 CFM56-7b24 CFM56-7b24 CFM56-7b24 CFM56-7b26 CFM56-7b27 CFM56-7b27 CFM56-7b26

1978-04 1980-05 1980-10 1981-09 1981-09 1987-01 1984-07 1985-12 1985-12 1986-02 1986-10 1987-06 1987-06 1987-06 1989-02 1991-05 1994-02 1997-07 1990-02 1991-05 1991-05 1991-08 1991-08 1991-08 1992-02 1997-01 1990-11 1990-11 1992-10 1997-07 1997-07 1997-12 1998-10 1998-11 2000-12 2000-12 2001-08 2004-03 2004-03 2011-06 2011-05 2011-05 1999-08 1999-08 2011-05 1998-02 2002-07 2002-07 2002-07 2001-04 2000-10 2001-08 2001-08 2007-09 2002-03 2005-04 2011-05 2005-10 2005-10 2005-12 2005-12 2005-12 2005-12 2005-12 2005-12 2006-01 2006-01 2011-05 2011-05 2009-01 2011-05 2010-01 2011-05

Sold Leased Sold Sold Leased Sold Sold Sold Leased Leased Leased Returned Sold Sold Leased Leased Returned Leased Leased Sold Leased Sold Leased Leased Returned Leased Sold Leased Leased Lease-Buyout Sold Leased Returned Returned Returned Leased Leased Sold Leased Delivered Delivered Delivered Sold Leased Delivered Returned Returned Leased Sub-Leased Leased Returned Sold Leased Returned Leased Sub-Leased Delivered Transferred Leased Transferred Leased Transferred Leased Transferred Leased Transferred Leased Delivered Leased Leased Delivered Leased Delivered

Date 2011.06.17 2011.06.23 2011.06.24 2011.06.05 2011.06.18 2011.06.10 2011.06.14 2011.06.03 2011.06.03 2011.06.01 2011.06.01 2011.06.04 2011.06.21 2011.06.16 2011.06.09 2011.06.25 2011.06.29 2011.06.30 2011.06.17 2011.06.02 2011.06.02 2011.06.23 2011.06.30 2011.06.23 2011.06.15 2011.06.07 2011.06.02 2011.06.02 2011.06.11 2011.06.03 2011.06.10 2011.06.27 2011.06.21 2011.06.21 2011.06.15 2011.06.16 2011.06.05 2011.06.15 2011.06.15 2011.06.29 2011.06.23 2011.06.22 2011.06.09 2011.06.09 2011.06.24 2011.06.09 2011.06.02 2011.06.03 2011.06.03 2011.06.16 2011.06.27 2011.06.10 2011.06.16 2011.06.30 2011.06.08 2011.06.01 2011.06.21 2011.06.01 2011.06.01 2011.06.01 2011.06.01 2011.06.01 2011.06.01 2011.06.01 2011.06.01 2011.06.01 2011.06.01 2011.06.22 2011.06.22 2011.06.03 2011.06.09 2011.06.27 2011.06.21

AFM74_Deals _AF&NM Special Feature 12/07/2011 10:22 Page 41

July-August 2011 AFM • ISSUE 74 | 41

AIRCRAFT DEALS REPORT Equipment Model

New Owner/ Operator

Previous Owner/ Operator

737-86j(W) 737-8k5(W) 737-8k5(W) 737-8k5(W) 737-8k5(W) 737-8k5(W) 737-86j(W) 737-86j(W) 737-86n(W) 737-86n(W) 737-86n(W) 737-86n(W) 737-86n(W) 737-8u3(W) 737-8u3(W) 737-8jp(W) 737-8jp(W) 737-87l(W) 737-8fz(W) 737-8fz(W) 737-8fz(W) 737-86n(W) 737-86n(W) 737-81d(W) 737-81d(W) 737-82r(W) 737-89l(W) 737-8kn(W) 737-8kn(W) 737-8kn(W) 737-8kn(W) 737-8kn(W) 737-846(W) 737-823(W) 737-823(W) 737-866(W) 737-8jp(W) 737-8fe(W) 737-8fe(W) 737-8fe(W) 737-8fe(W) 737-8fe(W) 737-800(W) 737-8jp(W) 737-800(W) 737-9gper(W) 737-9b5er(W) 737-9b5er(W) 747-338 747-446 747-446 747-446 747-4f6 747-446 747-8 757-2j4(W) 757-21b 757-2k2(W) 757-28a(Etops) 757-256(Etops) 767-231 767-231 767-231 767-231 767-231 767-231 767-231 767-231 767-205 767-205 767-338er 767-383er 767-319er 767-338er 767-383er 767-38eer 767-38eer 767-338er 767-3y0er

Air Berlin TUI Travel RBS Aerospace TUIfly Nordic TUI Travel Jetairfly RBS Aerospace Airline Taimyr GE Capital China Eastern Airlines China United Airlines GE Capital Xiamen Airlines ILFC Garuda Indonesian Norwegian Air Shuttle Norwegian Air Shuttle Shenzhen Airlines Babcock & Brown MAS Flyfirefly GE Capital Garuda Indonesian AWAS Skynet Asia Airways Pegasus Airlines Air China Avolon Virgin Australia Airlines Flydubai Avolon Virgin Australia Airlines Japan Airlines American Airlines American Airlines Egyptair Norwegian Air Shuttle Virgin Australia Airlines Virgin Australia Airlines Virgin Australia Airlines RBS Aerospace Virgin Australia Airlines ALC Norwegian Air Shuttle Mongolian Airlines Lion Air Korean Air Lines Korean Air Lines Unknown Aersale Aersale Pullmantur Air ILFC Wells Fargo Unknown Trump Group ACG Icelandair Astraeus Airlines Icelandair Wells Fargo ABX Air Wells Fargo ABX Air Wells Fargo ABX Air Wells Fargo ABX Air Wells Fargo ABX Air Cargo Aircraft Mgmt Pegasus Aviation North American Qantas Airways Muzun Leasing One Guggenheim Atlas Air Qantas Airways Sunwing Airlines

Boeing Boeing Boeing Company RBS Aerospace Boeing TUI Travel Air Berlin RBS Aerospace Boeing GE Capital Boeing Company Boeing GE Capital Boeing ILFC Boeing Boeing Boeing Boeing Babcock & Brown Boeing Company Boeing GE Capital Boeing AWAS Boeing Boeing GE Capital Avolon Boeing Flydubai Avolon Boeing Boeing Wilmington Trust Boeing Boeing Boeing Avolon Boeing Boeing RBS Aerospace Boeing Boeing Boeing Boeing Boeing Boeing Bank Of Utah Japan Airlines Aersale Aersale Air New Zealand Japan Airlines Boeing Tag Air China Southern Airlines Air Finland British Midland Towy Leasing DHL Wells Fargo DHL Wells Fargo DHL Wells Fargo DHL Wells Fargo DHL Wells Fargo Qantas Airways Avianca Castle TJT Leasing Air Madagascar Gol Transportes Aereos Wells Fargo Ril Aviation Euro Atlantic Airways

Serial No. or No. of (Orders)/(Options) 36881 37259 37259 37259 37260 37260 37747 37747 38021 38021 38021 38022 38022 38821 38821 39007 39048 39145 39320 39320 39320 39403 39403 39415 39415 40011 40027 40234 40234 40246 40246 40246 40354 40763 40763 40800 40870 40994 40994 40995 40995 40995 (6) (15) (2) 37282 37633 37634 23408 26342 26346 26346 27602 27650 (2) 25155 25258 26330 28161 29311 22566 22566 22570 22570 22571 22571 22572 22572 23058 23058 24316 24357 24876 24930 25088 25132 25132 25316 25411

Engine Model CFM56-7b26 CFM56-7b27b1 CFM56-7b27b1 CFM56-7b27b1 CFM56-7b27b1 CFM56-7b27b1 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b24 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b26 CFM56-7b24 CFM56-7b26 CFM56-7b26 CFM56-7b27 CFM56-7b27 CFM56-7b27 RB211-524d4-19 CF6-80c2b1f CF6-80c2b1f CF6-80c2b1f CF6-80c2b1f CF6-80c2b1f GENX-2b67 RB211-535e4 RB211-535e4 RB211-535e4 RB211-535e4 RB211-535e4 JT9d-7r4d JT9d-7r4d JT9d-7r4d JT9d-7r4d JT9d-7r4d JT9d-7r4d JT9d-7r4d JT9d-7r4d JT9d-7r4d JT9d-7r4d CF6-80c2b6 PW4060 CF6-80c2b6 CF6-80c2b6 PW4062-3 CF6-80c2b6f CF6-80c2b6f CF6-80c2b6 PW4060

Date of Manf or First Exp Deliv

Equipment

2011-05 2011-05 2011-05 2011-05 2011-06 2011-06 2009-11 2009-11 2011-05 2011-05 2011-05 2011-05 2011-05 2011-05 2011-05 2011-05 2011-06 2011-05 2011-06 2011-06 2011-06 2011-05 2011-05 2011-05 2011-05 2011-05 2011-05 2009-06 2009-06 2011-05 2011-05 2011-05 2011-06 2011-05 2011-05 2011-05 2011-05 2011-05 2011-05 2011-05 2011-05 2011-05 2017-06 2015-02 2013-03 2011-05 2011-04 2011-05 1986-03 1992-02 1991-12 1991-12 1998-05 1999-10 2014-10 1991-04 1991-07 1996-05 1996-07 2000-08 1982-09 1982-09 1983-06 1983-06 1983-06 1983-06 1983-06 1983-06 1984-08 1984-08 1988-09 1989-03 1992-01 1990-11 1991-02 1992-01 1992-01 1991-09 1991-11

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

Date 2011.06.08 2011.06.13 2011.06.13 2011.06.13 2011.06.24 2011.06.24 2011.06.12 2011.06.12 2011.06.17 2011.06.17 2011.06.17 2011.06.10 2011.06.10 2011.06.21 2011.06.21 2011.06.07 2011.06.22 2011.06.09 2011.06.28 2011.06.28 2011.06.28 2011.06.15 2011.06.15 2011.06.21 2011.06.21 2011.06.06 2011.06.13 2011.06.01 2011.06.02 2011.06.03 2011.06.03 2011.06.03 2011.06.27 2011.06.09 2011.06.13 2011.06.15 2011.06.06 2011.06.08 2011.06.08 2011.06.20 2011.06.20 2011.06.20 2011.06.01 2011.06.01 2011.06.01 2011.06.07 2011.06.14 2011.06.28 2011.06.22 2011.06.29 2011.06.14 2011.06.16 2011.06.30 2011.06.23 2011.06.01 2011.06.01 2011.06.24 2011.06.11 2011.06.04 2011.06.10 2011.06.13 2011.06.13 2011.06.13 2011.06.13 2011.06.13 2011.06.13 2011.06.13 2011.06.13 2011.06.13 2011.06.13 2011.06.28 2011.06.14 2011.06.08 2011.06.23 2011.06.30 2011.06.30 2011.06.30 2011.06.23 2011.06.14

AFM74_Deals _AF&NM Special Feature 12/07/2011 10:23 Page 42

42 | AFM • ISSUE 74 July-August 2011

AIRCRAFT DEALS REPORT Equipment Model

New Owner/ Operator

Previous Owner/ Operator

767-3y0er 767-306er 767-306er 767-343er 767-316er(W) 767-300er 767-34af 767-34af 777-F6n 777-F6n 777-Fs2 777-Ffx 777-F1b 777-2fblr 777-2fblr 777-3b5er 777-367er 777-3f2er 777-3m2er Airbus A300b4-622r A318-111 A318-111 A318-121 A319-112 A319-112 A319-112 A319-112 A319-111 A319-112 A319-112 A319-112 A319-112 A319-112 A319-112 A319-112 A319-111 A319-132 A319-111 A319-111 A319-111 A319-115 A320-214 A320-214 A320-211 A320-214 A320-214 A320-214 A320-232 A320-232 A320-214 A320-214 A320-232 A320-232 A320-232 A320-232 A320-232 A320-232 A320-214 A320-214 A320-212 A320-214 A320-232 A320-232 A320-232 A320-212 A320-211 A320-214 A320-214 A320-214 A320-214 A320-214 A320-214 A320-232 A320-232 A320-214 A320-232 A320-232 A320-232

Sunwing Airlines Wilmington Trust Nordwind Airlines Condor LAN Ecuador Mongolian Airlines UPS UPS GE Capital China Cargo Airlines Federal Express Etihad Airways China Southern Airlines Boeing Business Jets Ceiba Intercontinental Korean Air Lines Cathay Pacific Turk Hava Yollari Taag Angola Airlines

Euro Atlantic Airways North American Wilmington Trust GECAS Technical LAN Airlines Boeing Boeing Boeing Boeing GE Capital Boeing Boeing Boeing Boeing Boeing Company Boeing Boeing Boeing Boeing

Wells Fargo Avianca Avianca Oceanair Constitution Aircraft Atlasjet International Hainan Airlines Lucky Air RBS Aerospace ALS Tatarstan Airlines Flynext Germania Flynext Germania Tam Linhas Aereas Easyjet Turk Hava Yollari Aircraft Purchase Fleet Herodias Alitalia Tibet Airlines ILFC BH-Air African Holding Comp Of America ILFC Calliope Ural Airlines Qantas Airways Jetstar Airways Unknown Interjet OAS Australia Qantas Airways Jetstar Airways OAS Australia Qantas Airways Jetstar Airways GE Capital Celestial Transamerica Aviation Azerbaijan Airlines Turk Hava Yollari Anadolujet Volaris Travel Service Airlines Arkia Israel Airlines Avolon Air Arabia Air Arabia Maroc Avolon Spring Airlines Interjet Avolon Indigo Juneyao Airlines Air China Hainan Airlines Shenzhen Airlines

Japan Airlines Wells Fargo Wells Fargo LAN Airlines Wells Fargo Constitution Aircraft Beijing Capital Airlines Hainan Airlines Iberia ALS ALS Bermuda Germania Germania Germania Germania Airbus Airbus Airbus Airbus Airbus Herodias Airbus Iberia ILFC Castle Koralblue Airlines ILFC AFS Ril Aviation Qantas Airways Air Berlin Unknown Macquarie OAS Australia Jetstar Airways Macquarie OAS Australia Jetstar Airways Orbest Orizonia Airlines GE Capital Smartlynx Airlines Belair Airlines Wells Fargo Crescent Leasing Amentum Nouvelair Tunisie Smartlynx Airlines Aerventure Avolon Air Arabia Maroc Aerventure Avolon Aerventure Crescent Leasing Avolon Airbus Airbus Airbus Airbus

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

Engine Model

Date of Manf or First Exp Deliv

26208 28098 28098 30009 35696 (1) 37866 37867 37716 37716 37729 39682 (6) 40668 40668 37648 37901 40795 40805

PW4060 CF6-80c2b6f CF6-80c2b6f CF6-80c2b6f CF6-80c2b7f Unknown CF6-80c2b7f CF6-80c2b7f GE90-110b1l GE90-110b1l GE90-110b1l GE90-110b1l GE90-110b1l GE90-110b1l GE90-110b1l GE90-115b GE90-115bl2 GE90-115b GE90-115b

1993-06 1996-02 1996-02 1999-03 2008-05 2014-02 2011-05 2011-06 2011-06 2011-06 2011-05 2011-05 2012-02 2011-05 2011-05 2011-05 2011-05 2011-05 2011-05

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

2011.06.14 2011.06.22 2011.06.23 2011.06.01 2011.06.09 2011.06.01 2011.06.08 2011.06.29 2011.06.27 2011.06.27 2011.06.03 2011.06.21 2011.06.01 2011.06.17 2011.06.17 2011.06.07 2011.06.24 2011.06.24 2011.06.14

703 2552 2575 3214 1124 1124 2617 2617 3169 3171 3171 3589 3589 3818 3818 4734 4744 4755 4759 4759 4759 4766 1087 1087 112 1454 1454 1751 2515 2515 2539 2539 2642 2642 2642 2651 2651 2651 2745 2745 283 3006 3308 3308 3543 400 426 4310 4310 4310 4375 4375 4411 4518 4518 4587 4593 4602 4620

PW4158 CFM56-5b8/P CFM56-5b8/P PW6122a CFM56-5b6/2p CFM56-5b6/2p CFM56-5b6/P CFM56-5b6/P CFM56-5b5/P CFM56-5b6/P CFM56-5b6/P CFM56-5b6/3 CFM56-5b6/3 CFM56-5b6/3 CFM56-5b6/3 CFM56-5b6/3 CFM56-5b5/3 V2524-A5 CFM56-5b5/3 CFM56-5b5/3 CFM56-5b5/3 CFM56-5b7/3 CFM56-5b4/P CFM56-5b4/P CFM56-5a1 CFM56-5b4/P CFM56-5b4/P CFM56-5b4/P V2527-A5 V2527-A5 CFM56-5b4/P CFM56-5b4/P V2527-A5 V2527-A5 V2527-A5 V2527-A5 V2527-A5 V2527-A5 CFM56-5b4/P CFM56-5b4/P CFM56-5a3 CFM56-5b4/P V2527-A5 V2527-A5 V2527-A5 CFM56-5a3 CFM56-5a1 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 V2527-A5 V2527-A5 V2527-A5

1993-06 2005-08 2005-09 2007-12 1999-10 1999-10 2005-11 2005-11 2007-06 2007-06 2007-06 2008-07 2008-07 2009-02 2009-02 2011-05 2011-05 2011-06 2011-06 2011-06 2011-06 2011-06 1999-09 1999-09 1990-07 2001-03 2001-03 2002-03 2005-07 2005-07 2005-09 2005-09 2006-03 2006-03 2006-03 2005-12 2005-12 2005-12 2006-03 2006-03 1991-12 2006-12 2007-10 2007-10 2008-06 1993-01 1993-04 2010-05 2010-05 2010-05 2010-07 2010-07 2010-08 2010-11 2010-11 2011-05 2011-05 2011-05 2011-06

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

2011.06.06 2011.06.06 2011.06.24 2011.06.14 2011.06.14 2011.06.14 2011.06.15 2011.06.15 2011.06.30 2011.06.29 2011.06.29 2011.06.01 2011.06.01 2011.06.01 2011.06.01 2011.06.07 2011.06.09 2011.06.22 2011.06.29 2011.06.29 2011.06.29 2011.06.26 2011.06.01 2011.06.02 2011.06.01 2011.06.23 2011.06.23 2011.06.23 2011.06.01 2011.06.01 2011.06.25 2011.06.25 2011.06.01 2011.06.01 2011.06.01 2011.06.01 2011.06.01 2011.06.01 2011.06.24 2011.06.24 2011.06.01 2011.06.14 2011.06.14 2011.06.14 2011.06.06 2011.06.19 2011.06.01 2011.06.01 2011.06.01 2011.06.02 2011.06.01 2011.06.02 2011.06.27 2011.06.01 2011.06.02 2011.06.01 2011.06.02 2011.06.10 2011.06.16

Equipment

Date

AFM74_Deals _AF&NM Special Feature 12/07/2011 11:35 Page 43

July-August 2011 AFM • ISSUE 74 | 43

AIRCRAFT DEALS REPORT Equipment Model

New Owner/ Operator

Previous Owner/ Operator

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

Engine Model

Date of Manf or First Exp Deliv

A320-214 A320-232 A320-232 A320-232 A320-214 A320-214 A320-214 A320-214 A320-214 A320-214 A320-232 A320-232 A320-214 A320-214 A320-214 A320-232 A320-232 A320-232 A320-214 A320-214 A320-214 A320-214 A320-214 A320-214 A320-214 A320-214 A320-214 A320-232 A320-232 A320-232 A320-214 A320-212 A320-212 A320-212 A320-212 A320-214 A320-211 A320-200neo(W) A320-200 A320-200neo(W) A320-200neo(W) A320-200 A320-200 A320-200neo(W) A320-200neo(W) A320-200neo(W) A320-200neo(W) A321-231 A321-231 A321-231 A321-231 A321-231 A321-211 A321-231 A321-200neo(W) A330-223 A330-223 A330-243 A330-243 A330-243 A330-203 A330-203 A330-202 A330-202 A330-202 A330-203(Mrtt) A330-203(Mrtt) A330-243f A330-343e A330-323e A330-323e A330-343e A330-323e A330-323e A330-343e A330-343e A340-313x A340-313x A380-841

China Eastern Airlines Tiger Airways Sichuan Airlines British Airways AWAS AWAS Frontier Airlines Interjet GE Capital Orbest Orizonia Airlines Wizz Air Hungary Wizz Air Hungary GE Capital Spring Airlines Easyjet Wizz Air Hungary Avolon Volaris CIT Vueling Airlines Aviation Capital Group Bank Of Utah Frontier Airlines Air France Air France Easyjet Spring Airlines Indigo Indigo Indigo Yes Airways Unknown Donbassaero Unknown Donbassaero Aegean Airlines White Airways AirAsia China Aviation Supplies Goair GE Capital ICBC Indigo Indigo LAN Airlines SAS SAS Sichuan Airlines Vietnam Airlines China Eastern Airlines Lufthansa Turk Hava Yollari Dgvr Alpha Mobilien Onur Air Transasia Airways Hong Kong Airlines China Southern Aircastle South African Air Europa OAS Australia Qantas Airways OAS Australia Qantas Airways Jetstar Airways Australian Air Force Australian Air Force Turk Hava Yollari Etihad Airways MAS MAS Aeroflot MAS MAS Singapore Airlines Saudi Arabian Airlines ILFC Srilankan Airlines Singapore Airlines

Airbus Tiger Airways Airbus Airbus Airbus Airbus AWAS Airbus Airbus GE Capital Airbus JSA Airbus GE Capital Airbus Airbus Wizz Air Hungary Avolon Airbus CIT Airbus Airbus Bank Of Utah Airbus JSA Aircraft Airbus Airbus Airbus Airbus HKAC Leasing Jet-I ILFC Unknown ILFC Unknown Smartlynx Airlines ILFC Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Airbus Gulf Air PK Airfinance Airbus Hainan Airlines Airbus Airbus Aircastle Calliope Macquarie OAS Australia Macquarie OAS Australia Jetstar Airways MTAD MTAD Airbus Airbus Airbus JSA Airbus Airbus JSA Airbus Airbus Cathay Pacific ILFC Airbus

4627 4645 4707 4725 4727 4727 4727 4733 4735 4735 4736 4736 4738 4738 4740 4741 4741 4741 4742 4742 4745 4745 4745 4747 4747 4749 4750 4752 4757 4757 566 579 579 645 645 724 726 (200) (46) (72) (60) (42) (30) (150) (20) (30) [11] 4731 4737 4746 4753 4761 675 792 (6) 1034 1233 1236 1236 551 887 887 945 945 945 951 969 1092 1226 1229 1229 1232 1234 1234 (15) (4) 381 381 058

CFM56-5b4/3 V2527-A5 V2527-A5 V2527-A5 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 CFM56-5b4/3 V2527-A5 V2527-A5 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 V2527-A5 V2527-A5 V2527-A5 CFM56-5b4/2 CFM56-5a3 CFM56-5a3 CFM56-5a3 CFM56-5a3 CFM56-5b4/P CFM56-5a1 Leap-X unknown unknown Leap-X unknown unknown unknown unknown Leap-X Leap-X V2533-A5 V2533-A5 V2533-A5 V2533-A5 V2533-A5 CFM56-5b3/P V2533-A5 unknown PW4170 PW4170 Trent772b-60 Trent772b-60 Trent772b-60 CF6-80e1a3 CF6-80e1a3 CF6-80e1a4 CF6-80e1a4 CF6-80e1a4 CF6-80e1a3 CF6-80e1a3 Trent772b-60 Trent772b-60 PW4168a PW4168a Trent772b-60 PW4168a PW4168a Trent772b-60 Trent772b-60 CFM56-5c4 CFM56-5c4 Trent970-84

2011-06 2011-03 2011-05 2011-05 2011-05 2011-05 2011-05 2011-05 2011-05 2011-05 2011-05 2011-05 2011-05 2011-05 2011-06 2011-05 2011-05 2011-05 2011-06 2011-06 2011-06 2011-06 2011-06 2011-06 2011-06 2011-06 2011-06 2011-05 2011-05 2011-05 1995-11 1996-02 1996-02 1996-11 1996-11 1997-09 1997-10 2016-11 2012-11 2015-11 2016-09 2012-09 2016-01 2016-04 2016-10 2017-01 2021-01 2011-05 2011-05 2011-06 2011-06 2011-06 1997-05 1998-02 2017-04 2009-06 2011-05 2011-06 2011-06 2003-11 2007-11 2007-11 2008-07 2008-07 2008-07 2008-04 2008-10 2011-05 2011-05 2011-05 2011-05 2011-06 2011-06 2011-06 2013-05 2013-07 2000-12 2000-12 2010-07

Equipment

Date

Delivered 2011.06.24 Returned 2011.06.02 Delivered 2011.06.09 Delivered 2011.06.01 Delivered 2011.06.09 Sold 2011.06.09 Leased 2011.06.09 Delivered 2011.06.22 Delivered 2011.06.07 Leased 2011.06.07 Delivered 2011.06.17 Sale-Leaseback 2011.06.17 Delivered 2011.06.20 Leased 2011.06.20 Delivered 2011.06.29 Delivered 2011.06.23 Sold 2011.06.23 Leased 2011.06.23 Delivered 2011.06.22 Leased 2011.06.22 Delivered 2011.06.27 Sold 2011.06.27 Leased 2011.06.27 Delivered 2011.06.01 Sale-Leaseback 2011.06.02 Delivered 2011.06.27 Delivered 2011.06.28 Delivered 2011.06.30 Delivered 2011.06.01 Sale-Leaseback 2011.06.02 Leased 2011.06.21 Sold 2011.06.09 Leased 2011.06.20 Sold 2011.06.10 Leased 2011.06.20 Sub-Leased 2011.06.01 Leased 2011.06.01 Ordered 2011.06.23 Ordered 2011.06.28 Ordered 2011.06.23 Ordered 2011.06.20 Ordered 2011.06.28 Ordered 2011.06.22 Ordered 2011.06.22 Ordered 2011.06.22 Ordered 2011.06.20 Optioned 2011.06.20 Delivered 2011.06.07 Delivered 2011.06.09 Delivered 2011.06.23 Delivered 2011.06.22 Delivered 2011.06.29 Returned 2011.06.01 Leased 2011.06.03 Ordered 2011.06.21 Returned 2011.06.29 Delivered 2011.06.22 Delivered 2011.06.01 Leased 2011.06.02 Leased 2011.06.08 Transferred 2011.06.01 Leased 2011.06.01 Transferred 2011.06.01 Leased 2011.06.01 Sub-Leased 2011.06.01 Sold 2011.06.22 Sold 2011.06.01 Delivered 2011.06.01 Delivered 2011.06.01 Delivered 2011.06.01 Sale-Leaseback 2011.06.02 Delivered 2011.06.23 Delivered 2011.06.24 Sale-Leaseback 2011.06.24 Ordered 2011.06.29 Ordered 2011.06.20 Returned 2011.06.01 Leased 2011.06.02 Delivered 2011.06.16 Source: OAG Fleet iNET, 2011

AFM74_Airport charges_AFM74 12/07/2011 10:10 Page 44

44 | AFM • ISSUE 74 July-August 2011

AIRPORTS & ROUTES: Airport charges Hardly a week goes by in Europe without a spat erupting between airport operators and airlines. In December 2010 it was weather-related disruption that hit the headlines, but the usual factor is charges. Alex Derber investigates how they are implemented.

A

N AIRPORT-AIRLINE RELATIONSHIP IS A CURIOUS ONE. Each side is dependent on the other to deliver customers, yet each operates according to a radically different business model. Take landing charges, for instance. If they rise too quickly airlines complain that the additional cost – reflected immediately in higher ticket prices – will drive passengers away.

An airport, meanwhile, might argue that such charges are vital for long-term infrastructural investment, without which future growth of the airport – and more passenger capacity for the airlines – would be impossible.

In Europe, most major airports are subject to distinct regulations governing how much they are able to charge. Capital city airports, in particular, are deemed vital to the economic interests of a nation and are thus not allowed to increase their prices to the detriment of the consumer. In the UK, for instance, London’s Heathrow, Gatwick and Stansted airports are regulated by the Civil Aviation Authority (CAA). Those airports are all privately operated but even where publicly owned, such as Amsterdam Schiphol, charges are regulated for principal air transport hubs – in that case by the Netherlands Competition Authority (NCA).

Controlling charges Regulation not only means that aircraft, passenger and security charges have to be approved, but also that they are transparent. In the UK this means that the accounts of major airports are examined by the CAA once every five years. The CAA will only investigate charges at non-regulated airports if it receives a complaint.

This is not to say that non-regulated airports can charge what they like. In the UK, any airport with more than one million passengers per year has to receive permission to levy charges. In addition, since March 2011, all airports across Europe with more than five million passengers per year have been subject to the EU Airport Charges Directive. Amongst other things, this requires that airports do not discriminate between users (airlines); that they consult users annually on charges and service quality; and that they provide users with information about cost structures and revenues relevant to charges.

“What’s been put in place is a fairly low-level piece of generic legislation,” she says.

If airlines are unhappy with charges the directive gives them a right of appeal to an independent supervisory authority.

“The Airport Charges Directive puts in place an initial set of requirements to airports to demonstrate that their charges are

£

£

Heathrow

9,000

Paris

4,000

Aircraft Charges

8,175

Passenger Charges

8,000

However, although the right of appeal has been welcomed by airlines, other provisions of the directive are less groundbreaking. Louise Congdon is a managing partner at the airports consultancy, York Aviation, and has previously worked for the UK CAA and Birmingham and Manchester airports. She feels that the European legislation is too much of a compromise to significantly affect airport charging regimes.

Government Charges

3,500

7,000

Aircraft Charges Passenger Charges Government Charges

3,669 3,529

3,451

3,030

3,000

6,000 5,450

2,500

5,000 4,360

4,360

2,000

4,000 3,339

3,000 2,142

1,500

2,550

2,359

1,064

615

1,226

1,000 0

933

910

2008

1,107

1,097

1,064

1,000

2,000

2009

604

2010

2011

0

Charges based on an international service with an A320 with a MTOW of 73.5 tonnes with 109 passengers on board.

2008

537

533

500

931

2009

2010

2011

Source: RDC Aviation

AFM74_Airport charges_AFM74 12/07/2011 10:11 Page 45

July-August 2011 AFM • ISSUE 74 | 45

AIRPORTS & ROUTES: Airport charges

CHARGE OF THE FLIGHT BRIGADE related to cost, and to consult, but it’s not very different to what was actually in practise in the UK anyway. Certainly, it’s far less onerous than the regime that exists at a regulated airport in terms of expectations about transparency and consultation.”

Nonetheless, the principle of non-discrimination does exercise a degree of control on how airports negotiate their charges.

Although it does not preclude non-regulated airports from negotiating lower charges with certain airlines – who in return promise to drive a certain number of passengers through the airport’s shops and amenities each year – it does require them to show that they would have done the same deal with any carrier in the same conditions.

£

In the case of regulated airports – the extra scrutiny means that operators have to show a particularly compelling business case for deviating from their published rate. “This involves providing a detailed business case to show that giving an additional discount would generate extra retail spend, for instance, and that the net effect would be that the airport was better off,” says Congdon.

Regulated airports have to be so careful with discounts because airlines not in receipt of them fear that their charges will rise to compensate. An airport manager must therefore show that the additional passengers and revenue brought in by an airline with a discount are enough to ensure that overall charges going forward will be lower than they would otherwise have been.

£

Amsterdam

3,000

Madrid

1,400

Aircraft Charges

Aircraft Charges

Passenger Charges

2,661

Government Charges

1,271

Passenger Charges

2,657

2,647

Government Charges

1,200

2,500 2,211

1,000 2,000

916

876

800

916

826

802

826

805

1,500 600 1,000

998

910

925

941

400

500

0

200

0

2008

0

2009

0

2010

0

2011

0

0

2008

0

2009

0

2010

0

2011

AFM74_Airport charges_AFM74 12/07/2011 10:12 Page 46

46 | AFM • ISSUE 74 July-August 2011

AIRPORTS & ROUTES: Airport charges Single or dual-till Most airports are regulated on a single-till basis, which means that all their revenues – whether they be from aeronautical charges, retail or car park sales – are considered as one. The rationale is that airlines bring in the customers for an airport’s shops so should also receive some of the benefit – in the form of lower charges.

However, many airports would like to be regulated on a dual-till basis and keep retail revenues to themselves. Indeed, this is the position of Airports Councils International – an airport industry body – which argues that a dual-till approach “allows the ‘monopolistic’ part of an airport’s business – the provision of core aeronautical activities – to be regulated, while ensuring that the other parts of the business can be run using the normal marketplace competition rules”.

Airlines, of course, would argue differently. Congdon says that “in many cases the aeronautical part of the business is designed not to cover its costs directly and, effectively, airport charges are supported from retail revenues earned from passengers.”

Without that subsidy, aeronautical charges would have to rise.

Where an airport achieves its biggest margins depends very much on its size. Smaller airports cannot generate sufficient volume of passengers to justify extensive retail or restaurant developments so often look to car park charges for profit, while larger hubs can afford to turn themselves into shopping centres with air transport services attached.

Scale and profit In the past, it was generally thought that an airport could hit profitability once it exceeded about one million passengers per year. However, the advent of low-cost airlines and European aviation liberalisation saw that threshold creep up. The reason was that airlines were forced to become more competitive and thus take a closer look at their costs. In turn, this restricted how much airports were able to levy airlines in charges, placing more of a focus on their retail revenues and passenger throughput.

designing Terminal 2 at Manchester in the 1980s we started from functional form, not architectural design, and we accepted that it might not win any architectural awards, but it would work.”

The best expressions of function over form are usually low-cost terminals, which concentrate on maximising passenger throughput and minimising aircraft turnaround times. When Dublin airport opened its grand, €610m ($884m) second terminal in 2010, Ryanair boss Michael O’Leary compared it to the “fantasy property developments” that sprung up prior to Ireland’s economic collapse. Ryanair had offered to build a cheaper second terminal for €250m ($360m).

Ryanair itself, though, has landed in hot water over alleged illegal subsidies for its operations at Lubeck and Frankfurt Hahn airports.

The budget operator is the biggest user of both airports and therefore has substantial power when negotiating charges. But, Air Berlin and Lufthansa both claim that because those airports are publicly owned, any reduced charges they give amount to illegal state aid.

The case is ongoing, but in 2008 Ryanair successfully fought a similar charge, overturning a 2004 ruling that it repay €4m ($5.8m) of incentives at Belgium’s Charleroi airport. At the time the carrier said the ruling showed “that the low-cost airports model works and does not involve state aid”.

Congdon, who consults for Ryanair, says: “ I think airports have to look at what they want to achieve very carefully. There will be some who can do without low-fare carriers, but if an airport wants growth in Europe, unless it’s a major hub airport, it must think very carefully if it can afford to turn them away because in short-haul terms, low-fare carriers are virtually the only show in town.”

In Europe today, airports with spare capacity must decide between doing a deal with a low-cost airline, or holding out for a customer who will pay their published rate. Provincial or secondary airports will almost always opt for the former, but they must do so with their eyes open, Congdon warns.

Congdon believes the threshold for profitability in Europe is now nearer two million passengers per year. “This means that airports have got to get much cleverer than they were 10 years ago in making best use of their assets. It’s forced airports to look at their cost base, at how they do things – it should make people think what it actually is they need to build and why.”

“A lot of publicly-owned airports across Europe entered into agreements with airlines for rational business reasons but often, when there were complaints to the Commission, they did not have their paperwork to demonstrate they had behaved as a rational private investor would, which is the key test. It is important that airports can show a business case and that it was The need for airports to focus on their own efficiencies will lead, considered and documented up front, such as gaining additional income in order to support longer term investment. This is Congdon says, to a decline – at least in the West – in prestige essential to be consistent with the market economy investor terminals and a rise in airports designed for functionality rather principle, which is what you have to comply with in order not to than aesthetics. “Personally, I think the age of the architectfall foul of state aid rules.” driven airport terminal passed a long time ago – when we were

£

£

Frankfurt

3,000

Rome

1,400 Aircraft Charges

Aircraft Charges Passenger Charges Government Charges

Passenger Charges Government Charges

2,500

2,372 2,372

2,330

1,200

2,430

2,166

1,209

1,167

1,224

1,206

1,000

2,000 800 1,500

1,397

600

528

434 826

825 646

633

663

530

519

502

496

1,000

434

400

631

633

500

200 96

0

2008

2009

2010

2011

0

Charges based on an international service with an A320 with a MTOW of 73.5 tonnes with 109 passengers on board.

2008

2009

2010

2011

Source: RDC Aviation

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AFM74_Asia and 737_AFM74 12/07/2011 10:06 Page 48

48 | AFM • ISSUE 74 July-August 2011

AIRPORTS & ROUTES: Asia and the 737NG With more than 200 seats, widebody aircraft have proven too large for some secondary markets.

In some cases, these markets have suffered from weak passenger load factors, thus making the services commercially unviable. The Next Generation single-aisle aircraft, boosted with a better operating range than the Classic models, is becoming a popular option for operations into secondary markets. Kee Keat Ong, senior consultant at ASM, investigates.

THE ROUTE TO TRAFFIC GROWTH: SINGLE-AISLE NGS AND ASIAN

ROUTE DEVELOPMENT A

SIAN FULL-SERVICE CARRIERS HAVE COMFORTABLY operated international medium-haul services with widebody aircraft for years. Unfortunately, the fuel costspike in 2008 forced a painful review of such services.

Although long-haul routes were the biggest some of these medium-haul international routes were also suspended, in particular services into non-hub (secondary) cities.

Nevertheless, airlines have adapted well to high fuel costs and many have evolved the ways they manage their business. Some Asian and Australasian carriers have made good use of Boeing’s Next Generation (NG) single-aisle aircraft in the existing market and the 737-800, which entered service in 1998, is fast gaining popularity in Asia and Australasia. These carriers capitalise on the lower seat capacity and lower operating costs of the narrowbody aircraft to right-size the seat capacity offered on some regional routes, especially the short- and medium-haul services to secondary markets. Over the last 12 months, carriers have strived even harder to develop new opportunities and to be creative in utilising their fleets.

Right-sizing seat capacity to match demand Many full-service carriers were operating services into secondary markets using widebody aircraft. More often than not, these lowfrequency services recorded weak passenger load factors as the seat capacity proved too large for secondary markets. Moreover, low-frequencies made the services unattractive to business travellers who instead opted to connect through the nearest hub airport with multiple daily-frequency services.

Fuel costs remained high, which made operating widebodies on these routes economically unviable; many Asian carriers had to resort to alternative ways to maintain these services. Carriers with Next Generation narrowbody aircraft ‘downgraded’ the widebody services to narrowbody ones to ensure the ‘right-size’ seat capacity aircraft was deployed to match the market demand.

Right-sizing the seat capacity also created an opportunity for the airlines to increase service frequencies enhancing the connecting traffic opportunities.

An example is Malaysia Airlines (MAS). In 2010, MAS leased 737-800s into its fleet prior to receiving its own factory-new jets from Boeing in 2011. It then deployed the 737-800s on regional services where operating widebody aircraft has proven a challenge. By right-sizing the seat capacity to better match demand, MAS also had the opportunity to increase frequencies on some sectors, enhancing its hub and spoke network model.

MAS used the 737-800s to enhance operations on all types of regional markets, i.e. capital city markets, leisure resort destinations and secondary markets.

The Kuala Lumpur (KUL) to Manila (MNL) sector was previously operated by the 294-seats A330-300 on a daily frequency. Now the carrier operates the 737-800 on a frequency of 10 flights a week. In comparison, the weekly seat capacity had been reduced by 25 per cent yet the weekly frequency has increased by 42 per cent. Moreover, the services offered better connectivity options at its Kuala Lumpur hub through two different flight time schedules.

AFM74_Asia and 737_AFM74 12/07/2011 10:07 Page 49

July-August 2011 AFM • ISSUE 74 | 49

AIRPORTS & ROUTES: Asia and the 737NG

The leisure resort, Malé, in the Republic of Maldives, is another beneficiary from the use of the 737-800. Previously, Malé was served by thrice-weekly flights using A330-300s via Colombo (CMB). Now, it is served by two dedicated nonstop services, both operated by 737-800s. The service frequency has also increased to five-times-a-week, direct into both markets. Previously, Malé had to share seat capacity with the Colombo market but now it has full seat capacity and more importantly, direct access to the Kuala Lumpur hub.

Hyderabad, India, provides a good example for the secondary market. It was previously operated using the 229-seats A330-200 on a thrice-weekly frequency but is now enjoying a five-times-a-week service using the 737800. The increase in frequency has again boosted opportunities to connect to the Kuala Lumpur hub and has enhanced the carrier’s hub and spoke network model. In terms of seat capacity, Hyderabad now enjoys a 16 per cent increase in weekly seat capacity.

Direct access to the secondary market In China, the advantages of lower seat capacity and a longer operating range have enabled more commercially viable direct services into secondary cities such as Kunming, Fuzhou, Qingdao, Dalian and Hangzhou. It is even more interesting to see city pairs between secondary cities, such as Hiroshima – Dalian (Air China); Phuket – Hangzhou (Hainan Airlines); and Nagoya – Qingdao (China Eastern Airlines). Chinese carriers with secondary hubs in secondary cities in mainland China are also fast expanding their international networks, connecting major foreign hub airports to secondary cities in China, such as Fuzhou – Singapore (Xiamen Airlines); Kunming – Kolkata (China Eastern Airlines); Shenzhen – Bangkok (planned by Hainan Airlines); and Nanning – Kuala Lumpur (China Eastern Airlines).

In Australasia, Virgin Australia operates 737NGs into secondary markets in south-east Asia – such as from Brisbane, Melbourne and Sydney – into Denpasar Bali, and Perth to Phuket.

AFM74_Asia and 737_AFM74 12/07/2011 10:09 Page 50

50 | AFM • ISSUE 74 July-August 2011

AIRPORTS & ROUTES: Asia and the 737NG Top 10 city pairs of longest sector length operated by 737NGs in Asia or Australasia.

No.

Airline

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

NH DJ DJ DJ DJ DJ MH 9W MH HU MH DJ / FJ CI DJ MH KE HU LJ / 7C / KE MH DJ

Origin

Destination

NRT PER SYD BNE MEL SYD BKI SIN BKI PEK KUL MEL TPE ADL BKI CJJ SIN ICN BKI AKL

BOM HKT DPS DPS DPS APW PER DEL HND HKT DEL NAN DPS DPS KIX BKK HFE BKK ICN CNS

Aircraft Type 737 73H 73H 73H 73H 73H 738 73H 738 738 738 73H 738 73H 738 73H 738 738 738 73H

Sector Length (km) 6,789 4,832 4,623 4,487 4,381 4,326 4,212 4,154 4,090 3,991 3,878 3,868 3,824 3,761 3,732 3,691 3,670 3,661 3,655 3,622

Block Time (minutes) 575 395 410 390 385 315 335 345 330 350 330 290 305 330 315 330 310 360 310 340

Source: Flightbase, July 2011

Top 10 city pairs of longest block time operated by 737NGs in Asia or Australasia.

No.

Airline

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

NH DJ DJ DJ DJ LJ / 7C / KE HU NH 9W DJ MH DJ MH KE KE MH CA KE HU KE

Origin

Destination

NRT SYD PER BNE MEL ICN PEK NRT SIN AKL BKI ADL BKI CJJ ICN KUL XMN ICN PEK PUS

BOM DPS HKT DPS DPS BKK HKT CTU DEL CNS PER DPS HND BKK CNX DEL CGK REP ALA REP

Aircraft Type 737 73H 73H 73H 73H 738 738 737 73H 73H 738 73H 738 73H 73H 738 738 73H 738 73H

Sector Length (km) 6,789 4,623 4,832 4,487 4,381 3,661 3,991 3,417 4,154 3,622 4,212 3,761 4,090 3,691 3,374 3,878 3,621 3,484 3,275 3,507

Block Time (minutes) 575 410 395 390 385 360 350 345 345 340 335 330 330 330 330 330 330 325 320 320

Source: Flightbase, July 2011

“

The Next

Generation single-aisle aircraft remains an attractive option for developing markets, especially secondary markets.

It is also a strong alternative for routes that can not sustain a daily frequency of widebody aircraft operations.

”

In Korea, Jeju Air is rapidly expanding its services out of Busan, with new services soon to be launched that connect Busan to Hong Kong and Bangkok respectively.

Base carriers at major hubs are also deploying the Next Generation single-aisle aircraft to operate direct services into secondary- or third-tier foreign markets. Air China connects Beijing with Sendai, Sapporo, Daegu, and Busan. China Eastern Airlines connects Shanghai Pudong with Jeju, Da Nang, and Toyoma in Japan.

Meanwhile, Continental Airlines based the 737-800s in Guam to serve various regional destinations, such as the secondary markets in Cairns, Fukuoka, Hiroshima, Nagoya, Okayama, Okinawa, Sendai, and Sapporo.

Back to MAS, the carrier based the first few factory-fresh 737800s it received to form its secondary hub in Kota Kinabalu (BKI).

It connects Kota Kinabalu to Tokyo Haneda, Osaka Kansai, Seoul Incheon and Perth. Another similar example is China Southern Airline’s secondary hub in Urumqi. The airline operates the 737NGs into central Asia such as Kazakhstan, Tajikistan and Kyrgyzstan.

Pushing the limits: Aircraft operating range As the airline industry continues to evolve its business operations, some airlines are pushing the Next Generation single-aisle fleet to operate on a sector length close to its maximum limit.

A unique case is Air Nippon, which operates Tokyo Narita – Bombay services using the 737-700ER and which recorded a 6,789km sector length, or nine hours 35 minutes block time. This is a unique case as the 737-700ER operated by Air Nippon is configured to have only 44 seats, with the majority being business-class.

The longest sector length scheduled service at high seat capacity is Virgin Australia’s Perth – Phuket services using the 737-800.

The weakening yield in the domestic Australian market has encouraged the carrier to look for alternatives in deploying the narrowbody aircraft. This has prompted it to push the Next Generation narrowbody to operate a much longer sector length.

Nevertheless, the carrier may face a minor payload penalty for the sector 4,832km or six hours 35 minutes block time.

Interestingly, Virgin Australia’s Sydney – Denpasar Bali services, although at a shorter sector length of 4,623km, is the longest block time sector after Air Nippon’s Tokyo Narita – Bombay service. The Sydney – Denpasar Bali flight takes six hours 50 minutes, probably due to the longer flight path across the ocean.

Most of the top city pairs listed in these tables are for new services launched within the last two to three years. As airlines strive to get the most out of their fleet we should expect to see more new city pairs introduced.

The Next Generation single-aisle aircraft remains an attractive option for developing markets, especially secondary markets. It is also a strong alternative for routes that can not sustain a daily frequency of widebody aircraft operations. Nevertheless, the biggest challenge in replacing the widebody with Next Generation single-aisle is belly hold cargo space. Hence, the fleet type is probably best deployed by budget carriers on leisure routes.

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AFM74_NextGen_AFM71 12/07/2011 10:52 Page 52

52 | AFM • ISSUE 74 July-August 2011

MAINTENANCE OPERATIONS: NG MRO The introduction of new aircraft always means a flurry of work behind the scenes, as maintenance organisations, training centres and parts suppliers gear up to support new products. Though lessons learned on older aircraft prove useful, new technology means that innovative strategies and techniques must be developed, particularly in the field of maintenance. Alex Derber finds out just how much all this new business is going to be worth.

MAINTAINING THE NEXT GENERATION

The A380 is the most advanced passenger aircraft currently flying, but even its maintenance intervals won’t compare to the forthcoming 787 and A350

T

HE NEXT GENERATION OF PASSENGER AIRCRAFT WILL look remarkably similar to what passengers are currently flying on. But while the basic shape of the 787 and A350 is little different to the A330 and 767 they replace, those two wings and a tube are going to require significantly less maintenance than their predecessor designs.

One of the main reasons for this is a shift from aluminium to composite airframes, which are far more resilient to corrosion and fatigue. Boeing’s 787, for instance, is a 50 per cent composite design and is expected to generate roughly 30 per cent lower life-cycle maintenance costs than the 767. This will be due both to a reduction in part counts and longer heavy maintenance intervals, of up to 10 years.

Such will be the maintenance cost advantage of newer generation aircraft that advisory group Seabury estimates real global MRO spend will barely rise through to 2025 from its present level of near $40bn, despite a big increase in the global fleet. That does, however, assume that both Boeing and Airbus tie customers for their new products into guaranteed maintenance cost-per-flight-hour contracts.

Boeing Boeing’s support programme for the 787 is called Goldcare.

Initially, it was a total package, like the maintenance deals that engine manufacturers seek to channel their customers towards.

However, following pressure from its customers, some of whom wanted to keep certain functions in-house or with other providers, Boeing broke Goldcare down into separate elements.

It also dropped line maintenance from the programme, which

resulted in SR Technics falling off the list of Goldcare providers.

Though component, heavy checks and materials management remained in Goldcare, an analysis from the OAG Fleet and MRO Forecast Suite shows why the omission of line maintenance mattered so much to SR Technics: across the 787 family the value of line maintenance work from 2011 to 2020 is expected to rise from $19m to $650m.

Goldcare’s first customer, in early 2010, was London-listed TUI Travel, which opted for the full roster of services. Its deal, Goldcare Enterprise, means that Boeing and its partners will provide heavy maintenance, engineering and materials management for each of TUI’s 13 787s on order, for 12 years from the delivery of each aircraft.

Boeing hopes that at least half its customers will buy in to the programme, though it does not expect many airlines to sign maintenance deals at the time of order – as occurs often for engine purchases. The OEM has also said it wants to extend Goldcare to other aircraft types.

The total 787 maintenance market to be captured over the coming decade has been modelled by OAG. The aircraft is due to enter service this year with Japan’s ANA and by 2015 should have reached an installed base of 443 aircraft. The maintenance spend model assumes that by 2020 1,171 Dreamliners will be in service.

This means that from 2015 to 2020 the value of its airframe heavy maintenance will rise from $9m to $43m; component maintenance will rise from $207m to $648m; and modifications work will increase from under $1m to $161m.

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AFM74_NextGen_AFM71 12/07/2011 10:46 Page 54

54 | AFM • ISSUE 74 July-August 2011

MAINTENANCE OPERATIONS: NG MRO

A380 – Entry into service: 2007 Line Maintenance ($m)

250

The vast gap between line ($650m) and heavy ($43m) maintenance in 2020 is a reflection both of the higher frequency of line work and the durability of next generation aircraft. By way of contrast, a current generation aircraft like the 737NG is expected to generate $703m of heavy maintenance work in 2011 – and $1.2bn of line.

Heavy Maintenance ($m)

200

Airbus

150

The most advanced commercial aircraft currently flying, the A380, entered service with an A check interval of 1,000 hours, C checks at 24 months and heavy structural inspections at six and 12 years.

During the aircraft’s development, airlines and suppliers attended more than 200 meetings to discuss how reliability, supportability and maintainability could be optimised.

100 50 0

2015 (219)

2016 (242)

2017 (266)

2018 (286)

2019 (306)

2020 (326)

Year (No. of aircraft)

One of the ways this was achieved was by increasing the number of internal sensors and monitors in the aircraft, which affords maintenance organisations a detailed overview of systems performance and allows them to pre-empt any failures, which increases reliability. Boeing incorporates similar technologies on its new aircraft.

As launch customer for the A380, SIA was the first airline to perform C checks on the aircraft

787-8/9 – Entry into service: 2011 800 700

Line Maintenance ($m)

600

Heavy Maintenance ($m)

OAG’s forecast suite extrapolates future aircraft numbers from orders already in place and an assessment of ongoing capacity requirements based on GDP growth and other factors. The value of maintenance work, meanwhile, is arrived at by taking current cost and maintenance interval assumptions and using a one per cent compound productivity improvement to account for savings generated by new materials and maintenance techniques.

500 400 300 200 100 0

2015 (62)

2016 (585)

2017 (726)

2018 (870)

In 2011, four years after the superjumbo’s entry into service (EIS) with Singapore Airlines, OAG calculates that line maintenance work for the type will be worth $53m. By 2015, with 218 A380s in service, that figure will have risen to $136m, while heavy maintenance will be worth $115m. By 2020, when OAG forecasts an installed base of 326 A380s, line maintenance will be valued at $197m and heavy work at $234m.

2019 2020 (1,020) (1,171)

What becomes apparent from the figures is that, compared with line maintenance, heavy checks on the A380 are far more valuable than on the newer 787. Boeing’s airframe is 50 per cent composite, while the A380 is roughly 25 per cent, which translates to 144 months per major heavy event for the 787, and 72 months for the A380 – thus increasing the cost of heavy checks on the latter aircraft over its lifetime.

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AFM74_NextGen_AFM71 12/07/2011 10:52 Page 56

56 | AFM • ISSUE 74 July-August 2011

MAINTENANCE OPERATIONS: NG MRO

At around 50 per cent composites, the A350 will, like the 787, require far less heavy maintenance than predecessor aircraft

A350-900 – Entry into service: 2013

Airbus’ next aircraft type to enter service will be the A350-900 in 2013, followed by the A350-800 in 2016 and the A350-1000 in 2017. Like the 787, the A350 will be 50 per cent composite and this will have similar implications for its line and heavy maintenance markets.

250 OAG forecasts that by 2015 there will 71 A350-900s in service, requiring $39m of line maintenance and, due to their young age, no heavy checks, intervals for which Airbus puts at 12 years.

More than 400 A350-900s could be in service by 2020, necessitating $19m of heavy checks and $222m of line maintenance.

Line Maintenance ($m)

200

Heavy Maintenance ($m)

150

Maintenance centres

100

The advanced materials and technologies of the next generation of commercial aircraft will require new skills and tooling across the world’s independent MRO organisations. Some of these are already in evidence, of course, with the A380.

50 0

2015 (71)

2016 (128)

2017 (194)

2018 (263)

2019 (331)

2020 (402)

Year (No. of aircraft)

Some operators have signed up to Airbus’ own support programme. Called Flight Hours Services (FHS), it offers airlines a customisable support solution incorporating component repairs and spare parts services, airframe maintenance, and engineering and fleet technical management. In 2007, A380’s launch customer, SIA, contracted Airbus’ FHS service to cover line replaceable units and services for avionics, cabin and integrated modular avionics systems on all its A380s over 10 years.

Independent MROs are also offering maintenance solutions for the A380. As two of the superjumbo’s earliest customers, Lufthansa and Air France teamed up to offer spares support on a pooling basis through Lufthansa Technik and Air France Industries (AFI).

Called Spairliners, the joint venture (JV) covers all aspects of component maintenance, inventory management and logistics, with repair work distributed between AFI’s component overhaul facility in Paris and Lufthansa Technik’s component workshops in Hamburg. Parts are flown from Paris, Charles de Gaulle and, proving the solution had global reach, in 2009 Qantas signed up to the programme. Australia’s flag carrier awarded Spairliners a 10-year contract to provide component support for a total of 20 A380s.

“The double-deck superjumbo is making its entry as the largest passenger airliner in the world. Being a category in itself, it requires major changes to the standard infrastructure to operate it,” states AFI. All of Air France’s A380 airframe maintenance will be carried out at the company’s purpose-built hanger at its Roissy, Charles de Gaulle facility.

In Germany, Lufthansa Technik possesses an A380 hangar at its central maintenance facility in Frankfurt. Two A380s or three 747s can be maintained simultaneously on in the 25,000sq.m hangar, but by 2015 there will be capacity to maintain four A380s simultaneously.

Lufthansa Technik has also been busy in China where its JV with Air China, Ameco Beijing, has also developed A380 maintenance capacity. Ameco Beijing opened its new hangar that can accommodate four Airbus A380s, or other widebodies, simultaneously. The hangar, opened in March 2008, is 70,000sq.m and can fit four A380s.

Elsewhere in Asia, SIA was also the first airline to conduct line maintenance on it. One of the many features of SIA’s advanced hangar is a computer-controlled docking system that employs lasers to fine-tune the docking process.

The Middle East hosts the world’s largest A380 operator, Emirates.

Emirates Engineering’s giant MRO centre in Dubai already houses seven A380-size hangars, overhaul shops for engines and components, storage facilities and a staff training centre.

However, such is the scale of Emirates’ own A380 fleet – which is scheduled to reach 90 aircraft – that even this mammoth facility may be unable find space for third-party work.

Project3_Layout 1 12/07/2011 11:17 Page 1

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AFM74_Data_AFNM 12/07/2011 10:24 Page 58

58 | AFM • ISSUE 74 July-August 2011

INDUSTRY DATA: FLEET FINANCE, FIRM ORDERS, AIRCRAFT TRANSACTIONS, LIST PRICES AND LEASE RATES AIRCRAFT TRANSACTIONS – Boeing, Airbus, ATR, and Bombardier. 18 Apr to 27 Jun 2011 Contract Date 4/18/2011 4/18/2011 4/18/2011 4/18/2011 4/18/2011 4/19/2011 4/19/2011 4/19/2011 4/19/2011 4/20/2011 4/20/2011 4/20/2011 4/20/2011 4/20/2011 4/20/2011 4/21/2011 4/21/2011 4/21/2011 4/21/2011 4/21/2011 4/21/2011 4/21/2011 4/21/2011 4/21/2011 4/21/2011 4/21/2011 4/22/2011 4/22/2011 4/22/2011 4/22/2011 4/26/2011 4/26/2011 4/26/2011 4/26/2011 4/26/2011 4/26/2011 4/26/2011 4/27/2011 4/27/2011 4/27/2011 4/27/2011 4/27/2011 4/28/2011 4/28/2011 4/28/2011 4/28/2011 4/28/2011 4/28/2011 4/28/2011 4/28/2011 4/28/2011 4/28/2011 4/28/2011 4/28/2011 4/28/2011 4/28/2011 4/28/2011 4/29/2011 4/29/2011 4/29/2011 4/29/2011 4/29/2011 4/29/2011 4/29/2011 4/30/2011 5/2/2011 5/2/2011 5/3/2011 5/4/2011 5/4/2011 5/4/2011 5/4/2011 5/4/2011 5/4/2011 5/4/2011 5/4/2011 5/5/2011 5/5/2011 5/5/2011 5/5/2011 5/5/2011 5/5/2011 5/5/2011 5/5/2011 5/5/2011 5/6/2011 5/6/2011 5/6/2011 5/6/2011 5/6/2011

S/N 26421 23054 30468 40355 37865 35983 36529 451 120330 3001 4671 23848 527 593 120280 637 641 729 4645 23772 24493 23847 40244 3093 11384 UE-132 46067 53039 31071 40723 1991 4613 49468 25393 25393 27115 848 53527 37084 20101 389 11374 621 2051 0185 0185 E3165 23374 34253 25283 25283 40894 32854 7075 15001 19000276 11382 4683 22470 27452 35493 37896 587 11428 47819 8098 U-123 24877 1660 1219 719 24327 35630 37366 39047 TC-245 E2053 E3120 28295 28296 28297 531 357 19000432 AC-563 4697 24387 37945 7431 294

A/C Model Boeing 737 (CFMI) Boeing 737 (JT8D) Boeing 737 (NG) Boeing 737 (NG) Boeing 767 Boeing 737 (NG) Boeing 737 (NG) Bombardier (de Havilland) Dash 8 Embraer EMB-120 Brasilia Airbus A318 Airbus A320 Boeing 737 (JT8D) Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) DHC-6 TOr Embraer EMB-120 Brasilia Airbus A300 Airbus A300 Airbus A300 Airbus A320 Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 737 (JT8D) Boeing 737 (NG) Fairchild/Dornier 328 Fokker 100 Hawker Beechcraft 1900 Boeing (McDonnell-Douglas) DC-8 Boeing (McDonnell-Douglas) MD-80 Boeing 737 (NG) Boeing 737 (NG) Airbus A318 Airbus A320 Boeing (McDonnell-Douglas) MD-80 Boeing 767 Boeing 767 Boeing 767 Viking Air DHC-6 Twin Otter Boeing (McDonnell-Douglas) MD-90 Boeing 737 (NG) Boeing 747 Bombardier (de Havilland) Dash 8 Fokker 100 Airbus A300 Airbus A318 Airbus A320 Airbus A320 BAE SYSTEMS (HS) 146 Boeing 737 (CFMI) Boeing 737 (NG) Boeing 767 Boeing 767 Boeing 767 Boeing 777 Bombardier (Canadair) CRJ RJ Bombardier (Canadair) CRJ900 RJ Embraer 195 Fokker 100 Airbus A320 Boeing 727 Boeing 737 (CFMI) Boeing 737 (NG) Boeing 777 Bombardier (de Havilland) Dash 8 Fokker 100 Boeing (McDonnell-Douglas) DC-10 Bombardier (Canadair) CRJ Regional Jet Hawker Beechcraft 99 Boeing 737 (CFMI) Airbus A318 Airbus A330 BAE SYSTEMS (Jetstream) Jetstream 31 Boeing 737 (CFMI) Boeing 737 (NG) Boeing 737 (NG) Boeing 737 (NG) Fairchild (Swearingen) Metro BAE SYSTEMS (HS) 146 BAE SYSTEMS (HS) 146 Boeing 737 (NG) Boeing 737 (NG) Boeing 737 (NG) Bombardier (de Havilland) Dash 8 Bombardier (de Havilland) DHC-6 TO Embraer 190 Fairchild (Swearingen) Metro Airbus A320 Boeing 737 (CFMI) Boeing 767 Bombardier (Canadair) CRJ Regional Jet CASA 212

Variant Reg No 500 G-BVKD 200 Adv.(Stg3 Hk) N737AJ 800 LN-RPR 800 Winglets JA338J 300ERF (GE) N342UP 800 Winglets TC-AJP 800 Winglets TC-SNF 300 C-GAPW ER XA120 (P&W) PR-AVH 210 (CFM) B-6776 200 Adv.(Stg3 Hk) N443SF 300 N838CA 300 RDPLER ZS-TAA 620R (P&W) N3740 620R (P&W) N5641 620R (P&W) N3729 230 (IAE) VH-FJR 300 EI-CXN 400 N314JW 200 Adv.(Stg3 Hk) N443RC 800 Winglets A6-FDQ 100 N545EF UP-F1001 D ZS-SNK 72 VP-BHS 87 N826TH 800 Winglets N992AN 800 Winglets TC-AMP 110 (CFM) N802FR 210 (CFM) B-6775 82 (MDC) N442AA 300ER (P&W) N655UA 300ER (P&W) N655UA 300ER (P&W) N660UA 400 (Floats) 8Q-TMX 30 N957DN 800 Winglets VQ-BKV 100F (M) N676UP 100 N826EX N134MN 620R (P&W) N2621 110 (CFM) N804FR 210 (CFM) CS-TNA 210 (CFM) CS-TNA 300 UR300 Winglets N10323 800 Winglets B-5146 300ER (P&W) N646UA 300ER (P&W) N646UA 300ER Winglets (GE) JA623A 300ER (GE) F-GSQV Challenger 800 N135BC 900ER C-GKUY LR EC-KYO N109MN 230 (IAE) HA-LWJ 200F(M)Adv.(Stg3Hk) N715AA 300 N270AE 800 Winglets EC300ER (GE) B-KPT 300 C-GKUX N994JM 30F (M) N478CT Challenger 850 C-GJTL 99A HH500 N487AE 110 (CFM) N805FR 320HGW (P&W) 9M-MTB G-BTXG 300 LN-KKG 800 Winglets JA737R 800 Winglets VT-SGU 800 Winglets LN-DYP II N71Z 200 ZS-SBD 300 ZS-SBR 600 LN-RRZ 600 LN-RRX 600 LN-RRY 300 N857CA 300 C-FCSX LR PP-PJM Expediter l N563TR 230 (IAE) CC-BAM 300QC ZS-ASL 300ERF (GE) N343UP 200LR EK-20017 200 N502FS

Owner Name TAG Aviation Ajeton La Darien JSA SNC Heloise General Electric ALC Avmax Group Aereo Calafia Avianca ICBC Belina Export Global Pripal Lao Airlines TAB Charters European Air Transport European Air Transport European Air Transport Falcon Transalpine Leasing National Nuclear Security Belina Export General Electric US Air Force Caspiy Balmoral Central Brisair Corsair Two LLC Avolon General Electric Insignia Tianshang Reliance United Airlines Tennebau Tennebaum Trans Maldivian Delta Air Lines Unknown Stewart Industries EP Aviation Qwest Air Parts Aircraft Solution Undisclosed GOAL FL Technics Unconfirmed Grandmax Group ALC unknown United Airlines FI Walnut ALIP GY Challenger Bombardier GOAL Qwest Air Parts JSA Cargo Aircraft Mgmt Aerovista AerDragon BOC Bombardier Jet Midwest Reliance Chartright Air Unconfirmed Evergreen Trade Insignia Pembroke Group Swedewings FL Technics Avolon BBAM DY2 Clingenpeel Internal Finance Internal Finance Infinity Aviation Infinity Aviation Infinity Aviation Global Pripal BBS Aircraft Banco Safra Career Aviation Bandurria Safair SNC Heloise Armavia Sentry

Operator Name TAG Aviation Ajeton SAS Japan Airlines UPS Airlines Pegasus Airlines SunExpress Avmax Aereo Calafia Avianca ICBC Belina Export Global Pripal Lao Airlines TAB Charters European Air Transport European Air Transport European Air Transport Tiger Airways A Transaero National Nuclear Security Belina Export FlyDubai US Air Force Caspiy Balmoral Central Contracts Brisair Corsair Two American Airlines Pegasus Airlines Frontier Airlines ICBC Reliance United Airlines United Airlines United Airlines Trans Maldivian Delta Air Lines S7 Airlines Stewart Industries EP Aviation Qwest Air Parts Universal Asset Mgmt Frontier Airlines GOAL FL Technics Unconfirmed Orient Thai Airlines Xiamen Airlines United Airlines United Airlines ANA Air France DJ Burrell & Burrell Bombardier Air Europa Qwest Air Parts Wizz Air Capital Cargo Vista Georgia AerCap Cathay Pacific Bombardier Jet Midwest Reliance Chartright Air Unconfirmed Evergreen Trade Frontier Airlines Malaysia Airlines Swedewings FL Technics Skymark Airlines SpiceJet Norwegian Clingenpeel Internal Finance Internal Finance SAS SAS SAS Commutair BBS Aircraft TRIP Sierra West Airlines LAN Airlines Safair UPS Airlines Armavia Sentry

Event Remarks Purchased - parked Purchased - parked Pur'd - subject to lease - pkd Pur’d - sale leaseback on del Pur’d - sale leaseback on del Pur’d - sale leaseback on del Purchased - subject to lease Purchased - parked Purchased Purchased Purchased Purchased - parked Purchased - parked Purchased Purchased Purchased - parked Purchased - parked Purchased - parked Pur’d - sale leaseback on del Purchased - subject to lease Purchased - parked Purchased - parked Pur’d - sale leaseback on del Purchased - parked Purchased Purchased Purchased - parked Purchased - parked Purchased - subject to lease Pur’d - sale leaseback on del Purchased - sale leaseback Purchased Purchased - parked Pur'd off lease/fin term complete Purchased - sale leaseback Purchased - subject to lease Pur'd off lease/fin term compl - pkd Purchased - parked Pur’d - sale leaseback on del Purchased - parked Purchased - parked Purchased - parked Purchased - parked Pur’d - sale leaseback - pkd Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - subject to lease Purchased - sale leaseback Pur'd off lease/fin term complete Pur’d - sale leaseback on del Purchased - sale leaseback Purchased - subject to lease Purchased - parked Purchased - subject to lease Purchased - parked Pur’d - sale leaseback on del Pur'd off lease/fin term complete Purchased - parked Purchased Pur’d - sale leaseback on del Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased Purchased - parked Purchased - sale leaseback Pur’d - sale leaseback on del Purchased - parked Purchased - parked Purchased - subject to lease Pur’d - sale leaseback on del Pur’d - sale leaseback on del Purchased - parked Purchased - parked Purchased - parked Purchased - subject to lease Purchased - subject to lease Purchased - subject to lease Purchased - parked Purchased - parked Pur’d - sale leaseback on del Purchased Pur’d - sale leaseback on del Purchased Pur’d - sale leaseback on del Purchased Purchased

AFM74_Data_AFNM 12/07/2011 10:24 Page 59

July-August 2011 AFM • ISSUE 74 | 59

INDUSTRY DATA: FLEET FINANCE, FIRM ORDERS, AIRCRAFT TRANSACTIONS, LIST PRICES AND LEASE RATES AIRCRAFT TRANSACTIONS – Boeing, Airbus, ATR, and Bombardier. 18 Apr to 27 Jun 2011 Contract Date 5/8/2011 5/9/2011 5/9/2011 5/9/2011 5/9/2011 5/9/2011 5/9/2011 5/9/2011 5/9/2011 5/9/2011 5/9/2011 5/9/2011 5/9/2011 5/9/2011 5/9/2011 5/9/2011 5/9/2011 5/9/2011 5/10/2011 5/10/2011 5/10/2011 5/10/2011 5/10/2011 5/10/2011 5/11/2011 5/11/2011 5/11/2011 5/11/2011 5/11/2011 5/11/2011 5/11/2011 5/11/2011 5/11/2011 5/11/2011 5/12/2011 5/12/2011 5/12/2011 5/12/2011 5/13/2011 5/13/2011 5/13/2011 5/13/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/15/2011 5/16/2011 5/16/2011 5/16/2011 5/16/2011 5/16/2011 5/16/2011 5/16/2011 5/16/2011 5/17/2011 5/17/2011 5/17/2011 5/17/2011 5/17/2011 5/17/2011 5/18/2011 5/18/2011 5/18/2011 5/18/2011 5/18/2011 5/18/2011 5/18/2011

S/N 53525 25843 25843 UE-137 UE-147 UE-152 UE-158 UE-172 UE-185 UE-189 UE-198 UE-203 UE-205 UE-206 UE-216 UE-227 UE-234 UE-239 621 24750 4034 UE-181 UE-187 UE-246 24245 24355 40245 27100 11304 11348 UE-168 UE-194 UE-199 056 41039 22449 23848 36584 4204 916 E1160 7037 368 398 466 470 474 320 419 3062 0191 1686 2724 622 E3358 E3362 53221 23927 24320 25083 26417 28149 25273 27095 30331 30383 14500960 3206 20211 730 1228 400 41041 36878 22769 24071 UC-121 052 22597 35825 29899 8090 440 124 155 261 4696 7520 7520 441

A/C Model Boeing (McDonnell-Douglas) MD-90 Boeing 737 (CFMI) Boeing 737 (CFMI) Hawker Beechcraft 1900 Hawker Beechcraft 1900 Hawker Beechcraft 1900 Hawker Beechcraft 1900 Hawker Beechcraft 1900 Hawker Beechcraft 1900 Hawker Beechcraft 1900 Hawker Beechcraft 1900 Hawker Beechcraft 1900 Hawker Beechcraft 1900 Hawker Beechcraft 1900 Hawker Beechcraft 1900 Hawker Beechcraft 1900 Hawker Beechcraft 1900 Hawker Beechcraft 1900 Airbus A300 Boeing 737 (CFMI) Bombardier (de Havilland) Dash 8 Hawker Beechcraft 1900 Hawker Beechcraft 1900 Hawker Beechcraft 1900 Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 737 (NG) Boeing 747 Fokker 100 Fokker 100 Hawker Beechcraft 1900 Hawker Beechcraft 1900 Hawker Beechcraft 1900 Saab 340 BAE SYSTEMS (Jetstream) Jetstream 41 Boeing 727 Boeing 737 (JT8D) Boeing 737 (NG) Airbus A319 ATR ATR 72 BAE SYSTEMS (HS) 146 Bombardier (Canadair) CRJ Regional Jet Airbus A300 Airbus A300 Airbus A300 Airbus A300 Airbus A300 Airbus A310 Airbus A310 Airbus A318 Airbus A320 Airbus A320 Airbus A320 ATR ATR 42 BAE SYSTEMS (Avro) RJ Avroliner BAE SYSTEMS (Avro) RJ Avroliner Boeing (McDonnell-Douglas) MD-80 Boeing 737 (CFMI) Boeing 737 (CFMI) Boeing 757 Boeing 767 Boeing 767 Boeing 767 Boeing 767 Boeing 767 Boeing 767 Embraer ERJ-135 Fairchild/Dornier 328JET Fokker 50 Airbus A300 Airbus A330 Airbus A330 BAE SYSTEMS (Jetstream) Jetstream 41 Boeing 737 (NG) Boeing 747 Boeing 747 Hawker Beechcraft 1900 Airbus A380 Boeing 737 (JT8D) Boeing 737 (NG) Boeing 747 Bombardier (Canadair) CRJ Regional Jet Bombardier (de Havilland) Dash 8 Airbus A300 Airbus A300 Airbus A300 Airbus A320 Bombardier (Canadair) CRJ Regional Jet Bombardier (Canadair) CRJ Regional Jet Bombardier (de Havilland) Dash 8

Variant 30 400 400 D D D D D D D D D D D D D D D 620R (P&W) 400 400 D D D 300 300 800 Winglets 400 (GE)

Reg No B-2252 N843BB N843BB N81533 N81535 N81536 N38537 N16540 N53545 N69547 N47542 N17541 N87550 N87551 N87552 N87554 N87555 N81556 N2621 N980ST G-ECOZ N49543 N81546 N87557 N203MG EI-CXR A6-FDR EI-XLC ZPZPD N82539 D N69549 D N81538 A SPHK-4775X 200 Adv. (Stg3 Hk)FAB-112 200 Adv.(Stg3 Hk) YV488T 800 Winglets B-5491 110 (CFM) N952FR 500 OH-ATM 100 A2-ABF 100ER N931CA 600 (GE) EK-30068 600 (GE) EK-30098 N80058 600R (GE) N11060 600R (GE) N7062A 220 (P&W) XY-AGE 220 (P&W) XY-AGD 120 (P&W) PR-AVK 210 (CFM) CS-TNB 210 (CFM) B-6320 230 (IAE) 9V-TAE 500 A5-RGH RJ100 SX-DMC RJ100 SX-DMD 82 (MDC) EP-LCJ 300 3X-GGR 300 D-AGEB 200 (RR) UP-B5702 300ER (P&W) OE-LAW 300ER (RR) B-2569 300ER Winglets(P&W) OE-LAT 300ER Winglets(P&W) OE-LAX 300ER Winglets (P&W)OE-LAZ 300ER Winglets(P&W) OE-LAE Legacy 600 OE-IBR OE-HRJ PH-KVG 620R (P&W) N4730 340HGW (RR) TC-JNN 340HGW (RR) C-GHKR SE800 Winglets B-5586 200SF (P&W) N923FT 200SF (P&W) N110TR C-1 N821SF 860 (EA) F-HPJE 200 Adv.(Stg3 Hk) N250TR 800 Winglets PR-GGJ 400 (GE) N917UN Challenger 850 RA-67219 200 LN-WSB B4-100F (GE) N124TN B4-200F (GE) N155TN B4-200F (GE) N261AX 230 (IAE) B-6761 200ER VQ-BLZ 200ER VQ-BLZ 200 LN-WSC

Owner Name Delta Air Lines Aviation Exchange Aviation Technologies VPAA VPAA VPAA VPAA VPAA VPAA VPAA VPAA VPAA VPAA VPAA VPAA VPAA VPAA VPAA European Air Transport AAR Bombardier VPAA VPAA VPAA Source One Transalpine Leasing General Electric SB Leasing Sol del Paraguay Sol del Paraguay VPAA VPAA VPAA Sprint Air Easyfly Bolivian Air Force Avior Airlines AerDragon AerCap Undisclosed Air Botswana Undisclosed Mahan Air Mahan Air Apollo Apollo Apollo Undisclosed Undisclosed Avianca GOAL ALC MC Aviation/Mitsubishi Druk Air Sky Wings Airlines Sky Wings Airlines Kish Air GR Avia A J Walter SCAT Austrian ALC Austrian Austrian Austrian Austrian Avcon Icejet Insel Air International European Air Transport Undisclosed Air Canada Undisclosed ICBC Kalitta Air Kalitta Air Suburban Air Freight DS-Fonds MAP JSA SB Leasing Yamal Airlines Wideroe Kalitta Turbine Leasing Kalitta Turbine Leasing Kalitta Turbine Leasing ICBC Magpie Aviation AK Bars Aero Wideroe

Operator Name Delta Air Lines Aviation Exchange Depot Aviation Technologies Gulfstream Gulfstream Gulfstream VPAA Gulfstream Gulfstream Gulfstream Gulfstream Gulfstream Gulfstream Gulfstream Gulfstream Gulfstream Gulfstream Gulfstream European Air Transport AAR Services Bombardier Gulfstream VPAA Gulfstream Source One Transaero FlyDubai Transaero Sol del Paraguay Sol del Paraguay Gulfstream Gulfstream Gulfstream Sprint Air Easyfly Bolivian Air Force Avior Airlines AerCap Frontier Airlines FinnComm Airlines Air Botswana Undisclosed Mahan Air Mahan Air Apollo Apollo Apollo Air Bagan Air Bagan Avianca GOAL Spring Airlines Tiger Airways Druk Air Sky Wings Airlines Sky Wings Airlines Kish Air GR Avia A J Walter SCAT Austrian ALC Austrian Austrian Austrian Austrian Avcon Jet Icejet Insel Air International European Air Transport Turkish Airlines Air Canada Undisclosed ICBC Kalitta Air Kalitta Air Suburban Air Freight Air France MAP GOL Sberbank Leasing Yamal Airlines Wideroe Kalitta Turbine Leasing Kalitta Turbine Leasing Kalitta Turbine Leasing China Southern Airlines AK Bars Aero AK Bars Aero Wideroe

Event Remarks Purchased - parked Purchased - parked Purchased - parked Purchased - subject to lease Purchased - subject to lease Purchased - subject to lease Purchased - parked Purchased - subject to lease Purchased - subject to lease Purchased - subject to lease Purchased - subject to lease Purchased - subject to lease Purchased - subject to lease Purchased - subject to lease Purchased - subject to lease Purchased - subject to lease Purchased - subject to lease Purchased - subject to lease Purchased - parked Purchased - parked Purchased - parked Purchased - subject to lease Purchased - parked Purchased - subject to lease Purchased - parked Purchased - subject to lease Pur’d - sale leaseback on del Pur'd - subject to lease - parked Purchased - parked Purchased - parked Purchased - subject to lease Purchased - subject to lease Purchased - subject to lease Purchased - parked Purchased - parked Purchased Purchased Purchased Purchased - subject to lease Pur’d - sale leaseback on del Purchased - parked Pur’d - subject to lease - pkd Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Pur’d - sale leaseback - pkd Pur’d - sale leaseback - pkd Purchased Purchased - parked Purchased - subject to lease Purchased - subject to lease Purchased Purchased - parked Purchased - parked Pur'd off lease/fin term complete Purchased - parked Purchased - parked Purchased Pur'd off lease/fin term complete Purchased - parked Pur'd off lease/fin term complete Pur'd off lease/fin term complete Pur'd off lease/fin term complete Pur'd off lease/fin term complete Purchased Pur'd off lease/fin term complete Purchased - parked Purchased - parked Purchased - sale leaseback on del Pur'd off lease/fin term complete Purchased - parked Purchased Purchased - parked Purchased - parked Purchased Purchased - sale leaseback on del Purchased - parked Purchased - subject to lease Purchased - parked Purchased Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - sale leaseback on del Purchased - sale leaseback - pkd Purchased - parked Purchased - parked

AFM74_Data_AFNM 12/07/2011 10:25 Page 60

60 | AFM • ISSUE 74 July-August 2011

INDUSTRY DATA: FLEET FINANCE, FIRM ORDERS, AIRCRAFT TRANSACTIONS, LIST PRICES AND LEASE RATES AIRCRAFT TRANSACTIONS – Boeing, Airbus, ATR, and Bombardier. 18 Apr to 27 Jun 2011 Contract Date 5/18/2011 5/19/2011 5/19/2011 5/19/2011 5/19/2011 5/19/2011 5/19/2011 5/20/2011 5/20/2011 5/20/2011 5/20/2011 5/20/2011 5/20/2011 5/23/2011 5/23/2011 5/23/2011 5/23/2011 5/24/2011 5/24/2011 5/24/2011 5/25/2011 5/25/2011 5/25/2011 5/26/2011 5/26/2011 5/26/2011 5/26/2011 5/26/2011 5/26/2011 5/26/2011 5/26/2011 5/26/2011 5/26/2011 5/26/2011 5/27/2011 5/27/2011 5/27/2011 5/27/2011 5/27/2011 5/27/2011 5/28/2011 5/30/2011 5/30/2011 5/30/2011 5/30/2011 5/31/2011 5/31/2011 5/31/2011 5/31/2011 5/31/2011 6/1/2011 6/1/2011 6/1/2011 6/1/2011 6/2/2011 6/2/2011 6/2/2011 6/3/2011 6/3/2011 6/3/2011 6/3/2011 6/3/2011 6/3/2011 6/3/2011 6/4/2011 6/5/2011 6/6/2011 6/6/2011 6/7/2011 6/7/2011 6/7/2011 6/8/2011 6/8/2011 6/8/2011 6/8/2011 6/8/2011 6/9/2011 6/9/2011 6/9/2011 6/9/2011 6/9/2011 6/9/2011 6/9/2011 6/9/2011 6/9/2011 6/9/2011 6/10/2011 6/10/2011 6/11/2011

S/N 99 3030 1224 49398 25361 435 4033 0792 E2025 24897 28914 25067 26943 4713 37085 40869 533 49458 49944 94 14500974 14501132 UB-55 4714 4716 208 E1260 53194 40762 25641 29950 438 4022 110388 20046 24009 24010 27425 35842 4265 38966 604 30196 25064 26341 686 4728 28666 BC-770B 11371 0112 2515 969 7042 25769 24681 UC-118 33024 33024 23371 28900 4265 4265 AC-759B 063 UB-73 703 410 40246 11280 11281 36881 40994 7186 446 576 E3203 49620 30327 4038 120268 145362 145362 UE-138 UE-292 UE-5 28900 23521 46162

A/C Model Variant Bombardier (de Havilland) DHC-6 TO 100 Airbus A318 120 (P&W) Airbus A330 240 (RR) Boeing (McDonnell-Douglas) MD-80 83(MDC)(Stge4 ready) Boeing 737 (CFMI) 400 Bombardier (de Havilland) Dash 8 200 Bombardier (de Havilland) Dash 8 400 Airbus A321 230 (IAE) BAE SYSTEMS (HS) 146 200 Boeing 737 (CFMI) 500 Boeing 737 (CFMI) 500 Winglets Boeing 747 400 (RR) Boeing 777 200ER (P&W) Airbus A319 110 (CFM) Boeing 737 (NG) 800 Winglets Boeing 737 (NG) 800 Winglets Bombardier (de Havilland) DHC-6 TO 300 Boeing (McDonnell-Douglas) MD-80 83 (MDC) Boeing (McDonnell-Douglas) MD-80 83 (MDC) Gulfstream Aerospace Gulfstream I Embraer ERJ-135 Legacy 600 Embraer ERJ-135 Legacy 650 Hawker Beechcraft 1900 C Airbus A320 210 (CFM) Airbus A320 230 (IAE) ATR ATR 42 300 BAE SYSTEMS (Avro) RJ Avroliner RJ70 Boeing (McDonnell-Douglas) MD-80 88 Boeing 737 (NG) 800 Winglets Boeing 747 400 (GE) Boeing 747 400 (P&W) Bombardier (de Havilland) Dash 8 300 Bombardier (de Havilland) Dash 8 400 Embraer EMB-110 Bandeirante P1 Boeing 727 100(RbkStg3Sys) Boeing 737 (CFMI) 300 Boeing 737 (CFMI) 300 Boeing 737 (CFMI) 500 Boeing 737 (NG) 800 Winglets Bombardier (de Havilland) Dash 8 400 Boeing 737 (NG) 800 Winglets BAE SYSTEMS (Jetstream) Jetstream 31 Boeing 737 (NG) 800 Boeing 747 400 (GE) Boeing 747 400 (GE) Airbus A310 320 (P&W) Airbus A321 210 (CFM) Boeing 757 200 (RR) Fairchild (Swearingen) Metro III Fokker 100 Airbus A320 210 (CFM) Airbus A320 230 (IAE) Airbus A330 200 MRTT (GE) Bombardier (Canadair) CRJ Regional Jet 100ER Boeing (McDonnell-Douglas) DC-3 BT-67 Boeing 737 (CFMI) 300 Hawker Beechcraft 1900 C-1 Boeing (McDonnell-Douglas) DC-3 C-47TP Boeing (McDonnell-Douglas) DC-3 C-47TP Boeing 737 (CFMI) 300 Boeing 737 (CFMI) 500 Winglets Bombardier (de Havilland) Dash 8 400 Bombardier (de Havilland) Dash 8 400 Fairchild (Swearingen) Metro III Airbus A340 210 (CFM) Hawker Beechcraft 1900 C Airbus A300 620R (P&W) Bombardier (de Havilland) DHC-6 TO 300 Boeing 737 (NG) 800 Winglets Fokker 100 Fokker 100 Boeing 737 (NG) 800 Winglets Boeing 737 (NG) 800 Winglets Bombardier (Canadair) CRJ Regional Jet 200ER Bombardier (de Havilland) Dash 8 200 Bombardier (de Havilland) Dash 8 300 BAE SYSTEMS (HS) 146 300 Boeing (McDonnell-Douglas) MD-80 83 (MDC) Boeing 737 (NG) BBJ1 Bombardier (de Havilland) Dash 8 400 Embraer EMB-120 Brasilia ER Embraer ERJ-145 MP Embraer ERJ-145 MP Hawker Beechcraft 1900 D Hawker Beechcraft 1900 D Hawker Beechcraft 1900 D Boeing 737 (CFMI) 500 Winglets Boeing 737 (JT8D) 200 Adv.(Stg3 Hk) Boeing (McDonnell-Douglas) DC-8 62AF (Stg3 Hk)

Reg No N990KD PR-AVJ N975AV N566MS N761AS LN-WSA G-ECOV EI-LVD G-TBIC N561MS N14653 5NN790UA OK-REQ VQ-BKW LN-DYQ C-FAKB N572AA HK-4591X N8E N10SV N747AG N900MX F-HBNF HA-LWK N9621C G-CGWY N825AG N867NN N597MS N747NB N876CA C-GKZV N62CZ VP-BDJ N302AW N303AW N463AC PR-GUG C-GMRX B-5587 N78019 LN-RCX N634AS N349AS N841AB D-ABCH N952FD N770ML UP-F1002 N101LF VH-VQS A39-003 N934CA C-FTGX N554MS N439QA N198RD N198RD HS-BR N14639 HB-JIK HB-JIK N640PA LV-ZPO ZS-OUD N4703 N974SW A6-FDS VH-XWO VH-XWP D-ABKT VH-YFF C-GEXI N446YV C-GFCD ZA-MAN N620MD N796BA C-GLGV N286AS SE-RAF SE-RAF N239SC C-GVGA N5YV N14639 CZS-

Owner Name Alberta Aircraft Leasing Avianca Celestia Falcon Air Express Sayegh Group Aviation Wideroe Bombardier PK Airfinance Casco Aero AeroTurbine Continental Airlines Max Air T7 Aviation Eastwest Aircraft Leasing Cramington DY2 Kenn Borek Air Trident Aviation Services Jet Midwest Mission Air ECC Leasing Continental Aircraft Tropical Transport Svcs Avolon JSA AeroVision Ansett Tiger Aircraft Trading NAS BHK Partners VEBL Global Pripal Bombardier Piper East Weststar Aviation Services N302AW N302AW Undisclosed AWAS Skyservice ICBC DAO Aviation SAS AerSale AerSale Airbus Volito FedEx Career Aviation Caspiy African Holding Co of America Qantas Australian Air Force Avmax Bell Geospace TAG Aviation Undisclosed IAL Corp Lee County Mosquito Control Grandmax Group Continental Airlines SkyWork Airlines Centaurium Worthington Aviation Parts Aerolineas Argentinas Executive Turbine Air Charter Aircraft Solution Aircraft Investments Avolon Aircraft Leasing Aircraft Leasing JSA Avolon Avmax Zions Credit Corp Cenovus Energy Albanian Airlines Aerolux F & L Aviation Bombardier Air Investments Goiania Comercio E Servicos City Airline Southern Cross Execaire Royal Leasing Undisclosed Unconfirmed Stars Away Aviation

Operator Name Alberta Aircraft Leasing Avianca Avianca Falcon Air Express Sayegh Group Aviation Wideroe Bombardier PK AirFinance Casco Aero AeroTurbine Continental Airlines Max Air T7 Aviation CSA Czech Airlines S7 Airlines Norwegian Kenn Borek Air Trident Jet Midwest Mission Air Capital ECC Leasing ACM Aviation Tropical Transport Services Air France Wizz Air AeroVision Ansett Tiger Aircraft American Airlines CDB VEB-Leasing Commutair Bombardier Wiggins Airways Weststar Aviation US Airways US Airways Undisclosed GOL Linhas Aereas Skyservice China Southern Airlines DAO Aviation SAS AerSale AerSale Airbus airberlin FedEx Sierra West Airlines Caspiy African Holding Co of America Jetstar Australian Air Force Avmax ALCI Aviation TAG Aviation Undisclosed IAL Corp Lee County Mosquito Control Orient Thai Airlines Continental Airlines SkyWork Airlines SkyWork Airlines Worthington Aviation Parts Aerolineas Argentinas Executive Turbine Universal Asset Mgmt Aircraft Investments FlyDubai Alliance Airlines Alliance Airlines airberlin Virgin Australia Avmax Zions Credit Corp SunWest Aviation Albanian Airlines Aerolux F&L Aviation Bombardier Air Investments City Airline City Airline Southern Cross Aircraft Execaire CorpJet Undisclosed Unconfirmed Stars Away Aviation

Event Remarks Purchased - parked Purchased Purchased - sale leaseback on del Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Pur'd off lease/fin term complete Purchased - parked Purchased - parked Purchased - sale leaseback on del Purchased - sale leaseback on del Purchased - sale leaseback on del Purchased Purchased - parked Purchased - parked Purchased Purchased Purchased - sale leaseback on del Purchased - parked Purchased - sale leaseback on del Purchased - sale leaseback on del Purchased - parked Purchased - parked Purchased - parked Purchased - sale leaseback on del Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased Purchased Purchased - subject to lease Purchased - subject to lease Purchased - parked Purchased - sale leaseback on del Purchased - parked Purchased - sale leaseback on del Purchased - parked Pur'd off lease/fin term complete Purchased - parked Purchased - parked Purchased - parked Purchased - sale leaseback on del Purchased - parked Purchased - parked Purchased Purchased - parked Pur'd off lease/fin term complete Pur'd off lease/fin term comp - pkd Purchased - parked Pur'd off lease/fin term complete Purchased - parked Purchased - parked Purchased - parked Purchased Purchased - parked Pur'd off lease/fin term complete Purchased - parked Purchased - sale leaseback - pkd Purchased - parked Pur'd off lease/fin term complete Purchased Purchased - parked Purchased - parked Purchased - sale leaseback on del Purchased - parked Purchased - parked Purchased - sale leaseback on del Purchased - sale leaseback on del Purchased - parked Purchased - parked Purchased - subject to lease Purchased - parked Purchased - parked Purchased Purchased - parked Purchased - parked Purchased - sale leaseback Purchased Purchased - parked Purchased Purchased - subject to lease Purchased - parked Purchased - parked Purchased - parked

AFM74_Data_AFNM 12/07/2011 10:25 Page 61

July-August 2011 AFM • ISSUE 74 | 61

INDUSTRY DATA: FLEET FINANCE, FIRM ORDERS, AIRCRAFT TRANSACTIONS, LIST PRICES AND LEASE RATES AIRCRAFT TRANSACTIONS – Boeing, Airbus, ATR, and Bombardier. 18 Apr to 27 Jun 2011 Contract Date 6/13/2011 6/13/2011 6/13/2011 6/13/2011 6/13/2011 6/13/2011 6/13/2011 6/13/2011 6/13/2011 6/13/2011 6/13/2011 6/13/2011 6/13/2011 6/13/2011 6/13/2011 6/13/2011 6/13/2011 6/13/2011 6/13/2011 6/14/2011 6/14/2011 6/14/2011 6/14/2011 6/15/2011 6/15/2011 6/15/2011 6/15/2011 6/15/2011 6/15/2011 6/15/2011 6/15/2011 6/16/2011 6/16/2011 6/16/2011 6/16/2011 6/16/2011 6/16/2011 6/17/2011 6/17/2011 6/17/2011 6/17/2011 6/19/2011 6/20/2011 6/21/2011 6/21/2011 6/21/2011 6/22/2011 6/22/2011 6/22/2011 6/23/2011 6/23/2011

S/N 208 22440 20665 21290 21393 21953 21954 21998 21999 22001 22006 22008 22013 22253 22466 22468 22982 40763 145285 3214 3006 951 22940 747 53224 53229 49853 27373 587 1860 20217 E2114 24750 22431 8104 11305 849 4736 064 7226 14501127 408 120301 E2257 21508 36880 E2138 581 UE-167 27650 211

A/C Model ATR ATR 42 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 727 Boeing 737 (NG) Embraer ERJ-145 Airbus A318 Airbus A320 Airbus A330 Boeing 737 (CFMI) Airbus A330 Boeing (McDonnell-Douglas) MD-80 Boeing (McDonnell-Douglas) MD-80 Boeing (McDonnell-Douglas) MD-80 Boeing 737 (CFMI) Bombardier (de Havilland) Dash 8 Bombardier (Shorts) SC.7 Skyvan Fokker 50 BAE SYSTEMS (HS) 146 Boeing 737 (CFMI) Boeing 737 (JT8D) Bombardier (Canadair) CRJ Regional Jet Fokker 100 Viking Air DHC-6 Twin Otter Airbus A320 Airbus A380 Bombardier (Canadair) CRJ Regional Jet Embraer ERJ-135 Airbus A330 Embraer EMB-120 Brasilia BAE SYSTEMS (Avro) RJ Avroliner Boeing 737 (JT8D) Boeing 737 (NG) BAE SYSTEMS (HS) 146 Bombardier (de Havilland) Dash 8 Hawker Beechcraft 1900 Boeing 747 Bombardier (de Havilland) Dash 8

Variant 300

Reg No N9621C 200F(M)Adv.(RbkStg3Sys) N748DH 200F(M)Adv.(Stg3 Hk) N745DH 200F(M)Adv.(Stg3 Hk) N742DH 200F(M)Adv.(Stg3 Hk) N793DH 200F(M)Adv.(Stg3 Hk) N770AT 200F(M)Adv.(Stg3 Hk) N760AT 200F(M)Adv.(Stg3 Hk) N782DH 200F(M)Adv.(Stg3 Hk) N783DH 200F(M)Adv.(Stg3 Hk) N784DH 200F(M)Adv.(Stg3 Hk) N780DH 200F(M)Adv.(Stg3 Hk) N754DH 200F(M)Adv.(Stg3 Hk) N749DH 200F(M)Adv.(Stg3 Hk) N747DH 200F(M)Adv.(Stg3 Hk) N752DH 200F(M)Adv.(Stg3 Hk) N753DH 200F(M)Adv.(Stg3 Hk) N751DH 800 Winglets N868NN MP G-CGUS 120 (P&W) PR-AVL 210 (CFM) 4K-AZ84 200 MRTT (GE) A39-002 300 N300SW 200 MRTT (GE) A39-001 82 (MDC) EP-LCK 82 (MDC) EP-LCL 82 (SAIC) HS300SF B-2951 300 VH-XKI 3 9Q-CST PH-KVH 200QT OB400 N980ST 200 Adv.(Stg3 Hk) VP-CAQ Challenger 850 A6PH400 (Floats) 8Q230 (IAE) HA-LWL 860 (EA) F-HPJF 200LR C-GLPZ Legacy 650 G-VILP 340HGW (RR) C-GHKW ER N301YV RJ85 JU-9909 200 Adv.(Stg3 Hk) N977UA 800 Winglets D-ABKS 200 N18FF 300 C-GLKW D N167YV 400 (GE) N918UN 100 P2-

Owner Name Intertrade Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed NAS Investments ECC Leasing Avianca Azerbaijan Airlines Australian Air Force Frontiers of Flight Museum Australian Air Force Kish Air Kish Air Unconfirmed SF Airlines Skippers Aviation ITAB Insel Air International Star Peru National Nuclear Security Undisclosed Unconfirmed Undisclosed Trans Maldivian JSA Undisclosed Avmax Etlagh Aviation Air Canada JP Morgan Eznis Airways Jet Care Corp JSA Tronos Plc Avmax Group Fargo SB Leasing Airlines

Operator Name Intertrade Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed American Airlines ECC Leasing Avianca Azerbaijan Airlines Australian Air Force Frontiers of Flight Museum Australian Air Force Kish Air Kish Air Unconfirmed SF Airlines Skippers Aviation ITAB Insel Air International Star Peru National Nuclear Security Jet Connections Unconfirmed Undisclosed Trans Maldivian Wizz Air Air France Avmax London Executive Aviation Air Canada SkyWest Airlines Eznis Airways Jet Care Corp airberlin Tronos Avmax Group Fargo Jet Center Sberbank Leasing Airlines

Event Remarks Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased - sale leaseback on del Purchased - parked Purchased Purchased Pur'd off lease/fin term complete Purchased - parked Pur'd off lease/fin term com - pkd Pur'd off lease/fin term complete Pur'd off lease/fin term complete Purchased - parked Purchased - parked Purchased Purchased Purchased - parked Purchased - parked Purchased - parked Purchased Purchased - parked Purchased - parked Pur'd off lease/fin term comp - pkd Purchased - sale leaseback on del Purchased - sale leaseback on del Purchased - parked Purchased - sale leaseback on del Pur'd off lease/fin term complete Purchased - subject to lease Purchased Purchased - parked Purchased - sale leaseback on del Purchased - parked Purchased - parked Purchased - parked Purchased - parked Purchased

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

ENGINE DATA CHANGES 18 Apr to 27 Jun 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

18 Apr 2011 27 Jun 2011 Full-life value Full-life value % mkt value mkt value change

18 Apr 2011 Current half-life rate

27 Jun 2011 Current half-life % rate change

$2.18m $2.38m $2.58m $8.19m $6.49m $7.25m $6.81m $7.11m $7.51m $7.96m $2.05m $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

$0.70m $0.90m $1.10m $6.20m $4.50m $5.00m $4.90m $5.20m $5.55m $6.00m $1.00m $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

$0.70m $0.90m $1.10m $5.85m $4.15m $4.35m $4.90m $5.20m $5.55m $6.00m $1.00m $2.20m $2.68m $1.50m $3.75m $4.40m $9.35m $20.70m $5.00m $0.60m $3.75m $4.10m $2.80m $3.90m $1.40m $8.14m $8.60m $14.00m $1.40m $2.00m

$2.18m $2.38m $2.58m $7.94m $6.24m $6.60m $6.81m $7.11m $7.51m $7.96m $2.05m $3.85m $4.33m $4.69m $7.13m $7.91m $14.07m $26.77m $7.12m $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% -3.1% -3.9% -9.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -2.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

18 Apr 2011 Mkt lease rate

27 Jun 2011 Mkt lease rate

% change

0.0% $0.030m $0.030m 0.0% 0.0% $0.032m $0.032m 0.0% 0.0% $0.035m $0.035m 0.0% -5.6% $0.075m $0.070m -6.7% -7.8% $0.055m $0.050m -9.1% -13.0% $0.058m $0.052m -10.3% 0.0% $0.059m $0.059m 0.0% 0.0% $0.062m $0.062m 0.0% 0.0% $0.065m $0.065m 0.0% 0.0% $0.067m $0.067m 0.0% 0.0% $0.020m $0.020m 0.0% 0.0% $0.027m $0.027m 0.0% 0.0% $0.033m $0.033m 0.0% 0.0% n/a n/a 0.0% $0.050m $0.050m n/a 0.0% $0.070m $0.070m 0.0% 0.0% n/a n/a 0.0% $0.210m $0.210m 0.0% -3.8% $0.058m $0.058m 0.0% 0.0% $0.023m $0.023m 0.0% 0.0% $0.060m $0.060m 0.0% 0.0% $0.065m $0.065m 0.0% 0.0% $0.055m $0.055m 0.0% 0.0% $0.050m $0.050m 0.0% 0.0% $0.026m $0.026m 0.0% 0.0% $0.110m $0.110m 0.0% 0.0% $0.120m $0.120m 0.0% 0.0% $0.155m $0.155m 0.0% 0.0% $0.030m $0.030m 0.0% 0.0% $0.045m $0.045m 0.0% Data supplied courtesy of Ascend Online Fleets / Ascend V1 database

AFM74_Data_AFNM 12/07/2011 10:25 Page 62

62 | AFM • ISSUE 74 July-August 2011

INDUSTRY DATA: FLEET FINANCE, FIRM ORDERS, AIRCRAFT TRANSACTIONS, LIST PRICES AND LEASE RATES FIRM ORDERS – 18 Apr – 27 Jun 2011 Mfr & Type

Variant

Customer

Airbus A320 200 neo (CFM) AirAsia Airbus A320 200 neo (Engines Unannounced) Go Air Airbus A320 200 neo (PW) IndiGo Airlines Airbus A320 200 (Engines Unannounced) IndiGo Airlines Airbus A320 200 neo (Engines Unannounced) LAN Airlines Airbus A320 200 neo (CFM) GECAS Airbus A320 200 neo (CFM) SAS Airbus A320 210 (CFM) Cebu Pacific Air Airbus A320 210 (CFM) Star Flyer Airbus A320 200 neo (PW) ILFC Airbus A320 200 neo (Engines Unannounced) ILFC Airbus A321 230 (IAE) Sharklets JetBlue Airways Airbus A321 200 neo (Engines Unannounced) TransAsia Airways Airbus A321 200 (Engines Unannounced) ALC Airbus A321 200 neo (Engines Unannounced) ILFC Airbus A321 200 neo (PW) ILFC Airbus A330 340HGW (RR) Saudi Arabian Airlines Airbus A330 320HGW (P&W) Korean Air Airbus A380 800 (Engines Unannounced) Skymark Airlines ATR ATR 42 500 TAME Ecuador ATR ATR 72 600 Nordic Aviation Capital ATR ATR 72 500 Avation Plc ATR ATR 72 500 BoraJet ATR ATR 72 500 Israir ATR ATR 72 500 Malaysia Airlines ATR ATR 72 600 Avation Plc ATR ATR 72 600 Azul ATR ATR 72 600 Unannounced ATR ATR 72 600 GECAS Boeing (McDonnell-Douglas) C-17 A Indian Air Force Boeing (McDonnell-Douglas) C-17 A US Air Force Boeing (McDonnell-Douglas) C-17 A Australian Air Force Boeing 737 (NG) 800 Winglets Norwegian Boeing 737 (NG) 800 Winglets ALC Boeing 737 (NG) 700/800 Unannounced Boeing 737 (NG) 800 Winglets Mongolian Airlines Boeing 737 (NG) 800 Winglets Unannounced Boeing 747 8I (GE) Unannounced Boeing 767 300ER (GE) LAN Airlines Boeing 767 300ER Winglets (GE) Mongolian Airlines Boeing 777 300ER (GE) Qatar Airways Boeing 777 300ER (GE) American Airlines Boeing 777 200LRF (GE) Lufthansa Boeing 777 300ER (GE) Aeroflot Boeing 777 300ER (GE) American Airlines Bombardier (Canadair) CRJ900 RJ900ER NextGen PLUNA Bombardier (Canadair) CSeriesCS100 Unannounced Bombardier (Canadair) CSeriesCS100 Unannounced Bombardier (Canadair) CSeriesCS100 Unannounced Bombardier (Canadair) CSeriesCS100 Braathens Leasing Bombardier (Canadair) CSeriesCS300 Braathens Leasing Embraer 175 LR ALC Embraer 190 LR Air Astana Embraer 190 LR ALC Embraer 190 LR GECAS Embraer 190 LR Sriwijaya Air Embraer 190 LR ALC Embraer 195 LR ALC Embraer ERJ-135 Legacy 650 Comlux Aviation GECI Intl Skylander SK-105 Trans Asia Viking Air DHC-6 Twin Otter 400 Airfast Indonesia

Order date 23/06/2011 23/06/2011 22/06/2011 22/06/2011 22/06/2011 20/06/2011 20/06/2011 16/06/2011 09/05/2011 27/04/2011 27/04/2011 21/06/2011 21/06/2011 15/05/2011 27/04/2011 27/04/2011 20/06/2011 03/05/2011 23/06/2011 21/06/2011 22/06/2011 21/06/2011 21/06/2011 21/06/2011 21/06/2011 21/06/2011 21/06/2011 21/06/2011 20/06/2011 15/06/2011 16/05/2011 18/04/2011 21/06/2011 20/06/2011 06/06/2011 31/05/2011 02/05/2011 20/06/2011 18/05/2011 03/05/2011 27/05/2011 25/05/2011 13/05/2011 11/05/2011 29/04/2011 25/04/2011 24/06/2011 20/06/2011 07/06/2011 01/06/2011 01/06/2011 15/05/2011 20/06/2011 20/06/2011 20/06/2011 20/06/2011 13/06/2011 20/06/2011 17/05/2011 22/06/2011 22/06/2011

Order/ Number Type Swap Order Order Order Order Order Order Order Order Order Order Order Type Swap Order Type Swap Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order Order

200 72 150 30 20 60 30 7 2 47 28 30 6 1 12 13 4 5 2 3 10 4 1 2 2 4 10 19 15 10 5 1 15 6 1 2 1 2 5 1 4 1 5 8 2 3 10 10 3 5 5 5 2 5 2 20 5 5 3 8 4

Engines at Order

Variant at delivery

Engines at delivery

LEAP-X-1A 200 neo (CFM) LEAP-X-1A Unannounced 200 neo (Engines Unannounced) Unannounced PW1000G-1100G 200 neo (PW) PW1000G-1100G Unannounced 200 (Engines Unannounced) Unannounced Unannounced 200 neo (Engines Unannounced) Unannounced LEAP-X-1A 200 neo (CFM) LEAP-X-1A LEAP-X-1A 200 neo (CFM) LEAP-X-1A CFM56-5B4/3 210 (CFM) CFM56-5B4/3 CFM56-5B4/3 210 (CFM) CFM56-5B4/3 PW1000G-1100G 200 neo (PW) PW1000G-1100G Unannounced 200 neo (CFM) LEAP-X-1A V2500-2533-A5Sel.One 230 (IAE) Sharklets V2500-2533-A5Sel.One Unannounced 200 neo (Engines Unannounced) Unannounced Unannounced 210 (CFM) CFM56-5B3/3 Unannounced 200 neo (CFM) LEAP-X-1C PW1000G-1100G 200 neo (PW) PW1000G-1100G Trent-772B-60EP 340HGW (RR) Trent-772B-60EP PW4000-4170 Adtg 70 320HGW (P&W) PW4000-4170 Adtg 70 Unannounced 800 (Engines Unannounced) Unannounced PW100-127M 500 PW100-127M PW100-127M 600 PW100-127M PW100-127M 500 PW100-127M PW100-127M 500 PW100-127M PW100-127M 500 PW100-127M PW100-127M 500 PW100-127M PW100-127M 600 PW100-127M PW100-127M 600 PW100-127M PW100-127M 600 PW100-127M PW100-127M 600 PW100-127M PW2000-2040 A PW2000-2040 PW2000-2040 A PW2000-2040 PW2000-2040 A PW2000-2040 CFM56-7B26/3 800 Winglets CFM56-7B26/3 CFM56-7B26/3 800 Winglets CFM56-7B26/3 CFM56-7B Series 700/800 CFM56-7B Series CFM56-7B26/3 800 Winglets CFM56-7B26/3 CFM56-7B26/3 800 Winglets CFM56-7B26/3 GEnx-2B67 8I (GE) GEnx-2B67 CF6-80C2B6F 300ER (GE) CF6-80C2B6F CF6-80C2B6F 300ER Winglets (GE) CF6-80C2B6F GE90-115B 300ER (GE) GE90-115B GE90-115B 300ER (GE) GE90-115B GE90-110B1L 200LRF (GE) GE90-110B1L GE90-115B 300ER (GE) GE90-115B GE90-115B 300ER (GE) GE90-115B CF34-8C5 900ER NextGen CF34-8C5 PW1000G-1524G CS100 PW1000G-1524G PW1000G-1524G CS100 PW1000G-1524G PW1000G-1524G CS100 PW1000G-1524G PW1000G-1524G CS100 PW1000G-1524G PW1000G-1524G CS300 PW1000G-1524G CF34-8E5 LR CF34-8E5 CF34-10E5 LR CF34-10E5 CF34-10E5 LR CF34-10E5 CF34-10E5 LR CF34-10E5 CF34-10E5 LR CF34-10E5 CF34-10E5 LR CF34-10E5 CF34-10E5 LR CF34-10E5 AE 3007-A2 Legacy 650 AE 3007-A2 PT6A-65B PT6A-65B PT6A-34 400 PT6A-34

AFM74_Data_AFNM 12/07/2011 10:26 Page 63

July-August 2011 AFM • ISSUE 74 | 63

INDUSTRY DATA: FLEET FINANCE, FIRM ORDERS, AIRCRAFT TRANSACTIONS, LIST PRICES AND LEASE RATES STORED AIRCRAFT 27 June 2011 Mfr & type

Fleet Stored

Total Fleet

Fleet Stored %

Seats Stored

Total Seats

Seats Stored%

A.S.T.A. (GAF) Nomad 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 Alenia C-27J Spartan 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 31 BAE SYSTEMS (Jetstream) Jetstream 41 Boeing 707 Boeing 717 Boeing 727 Boeing 737 (CFMI) Boeing 737 (JT8D) Boeing 737 (NG) Boeing 747 Boeing 757 Boeing 767 Boeing 777 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-215 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 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 General Dynamics (Convair) 600 Gulfstream Aerospace Gulfstream I Handley Page Jetstream (HP/Scottish) Hawker Beechcraft 1900 Hawker Beechcraft 99 Hindustan Aeronautics 748 Hindustan Aeronautics Saras Indonesian Aerospace 212 Indonesian Aerospace CN-235 Israel Aerospace Industries Arava Lockheed Galaxy Lockheed Hercules Lockheed L-1011 TriStar Lockheed L-188 Electra NAMC YS-11 Saab 2000 Saab 340 Viking Air DHC-6 Twin Otter

9 37 36 11 84 46 5 37 96 11 23 27 2 1 2 39 3 71 20 16 80 26 46 27 130 264 215 61 169 77 80 8 32 12 47 178 8 289 53 1 1 13 1 131 2 11 3 13 1 11 14 64 7 62 56 8 1 11 6 1 63 60 56 64 3 50 34 22 60 56 42 4 28 51 12 1 16 2 51 5 1 1 10 8 15 7 201 15 8 19 3 99 1

71 359 500 14 364 190 69 1,292 2,588 652 789 369 54 41 2 163 12 164 65 54 246 93 195 155 399 1,752 464 3,670 922 1,004 934 937 197 75 90 294 192 940 108 2 19 71 1 1,033 340 252 45 105 1 61 51 546 56 968 249 186 1 187 360 75 263 266 313 683 3 484 180 100 109 228 188 47 123 91 69 1 45 2 619 143 65 1 68 49 73 111 1,546 28 20 39 58 402 4

12.68 10.31 7.20 78.57 23.08 24.21 7.25 2.86 3.71 1.69 2.92 7.32 3.70 2.44 100.00 23.93 25.00 43.29 30.77 29.63 32.52 27.96 23.59 17.42 32.58 15.07 46.34 1.66 18.33 7.67 8.57 0.85 16.24 16.00 52.22 60.54 4.17 30.74 49.07 50.00 5.26 18.31 100.00 12.68 0.59 4.37 6.67 12.38 100.00 18.03 27.45 11.72 12.50 6.40 22.49 4.30 100.00 5.88 1.67 1.33 23.95 22.56 17.89 9.37 100.00 10.33 18.89 22.00 55.05 24.56 22.34 8.51 22.76 56.04 17.39 100.00 35.56 100.00 8.24 3.50 1.54 100.00 14.71 16.33 20.55 6.31 13.00 53.57 40.00 48.72 5.17 24.63 25.00

15 139 10.79 1,604 13,837 11.59 2,224 30,559 7.28 53 53 100.00 16,200 38,970 41.57 6,056 23,056 26.27 366 6,366 5.75 3,636 166,777 2.18 14,494 411,718 3.52 2,135 122,917 1.74 5,903 213,884 2.76 5,593 97,923 5.71 924 25,548 3.62 0 0 20 20 100.00 3,606 14,878 24.24 70 315 22.22 6,297 11,896 52.93 344 669 51.42 456 716 63.69 1,336 4,244 31.48 749 2,575 29.09 1,903 5,584 34.08 2,664 17,716 15.04 6,236 12,914 48.29 33,786 220,833 15.30 22,619 45,619 49.58 5,795 566,516 1.02 40,177 201,610 19.93 11,848 153,459 7.72 13,187 177,716 7.42 1,718 276,424 0.62 2,165 6,255 34.61 413 2,708 15.25 32 161 19.88 10,918 19,875 54.93 100 5,143 1.94 41,602 135,247 30.76 7,845 16,221 48.36 0 0 0 0 0 0 0 0 5,989 48,296 12.40 140 23,014 0.61 860 20,522 4.19 0 30 0.00 346 1,001 34.57 0 0 54 129 41.86 0 38 0.00 1,118 8,203 13.63 292 2,310 12.64 3,107 51,152 6.07 916 3,298 27.77 128 430 29.77 0 0 764 13,554 5.64 592 35,015 1.69 108 8,727 1.24 778 1,753 44.38 1,738 7,126 24.39 1,799 7,082 25.40 3,179 33,379 9.52 44 44 100.00 593 4,999 11.86 518 2,084 24.86 665 3,070 21.66 1,745 3,029 57.61 5,246 22,349 23.47 2,010 8,416 23.88 284 3,577 7.94 838 3,117 26.88 3,240 5,743 56.42 43 437 9.84 0 0 151 366 41.26 18 18 100.00 950 9,700 9.79 15 306 4.90 0 96 0.00 14 14 100.00 205 828 24.76 255 371 68.73 19 116 16.38 0 0 100 244 40.98 3,131 5,196 60.26 89 89 100.00 399 399 100.00 150 2,712 5.53 3,257 11,614 28.04 19 76 of Ascend Online Fleets 25.00 Data supplied courtesy / Ascend V1 database

AFM74_Data_AFNM 12/07/2011 10:27 Page 64

64 | AFM • ISSUE 74 July-August 2011

INDUSTRY DATA: FLEET FINANCE, FIRM ORDERS, AIRCRAFT TRANSACTIONS, LIST PRICES AND LEASE RATES LIST PRICES AND LEASE RATES Manufacturer

Average List Price

Type

Oldest

CMV Newest

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

$120.15m $57.00m $81.50m $62.50m $77.70m $85.00m $56.00m $99.70m $200.80m $222.50m $127.50m $228.00m $261.80m $275.40m $236.60m $267.60m $375.30m $40.00m $40.00m $44.00m $34.50m $56.90m $67.90m $80.80m $71.75m $85.80m $250.00m $317.50m $79.80m $144.10m $164.30m $186.50m $232.30m $262.40m $222.00m $284.10m $185.20m $119.10m $34.25m $37.80m $39.80m $30.25m $38.60m $39.40m $24.20m $35.57m $40.81m $15.70m $15.70m $28.85m $17.14m $22.25m $34.18m $34.20m $38.00m $40.10m $24.50m $31.60m $16.90m $20.50m

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 $12.00m $11.80m $5.00m $11.95m $19.30m $43.00m $27.00m $18.00m $20.00m $55.45m $60.40m $146.00m $7.90m $2.50m $4.00m $2.70m $11.00m $15.30m $19.70m $18.90m $32.90m $19.00m $6.50m $4.50m $9.50m $21.80m $42.00m $90.00m $43.50m $86.00m $10.00m $0.50m $1.00m $1.50m $2.00m $1.60m $5.00m $2.75m $10.00m $13.80m $3.70m $3.70m $8.50m $4.70m $4.80m $14.00m $16.20m $19.50m $21.10m $3.50m $3.00m $5.30m $5.60m

$13.50m $2.00m $8.00m $24.50m $31.10m $39.30m $18.75m $43.40m $84.00m $93.25m $18.00m $59.75m $78.45m $90.40m $185.00m $11.45m $6.45m $7.55m $5.50m $19.50m $32.10m $40.75m $23.05m $44.40m $59.25m $20.60m $14.50m $58.90m $37.05m $117.75m $135.00m $64.00m $147.00m $10.00m $0.90m $2.00m $2.90m $2.00m $2.40m $5.00m $8.05m $21.20m $23.55m $8.50m $15.40m $18.80m $5.25m $8.70m $23.25m $25.05m $29.00m $30.60m $3.50m $3.70m $14.60m $18.50m

%Change 0.0% 0.0% 0.0% 0.0% 0.0% -3.2% 0.0% 0.6% 0.0% 0.3% 0.0% 0.0% -1.2% -0.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -2.0% 0.0% 0.0% -1.7% 0.0% -19.1% -5.0% -6.5% -10.5% 0.0% -12.3% 0.0% -7.6% -5.6% -5.7% 0.0% 0.0% 0.0% 0.0% 0.0% 1.2% 1.5% 0.0% 0.0% 0.0% -6.1% 1.0% 3.5%

Dry Lease Rate Oldest Newest $0.140m $0.070m $0.100m $0.125m $0.125m $0.070m $0.150m $0.195m $0.440m $0.330m $0.320m $0.275m $0.525m $0.575m $1.450m $0.105m $0.055m $0.090m $0.055m $0.150m $0.160m $0.235m $0.190m $0.310m $0.350m $0.120m $0.160m $0.205m $0.350m $0.560m $0.810m $0.575m $0.860m $0.150m $0.025m $0.025m $0.040m $0.030m $0.040m $0.090m $0.040m $0.110m $0.150m $0.055m $0.055m $0.130m $0.050m $0.060m $0.150m $0.165m $0.210m $0.215m $0.055m $0.060m $0.065m $0.070m

$0.180m $0.070m $0.120m $0.185m $0.265m $0.320m $0.180m $0.375m $0.755m $0.870m $0.320m $0.580m $0.760m $0.835m $1.745m $0.145m $0.090m $0.120m $0.075m $0.200m $0.280m $0.350m $0.220m $0.375m $0.670m $0.230m $0.230m $0.520m $0.430m $0.995m $1.045m $0.705m $1.285m $0.150m $0.030m $0.045m $0.060m $0.030m $0.050m $0.090m $0.080m $0.225m $0.245m $0.085m $0.130m $0.210m $0.050m $0.085m $0.230m $0.235m $0.260m $0.275m $0.055m $0.070m $0.130m $0.180m

Seating* %Change (Typical C+Y) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -21.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

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 — March to July 2011 Region Undisclosed Africa Asia-Pacific Central America Europe Middle East North America South America

Net Orders 27 N/A 478 NA 78 8 108 38

Delivered new 4 5 51 4 57 21 57 8

Leased

Purchased 2nd hand

NA 4 59 6 86 11 48 14

5 14 34 7 56 2 255 19

Fleet as of 5 July 2011 NA 2572 7484 1265 8178 2017 17595 3210 Source: OAG Fleet iNET, July 2011

Project2_Layout 1 11/07/2011 12:42 Page 1

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After all, if we make the deal work for everyone today, we’ll all look forward to doing the next one tomorrow. Learn more at www.aviationcapital.com Operating Leases • Asset Management • Aviation Investment Main Office: Newport Beach +1 949 219 4600 • Regional Offices: London, Santiago, Seattle, Shanghai, Singapore

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