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LATEST NEWS

Wednesday, June 3rd, 2020

Final two bidders in race to buy Virgin Australia revealed

Deloitte, who was appointed as administrator when Virgin Australia went into administration at the end of April this year have announced that it has narrowed down five prospective purchasers for the struggling carrier to a final two candidates.

Bain Capital and Cyrus Capital Partners, two “well-funded” U.S.-based private equity firms with “deep aviation experience” have been shortlisted according to Vaughan Strawbridge of Deloitte. “We will now spend the coming weeks facilitating in-depth bidder engagement with thestakeholders of the business and work closely with both preferred bidders in the lead up to binding final offers being received,” he said in a statement on Tuesday.

Deloitte is keen to sell the airline by the end of June and the two final bidders will have until June 12 to submit final, binding bids. Bain Capital is being advised by former Jetstar chief executive Jayne Hrdlicka, while Cyrus Capital was involved with the launch of Virgin America with Richard Branson, according to Australia’s Courier Mail.

Prior to Virgin Australia going into administration it had laid off 1,000 members of staff and furloughed 8,000 others as a result of the dramatic drop in demand owing to the COVID-19 pandemic. Virgin Australia had looked to the Australian government for an AU$1.4 billion loan to enable it to stay afloat, but the request was refused, predominantly because the parent company, Virgin Australia Holdings, had a majority of overseas owners, including Etihad Airways (20.94%), Singapore Airlines (20.09%), Nanshan Group (19.98%), HNA Group (19.82%) and Virgin Group (10.42%).

The carrier was nearly AU$7.0 billion in debt when it went into administration.

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Avia Solutions Group to sell Baltic Ground Services Poland

Avia Solutions Group has decided to sell Baltic Ground Services Poland, a subsidiary of the group’s family member, Baltic Ground Services (BGS).

Under the circumstances of flights being grounded under COVID-19 impact and the competition with the Poland‘s state owned service providers being high, Avia Solutions Group believes that the sale of Baltic Ground Service Poland is an optimal solution. Baltic Ground Services Poland constituted only 2.2% from total pro forma consolidated revenues of Avia Solutions Group PLC.

BGS PL offers passenger and aircraft handling, into-plane fuelling and de-icing/anti-icing services and provides high quality solutions to international customers.

Qatar Airways to resume services to Venice

Qatar Airways will be resuming services to Venice, Italy starting from July 15, 2020. The popular tourist destination and major arts and cultural centre will become the airline’s third destination in Italy to resume flights, marking a significant step in the resumption of global leisure travel.

The national carrier of the State of Qatar will also increase flights to Dublin, Milan and Rome, with daily services starting from June 13, 2020. As one of the only global airlines to have maintained a significant schedule throughout this crisis, Qatar Airways is uniquely positioned to monitor trends in traffic flow and passenger bookings.

The airline expects these additional flights to provide further seamless connectivity via its hub, Hamad International Airport, with its Asia-Pacific destinations, in particular Australia where the airline continues to operate 21 weekly flights to Brisbane, Melbourne, Perth and Sydney.

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IBA highlights resilience of regional jet and turboprop aircraft values but performance variation due to secondary market supply

Independent aviation consultancy IBA, is optimistic about the resilience of regional jet and turboprop aircraft values, but expects value and lease performance to vary based on secondary market supply for specific models. IBA indicates that the supply of new regional jet and turboprop aircraft over the next one to two years is likely to be low, as OEMs are faced with diminishing backlogs, entry into service/delivery issues or significant deferrals. However, an oversupply of used aircraft, resulting in part from airline failures and fleet renewal programmes, will put pressure on the market value and lease rate performance of some regional aircraft models, with mid-life (twelve years old) and older aircraft feeling the greatest impact.

IBA highlighted concerns around the potential oversupply of some Embraer E-Jet models. The collapse of Flybe in March released fourteen Embraer E-Jet aircraft, predominantly E175 models, into the secondary market, and data from IBA.iQ shows that Embraer E190 aircraft feature regularly in operator exit strategies including those of Air Canada, American Airlines and JetBlue.

In the turboprop category, around 10% of the global fleet of DHC8-400Q aircraft was operated by Flybe. German Airways has filed for insolvency after Eurowings terminated its wet lease agreement with German Airways affecting fifteen DHC8-400Q aircraft, and Air Baltic and Austrian Airlines both plan to retire their DHC8-400Q aircraft over the next two years.

Covid-19 is likely to delay operators’ fleet renewal programmes in many cases, but market values and lease rates for mid-life E190 and DHC8 aircraft are likely to suffer if market availability increases.

IBA expects young (three years old) regional jet and turboprop aircraft to remain part of operators’ near-term fleet plans and negative movements in market values for these aircraft to be consequently limited, but this could change rapidly in the event of an airline failure or Chapter 11 event.

In the United States, limits placed by the Scope Clause on the number of aircraft that can be operated by regional feeder carriers may put smaller regional jets at risk as airlines contract their fleets. IBA expects 50-seat aircraft such as ERJ-140/-145 and CRJ-200 to be most vulnerable.

However, the shortage of pilots in the United States has eased since the outbreak of Covid-19, which may create an opportunity for carriers to re-negotiate the Scope Clause. It is also possible that airlines will deploy regional jets in place of larger aircraft in the near-term while air traffic demand recovers.

Phil Seymour, President of IBA, says: “Any aircraft being sold on today's market will be deemed "distressed" especially if a quick sale is required in a liquidation scenario. We expect regional jet and turboprop aircraft values to remain relatively resilient to the effects of Covid-19, especially in the longer-term. However, the devil is in the detail, and values for specific regional jet models will be vulnerable if availability increases in the secondary market through airline failures, Chapter 11 events or fleet replacement programmes.”

In the regional engine market, IBA expects the CF34-8C (CRJ-700-1000) to benefit from having no direct replacement and to weather Covid-19 well in the long term, with some short term softening in values. Similarly, the CF34-8E (E-170/175) may experience a temporary decline in market value, but this will largely be concentrated in the airframe as opposed to the engine.

The CF34-10E (E-190/195) was facing competition from the A220 and E2 prior to Covid-19, and is at risk from upcoming retirements by Air Canada and American. However, European operators seem more confident in the fleet. IBA expects the PW100 Family (ATR42/72 Q400) to hold relatively stable as the values are largely driven by OEM/MRO cost rather than market rates.

SRT_06 (2020-04-27)

MNG Jet installs Honeywell JetWave satcom system for first time in Turkey

For the first time in Turkey, Honeywell has supported channel partner MNG Jet in installing Honeywell’s JetWave satellite communications hardware on MNG Jet’s Bombardier Challenger 605. This satellite communications installation enables high-speed cabin Wi-Fi, via Inmarsat’s Jet ConneX service, for a better passenger connectivity experience. Additionally, it provides pilots with a better internet connection to support flight planning and management.

Honeywell’s JetWave hardware enables a connection to the fastest broadband available in business aviation. Whether working in the air, staying close to family and friends on social media, or streaming their favourite video series, passengers will benefit from reliable connectivity at speeds like those found at home. This is enabled by the CNX-900, one of the most advanced routing software application suites offered today.

Airbus A400M completes full paratrooper simultaneous dispatch certification

The Airbus A400M new generation airlifter has successfully achieved certification of the simultaneous paratrooper dispatch capability and completed the full industrial development of the type’s paratrooping deployment capacity, with a maximum dispatch of 116 paratroopers using
both side doors (58 + 58).

The certification fight test, completed in May 2020 in coordination with the French Armament General Directorate (DGA) and supported by the French and Belgian Armed Forces, combined an extensive paratrooping campaign of more than 1,000 jumps along with the implementation of new capability development methodologies based on recording and 3D modelling of paratrooper jump trajectories.

With the completion of this key milestone, the A400M excels in its paratrooping role, being able to carry 116 paratroopers who can jump two at a time from the ramp in freefall, or through the paratroop side doors with automatic parachute opening, a state-of-the-art capability that greatly increments its operational possibilities.

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AeroCentury reports first quarter net loss of US$10.2 million

AeroCentury, an independent aircraft leasing company, has reported a first quarter 2020 net loss of US$10.2 million, compared to a net loss of US$1.3 million for the first quarter of 2019.

Results for the quarter ended March 31, 2020 included impairment losses totaling US$6.7 million, arising from revised estimated sales proceeds for three regional jet aircraft and an older turboprop aircraft that is being sold in parts. Results also included a US$1.2 million bad debt allowance related to two of the company’s aircraft that are subject to finance leases and a US$1.9 million non-cash charge related to the company’s interest rate swaps, which is included in interest expense.

The results for the first quarter ended March 31, 2019 included $1.4 million of impairment provisions related to the write-down of two older off-lease turboprop aircraft and a spare engine to their estimated sales values, and a non-cash charge of $0.4 million related to the company’s interest rate swaps, which was included in interest expense.

On May 1, 2020, the company and its credit facility lenders entered into a Fourth Amended and Restated Loan and Security Agreement, which converted the company’s revolving credit facility with MUFG Union Bank as Agent, into a term loan with an initial principal balance of US$83,689,900. The amendment provides for a forbearance of the existing defaults and events of default under the company’s indebtedness to at least June 29, 2020, which is the milestone for the company entry into a written agreement for a strategic transaction that would enable repayment of the MUFG indebtedness. 

More flights to international destinations will take off from Munich Airport again in June

The number of flights on offer from Munich Airport will be expanded once more over the coming weeks following the drastic reduction due to the coronavirus pandemic. Over the past few months, international air travel in particular had come to a virtual standstill on account of the numerous travel restrictions. Now, many airlines are starting to gradually ramp up their operations once again in June.

Lufthansa will be flying regularly from Munich to Brussels, Milan, Rome, Vienna, and Zurich again within the next few days. Two attractive cities in the U.S. will also be on the list of nonstop destinations with Lufthansa starting this coming week. Tuesday, June 2, the airline has reopened its route from Munich to Chicago. The first flight to Los Angeles is scheduled to take place one day later. Initially, service to both US destinations is to be provided three days a week. Lufthansa is also expected to conduct three weekly flights on its route from Munich to Tel Aviv once more as of June 3.

Lufthansa subsidiary Eurowings has already been flying its route from Munich to Palma de Mallorca again and will also be offering flights to Pristina again starting June 6.

Qatar Airways, which has maintained its operations in Munich over the past several weeks, will continue flying to Doha four times per week. Greece’s AEGEAN Airlines has re-established its connection from Munich to Athens and is offering three weekly flights there to start with. Effective immediately, Luxair is again providing service from Munich to Luxembourg five times a week, and airBaltic has reactivated its service to Riga with four flights per week. The schedule of existing connections operated by Alitalia to Rome, KLM to Amsterdam, Air France to Paris, Finnair to Helsinki, and Belavia to Minsk will be partially expanded to provide greater frequency.

Lufthansa will begin flying from Munich to a large number of additional destinations starting in mid-June. Besides the long-haul destinations of San Francisco, Montreal, Delhi, and Seoul, it plans to fly to 30 more European cities once again on a regular schedule. Many other airlines have also announced they will be resuming flights to many destinations as early as the second half of June. However, the precise details of the flights from and to Munich that are being added have not yet been made available.

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Thoma Bravo signs agreement to acquire Exostar

Thoma Bravo, a private equity investment firm focused on the software and technology-enabled services sector, has announced an agreement to acquire Exostar, a leader in trusted, secure business collaboration for the highly-regulated aerospace and defense, life sciences and healthcare industries. Thoma Bravo’s strategic investment is expected to help Exostar accelerate business growth and broaden its existing customer base. The transaction is subject to customary closing conditions and regulatory approvals. Terms of the transaction were not disclosed.

Exostar’s unique platform creates trusted communities where companies can manage the complexity and mitigate the risks associated with collaborating with external partners. Thoma Bravo plans to leverage its expertise in enterprise software solutions for complex industries to partner with Exostar’s existing management to further develop and expand the company’s current capabilities, particularly in cybersecurity, to position the company for further growth.

Exostar was developed as a joint venture between some of the world’s leading businesses, including BAE Systems, Boeing, Lockheed Martin, Raytheon, Rolls-Royce, and, more recently, Merck. Initially formed as a B2B aerospace and defense industry exchange, the company’s secure platform now
serves over 150,000 organizations worldwide in not only aerospace and defense, but the life sciences and healthcare markets as well. Exostar’s former shareholders plan to remain actively involved as customers and advisors offering guidance on the product roadmap and strategic platform investments.
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Tamar Jorssen
Vice President Sales & Business Development
Email: tamar.jorssen@avitrader.com
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Tamar