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Friday, April 10th, 2020

Norwegian looking to convert US$4.3 billion debt into equity – most of fleet still grounded

In a bid to deal with the economic ramifications of the COVID-19 pandemic Norwegian, Europe’s third-largest low-cost carrier, is now looking to convert up to US$4.3 billion of debt into equity and will be issuing new shares in an attempt to stay afloat. The strategic move is in response to the requirements needed to meet the criteria in order to obtain a government loan of US$292 million by reducing the ratio of debt to equity.

Part of Norwegian’s problem has been the level of borrowing required to support its meteoric rise to the point where it is now the largest foreign carrier flying to New York and other major U.S. cities. By 2019, that level of debt stood at US$8 billion. By mid-March the low-cost carrier had laid off 7,300 of its employees – roughly 90% - after which it turned to the Norwegian government for financial help.  

“The proposed measures are necessary in securing the next tranches of the Norwegian government state guarantee program,” Chief Executive Jacob Schram said in a statement on Wednesday, adding that: “They are also necessary for the future of the company by strengthening the company’s balance sheet.”

The deal will require shareholder approval, scheduled for May 4, subject to approval from existing creditors. According to Norwegian, the carrier would convert part or all of its bonds worth NEK5.68 billion into shares as well as leasing debt of up to NEK38.82 billion. It would also look to raise at least NEK300 million of fresh cash by selling new shares, with the aim of reaching a total of 400 million to meet government terms for its aid. The share value of Norwegian has dropped 80% over the last two months and in order to qualify for a second tranche of NEK1.2 billion it will have to persuade creditors to temporarily forego payments while, according to the government, to access a final tranche of NEK1.5 billion, the carrier will have to raise additional equity. (US$1.00 = NEK10.22 at time of publication.)

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Changes in the Supervisory Board of Lufthansa Technik

At its extraordinary meeting on April 2, the Lufthansa Technik Supervisory Board has appointed Dr. Detlef Kayser as the new Chairman of the Supervisory Board. He will take over from Carsten Spohr as Chairman with effect from the same date. In addition, Thorsten Dirks was elected as a new member of the Supervisory Board.

With this decision, the Supervisory Board acknowledges the increased responsibilities of all members of the Lufthansa Executive Board during the Corona crisis. The change in the Supervisory Board mandates ensures the necessary intensive steering during this crisis and maintains the influence and attention of the Lufthansa Executive Board on the most important matters of Lufthansa Technik.

Dr. Kayser has joined the Executive Board of Deutsche Lufthansa AG on January 1, 2019 and is responsible for the business area Airline Resources & Operations Standards.

Dirks has been a member of the Executive Board since May 2017 and was responsible for the "Eurowings" Executive Board division until December 31, 2019. Since January 1, 2020, he is Head of IT, Digital & Innovation at Deutsche Lufthansa AG.

SAS' capacity down -45.4% in March

As an effect of the COVID-19 pandemic and the travel restrictions imposed by many governments, SAS' capacity was reduced by over 45% compared to last year. During April, almost all flights will be canceled except for a few domestic routes in Norway and Sweden.

SAS' total traffic in March declined -62% and capacity was down -45.4% compared to the same period in 2019. The load factor declined -21.8 points to 49.6%.

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Leonardo to supply range of electronics for Spanish Air Force PC-21 trainers

Leonardo has been awarded a contract by Pilatus Aircraft to provide airborne communications systems, cockpit control panels and associated electronics for installation on-board PC-21 single-engine turboprop trainers being supplied to the Spanish Air Force (Ejército del Aire). The aircraft were ordered by the Spanish Ministry of Defense through its Armament and Material Directorate (DGAM) to replace the Spanish Air Force’s Casa C-101 jet trainers, which have been in-use since 1980.

Leonardo’s multiband V/UHF RT-700/A communications system is a compact and lightweight military ETSO (European Technical Standard Order)-certified product. It provides voice and data communications in the 30-470MHz range and can transmit and receive securely when connected to an external encryption unit. Notably, the product provides ETSO-certified communications in the VHF ATC band (25/8,33kHz).

The contract further strengthens Leonardo’s long-established partnership with Pilatus Aircraft. The Swiss aerospace manufacturer previously selected Leonardo avionics and lights/panels for PC-21 aircraft ordered by customers in Switzerland, Singapore, the United Arab Emirates, Qatar, Saudi Arabia and Australia. The Spanish Air Force is the third European air force to choose the PC-21 Next Generation Trainer.

Boeing’s Loyal Wingman program achieves ‘weight on wheels’ milestone

Boeing Australia has achieved two more milestones on the Royal Australian Air Force’s Loyal Wingman – Advanced Development Program: weight on wheels and aircraft power on.

The development milestones for the unmanned aircraft come just weeks after completion of the first fuselage, allowing for rapid progress on systems installation and functional and integration testing from the aircraft’s own landing gear.

“We’re continuing at pace toward our goal of flying later this year, so that we can show our customer and the world what unmanned capability like this can do,” said Dr. Shane Arnott, program director of the Boeing Airpower Teaming System.

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Air France KLM Group reports March traffic figures

Air France KLM Group's March traffic figures were strongly impacted by COVID-19, reflecting progressive extension of capacity reductions due to the global expansion of the virus. Special flights have been operated by Air France, KLM and Transavia to repatriate citizens to their home countries, in close cooperation with the Governments of France and the Netherlands.

For April and May 2020 the Group foresees over 90% of planned capacity to be suspended as a consequence of the globally imposed travel restrictions to counter the spread of the COVID-19. Air France and KLM aim to continue serving key city pairs by a skeleton operation from their respective hubs. Beyond May 2020 the Group is currently unable to provide insight due to the high level of uncertainty over the duration of the crisis and continuously monitors the situation and accordingly evaluates if additional network adjustments are required.

Total group passenger activity (Air France, KLM and Transavia): total traffic in March declined -50.6%, while capacity was down -35.5% compared to March 2019. Load factor for March 2020 declined -20.5 points to 67.1%.

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American Airlines increases weekly cargo-capacity to 5.5 million pounds

American Airlines is expanding its cargo-only operation this month to provide more than 5.5 million pounds of capacity to transport critical goods each week between the U.S. and Europe, Asia and Latin America.

These flights will help transport life-saving medical supplies and materials to the U.S., including personal protective equipment and pharmaceuticals. Other essential goods will include manufacturing and automotive equipment, fresh fruits and vegetables, fish, mail, and electronics.

In March, the airline began operating its first cargo-only flights since 1984 between Dallas-Fort Worth (DFW) and Frankfurt (FRA), transporting more than 350,000 pounds of medical supplies, mail for active U.S. military, telecommunications equipment and electronics to support communities impacted by the coronavirus (COVID-19) health crisis around the globe.

In the coming week, American will expand its cargo-only service to multiple destinations with the addition of flights from DFW to Dublin (DUB) and Hong Kong (HKG); between New York (JFK) and London Heathrow (LHR). The airline is also working toward adding cargo-only service to Shanghai (PVG) and Seoul (ICN) and between Miami (MIA) and Buenos Aires (EZE) by the end of the month.

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Air Lease Corporation activity update for first quarter of 2020

Air Lease Corporation (ALC) has announced an update on deliveries, sales and new significant financing occurring in the first quarter of 2020.

As of March 31, 2020, ALC’s fleet was comprised of 301 owned aircraft in its operating fleet and 82 managed aircraft with 399 new aircraft on order from Boeing and Airbus set to deliver through 2026.

During the first quarter, ALC delivered eight new aircraft including two Airbus A320neos, four Airbus A321neos, two Boeing 787-10s, and acquired one Airbus A330-300 in the secondary market. Aircraft investments in the quarter totaled approximately US$700 million.

The company has sold three aircraft to Thunderbolt Aircraft Lease Limited III during the quarter. Sales proceeds for the quarter totaled approximately US$65 million.

ALC issued US$1.4 billion of senior unsecured medium-term notes comprised of US$750.0 million due 2025 at a fixed rate of 2.30% and US$650.0 million, due 2030, at a fixed rate of 3.00%. The company upsized its senior unsecured revolving credit facility to US$6.1 billion from US$5.8 billion.
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