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Monday, April 27th, 2020

Boeing turns back on US$4.2 billion Embraer deal

Boeing let the midnight deadline on April 24 pass before announcing that it was pulling out of the deal to acquire the commercial aircraft arm of Brazil’s Embraer first agreed in 2018.

Boeing has cited that Embraer failed to meet a number of conditions required for the transaction to be closed. Embraer has retaliated by making it clear it feels Boeing has done everything it can to sabotage the deal in light of the financial crisis being faced through the continued grounding of the MAX 737 jet and current COVID-19 crisis. “Over the past several months, we had productive but ultimately unsuccessful negotiations ... We all aimed to resolve those by the initial termination date, but it didn’t happen,” Boeing senior vice-president Marc Allen said in a statement.

“Embraer believes strongly that Boeing has wrongfully terminated the (agreement,)” the Brazilian company said. Boeing’s interest in Embraer came about as a result of Airbus’ acquisition of Bombardier’s C Series, now renamed the A220, with the American planemaker looking to capitalize on cheaper Brazilian engineers and new manufacturing options.

According to Reuters news agency, the deal included a US$100 million breakup fee, but Embraer will likely seek Boeing for appreciably more, alleging that the long period of uncertainty has hindered sales of its E2 jets. It confirmed it would pursue “all remedies” against Boeing, though without expanding on the statement.

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Supervisory Board of airBaltic approves new business plan

The Supervisory Board of the Latvian airline airBaltic has approved the new business plan of the company, "Destination 2025 CLEAN". The new business plan, focuses on the impact of the coronavirus crisis and adjustments that had to be made to the existing five-year strategy.

Martin Gauss, CEO of airBaltic: “The new environment of the aviation industry requires serious and clear decisions for a positive business development. With the business plan "Destination 2025 CLEAN" we will be able to provide a very strong connectivity for the Baltic states.”

The new plan foresees a reduced fleet for the upcoming years, initially resuming operations with 22 Airbus A220-300 aircraft. The new plan takes into account the reduced capacity for the years 2020 and 2021, while at the same time foresees return to growth with up to 50 Airbus A220-300 aircraft by the end of 2023.

Business plan "Destination 2025" was originally presented in May 2018 and relies on expansion of routes from all three Baltic countries – Latvia, Estonia and Lithuania, covering the main European hubs. The strategy also foresees airBaltic achieving a significant increase in passenger numbers and its revenue by 2025.

Condor continues to fly

The German government and the Hessian state government have pledged their support to Germany's leisure airline Condor, through a guarantee for a loan from the federal government's corona-shield program.

Condor will receive a loan of €294 million as corona-aid as well as €256 million to fully refinance the bridging loan that the leisure airline received last winter following the insolvency of Thomas Cook. The EU Commission has given its approval already.

Condor had applied for the guarantee in order to prevent liquidity bottlenecks caused by the immense impact of the corona pandemic on air traffic and to repay the existing loan despite the withdrawal of the contractually agreed new owner PGL (Polish Aviation Group).

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Jazz Aviation and Air Canada Cargo to operate routes with Dash 8-400 aircraft Simplified Package Freighter

Jazz Aviation and Air Canada, through its freight division Air Canada Cargo, will begin operating the recently approved Dash 8-400 Simplified Package Freighter developed by De Havilland Canada, to short and medium haul markets under the Air Canada Express banner. These reconfigured aircraft will carry a total of 18,000 lbs of cargo in the passenger cabin and belly.

“De Havilland Canada’s Dash 8-400 Simplified Package Freighter will allow us to redeploy aircraft, while contributing to the collective fight against COVID-19 by supporting our customer, Air Canada, in the delivery of essential cargo,” said Randolph deGooyer, President, Jazz Aviation LP.

Under an agreement with De Havilland Canada, Jazz has ordered a Service Bulletin and conversion kit that will be applied to the first of 13 select Dash 8-400 aircraft. De Havilland Canada will be the exclusive supplier of all future Dash 8-400 aircraft Simplified Package Freighter modifications for Jazz’s fleet. To facilitate the cargo-only flights, Air Canada Cargo has created five, segment-specific sales teams to focus on the unique needs of customers at different levels in the supply chain.

Air Hong Kong signs lease return services deal with FLYdocs

Air Hong Kong, the longest-serving dedicated freighter airline based in Hong Kong, has appointed FLYdocs, a global leader in aircraft transition management, to manage end-of-lease return services for a fleet of two Airbus A330 aircraft. The contract includes digital migration, build and audit as well as a record project manager for the aircraft transition work. 

André Fischer, CEO at FLYdocs commented: "The cargo market is playing such a vital role in driving the world’s supply chains going so we are delighted to contribute to keeping Air Hong Kong flying. We have a global team of technical managers and engineers with enormous flexibility and passion ready to deliver this project smoothly and on time. We look forward to a long and successful partnership with Air Hong Kong”.

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COVID-19 impact on Asia-Pacific aviation worsens

The latest estimates from the International Air Transport Association (IATA) indicate a worsening of the country impact from the COVID-19 crisis in the Asia Pacific region.

On April 14, 2020, IATA released updated analysis showing that the COVID-19 crisis will see global airline passenger revenues drop by US$314 billion in 2020, a 55% decline compared to 2019. Airlines in Asia Pacific will see the largest revenue drop of US$113 billion in 2020 compared to 2019 (-US$88 billion in 24 March estimate), and a 50% fall in passenger demand in 2020 compared to 2019 (-37% in March 24, estimate). These estimates are based on a scenario of severe travel restrictions lasting for three months, with a gradual lifting of restrictions in domestic markets, followed by regional and intercontinental.

“The situation is deteriorating. Airlines are in survival mode. They face a liquidity crisis with a US$61 billion cash burn in the second quarter. We have seen the first airline casualty in the region. There will be more casualties if governments do not step in urgently to ensure airlines have sufficient cash flow to tide them over this period,” said Conrad Clifford, IATA’s Regional Vice President, Asia-Pacific. He identified India, Indonesia, Japan, Malaysia, the Philippines, Republic of Korea, Sri Lanka and Thailand as priority countries that need to take action.

“Providing support for airlines has a broader economic implication. Jobs across many sectors will be impacted if airlines do not survive the COVID-19 crisis. Every airline job supports another 24 in the travel and tourism value chain. In Asia-Pacific, 11.2 million jobs are at risk, including those that are dependent on the aviation industry, such as travel and tourism,” said Clifford.

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Air France-KLM Group and Air France secure funding of €7 billion

Following several weeks of discussions with the French state and banking institutions, the Air France-KLM Group and Air France were able to finalize various components of a support mechanism dedicated to Air France on which principle agreements are being finalised.

This support mechanism is comprised of a French state-backed loan of €4 billion granted by a syndicate of six banks to Air France-KLM and Air France. The French state is guaranteeing this loan up to 90%, and it has a maturity of 12 months, with two consecutive one-year extension options exercisable by Air France-KLM. In addition, a direct shareholder’s loan of €3 billion from the French state to Air France-KLM with a maturity of four years, with two consecutive one-year extension options, exercisable by Air France-KLM.

This aid mechanism, which remains subject to approval by the European Commission, will enable the Air France-KLM Group to provide Air France with the means necessary to meet its obligations by continuing its transformation in order to adapt in a sector that the global crisis will severely disrupt.

The Dutch state has also stated its intention to support the KLM Group. Discussions to finalise the aspects and conditions of an additional aid are ongoing.

The transformation plan, which will be finalized in the coming months, will include economic, financial and environmental commitments. It will notably involve a review of Air France's activities looking to adapt them to the new market reality brought about by the crisis, and will have to strengthen its financial situation. This transformation will also contain an ambitious environmental roadmap to accelerate the Group's sustainable transition.

Once this plan has been finalised and when better visibility on post-crisis air traffic levels becomes available, the Air France-KLM Board of Directors will consider increasing its equity capital subject to market conditions. This could occur at the latest following the Board meeting scheduled to approve the financial statements for 2020. In this context, the French state has indicated its intention to examine the conditions under which it might participate in such an operation to increase its capital.

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Air Arabia Abu Dhabi receives Air Operating Certificate

Air Arabia Abu Dhabi, the capital’s first low-cost carrier, has received its Air Operating Certificate (AOC), which allows it to start operating from Abu Dhabi as the fifth UAE national airline.

Securing the AOC highlights that Air Arabia Abu Dhabi has all the professional capabilities, adheres to all safety regulations needed for aircraft operations and has proven fit-to-fly ability following the
completion of rigorous inspections by the UAE’s General Civil Aviation Authority (GCAA).

Air Arabia Abu Dhabi will continue to work closely with the General Civil Aviation Authority (GCAA) to finalise the launch date as market conditions improve and skies are open again.

Air Arabia Abu Dhabi was formed following the agreement by Etihad Airways and Air Arabia to establish an independent joint venture company that will operate as a low-cost passenger airline with the Abu Dhabi International Airport as its hub. The new carrier will complement the services of Etihad Airways from Abu Dhabi and cater to the growing low-cost travel market segment in the region.
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