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Friday, March 20th, 2020

Slump in share values threatens Boeing-Embraer deal

The coronavirus crisis has seen share values in the aerospace sector tumble drastically, and a combination of cash problems at Boeing and a huge drop in Embraer’s share value has left the 2017 deal for Boeing to acquire an 80% stake in the commercial arm of the Brazilian planemaker on a knife edge.

The situation has not been helped by the fact that while Brazil’s anti-trust watchdog dismissed prosecutor’s objections to the deal, it has yet to win approval from the European Union. On Wednesday of this week, shares in Embraer fell 14%, giving it a market value in the region of US$1.3 billion, having fallen by two thirds when the Boeing deal was first announced.

However, the deal with Boeing was for the purchase of an 80% stake in Embraer’s commercial unit for US$4.2 billion and while Boeing may now look to reduce their offer, Embraer shareholders currently have little room to maneuver, while Embraer itself plans to share a US$1.6 billion special dividend with its shareholders from the transaction’s funds.

According to Reuters news agency, after allowing for taxes, the plan would place Embraer's commercial arm led by John Slattery in a new Boeing-led venture competing with Airbus's A220 and retaining US$1 billion of net cash for Embraer's remaining defense and private-jet units. According to analysts, Embraer's poor market value threatens to upend those calculations, barring an unlikely decision to forego the special dividend or saddle the old Embraer with debt.

Embraer does not appear to have a Plan B if the deal with Boeing goes south, and though the world’s third-largest planemaker is confident it could survive alone, it now faces even stiffer competition as a consequence of the Airbus-Bombardier tie up. While Embraer was keen to promote its E195-E2 in England this week, Brazil’s Azul SA, Embraer’s best customer, made it clear last week that owing to the coronavirus outbreak, it would be looking to delay certain orders for jets.

SRT_05 (2020-03-11)

Markus Binkert becomes new CFO of SWISS International Air Lines

Markus Binkert, former long-serving member of SWISS’s management corps and Management Board and currently CCO of Lufthansa’s Munich hub, is to assume the previously vacant position of SWISS Chief Financial Officer with immediate effect.

In a further move, Thomas Frick, Accountable Manager and Member of the SWISS Extended Management Board, is to assume the restored Management Board function of Chief Operating Officer.

Both appointments are an immediate response to the major challenges which the company is currently facing as a result of the coronavirus crisis.

Air New Zealand to close London cabin-crew base

Air New Zealand will close its London cabin-crew base of 130 flight attendants due to the impact of COVID-19 and travel restrictions imposed by governments around the world.

London-based cabin crew will operate their final service on the route on March 20 (ex Los Angeles). A New Zealand-based crew will operate the remaining flight on March 21. The route will then be suspended until June 30. Air New Zealand had planned to close the cabin crew base with its withdrawal from the route in October 2020.

Earlier in the week, Air New Zealand announced it is reviewing its cost base in response to COVID-19 and is working with unions on a range of measures to reduce its labor-bill by 30%. The airline placed itself into a trading halt on Monday, March 16, to allow it time to fully assess the operational and financial impacts of global travel restrictions. The trading halt remains in place.


AEI to provide Nauru Airlines with B737-300SF freighter conversion

Aeronautical Engineers (AEI) has agreed to provide Nauru Airlines with a 10-pallet position B737-300SF freighter conversion.The flag carrier airline of the Republic of Nauru will use the AEI B737-300SF freighter to transport fresh food, mail, medicines and other freight from various points in the Pacific. The freighter will also be used to support charter flights in the region.

Nauru Airlines is celebrating its golden jubilee in 2020 with 50 years of continuous operation. Modifications to the aircraft (MSN 28732) will begin at Commercial Jet’s Miami, Florida facility in late May 2020.

EU travel restrictions: 48,200 flights and 10.2m seats in jeopardy

ForwardKeys, the travel analytics company, has revealed the potential impact of Tuesday evening’s decision by EU member states to adopt EU guidelines on the closure of EU borders for 30 days, for all but essential travel into the bloc. Up to 48,200 flights and 10.2 million seats are in jeopar

Olivier Ponti, VP Insights, ForwardKeys, commented: “At present, it is not clear exactly what proportion of the 48,200 flights between the EU and so-called ‘third countries’ will be cancelled, because the EU guidelines clearly contemplate that a skeleton service needs to be maintained for
essential travel and it is up to each member state to decide on the extent of implementation in their own territory. However, it is inevitable that this guidance will have an extremely substantial negative impact on connectivity.”

The airline that could suffer the worst from the new EU restrictions is Air France, which has around 800,000 seats between the EU and other world regions. Next, in order, come Lufthansa, Emirates, KLM, Wizz Air, Qatar Airways, Ryanair, Turkish Airlines, Delta and Aeroflot.

For the purposes of the EU’s guidance, the UK is not considered to be a ‘third country’ so the number of seats in jeopardy for this analysis does not include air traffic between the UK and EU countries. However, with Ryanair’s announcement yesterday that it expects to stop “most if not all” flights by March 24 and to cut 80% of its schedules before then, the impact on European air travel will likely be substantially greater than the 48,200 flights put at risk by the EU’s guidance.


Hi Fly to collect much needed medical supplies from China

With the declaration of a State of Emergency in Portugal to combat the global coronavirus pandemic, Hi Fly is making one of its Airbus A340s available to the nation for an emergency flight to China to collect protective masks, goggles, clothing, diagnostic tests, ventilators and other pieces of much needed medical equipment - already in short supply in Portugal and other parts of Europe.

The Hi Fly aircraft, which can carry around 30 tons of essential supplies back to Lisbon, will depart on March 20, from Beja Airport, Portugal, to Guangzhou in China, where it will load the life-saving supplies before returning to Portugal. The flight is expected to land back in Lisbon on the morning of March 22.

To guarantee that the flight was undertaken, Hi Fly declined all profits from the mission, and also, via its philanthropic partner The Mirpuri Foundation, made a €100,000 donation to the costs of the mission.

Hi Fly and Mirpuri Foundation Founder and President Paulo Mirpuri said: “Our intention is only to help the people of Portugal prevail in what could be a difficult battle against this worrying virus.

"We are grateful to our air crews who have undertaken this challenging task, to assist with this mission to collect much needed medical supplies.”

West Star Aviation completes inspection on Falcon 900EX

West Star Aviation has completed the first 24-year, fourth C-Inspection on a Falcon 900EX.

The inspection involved most areas of the aircraft as well as in-depth inspection and repair of the winglets, nose and main landing gear, and engine.  Additionally, interior and avionics updates were completed as well as custom exterior paint.

The complete project was performed at the Alton, IL (ALN) facility, one of the four West Star full-service MRO locations.


HAECO Landing Gear Services has attained Boeing 787 landing gear overhaul capability

HAECO Landing Gear Services has attained Boeing 787 landing gear overhaul capability, providing timely support for the fast-approaching landing gear overhauls due on regional and international Boeing 787 fleets.

In addition to the Boeing 787, HAECO Landing Gear Services holds MRO capabilities covering a wide range of aircraft, including all series of Boeing 737, 747 (including the 747-8), 757, 767, 777 and Embraer E190/E195.

Moscow Domodedovo served about four million passengers in first two months of 2020

Moscow Domodedovo Airport welcomed almost four million passengers in the first two months of 2020, a 15% year-to-year rise.
Domestic passenger traffic at Domodedovo amounted to 2.44 million in January-February, a 14% year-to-year increase. Kaliningrad, Mineralnye Vody, Sochi, Saint Petersburg, Belgorod were the most popular destinations.

In the first two months of 2020, passenger traffic on the mentioned routes reached 597 thousand people, a 30 % year-over-year rise.
International traffic rose 15% to 1.52 million compared to the same period last year. Antalya, Minsk, Doha, Istanbul and Verona were key growth drivers. In the first two months of 2020, the airport served 307 thousand passengers on these routes, a 45% year-over-year rise.

In February, passenger traffic at Moscow Domodedovo amounted to 1.9 million travelers, a 16% year-to-year increase.
Domodedovo served 1.2 million domestic passengers in February, a 16% year-to-year increase. Kaliningrad, Sochi, Mineralnye Vody, Saint Petersburg, Blagoveshchensk were key growth drivers. Passenger traffic on the mentioned routes reached 306 thousand people, a 30% year-over-year rise.

International traffic rose 16% to 690 thousand compared to the same period last year. Antalya, Minsk, Dubai, Doha, and Yerevan were the most popular destinations. In February, Domodedovo served 187 thousand travelers on these routes, a 31% year-over-year rise.

GAT_20 (2020-03-11)

Lufthansa Group achieves adjusted EBIT of €2 billion in 2019

Lufthansa Group has achieved adjusted EBIT of €2 billion in the financial year 2019, in line with the forecast despite considerable charges. The main drivers for the decline were a €600 million increase in fuel costs and a noticeable economic slowdown, especially in the Group's home markets.

Earnings development was also impacted by high price pressure in the European market due to overcapacity and the weakening of the global airfreight market.

Lufthansa Group revenue in 2019 rose by 2.5% to €36.4 billion (previous year: €35.5 billion). The adjusted EBIT margin was 5.6% (previous year: 8.0%). Consolidated net profit fell by 44% to €1.2 billion (previous year: € 2.2 billion).

Unit revenues of the passenger airlines in the Group fell by 2.5% in 2019, adjusted for exchange rate effects, in particular due to the overcapacity in the Lufthansa Group's home markets. At the same time, unit costs adjusted for fuel and currency effects were reduced by 1.5% in 2019, the fourth year in succession. 

In order to secure its strong financial position, the Lufthansa Group has raised additional funds of around €600 million in recent weeks. In actuarial terms, the Group thus has liquidity of around €4.3 billion. In addition, there are unused credit lines of around €800 million. Further funds are currently being raised. Among other things, the Lufthansa Group will use aircraft financing for this purpose.

"The Lufthansa Group is financially well equipped to cope with an extraordinary crisis situation such as the current one. We own 86% of the Group's fleet, which is largely unencumbered and has a book value of around €10 billion. In addition, we have decided to propose to the Annual General Meeting that the dividend payment be suspended, and we are proposing short-time working in our home markets," said Ulrik Svensson, Chief Financial Officer of Deutsche Lufthansa AG.

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Tamar Jorssen
Vice President Sales & Business Development
Email: [email protected]
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