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Wednesday, March 17th, 2021

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Fraport retains positive outlook despite posting €690 million 2020 fiscal year loss

Fraport AG Frankfurt Airport Services worldwide (Fraport) has released its financial results for fiscal year 2020, ending December 31. For the first time in 20 years net profit for the Group dropped into negative territory at €-690.4 million, despite the implementation of extensive cost-cutting measures.

Group revenue decreased by 54.7% year-on-year to €1.68 billion. Adjusting for revenue from construction relating to capacitive capital expenditure at Fraport’s subsidiaries worldwide (based on IFRIC 12), Group revenue was down 55.4% to €1.45 billion. This was the consequence of the dramatic reduction in passenger traffic at Frankfurt Airport, which fell by 73% year-on-year to 18.8 million passengers, and reductions of between 34% and 83% in passenger traffic at China’s Xi’an Airport and Slovenia’s Ljubljana Airport respectively to reflect the full range of reductions across all Group airports.

Fraport substantially reduced operating expenses (cost of materials, personnel expenses and other operating expenses) by nearly a third, after adjusting for the additional expenses for personnel-reduction measures. This enabled Fraport to achieve a slightly positive EBITDA (before special items) of €48.4 million in fiscal 2020, down 95.9% year-on-year. When taking into account the extra expenses of €299 million for personnel-reduction measures, Group EBITDA in 2020 fell to minus €250.6 million (2019: €1.18 billion). Group EBIT slipped to minus €708.1 million (2019: €705.0 million), while the Group result (net profit) amounted to minus €690.4 million (2019: €454.3 million).

Fraport AG’s executive board chairman, Dr. Stefan Schulte, said: “We are looking back on an extremely challenging year 2020. Unlike almost any other industry, aviation has been hit hard by the COVID-19 pandemic. Nevertheless, we are now seeing the light at the end of the tunnel. The rollout of vaccination programs and greater availability of testing options provide the prerequisites for air traffic to rebound – starting this summer at the latest. People want to finally travel again, while airlines are ready to ramp up their capacities. At the same time, we have realigned our company to become leaner and more agile. Therefore, we will emerge even stronger from this historic crisis. As the operator of the Frankfurt Airport global hub and thanks to our Group airports worldwide, we are well positioned to fully benefit from the air travel relaunch, while our long-term growth perspectives remain intact.” (€1.00 = US$1.20 at time of publication.)

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Leonardo announces launch of Leonardo DRS IPO for a minority stake

Leonardo's wholly owned subsidiary in the U.S., Leonardo US Holding, has launched its initial public offering (IPO) for a minority stake of Leonardo DRS, (DRS) common shares.

The initial public offering consists of 31,900,000 shares of DRS common stock to be offered at an anticipated initial public offering price range of between US$20.00 and US$22.00 per share, all of the shares to be sold in the offering will be offered and sold by Leonardo US Holding. DRS will not receive any proceeds from the offering. Leonardo US Holding also intends to grant the underwriters a 30-day option to purchase up to an additional 4,785,000 common shares at the public offering price less applicable underwriting discounts and commissions.

Post completion of the offering, Leonardo US Holding is expected to hold 78.0% of the issued and outstanding shares of common stock in DRS (approximately 74.7% if the underwriters’ option to purchase additional shares is exercised in full). DRS expects to list its common stock on the New York Stock Exchange under the ticker symbol DRS.

AJW Group and MENA Aerospace join forces to enhance aircraft support in the Middle East

AJW Group, an independent specialist in the supply and repair of aircraft spare parts with headquarters in the U.K., has entered into a regional partnership agreement with Bahrain-owned aviation service provider, MENA Aerospace to offer enhanced aircraft part support, component MRO and logistical support to fixed- and rotary wing aircraft operating in the Middle East.

This strategic partnership is positioned to provide integrated product solutions and services to customers all around the Middle Eastern region with customers benefitting from:
  • access to AJW’s extensive global inventory of more than 450,000-line items valued at US$500 million,
  • streamlined repair and overhaul services with AJWs tailored repair programs and in-house at AJW Technique, the group’s state-of-the-art, MRO facility based in Montreal
  • seamless logistical support throughout the Middle Eastern region
  • state-of-the-art facilities located at Bahrain International Airport.
The mutually beneficial partnership allows AJW to further develop its business in the Middle East region alongside MENA, an established aviation company that is known and highly-respected with an existing infrastructure and business network to offer regional customers a superior service in the supply and repair of aircraft spares.

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Aircraft engine market regaining REVS, but lengthy recovery timeframe says IBA

The aircraft engine market is showing early signs of recovery from the worst effects of the COVID-19, but is not set to return to pre-pandemic levels until the mid-2020s, according to aviation data and advisory company IBA.

During a webinar on the engine market, IBA outlined how the vaccine rollout is gathering pace in certain markets, including key transport hubs such as the UK and United Arab Emirates, and major markets such as the US. As a result, IBA forecasts a positive forward trend for late 2021 in engine utilisation, focused initially on larger domestic markets until global vaccine uptake increases further. Engine MRO demand will continue to lag behind as operators continue to offset maintenance expenses.

The number of engine flight hours is currently plateauing at around 1.4 million per month, having plunged from around 2.8 million at the end of 2019 to less than 600,000 in April 2020. Full scope engine shop visits are down by 70% compared to pre-Covid levels and engine MRO revenue by 50%. However, IBA is now seeing three-month lead times for some shop visits, indicating that engine MRO providers have re-structured their operations to better match capacity to demand.

However, IBA believes this capacity re-structuring may negatively impact the timeframe to recovery in engine shop visits. If engine MRO providers are able to build back capacity in line with increases in demand, shop visit levels could recover to pre-Covid levels by 2024. If they lag significantly behind demand, IBA forecasts a five-year recovery timeframe to 2026.

Between June 2021 and February 2021, data from IBA’s InsightIQ platform illustrated a uniform increase in the number of active engines and decrease in those on aircraft that are parked or stored. However, IBA believes some of this activity is airlines opting to fly aircraft and their engines at very low utilisation rates rather than incur the building costs of long-term storage.

While engines for aircraft types such as the Airbus A350 (Trent XWB engine), Boeing 737 MAX (LEAP-1B) and A320neo (PW1100G) are 100% in service, conversely 51% of CFM36-3 engines which power the Boeing 737 Classic and 40% of PW4000-94 powerplants for the Boeing 747 and 767 are out of service.

The dynamics of narrowbody aircraft engine utilisation have been significantly shifted by the return to service of the Boeing 737 MAX, with 168 LEAP-1B powerplants (powering 84 aircraft) entering service between November 2021 and March 2021. Whilst this engine type currently only represents 22% of the new gen narrowbody powerplants in service, that proportion is expected to increase sharply as the MAX re-enters service at greater scale across the globe.

There is a strong order backlog for all new gen narrowbody engine types (LEAP-1A, LEAP-1B and PW1100G), totalling 7,466 engines. The backlog for many new gen widebody engines types also remains substantial, in particular the GE9X (612), GEnx-1B (624), Trent 7000 (546) and the Trent XWB (1,008).

While the in-service status of current widebody engines is strong on many types, 44% of the 1,704 of the Trent 700 engines powering the A330ceo, and over 90% of the GP7200 and Trent 900s powering the A380 are either parked or stored. The delays to the Boeing 777X programme are also affecting this market segment by prolonging demand for the GE90.

Regional aircraft are leading the recovery in many regions as airlines downgrade to these types from larger narrowbodies due to lower levels of demand, and they are also consistently being used on essential (public service obligation) services. As a result, data from InsightIQ shows that, between July 2020 and February 2021, the percentage of regional engines that were active increased from 44% to 64%.

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Lufthansa Cargo expands CEIV Pharma-certified network

The Lufthansa Cargo Pharma Centers in Munich and Chicago, which opened in summer 2020, were recently CEIV Pharma-certified. This means that, in addition to CEIV Pharma certification as an airline, Lufthansa Cargo offers an excellent pharma network of 32 stations worldwide.

After extensive testing, the CEIV Pharma label of the International Air Transport Association also confirms to Lufthansa Cargo in Munich and Chicago the reliable handling and storage of urgent and temperature-sensitive shipments according to the highest international standard. This is also particularly relevant for the transport of highly sensitive COVID-19 vaccines, as these must be transported worldwide and with the utmost reliability.

The Lufthansa Cargo Pharma Hub Munich is unique at the logistically important hub. The state-of-the-art cold storage facility opened at Munich Airport in August 2020 and is the first cold storage facility there with CEIV Pharma certification. Covering almost 1000 square meters, it offers two different cooling areas (+2 to +8 °C and +15 to +25 °C) as well as a deep-freeze cell. Both during storage and handling, the temperature of highly sensitive pharmaceutical shipments can be optimally maintained.

Pel-Air receives second Beechcraft King Air 350 for NSW Air Ambulance Service

Pel-Air, a subsidiary of Australia’s independent regional and domestic airline Rex, has taken delivery of the second of five Beechcraft King Air 350 aircraft for the NSW Air Ambulance Service, commencing operations in January 2022. The first aircraft was delivered in November 2020.

The King Air 350 aircraft, with serial number FM-92, has been registered as VH-AAS. The aircraft arrived at Shellharbour Airport, NSW on March 15, after departing from the U.S.A. the week before.

The aircraft will undergo modifications locally, as Pel-Air progresses its preparations for the start of operations at the Mascot base, on Jan 1, 2022. Pel-Air is one of Australia’s leading fixed-wing air ambulance providers, having already been the incumbent contractor for the Victorian State government for the past nine years.
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Tamar Jorssen
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Email: tamar.jorssen@avitrader.com
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Tamar