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Friday, July 30th, 2021

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U.K.’s MOD awards £250 million contract for Tempest FCAS program

The U.K.’s Ministry of Defence (MOD) has awarded a £250 million (US$350 million) for the Tempest program which will deliver the military, industrial and economic requirements of Britain’s Future Air Combat System (FCAS), marking the official start of the program’s concept and assessment phase.

The concept and assessment phase contract will see the partners develop a range of digital concepts, embedding new tools and techniques to design, evaluate and shape the final design and capability requirements of Tempest. The program is being delivered by Team Tempest – combining the expertise of the U.K. MOD, BAE Systems, Leonardo U.K., MBDA U.K. and Rolls-Royce. Working with international partners, the team is leading progress towards a U.K.-led internationally collaborative FCAS which will ensure the Royal Air Force and its allies retain world-leading, independent military capability.

Commenting on the award, Ben Wallace, U.K. Secretary of State for Defence, said: “Today’s news is a momentous step towards designing and building a new combat air system which will boost our already world-leading industry and ultimately keep us safe for the rest of the century. The contract I’ve announced today spearheads a £2bn (US$2.8bn) investment over four years and will see thousands of jobs sustained right across the U.K. We will now be getting to work with our partners to get the concept right and get this incredibly exciting and ambitious project off the ground. Make no mistake: we are remaining at the top table when it comes to combat air.”

Tempest will pioneer cutting-edge technologies, including those assisted by Artificial Intelligence (AI), machine learning, and autonomous systems to meet the capability requirements of future conflicts and be operational in the mid-2030s.


American Airlines to take minority ownership in JetSmart

American Airlines and JetSMART, an ultra-low-cost carrier with principal operations in Chile and Argentina, have signed a letter of intent to create a broad network and a rewarding customer offering in the Americas. This proposed partnership would uniquely tie together the full-service, global presence of American with the complementary network of JetSMART in South America to offer competitive fares and expanded travel options for flyers throughout North and South America.

JetSMART is a portfolio airline of Indigo Partners, one of the world’s premier developers of new generation ultra-low-cost airlines. JetSMART operates a modern fleet of Airbus A320 aircraft and offers short-haul domestic and international service to 33 destinations throughout South America.

Under the proposed transaction, American would invest in JetSMART to facilitate this growth and give American a minority ownership stake in the short-haul South American carrier. Additionally, American and Indigo Partners would jointly commit to provide additional capital to fund potential future opportunities in the region. American can strengthen and grow its South American network through this proposed partnership to attract more travelers in more markets. This proposed partnership, along with others in Latin America, would also give American customers access to more low fares and travel options on a network that is twice as big as other alliances.

The intended investments and codeshare agreements are subject to definitive documentation and any required governmental and regulatory approvals.

IBC Advanced Alloys enters credit facilities

IBC Advanced Alloys, a leading beryllium and copper advanced alloys company, has announced new credit facilities of up to US$8,000,000 established pursuant to a credit and security agreement among Iron Horse Credit and certain of the company’s U.S. subsidiaries and an account sale and purchase agreement (ASPA) among Sallyport Commercial Finance and the subsidiaries. The Credit Facilities replace the Company’s existing revolving credit facility with the Bank of Montreal.

Pursuant to the Credit Agreement, Iron Horse Credit will provide the subsidiaries with a secured revolving credit facility of up to US$4,000,000. Pursuant to the ASPA, Sallyport Commercial Finance will provide the subsidiaries with up to US$4,000,000 in advance purchase funding based on the sale of the subsidiaries’ accounts receivable, with up to US$2,500,000 to be utilized in the near term, and the remaining US$1,500,000 to be utilized at the election of the subsidiaries. The subsidiaries will grant the lenders a senior security interest in their personal property assets, inventories, and accounts receivables, subject to the terms of an intercreditor agreement.

IBC intends to use the proceeds of the credit facilities to advance the consolidation and modernization of the company’s copper alloys manufacturing facility in Franklin, Indiana, and for working capital purposes.


GECAS’ 737-800 converted freighter fleet climbing to over 40

GECAS has contracted to add six 737-800BCFs to its in-service fleet, bringing the GECAS fleet of passenger-to-freighter (P2F) converted 737-800NG narrow-body freighters in operation to more than 40, an average of one aircraft added per month since first ever 737-800NG converted freighter was delivered in April 2018. Two of the aircraft will be added to ATRAN’s fleet and the remaining four with undisclosed operators.

A repeat customer, Volga-Dnepr Group’s ATRAN LLC recently took delivery of two 737BCF from GECAS and will add two more of the P2F narrowbodies to its operations in September. “In today's highly competitive landscape marked by capacity constraints, it is important to keep pace with the demand and guarantee stable, high-quality services for our customers. These reliable converted freighters will support our ongoing fleet development strategy, enable smooth phase-out of older freighters and ramp up our delivery options,” said Vitaliy Andreev, General Director of ATRAN Airlines.

Between 737-800BCFs and 777-300ERSFs (through ‘the Big Twin’ joint program with IAI), GECAS currently holds orders and options exceeding 100 P2F conversions.

MTU expects full-year 2021 revenue to be higher than predicted

In the first six months of 2021, MTU Aero Engines AG generated revenue of €2,004 million; in the first half of 2020, revenue was €2,049 million. The operating profitwas €190 million (1-6/2020: €224 million) and the adjusted EBIT margin was 9.5% (1-6/2020: 10.9%). Net income developed in line with operating profit and was €135 million, compared with €161 million in the prior-year period. “MTU continued to operate profitably in the first half of this year. Based on this performance and the improved visibility up to year-end, we can now give a more precise guidance for the 2021 fiscal year,” said Reiner Winkler, CEO of MTU Aero Engines AG. “We are somewhat more optimistic than previously about the commercial series business and the military business but have slightly reduced our forecast for commercial maintenance. Overall, we are slightly increasing the lower end of our target ranges for both revenue and earnings.”

MTU now expects full-year revenue to be around €4.3 to €4.5 billion. Previously, the company’s guidance was for a revenue range of between €4.2 and €4.6 billion. Revenue should develop better than previously expected in the military business and the commercial series business: revenue from the military business should rise in the mid to high single-digit percentage range. In the commercial series business, MTU expects growth in revenue to be in the low to mid-single-digit percentage range. So far, the company only expected a slight revenue increase in both business units. The expectations for revenue in the commercial spare parts business are unchanged, with the company forecasting a rise in the low to mid-single-digit percentage range. Revenue from commercial maintenance should increase by between 15% and 20% in 2021; previously, MTU assumed growth of between 15% and 25%. The adjusted EBIT margin is expected to be between 10% and 10.5% in 2021; the previous guidance was between 9.5% and 10.5%. Adjusted net income is likely to develop in line with the operating profit.


Air Cargo posts strongest first half-hear growth since 2017

The International Air Transport Association (IATA) released data for global air cargo markets for June showing a 9.9% improvement on pre-COVID-19 performance (June 2019). This pushed first half-year air cargo growth to 8%, its strongest first half performance since 2017 (when the industry posted 10.2% year-on-year growth).Global demand for June 2021, measured in cargo ton-kilometers (CTKs), was up 9.9% compared to June 2019.

Regional variations in performance are significant. North American carriers contributed 5.9 percentage points (ppts) to the 9.9% growth rate in June. Middle East carriers contributed 2.1 ppts, European airlines 1.6 ppts, African airlines 0.5 ppts and Asia-Pacific carriers 0.3 ppts. Latin American carriers did not support the growth, shaving 0.5 ppts off the total.

Overall capacity, measured in available cargo ton-kilometers (ACTKs), remained constrained at 10.8% below pre-COVID-19 levels (June 2019) due to the ongoing grounding of passenger aircraft. Belly capacity was down 38.9% on June 2019 levels, partially offset by a 29.7% increase in dedicated freighter capacity.

Underlying economic conditions and favorable supply chain dynamics remain highly supportive for air cargo:

The U.S. inventory to sales ratio is at a record low. This means that businesses have to quickly refill their stocks, and typically use air cargo to do so.

The Purchasing Managers Indices (PMIs) – leading indicators of air cargo demand – show that business confidence, manufacturing output and new export orders are growing at a rapid pace in most economies. Concerns of a significant consumer shift from goods to services have not materialized.

The cost-competitiveness and reliability of air cargo relative to that of container shipping has improved. The average price of air cargo relative to shipping has reduced considerably. And scheduling reliability of ocean carriers has dropped, in May it was around 40% compared to 70-80% prior to the crisis.

(As comparisons between 2021 and 2020 monthly results are distorted by the extraordinary impact of COVID-19, unless otherwise noted, all comparisons to follow are to June 2019 which followed a normal demand pattern).


Boeing donates €500,000 to assist Red Cross flood relief efforts in Germany

Boeing has announced a €500,000 donation from the Boeing Charitable Trust to the American Red Cross to assist with flood relief efforts in Germany. Funds will be deployed by the German Red Cross to provide emergency power, distribute emergency relief supplies, improve communication infrastructure and mobilize medical care, first aid and rescue services to the hardest hit areas in the region.

"Our hearts go out to all of the people of Germany who have been impacted by these devastating floods," said Marc Allen, Boeing's chief strategy officer, senior vice president of Strategy and Corporate Development and interim leader of Government Operations. "Through our partnership with the American Red Cross and German Red Cross, we are working quickly to bring much-needed emergency funding to communities hit hardest by these recent events. Germany is an important partner to both the U.S. and to Boeing, and we hope that this emergency assistance package provides some level of relief during these difficult times."

"Boeing has a strong relationship with Germany and we feel that it is our responsibility to stand at the side of the German people in these exceptional circumstances," added Dr. Michael Haidinger, president of Boeing Germany.

In the aftermath of the severe flooding, hundreds of people have lost their lives and the property loss is estimated to be in the billions. More than 3,000 German Red Cross workers are providing assistance in North Rhine-Westphalia and Rhineland-Palatinate. The work is only just beginning, and the Red Cross will continue to provide assistance in the months to come.

VSE Corporation acquires Global Parts Group

VSE Corporation, a leading provider of aftermarket distribution and maintenance, repair, and overhaul (MRO) services for land, sea and air transportation assets for government and commercial markets, has acquired privately held Global Parts Group (Global Parts) in an all-cash transaction valued at approximately US$38 million, subject to customary working capital adjustments.

Global Parts is a fully integrated aftermarket distribution and MRO services provider supporting the global business and general aviation (B&GA) market. Global Parts’ distribution business focuses on supporting airframe components, while its repair capabilities extend to hydraulics and pneumatics. Global Parts’ experienced workforce operates from its distribution and MRO center of excellence in Augusta (Wichita), Kansas.

“We are pleased to welcome the Global Parts team to the VSE family,” stated John Cuomo, President and CEO of VSE Corporation. “This transaction represents an important strategic investment for our Aviation segment, which significantly expands product distribution offerings and repair capabilities across a diverse base of global business and general aviation customers. Global Parts’ customer service-focused culture, long-term customer relationships, OEM supplier partnerships, consistent financial performance, and proven technical expertise are highly-complementary to our existing business, providing the opportunity for both revenue and margin enhancement opportunities over a multi-year period.”

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