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Tuesday, February 8th, 2022

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Frontier and Spirit to merge in US$2.9 billion ultra-low-cost-carrier deal

American budget carriers Frontier Group Holdings (Frontier Airlines) and Spirit Airlines Inc (Spirit Airlines) are to merge to create the fifth-largest American carrier in a US$2.9 billion deal. Frontier Airlines will hold a controlling stake in the yet-to-be-named new carrier.

The move could prove beneficial to both carriers while airlines, domestically and internationally, struggle to recover from the effects wrought on air travel by the COVID pandemic. Both companies have pledged to avoid job losses, with a prediction that the merger could generate a further 10,000 direct jobs by 2026. In addition, the new carrier intends to provide over 1,000 daily flights to over 145 individual destinations, despite higher fees having prompted Frontier to exit airports including Los Angeles and San Jose in California, and to stop serving Washington-Dulles and Newark.

The deal is anticipated to conclude by the end of 2022 and predominantly through operational synergies should save approximately US$500,000 per annum. However, before any merger can take place, the deal will have to pass antitrust regulation and gain Department of Justice (DOJ) approval. Unlike the merger between American Airlines and JetBlue Airways which saw the DOJ file a lawsuit alleging the deal would lead to increased fares at busy north-eastern US airports, regulators might look more favourably on the Frontier Airways and Spirit Airlines merger as that should result in lower fares for travellers. "In a competitive industry like ours, the lowest costs always win," Frontier Airlines Chief Executive Barry Biffle told analysts. "These low costs will, in turn, enable us to keep our fares low for customers."

Both carriers have orders with Airbus for new aircraft and have indicated they would be unlikely to cancel any of the ordered planes. Colorado-based Frontier Airlines would hold a 51.5% stake in the combined entity, while Spirit Airlines’ shareholders would receive $25.83 per share, a premium of 18.8% on last Friday's close. (£1.00 = US$1.35 at time of publication).


American Airlines signs definitive investment agreement with GOL

American Airlines has signed a definitive investment agreement with GOL, Brazil’s largest airline, deepening the relationship between the two carriers to create the broadest and most rewarding network in the Americas. The combined networks will provide customers with more than 30 destinations in the US served by American and more than 34 new destinations in South America served by GOL.

As part of the investment agreement previously announced last year, American will invest US$200 million in 22.2 million newly issued preferred shares of GOL in a capital increase, for a 5.2% participation in the company’s economic interest.

American has served Latin America since 1942 and offers service to 17 destinations in South America, including Sao Paulo (GRU) and Rio de Janeiro (GIG) in Brazil, from its US hubs in Dallas-Fort Worth (DFW), Miami (MIA) and New York (JFK). American has flown more than 14 million customers between the US and Brazil in the last 10 years — more than twice as many as any other U.S. carrier. GOL serves 63 destinations in Brazil and is the country’s largest airline.

Boeing buys two million gallons of sustainable aviation fuel for commercial operations

Boeing has signed a supply agreement for two million gallons (7.5 million litres) of blended sustainable aviation fuel (SAF) with EPIC Fuels to power its Commercial Airplanes operations in Washington state and South Carolina through 2022.

"SAF is a safe, proven, immediate solution that will help achieve our industry's long-term commitment to net-zero carbon emissions by 2050," says Sheila Remes, Boeing Vice President of Environmental Sustainability. "Boeing has been a pioneer in making sustainable aviation fuels a reality. Through this agreement we will reduce our carbon footprint and have SAF available for customer deliveries as well as our own operations."

Sustainably produced jet fuel, which reduces CO2 emissions by as much as 80% over the fuel's life cycle with the potential to reach 100% in the future, is widely recognized as offering the most immediate and greatest potential to decarbonize aviation over the next 20 to 30 years. Made from several feedstocks, sustainable aviation fuel is certified for commercial use and can be blended with traditional jet fuel without modifications to airplanes, engines or fueling infrastructure. Approximately a year ago, Boeing committed to deliver its commercial airplanes capable and certified to fly on 100% SAF by 2030.

The purchase agreement with EPIC Fuels includes a SAF product made from inedible agricultural waste, blending 30% neat SAF with 70% conventional jet fuel. The purchase will enable broader use of SAF for Boeing commercial production, test, ferry, Dreamlifter and customer flights at facilities in Everett, Renton and Seattle in Washington state and North Charleston, South Carolina. EPIC Fuels will also continue to supply customized blends from 50/50% up to 100% SAF for the Boeing ecoDemonstrator programme, which accelerates innovation by taking promising technologies out of the lab and testing them in the air to solve real-world challenges for airlines and passengers. SAF is currently approved for a 50/50 blend with conventional jet fuel for commercial flights.


Aergo Capital delivers one DHC-8-Q400 aircraft to AvantiAir

Aergo Capital (Aergo) has successfully delivered one DHC-8-Q400 aircraft bearing manufacturers serial number 4187 to AvantiAir. The delivery was completed on January 26, 2022. This unit is part of the 20 DHC-8-Q400 aircraft Aergo acquired in 2021.

Fred Browne, Chief Executive Officer, Aergo, commented: “We are delighted to add AvantiAir to Aergo’s growing customer base. We continue to seize upon opportunities in the turbo space as we see strong growth in that sector. This transaction underscores Aergo’s strategic focus on investing in the regional and turboprop space.” 

Smith, Gambrell & Russell, LLP acted as lead counsel to Aergo and Bird & Bird LLP acted as lead counsel to AvantiAir.

Lufthansa Technik and WestJet sign CFM56-7B engine maintenance service agreement

WestJet has awarded its CFM56-7B engine maintenance programme to Lufthansa Technik. The agreement provides WestJet with access to a wide range of services including overhaul capabilities and on-site maintenance support. Under a separate agreement, Lufthansa Technik has collaborated with FTAI Aviation to provide access to CFM56 modules and material to support this maintenance programme. An important principle of this maintenance approach is the replacement of modules, which optimizes engine life and delivers a more environmentally sustainable programme. 

"WestJet is excited to move forward in this new agreement with Lufthansa Technik in a dynamic new program to support our fleet. We are looking forward to working with this expanded relationship with Lufthansa Technik to provide excellent support and engine life cycle management. Further, working with a support organization that understands the airline perspective and needs, serves to enhance the value of support brought to the table. This is the result of a very competitive process started in January 2021 that resulted in Lufthansa Technik's team being awarded a contract that provides leading value and support through a team approach offering creative solutions," said Gandeephan Ganeshalingam, Vice President of Technical Operations, WestJet.

"One major pillar in our collaboration is that we will be able to, where appropriate, further optimize an engine's life. This results in high-engine reliability and stable operations for WestJet," said Georgios Ouzounidis, VP Corporate Sales North America at Lufthansa Technik. 


AAR signs ten-year extension of component MRO agreement with IAMCO

AAR, a leading provider of aviation services to commercial and government operators, MROs and OEMs, has extended its component MRO contract with International Aerospace Management Company (IAMCO), which is responsible for depot-level maintenance for the North Atlantic Treaty Organization’s (NATO) E-3A AWACS aircraft fleet, for another ten years. The services will be performed at AAR’s Component Repair facility in Amsterdam.

“IAMCO is very pleased to confirm AAR as one of its sources of repair for component MRO in this extension of the E-3A programme,” says Bernard Masuy, IAMCO Branch Manager, Components. “AAR’s Amsterdam facility proves to be a reliable partner and a strong pillar of the E3A DLM component maintenance programme.

SmartLynx Airlines to expand its fleet by adding new aircraft type

The beginning of 2022 marks a significant milestone in SmartLynx Airlines’ expansion. The ACMI and charter operator has signed an agreement with SMBC Aviation Capital to lease two Boeing 737 MAX 8 aircraft to meet growing demand from European and overseas markets.

This deal launches a successful partnership between the airline and one of the biggest global lessors, with deliveries of the aircraft to SmartLynx Airlines already being underway. Such strategic expansion into the Boeing aircraft family will allow SmartLynx Airlines to build a reliable fleet that will ensure the provision of even greater and more versatile products and services. Additionally, the longer range of the Boeing 737 MAX 8 opens new market opportunities for SmartLynx Airlines and its customers.

The first two 737 MAX 8 units will be introduced to the SmartLynx fleet in April, with further type additions planned later in the Summer, 2022. To ensure successful deliveries, SmartLynx has also entered into a partnership with Boeing, which will support the airline throughout the whole entry-into-service process.

Klaus Heinemann joins Nordic Aviation Capital as Strategy Consultant

Regional aircraft leasing company Nordic Aviation Capital (NAC), has appointed Klaus Heinemann as a Strategy Consultant with the intention to be named Non-Executive Chairman of the Board upon NAC’s emergence from Chapter 11. Heinemann brings over four decades of aviation financing and board expertise to NAC, having held senior leadership roles throughout his career.

Heinemann was CEO of AerCap Holdings NV from 2002 to 2012, where he was instrumental in building the firm into a top global aircraft lessor. He was previously on the Executive Board at DVB Bank from 1998 to 2002, driving its transformation to a global transportation-focused bank. Klaus also served as Joint General Manager at Long Term Credit Bank from 1988 to 1998, where he built its aviation financing franchise. He began his banking career in 1976 at Bank of America, where he worked for 11 years.

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Tamar Jorssen
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Email: tamar.jorssen@avitrader.com
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