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Tuesday, May 17th, 2022

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SMBC Aviation Capital to acquire Goshawk Aviation for US$6.7bn - will create second-largest global lessor

Japanese-owned, Dublin-based lessor SMBC Aviation Capital has agreed to purchase similarly Dublin-based global aircraft lessor Goshawk Aviation for an enterprise value of US$6.7bn. The deal, once completed will create the largest Japanese-owned aircraft lessor and the world’s second-largest lessor by dint of total assets exceeding US$37 billion, including those aircraft that will be on its order book currently valued at US$13 billion comprising exclusively new-technology, narrow-body Airbus A320neo and Boeing 737MAX aircraft.

SMBC Aviation Capital is jointly owned by Sumitomo Mitsui Financial Group and Sumitomo Corporation, while Goshawk Aviation is owned by NWS Holdings Limited and Chow Tai Fook Enterprises Limited, both Hong Kong enterprises. The deal will see SMBC Aviation Capital acquire a portfolio of 176 owned and managed aircraft, creating a portfolio of 709 owned and managed aircraft. The 261 planes on order are all new-generation models and subsequently the new portfolio of aircraft will be comprised of 82% narrow-body jets.

Any aircraft currently owned by Goshawk Aviation that are located in Russia and subject to EU sanctions are not included in the transaction. The transaction will be financed through a combination of debt and equity. Debt financing for the transaction will be sourced from the shareholders as well as the bank and capital markets. Equity for the transaction will be provided by SMBC Aviation Capital’s shareholders, Sumitomo Mitsui Financial Group and Sumitomo Corporation.

The combined business will continue to operate as SMBC Aviation Capital and will consist of a single corporate structure incorporated in the Republic of Ireland, with headquarters in Dublin. The transaction is subject to the receipt of relevant regulatory approvals and other closing conditions and is expected to close in the second half of 2022. Goldman Sachs International acted as exclusive financial adviser to SMBC Aviation Capital. Cravath, Swaine & Moore LLP and Milbank acted as the legal advisers to SMBC Aviation Capital. (£1.00 = US$1.25 at time of publication).


Qatar Airways and Malaysia Airlines unveil enhanced strategic partnership

Qatar Airways and Malaysia Airlines have unveiled the roadmap outlining the next phase of their strategic partnership, following Malaysia Airlines’ announcement to launch a non-stop service from Kuala Lumpur to Doha from May 25. The two partners will significantly expand their codeshare cooperation, allowing passengers to travel the world and enjoy seamless connectivity via their leading hubs in Kuala Lumpur and Doha.

The codeshare expansion, which adds 34 destinations to the existing 62 codeshare destinations, marks another milestone in the long-standing relationship between the two countries' national carriers and oneworld partners. The agreement benefits travellers from across the globe who will have access to a much greater combined network and enjoy a seamless travel experience on both airlines with a single ticket including check-in, boarding and baggage-check processes, frequent flyer benefits and world-class lounge access for the entire journey.

Starting May 25, 2022, customers flying on Malaysia Airlines’ new Kuala Lumpur to Doha service will have access to 62 codeshare destinations within Qatar Airways' broad network to the Middle East, Africa, Europe and North America.  Likewise, Qatar Airways customers travelling from Doha to Kuala Lumpur can seamlessly transfer to 34 Malaysia Airlines’ destinations including their entire domestic network and key markets in Asia, such as Singapore, Seoul, Hong Kong, and Ho Chi Minh City, subject to governmental approval.

AEI to provide EGYPTAIR with its first B737-800SF freighter conversion

Aeronautical Engineers (AEI) has released that EGYPTAIR has signed a contract for an AEI B737-800SF freighter-conversion. The aircraft (MSN: 35560) is scheduled to commence modification in October 2022. Touch labour for the conversion and maintenance requirements will be accomplished by the authorized AEI Conversion Centre, Commercial Jet, in Miami, Florida.

EGYPTAIR currently owns three Airbus A330-200 freighters, with a capacity of 60 tonnes per aircraft. EGYPTAIR’s cargo operations have grown during the COVID-19 period. The company has started new routes to accommodate the need to transport medical items and agricultural crops. Once completed, this will be the first AEI B737-800SF converted freighter to be owned and operated by EGYPTAIR.

EI is currently the only conversion company to have ETOPS 180 approval on the B737-800 freighter conversion. Additionally, AEI can convert all B737-800-line number aircraft including those with Split Scimitar winglets.


Ryanair posts full-year loss of €355 million

Ryanair Holdings has posted a full-year loss of €355 million (pre-exceptionals), compared to a prior-year loss of €1,015 million.

FY22 scheduled revenues increased 156% to €2.65 billion.  While traffic recovered strongly from 27.5 million to 97.1 million guests, the delayed relaxation of EU Covid-19 travel-restrictions until July 2021 (Oct. in the case of the UK Govt.), combined with the damaging impact of the Omicron variant and Russia’s invasion of Ukraine in H2, meant that fares required significant price stimulation.  Average fares in FY22 were down 27% to just €27. Ancillary revenue delivered a solid performance, generating more than €22 per passenger as traffic recovered and guests increasingly chose priority boarding and reserved seating. Total revenues increased by over 190% to €4.80 billion. 

While sectors increased almost 200% and traffic rose 253%, operating costs rose just 113% to €5.27 billion (incl. a notable 237% increase in fuel to €1.83 billion), driven primarily by lower variable costs such as airport and handling, route charges and lower fuel burn as 61 Boeing B737 Gamechangers entered the fleet (offset by the higher cost jet fuel). Lower costs, coupled with rising load factors, saw FY22 (ex-fuel) unit cost per passenger reduce to €35.

The company's FY23 fuel needs are approx. 80% hedged (65% jet swaps at c. US$63bbl and 15% caps at c. US$78bbl). Almost 10% of Ryanair’s H1 FY24 fuel requirements are hedged at c. US$76bbl (via jet swaps). Carbon credits are 85% hedged for FY23 at €53 (well below the current spot price of almost €90). This very strong fuel hedge position gives Ryanair a considerable competitive advantage for the next 12 months and will enable it to grow market share strongly over the coming year.

Ryanair plans to grow FY23 traffic to 165 million (up from 97 million in FY22 and 149 million pre-Covid) and will pursue its load active, yield passive strategy to achieve this growth. While 80% of Ryanair’s fuel requirements are hedged well below current spot prices of over US$100bbl, our unhedged 20% will give rise to some unbudgeted cost increases.


Chris Avery to join WestJet as Vice-President, Commercial Strategy

WestJet has appointed Chris Avery, as Vice-President, Commercial Strategy. Avery, a former WestJetter, will join WestJet's senior leadership team effective immediately.

Avery returns to WestJet following five years with Canadian North where he served as President and CEO from 2018 to 2022 and as Vice-President, Customer and Commercial from 2017 to 2018. During his time at the helm of Canadian North, Avery led the merger and integration activities between Canadian North and First Air and successfully navigated the pandemic crisis to position the airline for recovery.

Prior to joining Canadian North, Avery spent 11 years with WestJet in senior leadership roles serving as Vice-President, Network Planning and Alliances, Vice-President and General Manager WestJet Vacations and Vice-President, Revenue and Planning. With more than two-decades of aviation experience across North America, Avery has also held positions with Alaska Airlines, Air Transat and Canadian Airlines International.

Bamboo Airways selects Panasonic Avionics for wide-body IFEC systems

Panasonic Avionics Corporation (Panasonic Avionics) has announced an agreement with Bamboo Airways to provide its in-flight entertainment and connectivity systems (IFEC) for the Vietnamese airline’s wide-body fleet.

Panasonic Avionics is installing its eX3 in-flight entertainment system on the airline’s Boeing 787-9 fleet, with the aircraft entering service on its intercontinental routes to Europe and Australia in recent weeks.

Passengers throughout each aircraft will enjoy an immersive, cinematic experience with HD screens at each seat, complete with capacitive touch displays and handsets and USB and laptop charging facilities. Business-Class passengers will enjoy 18-inch HD screens, with generous 13-inch and 12-inch screens in Premium-Economy and Economy-Class respectively.

Bamboo Airways has also selected global in-flight connectivity services from Panasonic Avionics which can deliver average speeds up to 100 megabits per second (Mbps) to the aircraft. The airline’s in-flight connectivity experience, powered by Panasonic Avionics’ global network of high-speed, high-bandwidth satellites will deliver a host of next-generation connectivity benefits, including fast internet and in-flight mobile phone services.


JetBlue urges Spirit shareholders to ‘vote no’ on Frontier transaction

JetBlue has filed a “Vote No” proxy statement urging Spirit shareholders to vote against the inferior, high-risk and low-value Spirit/Frontier transaction at Spirit’s upcoming special meeting.

In addition, JetBlue commenced an all-cash, fully financed tender offer to acquire all of the outstanding shares of Spirit for US$30 per share, without interest and less any required withholding taxes. Given the Spirit Board of Directors’ complete unwillingness to share the same necessary diligence information that was shared with Frontier, JetBlue is now offering to acquire Spirit for US$30 per share in cash through a fully financed tender offer. This represents a 60% premium to the value of the Frontier transaction as of May 13, 2022 – a very compelling offer and higher than the premium implied by JetBlue’s original proposal. JetBlue is fully prepared to negotiate in good faith a consensual transaction at US$33, subject to receiving necessary diligence.

JetBlue launched a website at www.JetBlueOffersMore.com and issued a letter to Spirit shareholders detailing the benefits of its transaction and the certainty of closing.

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Tamar Jorssen
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