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Wednesday, May 13th, 2020

Ryanair does U-turn and opts for all-Boeing fleet

Having had talks with Airbus in March 2019 about a potential order for 100 A321s and thus create a dual Airbus-Boeing fleet of aircraft, Ryanair, the Irish low-cost carrier, has announced its intention to cancel any existing deliveries of Airbus aircraft, all of which would have been from leasing companies.

As part of the U-turn, Ryanair CEO told Reuters news agency that 30 jets destined for its Lauda subsidiary would be replaced with Boeing 737 jets, of which Ryanair currently has 450. Currently O’Leary sees holding any talks with Airbus as a waste of time, saying that:  “We would not initiate talks with Airbus until such time as Airbus wants to initiate talks with us,” adding that: “Until they need an order from the Ryanair Group, frankly we are wasting our time talking to Airbus.”

Until the Covid-19 pandemic decimated worldwide air travel, Ryanair had anticipated expanding the Lauda fleet from 23 to 38 Airbus jets by the summer of this year, but instead it is now in talks with unions at Lauda concerning a new labor agreement and also pay cuts. As the Austrian union is currently refusing to engage in negotiations with Ryanair, O’Leary has made it very clear that if nothing changes, he will simply close down the home base of Lauda in Austria. He also made it clear that talks with Boeing regarding a new order and possible compensation for losses incurred through the grounding of the 737 would be unlikely to conclude before a previously given deadline of May 18-19 and that such negotiations would be unlikely to conclude until the grounding of the 737 was lifted, which is currently expected to be in August or September this year.

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The Av8 Group announces new facility expansion

The Av8 Group has completed its 10,000 ft² expansion at its Houston location. This will provide additional space for the company's specialized service of landing gear and other component overhauls.

The original facility occupied 20,000 ft² of space, and now with the added square feet will have a combined total of 30,000 ft², to service the growing requests for landing gear and component overhauls. The construction started last fall and final touches were completed in March 2020 with the capacity to accept additional projects.

Mesa Air Group posts US$1.9 million profit

Mesa Air Group reported second quarter fiscal 2020 financial and operating results. Mesa’s second-quarter 2020 results reflect net income of US$1.9 million, compared to net income of US$13.2 million the previous year.  Mesa’s pre-tax income was US$3.2 million, compared to $17.3 million for the second-quarter 2019. 

In addition, Mesa’s Adjusted EBITDA for the second quarter was US$35.3 million, compared to US$53.7 million the previous year and Adjusted EBITDAR was US$47.6 million, compared to US$67.8 million in the second-quarter 2019.

The primary reason for the US$14.1 million reduction in pre-tax income from was the anticipated increase in airframe and engine heavy maintenance of US$10.1 million and US$4.0 million in reduced revenue in March as a result of COVID-19.

Mesa ended the quarter at US$52.4 million in unrestricted cash and equivalents compared to US$57.8 in the second-quarter 2019. During the quarter the company drew down the line of credit facility by US$23 million, paid US$11 million in deposits in connection with previously ordered engines, paid US$3 million in capital expenditures, paid US$8 million in property tax for prior periods and had US$6 million in cash lease payments in excess of book lease amounts.

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IBA highlights at risk aircraft types as COVID-19 drives oversupply, fleet reductions and value falls

IBA, the independent aviation consultant, has identified a number of aircraft types that are at greatest risk of being placed in storage, as the effects of Covid-19 drive aircraft oversupply and falls in fleet sizes, asset values and lease rates.

Using data from IBA.iQ, the platform for aviation intelligence, IBA’s analysts have calculated that approximately 3,400 narrowbody aircraft could be prematurely withdrawn from service over the next 20 months – a net reduction of 7.5% of the total narrowbody fleet. These withdrawals are driven by a blend of factors including airline failures, airline fleet restructurings driven by current market conditions, as well as scheduled lease ends.

The narrowbody types most at risk are A320ceo and Boeing 737NG aircraft over 16 years old. Narrowbody aircraft set for almost universal withdrawal from service include the Boeing 717, 737 Classic and 757, and the MD-80 and MD-90.

IBA also calculates that 1,850 widebody aircraft could be withdrawn from service – a net reduction of almost 30% of the total widebody fleet. The factors determining the most at risk aircraft include cost of operation as well as age. This leads IBA to forecast the possibility of an almost universal withdrawal of the A380 from service over the next two years if demand forecasts bear out, along with older twin and four engine aircraft including the Airbus A300, A310 and A340 and Boeing 747 and 767. IBA also forecasts that A330 and Boeing 777 aircraft over 13 years old could be surplus to requirements.

IBA forecasts that the market values of narrowbody aircraft types aged around three years could fall by between 6% and 12%, whilst the lease rates for those aircraft could drop by between 10% and 15%. The value of older narrowbody types of around aged 18 years could drop by between 16% and 29%, and the lease rates of types aged around 12 years could fall by between 16% and 18%.

The market values of young widebody aircraft aged around three years could drop by between 3% and 7%, and lease rates for aircraft of this type and age could fall by between 8% and 19%. Older widebody types aged around 12 years could drop in value by 11% to 25%, and their lease rates could fall between 13% and 17%.

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American Airlines expands cargo operations

American Airlines has expanded its cargo schedule in May to provide 140 weekly flights to 15 cities in Asia Pacific, Europe and the Caribbean, up from 80 flights last week.

New destinations include daily flights between Dallas-Fort Worth (DFW) and Hong Kong (HKG); and weekly flights from DFW and Beijing (PEK); DFW Chicago (ORD) and Paris (CDG); ORD and London Heathrow (LHR); Philadelphia (PHL) and Rome (FCO); PHL and San Juan (SJU), and PHL and Zurich (ZRH).

Embraer delivers five commercial and nine executive jets in first-quarter 2020

Embraer delivered a total of 14 jets in the first quarter of 2020, of which five were commercial aircraft and nine were executive jets (five light and four large). As of March 31, the firm order backlog totaled US$ 15.9 billion.

Historically, Embraer seasonally has fewer deliveries during the first quarter of the year, and in 2020 in particular, the commercial aircraft deliveries in the first quarter were also negatively impacted by the conclusion of the separation of Embraer's Commercial Aviation unit in January.

During the first quarter, Embraer Executive Jets announced that the new Phenom 300E was granted its Type Certificate by ANAC (National Civil Aviation Agency of Brazil), EASA (European Union Aviation Safety Agency) and the FAA (Federal Aviation Administration). The new Phenom 300E is the recently enhanced version of the Phenom 300 series, which was the most delivered business jet series in the 2010s.

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Finnair introduces new measures on board and the airport to protect health of customers

Air travel will gradually start to recover as travel restrictions are lifted. To make flying as safe as possible, Finnair is preparing for gradually growing passenger numbers with several new measures.

"Now that air travel gradually begins to recover and passenger numbers start to grow, we want everyone to be able to fly with confidence”, says Piia Karhu, SVP, Customer Experience at Finnair. “With these additional measures, we are supporting the health of our customers and employees at the airport and onboard.”

Finnair has already earlier this spring implemented several changes to protect the health of customers and employees. The service process and in-flight service have been amended, customers are seated as far away from each other onboard as possible, there are plastic shields at service points and aircraft cleaning has been further intensified. Customer service personnel follow a no-touch policy with customers’ travel documents and baggage.

The most visible change to customers now is the requirement to wear a mask for the entire duration of the flight. This measure is in effect from May 18 to at least until the end of August.

"Customers will board the flight with their own mask and wear it throughout the flight,” Piia Karhu tells. “Also, Finnair’s customer facing staff at the airport as well as the cabin crew will wear surgical masks. We decided to introduce this measure because the usage of masks is becoming more widespread and they protect passengers from possible droplet infections. When everyone wears a mask, we’re able to protect each other.”

"We recommend that customers acquire a mask that fits them already before their flight, pack as little as possible and check in online or with a mobile app – all of these reduce waiting times and contacts at the airport”, Piia Karhu continues. “I’m confident everyone also understands that they won’t be able to board a flight if there is the slightest suspicion of a Covid-19 infection or if they have respiratory symptoms.”

Finavia, the Finnish airport operator, has also introduced new measures at Finnish airports. Customer facing employees at the airports will wear surgical masks, floor stickers mark social distancing rules at airports, customer service points are equipped with plastic shields and hand sanitiser is available in various locations.

According to medical experts, an aircraft is not a particularly risky environment to get an infection due to the highly efficient air conditioning and filters that keep the air very clean.

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Brussels Airlines presents turnaround plan to pull out of crisis

The Brussels Airlines management has presented its turnaround plan to the social partners. With the plan, the Belgian airline wants to pull the company out of the crisis that severely hit the financials of Brussels Airlines. At the same time, the airline focuses on structural profitability in order to enable solid growth. The carrier therefore needs to reduce its overall costs, increase efficiency and productivity.

A sufficiently positive EBIT margin will allow the airline to secure its future, invest in its fleet and to further develop its hub at Brussels Airport. Furthermore, the Belgian home carrier will make sure
to continue playing a pivotal role for the Belgian economy and to remain one of the core airlines within the Lufthansa Group.

The main measures of the turnaround plan are: the review of the network by focusing on the market needs and by optimizing the route profitability, the adaptation of the fleet according to the network optimization: from 54 to 38 aircraft (-30%), and the reduction of the personnel costs by reducing the number of jobs by 25%.

Together with the social partners, the number of forced redundancies will be reduced to a maximum extent. The reduction of overhead, operational costs and the increase of operational efficiency, among others, by improving productivity and further standardizing the fleet and the simplification of the employee reward set-up, aiming at remaining an attractive employer while controlling the future cost evolution. Brussels Airlines’ intention is to investigate as many solutions as possible to limit the number of forced dismissals.

Sean Sullivan joins Vx Capital Partners as Chief Financial Officer

Vx Capital Partners (Vx) has announced the appointment of Sean Sullivan as its Chief Financial Officer. Sullivan, previously Head of Americas at AerCap, will oversee finance, accounting, and acquisitions. He will lead Vx’s efforts to raise private equity funds and expand its current focus on sale and leasebacks.

Sullivan previously held senior positions at International Lease Finance Corporation, Allco Finance Group, and Bank of America Leasing and Capital.

Founded by industry veterans in 2002, Vx’s approach to equipment leasing combines deep aviation experience with unique financial insight. Together with its partners, it has invested approximately US$1.5 billion in more than 150 commercial aircraft
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Tamar Jorssen
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