February 15th, 2018
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LATEST NEWS
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Investors will be keeping a keen eye on how airlines approach the dual problems of rising fuel costs and labor costs this year. Last December the International Air Transport Association (IATA) highlighted these two elements, which are airlines’ highest expenditures, as the major challenge for 2018.
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In 2016, labor costs accounted for 22% of airlines’ costs and fuel 21%. For 2018, predictions reveal an expected 30.9% cost for labor and 20.5% for fuel. With the fluctuating nature of fuel prices, back in 2013 those figures were 33% for fuel and 18% for labor.
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It should also be noted that labor costs are traditionally higher in Europe and North America than in Asia, for which fuel remains the higher cost.
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Exacerbating the current challenge of labor costs is a shortage of workers on a global scale, and in particular many airlines are struggling with a pilot shortage as they look to expand their fleets. According to IATA Chief Economist Brian Pearce, "As airlines have been making profit, the workforce has got market power, so that is pushing up the cost of labor."
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IATA has also forecast a hike in unit costs, measured as an airline’s cost to operate each kilometer and seat flown, from a rise of 1.7 percent in 2017 to 4.3 percent in 2018.
In the United States, investors are concerned that the three largest carriers – American, Delta and United – could well be heading for a price war just as higher costs from pay increases agreed last year start to take effect.
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Airlines must now look even more closely at those areas where potential savings can be made. According to aviation consultant John Strickland, "The most successful airline managements are the ones that have been very cost-focused every day - not just on staff costs but on aircraft costs, airport charges, distribution costs and so on."
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AerCap has posted fourth quarter 2017 net income of US$266.3m compared to US$364.7m for the same period in 2016. The decrease in net income was primarily due to the fact that during the fourth quarter of 2016, AerCap recognized income from lease terminations and a gain related to the repayment of a note receivable earlier than expected. Full year 2017 net income was US$1,076.2m compared to US$1,046.6m for 2016.
AerCap executed 402 aircraft transactions in 2017, including 119 widebody transactions and ordered 30 Boeing 787 aircraft and 50 Airbus A320neo Family aircraft. AerCap's Board of Directors approved a new share repurchase program authorizing total repurchases of up to US$200m of AerCap ordinary shares through June 30, 2018.
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Vincent Mascré has been appointed Chairman of the Executive Board of Zodiac Aerospace, and Chief Executive Officer of the company's Seats business. Following this appointment, Jean-Paul Alary replaces him as CEO of Safran Landing Systems, and Cédric Goubet will succeed Jean-Paul Alary as CEO of Safran Nacelles.
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Delta Cargo is introducing Equation Critical, a new service for international shipments. This premium GPS-enabled service for the transportation of highly time-sensitive shipments that must travel on the next available flight, offers GPS tracking on deltacargo.com and moves with the highest priority across Delta's global network. Customers will know where their shipment is, anywhere in the world, in real time.
In distinctive pink packaging, the airline's Critical service does not require pre-booking and can be tendered up to 90 minutes before a flight. This service caters to customers who are shipping time-sensitive items, such as legal documents, essential machinery parts and aircraft on the ground (AOG) components. Critical shipments come with a service-level guarantee and Delta's Cargo Control Center proactively monitors Critical shipments throughout the journey.
Initially, Delta's Equation Critical service will launch for international shipments originating in Atlanta, Savannah and London, destined for Bogota, Colombia; Johannesburg, South Africa; Quito, Ecuador; and Seoul-Incheon, South Korea. Atlanta, Savannah and London will also accept import shipments. These routes allow fully GPS-enabled shipments. Equation Critical will be progressively rolled out in other international markets across Delta's extensive network, subject to customer demand and regulatory approvals.
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Lease Corporation International (LCI), a leading helicopter lessor and aviation division of the Libra Group, has closed its inaugural capital markets term loan financing, with a value in excess of US$55m.
The private, senior secured tranches have a maturity of five years, and were offered to a range of US financial institutions. CIT Group and Prudential Capital Group, the private capital investment arm of PGIM, the US$1 trillion global investment management businesses of Prudential Financial, jointly funded the financing.
LCI is using the proceeds from the financing to fund the continuing expansion of its fleet with the acquisition of six new Leonardo AW139 and AW169 helicopters. All of the aircraft have confirmed placements with lessees in Emergency Medical Services (EMS) and Search and Rescue (SAR) roles.
LCI’s fleet, which comprises approximately US$750 million of assets in service and on order, is focused on the latest technology medium and super medium helicopters manufactured by the leading helicopter OEMs including Leonardo, Airbus and Sikorsky.
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Norwegian is continuing its global expansion by launching the UK’s first low fare route to South America, with a non-stop service from London Gatwick to Buenos Aires. The new year-round service of four weekly flights from London Gatwick to Buenos Aires Ezeiza International Airport will offer passengers more choice and low fares.
Gatwick Airport CEO Stewart Wingate said: “The launch of Norwegian’s first ever South American route is another exciting landmark in Gatwick’s ongoing mission to connect the UK to more and more long-haul destinations. The airport now offers 63 long-haul connections – with many, including Buenos Aires, operated by low-cost carriers – making Gatwick the busiest departure airport for low-cost long-haul services in the world.
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Oriens Aviation, the British Isles sales distributor for the PC-12 added to Pilatus Aircraft’s excellent year in 2017, bringing five new aircraft into service with new customers; selling its original demonstrator (G-RABB) and securing its first new-build delivery position for 2018.
Oriens delivered an aircraft to a private owner in Oxford in March; one to Leeds-based entrepreneur Neil Armstrong in June and a third to Chris Makin, owner of newly named Leeds East Airport, in December. Ravenair is this aircraft’s operator and management company, operating under EASA PART-NCO Lease Operations.
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Airbus has appointed Bruno Even Chief Executive Officer (CEO) of Airbus Helicopters, effective April 1, 2018. He will report to Airbus CEO Tom Enders and join the company’s Executive Committee. Bruno Even comes to Airbus from Safran where he was CEO of the Helicopter Engines business since 2015. He succeeds Guillaume Faury who will assume his duties as President Airbus Commercial Aircraft next week.
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AAR, one of the leading provider of aviation services to commercial airlines and governments, was awarded a seven-year, firm-fixed price, indefinite-delivery/indefinite-quantity contract by the Naval Air Systems Command (NAVAIR) for depot airframe maintenance and depot field team support of the P-8A fleet for the Navy, government of Australia and foreign military sales (FMS) customers.
Airframe services to be provided by AAR and Boeing include scheduled and unscheduled maintenance, in-service repair, technical directive incorporation, airframe modifications and AOG support. AAR’s work on the P-8A airframe will be performed at AAR’s Maintenance, Repair and Overhaul (MRO) facilities in Indianapolis, Oklahoma City and Miami, which are part of its airframe MRO network, which is the largest in the Americas.
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Air Lease Corporation has signed a long term lease agreement for one Airbus A320-200neo with Atlantic Airways, the national airline of the Faroe Islands. The aircraft will deliver in March 2019 from ALC’s order book with Airbus.
“We are very pleased to announce this new lease placement with Atlantic Airways, a new customer for ALC,” said Steven F. Udvar-Házy, Executive Chairman of Air Lease Corporation. “Atlantic Airways connects the Faroe Islands in the North Atlantic with multiple destinations in Scandinavia and a growing route network in Europe. The A320neo will help add capacity and efficiency to Atlantic’s all-Airbus fleet.”
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IFS, the global enterprise applications company, has reported that Air Transport Services Group (ATSG), a provider of medium wide-body aircraft leasing, air cargo transportation and related services, has selected IFS Maintenix to deliver comprehensive fleet maintenance management across its two cargo airline subsidiaries - ABX Air and Air Transport International - and its aircraft leasing subsidiary, Cargo Aircraft Management.
As one of the largest owner and operator of converted Boeing 767 freighter aircraft, ATSG has experienced strong growth in recent years. To meet evolving operational demands, ATSG's airline subsidiaries - ABX Air and Air Transport International (ATI) - and its aircraft leasing subsidiary - Cargo Aircraft Management (CAM) - sought a modern, scalable software solution that could drive greater standardisation and maintenance management process efficiencies.
Following a market review, ATSG’s subsidiaries selected IFS Maintenix to deliver a full suite of engineering, planning and line maintenance functionality, helping ATSG optimise the maintenance management for its combined fleet.
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