AFM73 Airline Fleet Management

Issue 73 www.ubmaviationnews.com

The business andfinancing ofairline operations

May-June 2011

FINANCING THE 777:DVB DISCUSSES THEFAMILY’S MERITS

PLUS:

n REGIONAL FOCUS: WE INVESTIGATE REGIONALAIRLINES, AIRPORTS AND ROUTE DEVELOPMENT

n AIRLINE ALLIANCES: CAN AIRLINES GO IT ALONE?

n EUROPEAN MRO FORECAST

n CHOOSING THE RIGHT TIME FOR PASSENGER-TO-FREIGHTER CONVERSIONS

KEEPING YOU IN THE AIR

www.elfc.com

Engine LeasingAsset Management

All Manufacturer Types Long, Medium & Short Term

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May-June 2011 • Issue 73

The business andfinancing of airline operations

34 Airlines: Mastering on-line sales Often the internet is the only means by whichthe customer communicates with an airlinebefore their flight. As such, airlines mustoptimise their on-line services to meetpassenger expectations and increase revenue.Fortunately, these are not mutually exclusiveconcepts but airlines must become more thanjust flight operators; they must embrace andunderstand the e-commerce model. RaphaelBejar, CEO of Airsavings discusses a strategy.

TRADING, LEGAL AND FINANCE:36 Financing the 777 familyFew large aircraft programmes have enjoyedthe fairytale success of the 777. Over time,various airlines commented that the 747 was“too big” or that the 767-300ER was “toosmall”. So in the late 1980s, the industrywelcomed the prospect of a new aircraft typethat was – in true Goldilocks tradition – ‘justright’. Simon Finn, SVP, aviation finance at DVBBank gives his detailed financial analysis ofthe aircraft type.

44 Deals News Catch up on the last month of aircraft deals.

AIRPORTS AND ROUTES:47 Regional airport success storiesAirports have been blighted by natural hazardsand economic crises and just a few of Europe’sregional airports have managed to consistentlyincrease traffic through these hard times.Looking ahead, they are further threatened bynational passenger taxes however, someregional airports are managing to hold tight.Bernard Fitzsimons reports on the market.

50 Going local: Regional routedevelopmentRegional travel is a major part of Europe’saviation sector. About 80 per cent ofscheduled intra-European air passengers startor end their flight at a regional airport. Ofthese, more than one-third fly between tworegional points. Jonathan Naylor, director atthe aviation consultancy, AviaSolutions,discusses the market.

MAINTENANCE OPERATIONS:52 European MRO forecastEuropean airlines will spend $14bn on MRO thisyear. But what types of work are they spendingthe money on and how will the balance ofexpenditure change over the next 10 years?Bernard Fitzsimons answers these questions.

INDUSTRY DATA58 Data including transactions andmarket, list and lease rates

C O N T E N T S

EDITORMary-Anne Baldwin: [email protected]: +44 (0) 207 579 4843

JOURNALISTAlex Derber: [email protected]

CONTRIBUTORSChris Kjelgaard, Bernard Fitzsimons, Simon Finn, Raphael Bejarand Jonathan Naylor.

DESIGN & PRODUCTIONKalven Davis: [email protected]:+44 (0) 207 579 4851

DISPLAY ADVERTISINGSimon Barker: [email protected] Samuel: [email protected]: +44 (0) 207 579 4845/46

GROUP PUBLISHER & SALESAnthony Smith: [email protected]:+44 (0) 207 579 4875

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NEWS ROUND-UP2 The latest on deals, mergersappointments and more

FOCUS:12 Regional airline report: Europeand the USEurope’s short-haul, low-cost carriers were adirect offshoot from similar airlines in theUS, but regional operators on either side ofthe Atlantic share few comparisons. Regionalflying developed radically differently due tosizeable differences in industry structure,regulation and market environment, andthis has had a direct impact on present-dayfortunes, as Alex Derber reports.

FLEET OPERATIONS:16 Engine leasing updateThe niche business of engine leasing used tobe somewhat counter-cyclical, as lessorsexploited hard times to buy assets and drivesale and leaseback deals. However, moreleasing companies have entered the marketand many airlines were either unwilling orunable to offload spare engines in the recentrecession. Alex Derber looks at theconsequences.

22 Airline alliances: Can airlinesgo it alone? New codeshare agreements are introducedalmost daily and they have become part ofthe fabric of international airline operations.Yet, with so many airlines entering this typeof agreement, the flaws are becomingevermore apparent. Mary-Anne Baldwinexamines the pros and pitfalls of theseincreasingly popular collaborations.

28 Cargo conversion: Choosing theright time For owners of commercial jets, deciding toconvert passenger aircraft to freighters is animportant economic move that involvesseveral key variables. These can make a ‘yes’decision compelling – or ‘no’ the onlysensible option. Chris Kjelgaard reports.

AFM73 TOC _TOC 19/05/2011 11:46 Page 2

2 | AFM • ISSUE 73 May-June 2011

NEWS ROUND-UP The latest on deals, mergers, appointments and more

Embraer’s 1Q profitmounts on tax rebateEmbraer’s 1Q profit has more thantripled, to $110m, because of a taxrebate. The $2.64m repayment com-pensated for sales, which fell 1.5 percent to $1.1bn. The company delivered20 commercial jets in the 1Q and has atotal firm order backlog of 987 aircraft,up $400m to $16bn. Revenue for thethree-month period rose to $1.1bn.

Republic posts 1QimprovementRepublic Holdings, America’s secondlargest regional airline group, has reporteda 23 per cent rise in 1Q fixed-fee profit,despite flat revenues and a rise in costs.The group, through its four regionalairlines, serves Delta, Continental, United,American Airlines, US Airways andMidwest – from whom it received $251min 1Q 2010 and $258m in 1Q 2011. Thegroup’s mainline branded service, FrontierAirlines, raised revenues and narrowed itspre-tax loss to $55m from $70m the yearbefore. Net loss for the Republic groupwas $22m, down from $37m.

ATSG obtains $325mcredit facilityAir Transport Services Group (ATSG)has obtained a commitment for a newfive-year secured $325m credit facilitywith a consortium of banks led bySunTrust. It will replace the currentfacility, also led by SunTrust, which isscheduled to expire at the end of2012. The new facility will include aterm loan of $150m and a $175mrevolver with an accordion for up toan additional $50m. It will initially bepriced at the 90-day LIBOR rate plustwo percentage points, 25 basis pointslower than the comparable rate underthe current agreement.

Air Lease sells 34.8million sharesThe underwriters for Air Lease Corp-oration’s (ALC) initial public offering (IPO)have exercised in full their over-allot-ment option to purchase an additional4,542,450 shares of the company’s classA common stock. The company soldapproximately 34.8 million shares of itsclass A common stock, raising approx-imately $868m in net proceeds. ALC’sstock closed at $27.95 a share on the NewYork Stock Exchange on April 19, up 5.5per cent from its IPO price of $26.50. JPMorgan Securities, Credit Suisse Securities(USA), Barclays Capital, FBR CapitalMarkets, RBC Capital Markets, and WellsFargo Securities acted as joint book-running managers for the offering, withMacquarie Capital (USA), Scotia Capital(USA), and SG Americas Securities actingas co-managers.

NEWSHIGHLIGHTS

Pratt & Whitney’s (P&W) PW1100G geared turbofan(GTF) will hold an advantage over CFM’s LEAP-X asthe engine of choice on the A320neo if it can executewell with a clearer path to further improvements,according to the latest report from BernsteinResearch. The analysts are backing P&W’s enginebecause the technology appears more mature at thisstage, and the report states that “should Pratt succeedwith the geared turbofan, there is the potential forthe geared engine architecture to play a major rolein multiple future engines over the long term”. Afurther advantage for the GTF is that it has a clearupgrade path, by means of higher gear ratios,temperatures and pressures; no such path is presenton the Leap-X, of which its aim is to maximiseperformance from conventional architecture.

Bernstein notes that the biggest barrier for the GTFis not its unconventional architecture but customers’memories of the troubled PW6000 programme andthus the manufacturer’s ability to deliver. Mean-while, its main concern about the Leap-X is that“greater cooling requirements will reduce fuel burnperformance and higher temperatures will reduceblade life on the early engines”.

It says CFM must therefore convince customersthat reliability will be better than the GTF eventhrough the Leap-X has more stages and con-sequently, more moving parts.

CFM can however point to a recent history ofreliability, service and support, and will be able toadvertise the Leap-X as the safe, trustworthy option.

The GTF has been selected by Airbus as the leadengine for the neo and has so far won all threecustomer selections: ILFC, IndiGo, and Lufthansa. ButBernstein sees the coming decisions by all-CFMairlines Virgin America and AirAsia as moreimportant indicators. Although the CFM56-5 has anapproximate 50 per cent share on the A320 – creatingan obvious customer base – Bernstein expects some

Which neo engine will win?

customers to switch manufacturers, and says VirginAmerica is seriously evaluating the GTF. “If it goeswith Pratt, it will be an indicator that CFM has adifficult challenge unless Pratt fails to perform,”concludes the report.Bernstein also said that aggressive competition isleading to prices that are essentially in line with thatof current engines on the A320. The report warnsthat both manufacturers will face risks with theirguarantees that reliability of their respective engineswill exceed the performance of the existing CFM56-5 and V2500, particularly early in life.

Republic can partyWith Europe’s regional airlines scrapping for every sliver of growth, how the industry must envy America’s capacity purchase system, whichguarantees short-hop carriers fixed revenues overlong periods and even reimburses their fuelexpenses.Republic Holdings, America’s second largest regionalairline group, has reported a 23 per cent rise in 1Qfixed-fee profit, despite flat revenues and a rise incosts. The group, through its four regional airlines,serves Delta, Continental, United, American Airlines,US Airways and Midwest – from whom it received$251m in 1Q 2010 and $258m in 1Q 2011.

But while it is hard to compare Europe with theUS due to fixed fees, there may still be lessons todraw from American carriers. One would expect loadfactors in the US to trail Europe, where loads areincentivised as they directly link to profits. In fact,average seat occupancy across US regionals, at 75 percent, is some 10 points higher than in Europe.

Divergent passenger demand will account for part ofthat, of course, but might the much-derided 50-seatjet also have something to do with it? Averageregional aircraft capacity in Europe is now above 70seats, whereas in the US it is 55, with BombardierCRJ100/200s accounting for almost a third of theentire fleet, despite their poor fuel economics.

It is often thought that US carriers have stuck with50-seat jets due to the reticence of Americans to flyon propeller aircraft and their own lethargicapproach to upgrading equipment. However,European regionals have rarely, if ever, posted acombined load factor of 70 per cent – a benchmarkreached in the US as early as 2005. It is arguable,therefore, that 50 seats are more suited to regionaloperations than 70, 80 or 90. Conversely, Europeanairlines would argue that without cosy capacitypurchase contracts they could never afford thedismal CASMs of antiquated CRJs. Differences ingeography, airport congestion and alternative formstransport also radically alter the competitivelandscape in Europe.

AFM73 News_AFM News 18/05/2011 09:23 Page 2

May-June 2011 AFM • ISSUE 73 | 3

The latest on deals, mergers, appointments and more NEWS ROUND-UP

NEWSHIGHLIGHTS

Air France A380 clips jetduring taxiing An Air France A380 clipped anothercommercial passenger jet at New JFKInternational Airport on April 11. TheA380’s wingtip scored the tail of aComair CRJ 700 regional jet duringtaxiing, spinning the smaller aircraft90 degrees on its wheels. The fulldamage is unknown, but no pass-engers were hurt.

US and EU launch sharedaviation safety act A pact to improve safety in the US andEuropean Union (EU) has come into effect.The Co-operation in the Regulation of CivilAviation Safety, which was written to helpbolster the aeronautical industry, will limittechnical and administrative procedures forcertificates and approvals. Furthermore,says the European Commission, the pact,which was three years in the waiting,provides a framework for the “continuous,transparent and timely exchange… ofinformation affecting all areas of aviationsafety law and policy”.

Traffic demand in Marchtakes a tumblePassenger demand slipped two percent during March, according to theInternational Air Transport Associ-ation (IATA). The figures, based onscheduled international traffic, show-ed growth had slowed from 5.8 percent in February 2010, to 3.8 per centin March 2011. Traffic in March fell oneper cent due to the earthquake andtsunami in Japan. Regionally, Asia-Pacific carriers saw a traffic loss ofover two per cent. Additionally,political unrest in the Middle East andNorth Africa (MENA) saw inter-national travel fall 0.9 percentagepoints with Egypt and Tunisiaexperiencing traffic 10 to 25 per centbelow the average for March.However, freight fared better; growthin this market rose to 3.7 per cent inMarch from the 1.8 per cent recordedin February.

The South African Civil Aviation Authority (SACAA)has denied colluding with South African Airways(SAA) for its ultra-long flights to the US. The airlinewas granted an exemption to operate its lengthyflight to New York, moving its staff and membersof the South African Transport Workers’ Union(SATWU) to raise allegations of corruption.

Both parties have denied any conspiracy, theSACAA said in a statement: “These entities [SACAAand SAA] operate independent from one another,with different mandates”. The ultra-long flight from

EU blacklist African andAsian airlinesThe European Commission’s latest update to itsblacklist of airlines banned from flying into Europemakes grim reading for certain countries harbouringbig ambitions for aviation. The usual crowd of Africanand ex-Soviet safety vacuums pop-up again (plus somenew ones like Mozambique), but many airlines fromthe Philippines and Indonesia – including major low-cost players like Cebu Pacific and Lion Air – remainstubbornly on the list.

The Philippines has just announced a majorliberalisation of its airspace, but perhaps more foreignairlines need to be let in when even its flag carrier,Philippine Airlines, is adjudged too perilous to enter

Johannesburg to New York, which started operatingon May 1, 2011, exceeded the length in which a flightis deemed safe – the ‘flight and duty period’ – so anexemption was required. SAA had applied for thisexemption on April 12, 2011, which was laterapproved on condition that suitable safety trainingand flight rostering was arranged, however theSATWU claim the latter was not given, putting crew and passengers at risk. The new non-stop flight shows “a flagrant disregard” for safety, thespokesman for SATWU, Zenzo Mahlangu, said.

EU airspace. The head of the country’s Civil AviationAuthority (CAA) resigned in late 2010 after less thana year in office following a bout of fruitlessrecrimination between the regulator and govern-ment over safety failings, but at least rising star CebuPacific, subject of the world’s largest budget airlineinitial public offering (IPO), hopes to exit the blacklistin June 2011.

There was also a measure of good news forIndonesia, which knocked cargo carriers Cardig Air,Republic Express, Asia Link and Air Maleo intosufficient shape to satisfy EU assessors. Its nationalcarrier, Garuda, also remains off the list, but Indonesia– as a touted BRIC member and one of the world’sfastest-growing economies – must do something torehabilitate the 30-plus airlines.

ICAO to implement newrules on black box recoveryFollowing the retrieval of the black box from the AirFrance A330 which crashed in the Atlantic Ocean in2009, the International Civil Aviation Organisation(ICAO) is hoping to fast-track new rules to make iteasier to find flight-data and cockpit-voice recordersin the aftermath of accidents.

The organisation wants to make the radio beaconsof flight recorders last three times longer than thecurrent 30 days, while also emitting more powerfulsignals. Under the proposals, the signals could beheard up to nine km away – in contrast to today’stwo km. In addition, the recorders would also be ableto float in case of an aircraft crashing into water, ashappened with the Air France A330.

ICAO secretary general, Raymond Benjamin, saysthe new regulations should come into force within18 to 24 months. They will be applied to both existingand new-build aircraft, placing an additional costburden on both airlines and manufacturers. Lookingfurther ahead, ICAO is also examining the possibility

SAA flight crew claim corruption over ultra-long flight

of aircraft permanently transmitting data on theirpositions by satellite, so that contact with the groundis never lost.

French investigation agency Bureau d’Enquetes etd’Analyses will examine the devices in the hope ofdetermining the cause of the accident.

Chinese carriers pen ordersfor 20 Embraer aircraftEmbraer has announced two orders for 20 aircraft,both of which are with Chinese companies. China’sHebei Airlines has ordered 10 E190s for expansion ofits services. Part of Hebei Aviation Investment Group,a state-owned company, the airline currently

operates six aircraft, including two ERJ 145s. Theother order came from China Southern Airlinesthrough CDB Leasing. The deal follows an order foranother 10 E190s earlier this year. A letter of intentwas also signed for a third group of 10 E190s, whichwould bring the total order to 30 aircraft, worth$1.25bn at list prices. All 30 aircraft are intended forChina Southern Airlines.




Strike savages Air IndiaA strike by roughly 800 ex-Indian Airlinespilots at Air India reached its tenth andfinal day on May 6, forcing India’s nationalcarrier to cancel up to 90 per cent ofdomestic flights. Delhi’s High Court hasstrongly criticised both pilots unions andairline management, which has beenaccused of making insufficient efforts toend the strike. However, the airline stillpromised to withhold April salaries fromstriking pilots. Pilots from former carrierIndian Airlines, which merged with AirIndia in 2007, are demanding equal payand conditions to flight crew at the airlinethey joined, as well as the reinstatementof sacked colleagues.

JetBlue and Icelandairform interline dealJetBlue Airways and Icelandair haveannounced a new interline partner-ship that will open travel betweenJetBlue’s destinations in the US andCaribbean, and Icelandair’s flightsthroughout Scandinavia, the UK, andContinental Europe. “Our harmoniousnetworks from New York, Boston andWashington, DC and like-mindedcustomer service make this a natural partnership,” said Helgi MarBjorgvinsson, Icelandair’s SVP of salesand marketing. “Teaming up withIcelandair is a great win for custo-mers,” commented JetBlue’s directorof airline partnerships, Scott Resnick.

Clark concerned about fuelThe president of Emirates Airline, TimClark, has predicted that soaring fuelprices will bring not just aviation but thewider economy to its knees. “I do notbelieve that the global economy will beable to sustain that kind of price for toolong,” he said. Speaking to reporters inDubai ahead of Emirates’ financial results,Clark said that fuel now accounts for 43per cent of the airline’s costs, as opposedto 12 per cent a decade ago. Clark addedthat there was a limit to how muchairlines could raise prices in response torising costs before they started drivingcustomers away.

NEWSHIGHLIGHTSSouthwest completesAirTran buyoutSouthwest Airlines has acquired AirTran Airwayshaving bought all outstanding shares, each worth an average $7.57, or $1bn in aggregate. The totaltransaction was valued at $3.2bn, including out-standing convertible notes and capitalised aircraftoperating leases. The acquisition allows Southwest toextend its network into key markets such as Atlantaand Washington, DC, via Ronald Reagan NationalAirport. Other opportunities include expanding

services at New York La Guardia, Boston Logan,Milwaukee, and Baltimore/Washington, andadditional routes to smaller domestic cities, GaryKelly, CEO, chairman, and president of SouthwestAirlines said. AirTran’s revenues and income for the12 months ending December 31, 2010 were $2.6bnand $128m, respectively. This compares withSouthwest’s $12.1bn and $988m. Net annual synergiesare estimated to top $400m by 2013; additional coststo merge the two companies are expected to reach$500m.

LAM retains Europe link despite blacklistingDespite a blanket European ban on all Mozambican airlines, announced on April 20, publicly-owned flag-carrier Mozambique Airlines (LAM) will continue flying from Maputo to Lisbon, Portugal. LAM is able to doso because it offers that service via a wet lease of a 767-300 operated by EuroAtlantic Airways, a Portuguesecompany not subject to any ban. The European Commission reported a “verified evidence of lack of abilityof the authority responsible for the safety oversight of air carriers certified in Mozambique to implementand enforce the relevant safety standards”. Mozambique first looked likely to enter the EU blacklist after anaudit in January 2010 found that the country failed to properly meet 77 per cent of International Civil AviationOrganisation (ICAO) safety standards.

Krakowski takes the rap forATC incidentsHank Krakowski, head of the US Air TrafficOrganisation, has resigned from his role following aspate of air traffic controllers (ATC) falling asleep onthe job. Four controllers have dozed at work in asmany weeks.

On April 13, a controller at Reno-Tahoe Inter-national Airport, Nevada, was out of radio contactwhile a medical flight carrying a patient was forcedto land unaided. On Monday April 11, a controller atBoeing Field, King County International Airport,Seattle, was found asleep – much like a fellowcontroller at Tennessee airport in February. Prior tothis was the near miss of a passenger jet and twomilitary aircraft in January, close to New York.

In a public statement Randy Babbitt, administrator forthe Federal Aviation Administration (FAA), whichgoverns the Air Traffic Organisation (ATO), describedKrakowski as “dedicated” and “professional,” howeverBabbitt accepted his resignation without protest. “Iam committed to maintaining the highest level ofpublic confidence and that begins with strongleadership,” Babbitt asserted. David Grizzle, FAA’schief counsel, will assume the role of acting ATO chiefoperating officer for the interim period.

It is believed that all US ATC towers withoutterminal radar approach control (TRACON) will beappointed two members of staff, and those that dowill have staff relocated so two controllers are in thetower cabin at all times. Babbitt also announced a full-scale investigation into some 15,000 air traffic con-trollers, including their training and work practices.



The latest on deals, mergers, appointments and more NEWS ROUND-UP

NEWSHIGHLIGHTS EU retains liquids banA long-awaited relaxation of the five-year ban on carrying liquids aboardaircraft in the European Union (EU)was called off at the last moment. The EU had hoped to allow passengerstravelling from non-EU states intoEurope to bring duty free liquids onboard. However, after some Europeanstates, citing security concerns, saidthat they would continue to enforceto old restrictions, European legis-lators backtracked in order to avoidconfusion. “The restrictions on carry-ing duty-free liquids purchasedoutside the EU through Europeanairports should remain in place untilpassengers can travel with certainty,”said EU Transport Commissioner SiimKallas. He advised EU states to deferany changes “for a limited period”.

PAL seeks loan for fleetrenewal Philippine Airlines (PAL) hopes to raise$200m this year to fund its fleet renewalprogramme, the Manila Bulletin reported.The airline plans to borrow the moneyunder a syndicated loan to pay for aircraftpurchases through to 2013. PAL, thePhilippines’ flag carrier, has a fleet of 36aircraft and posted a 3Q 2010 income of$15.1m, up from the previous year’s loss.

Thai A380 seatingannouncedThai Airways has revealed a high-density, 507-seat configuration for itsA380s. Korean Air, which has announ-ced the lowest-density arrangementso far, will fit only 407 seats in itsA380s. Thai’s superjumbos will feature435 economy seats on the lower deck,while the all-premium upper deck willhave 60 business- and 12 first-classpositions.

BA and Iberia to mergecargo operationsBritish Airways and Iberia will unite their cargo divisions following the mergerof their passenger operations to formInternational Airlines Group (IAG). Head-ing the business will be Steve Gunning as managing director and Ignacio DíezBarturen as deputy managing director,previously managing directors of BAWorld Cargo and Iberia Cargorespectively. The new entity will be one of the 10 largest air cargo car-riers worldwide. “Both British Airways’and Iberia’s cargo operations are highlysuccessful in their own right which is why it’s important that they keep theircurrent brands. However, by creating asingle business unit, our customers willbenefit from an integrated range ofproducts and access to a wider network,”Gunning commented.

REDjet redemption?After several delays, the first Caribbean budgetairline, REDjet, took to the skies but not withoutmishap. Founded in 2006, REDjet launched May 8 ,2011, however flights to Barbados and Jamaica werepostponed between May 11 to 24 due to lack ofregulatory approval. The airline’s website states thatits “expert management” will bring the socialbenefits of low-cost travel to the Caribbean. But whoare these “experts” and is the region suited toRyanair-style operations?

REDjet was founded by Irish father-son team, Ianand Robbie Burns, both of whom appear new toaviation. Ian, the airline’s CEO, was an accountantand partner at Robson Rhodes until he resigned in2007, the year in which the loss-making firm wastaken over by a rival amid allegations of improperauditing at software group iSoft in three consecutiveyears. His son, Robbie, appears to have held only onerole since graduating in business studies – workingfor mobile phone network Digicel. Dermot Ryan, the

CFO, is another accountant with no stated aviationexperience. COO, Kevin Dudley, however, has workedas an engineer at a number of airlines.

Like its management set-up, REDjet’s operatingstrategy is also somewhat curious. The airline hasbought two ex-American Airlines MD-82s, but, ratherthan follow the established low-cost convention ofmaxing out each aircraft’s 172-seat capacity, REDjethas fitted only 149 seats “to lower the weight,operational costs and crew required”. Now, it couldbe that Caribbean passenger traffic is too low tojustify more seats, but it still seems a strange decisiongiven that fuel costs are spiralling and the airline isoperating 24-year-old aircraft.

Unsurprisingly, established Caribbean operatorLIAT, which operates 15 Q300 turboprops, has voicedscepticism about the new airline, saying its businessmodel is ill-suited to the region. It is unfair to judgeREDjet just yet but, for students of low-cost carrierdevelopment around the world, the omens are not promising.

TAP Cargo notes Brazil’s growth potentialTAP Cargo has predicted 18 per cent growth in Brazil. TAP is the largest Portuguese exporter and plays a keyrole in business between Portugal and Brazil. From June it will operate 74 weekly services to 10 Braziliancities. “In 2010, we reached a perfect operational balance: we transported 17,000 tonnes from Portugal to Braziland then 17,000 from Brazil to Portugal,” said Pedro Mendes, TAP Cargo’s director in Brazil.

European Commission torewrite legislation onpassenger rights duringairspace closureThe European Commission is to rewrite regulationscovering airspace closures under ‘extraordinarycircumstances’, such as the eruption of Icelandicvolcano Eyjafjallajokull. Existing Air Passenger Rightslegislation cost airlines $3.5bn during the volcanic ash cloud crisis. It is likely the commission willredistribute responsibility for future natural disasters,suggesting governments cover a portion of costs and that airports pay compensation in the event offailing to deal proficiently with closures, such asthose during heavy snow. Siim Kallas, VP of thecommission, will consult industry and consumersthis year before new legislation is introduced.




NEWSHIGHLIGHTS

Superjet arrives for serviceArmenian flag carrier Armavia receivedthe first commercial Sukhoi Superjet 100on April 19. The aircraft, one of two onorder with the airline, was named YuriGagarin and replaces Armavia’s Tu-134s.Meanwhile, Aeroflot is pressing for finesagainst Sukhoi due to delays that haveseen its Superjet deliveries slip from 2010to this year.

AVIC to invest $1.5bn intoengine productionThe Aviation Industry Corporation of China (AVIC) is to invest CNY10bn($1.5bn) into the development ofaircraft engines, the company’s generalmanager Lin Zuoming, told regionalmedia. “To make China a major playerin the world aviation industry, theAviation Industry Corporation of China has placed aircraft engine dev-elopment as a top priority,” he said.The Commercial Aircraft Corporationof China (COMAC) will use CFMengines to power its C919 passengeraircraft, though a Chinese engine is setto be ready by 2020, China NewsService reported COMAC’s generalmanager, Wang Zhilin, as saying.

Lufthansa caterer LSGrestructuresAirline caterer LSG Sky Chefs is to be split into a management company and 12 individual operating companies, undera limited liability structure. “This re-alignment in the German market willstrengthen the entrepreneurial scope ofthe individual locations, and offer animproved perspective for all parties in-volved,” said Walter Gehl, CEO of LSG.Labour contracts will be unaffected by the changes.

Faulty landing gear forces Air France A330 turn-aroundAn Air France A330-200 (registration F-GZCB) was forced to make an emergency landing three hours aftertake-off as its landing gear would not fully retract on April 13. Flight AF-471 from Caracas, Venezuela to ParisCharles de Gaulle, France, landed at Simon Bolivar International Airport. Staff detected the fault 25 minutesafter take-off and pilots spent the remaining time circling the airport to burn fuel.

Airbus moves to advanceA320neo Airbus is to bring forward the entry into service (EIS)of the A320neo by six months and could make a fullproduction transition to the upgraded aircraft by 2018.The neo will now be available in October 2015, withAirbus claiming a “spectacular market reception”. It said it had received more than 300 commitmentssince launching the neo on December 1.

Production schedules have been revamped to allowthis change, and the manufacturer says that withsufficient demand the full production transition willbe made in 2018. This ramp-up could be achieved in

less than 30 months, according to Tom Williams, EVPprogrammes. John Leahy, COO customers, does notnecessarily expect this change to occur so soon as hepredicts the last regular A320 will be sold around 2020-22; however, he says Airbus is prepared for alleventualities.

Market forces are already taking hold, as Airbusstatistics show that 43 A320 orders were cancelledin February and March. Kuwait’s Jazeera Airwayscancelled orders for 25 A320s last month, followingDAE Capital’s cancellations for 18 A320s and 12 A350-900s in February. The cancelled A320s were wortharound $3.7bn at list prices.

Kenya agrees settlementwith Boeing on delayed 787Kenya Airways has reached a settlement agreementwith Boeing on the delayed delivery of nine 787-8Dreamliners. Kenya signed a purchase agreement in2006 for the aircraft, also taking options for fouradditional 787-8s. First deliveries were expected inOctober 2010 but have been delayed until 4Q 2013.Titus Naikuni, CEO of the airline, said: “We can onlyachieve our expansion strategy with the rightequipment and we are particularly pleased withBoeing that, despite the delay experienced on the 787programme, they have committed to the timelinesthat we have now signed on.” The 787-8 will replaceageing 767 aircraft as well as open new long-rangeroutes for Kenya.

Barbados’ safety ratingdrops to Category 2Barbados’ safety standards have been downgradedto Category 2 status following its failure to meetmeasures set by the International Civil AviationOrganisation (ICAO). With the demotion, Barbados’carriers cannot establish services in the US unlessthey already fly there. Detailed reasons for thejudgments have not been given publicly. The FederalAviation Administration (FAA) simply stated: “ACategory 2 rating means a country either lacks lawsor regulations… or that its civil aviation authority…is deficient in one or more areas, such as technicalexpertise, trained personnel, record keeping orinspection procedures.”

February fuel costs rise to $2.77 per gallon The cost of aviation fuel to US airlines rose to $2.77 per gallon in February, according to the Bureau ofTransportation Statistics (BTS), part of the US Department of Transportation. This compares with a cost of $2.62in January and $2.15 in February 2010. According to the bureau, US airlines spent $2.2bn to fuel scheduledflights in February 2011 and $39.4m on non-scheduled flights.


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Bob Jordan to head AirTran afterSouthwest takeover Southwest’s EVP ofstrategy and planning,Bob Jordan, will serve aspresident of AirTranfollowing Southwest’sacquisition of the com-pany, completed on May2. Bob Fornaro, formerchairman, president, and CEO of AirTran, willconsult on the integration of the two airlines. Thejoint integration board will also include Gary Kelly,CEO, chairman, and president of Southwest Airlines;Mike Van de Ven, Southwest’s EVP and chiefoperating officer; Loral Blinde, AirTran’s SVP humanresources and administration; and Jeff Lamb,Southwest’s SVP of administration and chief peopleofficer. Southwest Airlines’ headquarters will remainin Dallas; AirTran’s presence in both Orlando andAtlanta are under review.

Wisbrun to succeed Male at SkyTeamSkyTeam, the 13-member airline alliance that in-cludes Delta Air Lines and Air France-KLM, hasappointed Michael Wisbrun as its new managingdirector, replacing Marie-Joseph Male, effective June1, 2011. Wisbrun is currently EVP of KLM Cargo, andhe was also heavily involved in developing the KLM-Northwest joint venture.

Constantinos Mavrikis joins Hellenicas CCOHellenic Imperial Airways has appointed Constan-tinos Mavrikis as its new chief commercial officer(CCO). Formerly, Mavrikis worked at OlympicAirways for 30 years; he will now head Hellenic’sbusiness development units, including all com-mercial departments, marketing, sales, reservationsand ticketing.

Airberlin hires Grimus to leadnetwork plansWolfgang Grimus has been named head of networkplanning and development at airberlin, effective May 1. Grimus worked from 2006-2010 at AustrianAirlines, leading the carrier’s commercial passengerdivision in Central and Eastern Europe. Meanwhile,Barbara Cassani and Saad Hammad are joining AirBerlin’s board as non-executive directors. Cassini waspreviously the CEO of low-cost airline Go Fly andchaired the organising committee for London’s bidto host the 2012 Summer Olympics, for which shereceived a CBE. Hammad worked at easyJet as itschief commercial officer as well as holdingmanagement positions at Procter & Gamble and theBoston Consulting Group.

Gergye becomes Malév’s CCOMalév has appointed Ottó Gergye as CCO, effectiveMay 1, 2011. Gergye has 15 years’ experience in theaviation business, having occupied posts with CWT,KLM, Flight Center and British Airways. He movesfrom within Malév, where he has been managing thesales division.

Turner appointed to Rockwell Collins’boardRockwell Collins has elected Jeffrey Turner to theboard of directors as its ninth member. He is cur-rently president, CEO and director at Spirit Aero-Systems. Turner’s 38-year career has also included astint with Boeing.

Gulf Air appoints new CCOKarim Makhlouf has become the chief commercialofficer of Bahrain flag carrier Gulf Air. Makhloufjoined the airline in October 2010 as directorcommercial planning. He started his career withLufthansa before becoming SVP of its subsidiaryGerman Wings. He has also had senior roles atSkyEurope and Malev Hungarian Airlines.

Deamer takes SAS sales roleSAS has appointed Anne Deamer as business salesmanager following Jo Ashman’s retirement. Deamerwas previously general manager at the Institute ofTravel Management, but also worked for 20 years atBritish Airways.

Republic promotes Tim Dooley and Lars-Erik ArnellRepublic Airways has promoted two key staffmembers. Tim Dooley has been appointed SVP offinance and chief financial officer and Lars-Erik Arnellhas been named SVP of corporate development, botheffective immediately. Dooley is being promoted fromVP of financial planning and analysis and replaces HalCooper, who retired March 31. Arnell most recentlyserved as VP of corporate development.

Virgin Blue appoints Bayliss asnon-executive directorJoshua Bayliss has joined Virgin Blue as a non-executive director, with immediate effect. He iscurrently based in Geneva as a senior executive andgeneral counsel with the company. Bayliss hasexperience as a director across a number of VirginGroup companies, combining investment holdingand operational roles.

Luxon takes ANZ general manager roleAir New Zealand (ANZ) has announced theappointment of Christopher Luxon as group generalmanager international airline, effective May 30, 2011.He joins the company from Unilever, where he hasworked since 1993, most recently as president andCEO of its Canada division.

Harry Spencer becomes JetBlue’sfirst VP of compensationJetBlue Airways has appointed Harry Spencer as itsVP of compensation and benefits. In the newlycreated role, Spencer will oversee compensation forJetBlue crewmembers throughout the Americas.Spencer has worked for more than a decade withTime Warner and prior to that held benefits andfinance positions at Exxon Mobil Corporation. In hisnew position, he will report to Joanna Geraghty,JetBlue’s EVP and chief people officer.

PEOPLE IN THE NEWS

Hawaii next stop on VirginBlue partnership tourVirgin Blue is preparing a partnership withHawaiian Airlines, its fourth internationalairline tie-up after ones with Etihad, AirNew Zealand and Delta. The carrier is alsopoised to announce new flights to Hawaii.John Borghetti, Virgin Blue’s CEO, hasadded that the airline plans to win 20 percent of Australia’s corporate travel marketwithin the next three years.

AA adds to 777 orderAmerican Airlines has exercised twooptions for 777-300ERs, taking itsorders for the type to five. The ordersare due for delivery in 2012 and 2013.AA operates almost 50 777-200ERs.

Jatropha testing deemedsuccessful Jatropha, a plant used to create bio-fuel,can deliver “strong environmental andsocioeconomic benefits”, a report by Yale’sSchool of Environmental Studies hasconcluded. Japan Airlines, Air New Zea-land, Continental, TAM Airlines and Interjethave, in co-operation with Airbus, heldsuccessful test flights using fuel from theplant. James Garton, president of MissionNewEnergy US, said: “We are particularlypleased to learn of repeated testing ofJatropha in aviation with positive results.With… the constant increase in the priceof jet fuel, and the global need to acceptsustainability as a key to environmentalresponsibility, the Jatropha solution is timelyand efficient.” The study was funded byBoeing and used criteria developed by theRoundtable on Sustainable Biofuels.


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Indian officials uncover26 fake licences in pilotcrackdown India’s Directorate General of Civil Aviation(DGCA) has uncovered 26 fake licences inan extensive screening that is nearingcompletion. The DGCA has found 13pilots, six commanders and seven co-pilotswere wrongly awarded air transport pilotlicences (ATPL), all of which have beenrevoked. A number of pilots and airlineofficials have been arrested, includingsome at Air India. Police have startedproceedings in 11 cases of fraud.

Aeroflot considers neoorderRussia’s Aeroflot is considering anorder for the A320neo. Speaking toFrench newspaper La Tribune, theairline’s CEO, Vitaly Saveliev said: “Wewill continue our orders [and] we arestudying the A320neo. On the otherhand, we don’t need the A380.”Saveliev said some orders might beannounced at the Paris Air Show inJune, but he had “no idea” what thesemight be.

Final Embraer 145 flightat LOTLOT Polish Airlines has carried out its lastE145 flight. The aircraft type will beofficially retired from the airline’s routenetwork. Its place in LOT’s fleet will betaken by the E170 and E175, and theairline’s latest acquisition, the E190-200,also known as the ERJ-195. LOT received14 E145s following a contract signed withthe Brazilian manufacturer in the 1990s.

Spring into Japan?Spring Airlines, the privately-ownedChinese budget carrier, hopes to set up a joint venture in Japan, China Dailyreports. “To set up a joint venturein Japan, where pilots are relativelyabundant, will boost business in Japanand increase the number of routesbetween China and Japan, and Japan and South Korea,” said WangZhenghua, Spring’s chairman. How-ever, a spokesman for Shanghai-basedSpring told China Daily that the planwas still at an embryonic stage.

Vietnam Airlines to launch London linkVietnam Airlines is to inaugurate flights from Hanoi and Ho Chi Minh City to London this winter, althoughno firm decision has yet been taken if it will serve Heathrow or Gatwick airport. The airline confirmed that itwill initially offer four flights per week using a 777-200ER but plans to increase this to a daily schedule by 2014.The UK is currently the largest market from Vietnam that is not currently served by the airline. It alreadyserves Paris CDG and Frankfurt and Moscow Domodedovo from both Hanoi and Ho Chi Minh City, while AirFrance, Aeroflot Russian Airlines and Vladivostok Air boost capacity in the French and Russian markets. LOTPolish Airlines is the only other European carrier to provide links to Vietnam with a twice weekly service toHanoi from its Warsaw hub. The number of peopletravelling between the UK and Vietnam is increasing,according to visitor statistics, with an estimated 90,000making the journey in 2010, up 28 per cent on theprevious year. It is understood that Vietnam Airlineswill initially offer two flights per week from Hanoi and two from Ho Chi Minh City and has selectedHeathrow as its preferred London gateway, but has yetto secure the necessary slots at the airport.

Aeromexico boosts flights to USAeromexico is to boost its presence in the competitive Mexico-US market with two new routes to Californiaand increased frequencies on three existing routes between the two countries. The airline will introduce adaily flight from Guadalajara to San Francisco from July 4 and a daily link from Guadalajara to Sacramento,the only overseas carrier to provide links to the latter airport. This Guadalajara-Sacramento service will belaunched on July 16, just under a year after Mexicana Airlines suspended flights from Mexico prior to itsclosure last August. “I am pleased to announce the return of a foreign carrier to our family of airlines,” saidG Hardy Acree, director of airports for the Sacramento County Airport System. “Aeromexico understands thestrength of our market.” There is a strong demand on the route with more than 45,000 O&D [origin anddestination] passengers travelling between the two destinations in the past year, and this led Alaska Airlinesto add its own services on the route last December.

Strategic Airlines applies for US traffic rightsAustralian carrier, Strategic Airlines, has made a formal application to the International Air ServicesCommission (IASC) for permission to launch flights across the Pacific, potentially becoming the seventhcarrier to offer flights between Australia and the United States. The carrier is understood to be looking torebrand as Air Australia and has set September 2011 as the likely launch date. Although there is an OpenSkies agreement between the two countries, airlines still need to apply for written consent to operatescheduled flights so the necessary ‘fit for purpose’ checks can be made on proposed operators. The Brisbane-based carrier launched operations in 2009 and is part of the diverse Strategic Aviation Group, which providesregular airline services, as well as contract and ad hoc charter services, aircraft brokering, and logistics andcargo handling. It currently operates a fleet of A320s, some of which are operated under a Luxembourg AirOperator’s Certificate (AOC) on flights from Europe.

Cathay Pacific to continue Hong Kong-Singapore capacity upgradeCathay Pacific Airways will continue to operate seven non-stop flights per day between Hong Kong andSingapore, as well as an eighth daily flight via Bangkok. When the Hong Kong carrier introduced its seventhdaily rotation on April 29 it had originally planned for it to operate for just two months until June 30, but itwill now remain in place for the entire summer schedule.

Firefly to launch Kuala Lumpur-Sandakan Low-cost carrier Firefly is to launch flights between Kuala Lumpur and Sandakan, the second-largest city inSabah, East Malaysia, on the north-eastern coast of Borneo. The route is already served eleven times per weekby the budget carrier’s parent Malaysia Airlines, which carried an estimated 97,000 passengers during thepast year, a 31 per cent share of the total market. Traffic is dominated by AirAsia which carried around 212,000passengers during the same period.

Condor to offer winter links to AntalyaGerman carrier Condor is to add winter flights to the Turkish city of Antalya from Dusseldorf and Frankfurt.The airline will offer four times weekly services in November but will then revert to two flights per week fromDecember through to the end of the 2011/2012 schedule.

Bearskin Airlines launches Waterloo-Montreal ConnectionCanadian regional carrier Bearskin Airlines launched flights on May 1 between Waterloo International Airportand Montreal with the ambitious goal of building frequency on the route. It is initially offering five flightsevery week day and reduced schedule at weekends, with three of the flights operating directly and two viaOttawa. It already operates 56 flights per week from Waterloo to Ottawa having served the route since October2007 and it plans to replicate this in the Montreal market with flights arranged for the business community.

ROUTES NEWS


REGIONAL AIRLINE REPORT:

EUROPE AND THE US


FOCUS: Regional airlines

AFM73_Regional airline vers2_AFM71 18/05/2011 11:57 Page 12



Europe’s short-haul, low-cost carriers were a directoffshoot from similar airlines in the US, but regionaloperators on either side of the Atlantic share fewcomparisons. Regional flying developed radicallydifferently due to sizeable differences in industrystructure, regulation and market environment, andthis has had a direct impact on present-day fortunes,as Alex Derber reports.

RELATIVE TO GLOBAL TRENDS, EUROPE’S AIRLINEindustry has been slow to recover from the global

economic crisis, and regional airlines have reflectedthat. The European Regions Airline Association (ERA),representing about 70 airlines, reported 2.5 per centpassenger growth in 2010 for its members. That comparedwith a 4.2 per cent increase in passenger traffic acrossEuropean airports.

Tough times in EuropeThe ERA called 2010 “a second difficult year for intra-European airlines”, as the year’s modest growth was only aslight improvement on a dismal 2009 that saw regionalpassenger demand fall almost five per cent. Record loadfactors of 66.2 per cent in 2010 provided some good news,but yields remained depressed and capacity only rosefractionally after falling 3.5 per cent in 2009. Airlines werealso hit by volcanic ash cloud disruptions, associated costs incompensating passengers, weather disruptions and airtraffic control strikes.

In Northern Europe, 2010 was marked by a protracted tusslebetween Finnair and Latvia’s Air Baltic over Finncomm Airlines,which provided feeder services for Finnair.

As Air Baltic plotted a move into the Finnish market, Finnairmanaged to impose a temporary block on the sale of Finncommshares. While Finnair insisted it wanted nothing more than aminority shareholding in the regional carrier, Air Baltic accused itof protectionism. By late 2010, Finnair had agreed to buy 20 percent of its feeder partner, but further wrangling over the contracthas seen completion for that deal slip to Q2, 2011.

Air Baltic, meanwhile, pursued other avenues for Finnishexpansion, announcing a new hub in the country, at Oulu fromwhere it hoped to serve 15 destinations. Shortly after, it revealedplans for a new start-up in Lithuania to exploit the gap in themarket left by the bankruptcy of Star1 in October 2010. Detailsabout the new airline remain hazy, but Air Baltic had said it woulduse 737 aircraft and offer at least 10 destinations by the end of2011. However, both Ryanair and Wizz Air moved into Vilniussince that announcement, forcing Air Baltic to give up its routesfrom the Lithuanian capital.

There were also mixed fortunes for carriers in the UK, home toleading European regional Flybe. The Exeter-headquartered airlinepushed through a £60m ($98m) initial public offering (IPO) inDecember 2010, but in the same month lost 16 per cent of its flightsto weather-related cancellations, costing it £6m ($10m). The airlinealso lost out in the aforementioned Finnair-Finncomm deal, beforewhich Finnair had planned to award Flybe several feeder services.

One tie-up that did go ahead was the purchase of loss-making AirSouthwest by Humberside-based Eastern Airways, giving thelatter company a foothold in the regional market in southernEngland. However, in so doing Eastern assumed responsibility foran ailing carrier that had racked up losses of £5m ($8m) in the 18months leading up to its sale. Grim news indeed for Eastern,which saw passenger numbers fall by a fifth in 2010.

It was comparatively brighter in Southern Europe, wherePortuguese carrier SATA Air Acores, operating out of the Azoresislands in the Atlantic, secured a €37m ($53m) EuropeanInvestment Bank loan to buy four Q400 turboprops to replaceageing ATP aircraft. Introduction of the larger aircraft saw it raisecapacity by 10 per cent in 2010, though passenger numbers fellback slightly. SATA’s 2010 results are still forthcoming, but theAzores government-owned airline capitalised on public demandfor intra-island flights to record small but consistent profits for theprevious five years.

Of network-affiliated regionals, KLM Cityhopper and Air France’ssubsidiary, CityJet, saw passenger numbers rise by seven and 13per cent respectively. In contrast, Lufthansa Cityline numbers fell,from 6.4 million to 6.3 million, but it is difficult to assess theeffect of any of this on operating results as regional flying figuresare subsumed within the results of parent airlines.




“

On the legislative front, European plans to revise slot allocationrules, in order to ease congestion, have taken a battering fromairline trade bodies, including the ERA, which argues that presentrules are adequate. “The problem lies not in the allocation ofavailable capacity: it lies in the lack of capacity at congestedairports. The need to introduce any form of slot restriction at anairport is an indication of failure on the part of governments,” itstated in a position paper.

Indeed, slot restrictions at major European hubs would severelydamage regional airlines, which are already being squeezed outin favour of carriers operating larger-capacity aircraft. Regionalflights to Europe’s busiest airports have dropped by a third in thelast five years. Reasons for this include rising runway charges thatpenalise smaller aircraft on a cost-per-seat basis, and the desire ofairport operators to allocate scarce runway space to airlines ableto push more passengers-per-movement through terminal shopsand restaurants.

Responding to the problem of congested hubs, manufacturersare designing larger regional aircraft. Airlines are responding andaverage regional aircraft capacity in Europe has risen in the lastdecade from 60 to 70 seats.

Bombardier’s CSeries, which will challenge small Boeing andAirbus narrowbodies, is the best example of this trend, but theCanadian OEM’s CRJ range has also grown steadily, going from50- to 100-seat variants. ATR, based in France, is flirting with theidea of producing a 90-seat version of its ATR72 turboprop,though it has ruled out any decision on this until 2012.Bombardier, meanwhile, has reported strong interest from airlinesin a 90-seat stretch of its turboprop, dubbed the Q400X, whichcould be introduced as early as 2013.

Recent figures show that Europe’s fleet of 955 regional aircraft isevenly split between turbofans and turboprops, with the latterdominating in central and southern Europe, the former innorthern and eastern Europe. The fleet as a whole remainedsteady in 2009 and 2010, after falling from 1,075 aircraft in 2008.

US: fixed fees In the last decade, regional airlines in the US have doubled theamount of passengers carried, up to 160 million in 2009. This hasbeen achieved despite a fall in the number of operators.Consolidation, prudent capacity management and inevitablefailures have improved industry efficiency, resulting in load factorsup from 57 per cent in 2000 to 75 per cent 10 years later. In2009, the largest three airline groups – Skywest, Republic andPinnacle – accounted for almost half of all of the country’sregional traffic.

Skywest consolidated its position at the largest US regional withthe purchase of ExpressJet, America’s fourth-largest, in November2010. Operating as part of Atlantic Southeast, a Skywestsubsidiary, ExpressJet helped boost its parent airline’s profits from$131m in 2009 to $146m in 2010.

A major factor in the deal for ExpressJet was that SkyWest wasable to lock down a 10-year capacity purchase deal withContinental, covering 205 of ExpressJet’s ERJ145 aircraft. Suchagreements effectively see US majors contract regional flying toairline groups for a fixed sum. Such agreements, often long-term,form the backbone of the US regional industry, but while theyprovide stability and revenue certainty for many operators, theycan also be disastrous for some.

Mesa Air Group is a case in point. At one time, the groupoperated 150 aircraft for mainline partners, but the financial crisiscaused many of these to restructure their agreements as theysought to slash costs. In 2008, Delta terminated a contract forDelta Connection flights operated by Mesa’s subsidiary, FreedomAirlines, citing non-compliance with operational benchmarks.Two years of costly legal dispute followed to no avail for Mesa,which shut down the operation in August 2010.

By that time, United Airlines had also axed Mesa services,covering the operation of 26 CRJ200s and 10 Dash-8 turboprops.Mesa entered Chapter 11 bankruptcy protection in early 2010and was subsequently forced to cancel an order for 10 CRJ700s.When the company exited Chapter 11 in March 2011 it had shed100 aircraft from its fleet.

Such experiences have prompted other regional airline groups topush their own, at-risk services. Mesa has its go! subsidiary oper-ating scheduled flights to Hawaii, and Republic Holdings, America’ssecond largest regional airline group, owns Frontier Airlines. In Q1,2011 Republic saw sales at Frontier rise 13 per cent, year-on-year,while capacity purchase turnover remained flat.

Fleet differencesIn contrast to the European fleet, American regional carriers relyheavily on small turbofan aircraft. Despite their poor economicsand age, a third of the US regional fleet is comprised of 50-seatCRJ100/200 types. A huge number have also been mothballed dueto rising fuel costs, but a fall in lease rates and values, combinedwith squeezed financing for new aircraft, has meant that theseaircraft remain the backbone of regional flying in North America.

As a result, average regional aircraft size in the US is 55 seats,whereas in Europe it has crept past 70 seats, and was above 60a decade ago. Yet European carriers struggle to fill their largeraircraft. Average seat occupancy across US regionals was 75 percent in 2010, some 10 points higher than in Europe where theregional industry has rarely, if ever, posted a combined load factorof 70 per cent – a benchmark reached in the US in 2005.

European airlines would, of course, argue that capacity purchasecontracts and under-developed forms of alternative transportgrant the US industry a marked structural advantage. They mightalso point to losses incurred by mainline operators on capacitypurchase deals that have profited the regional partner. The US isalso following the European trend towards larger aircraft, thoughit still has ground to make.

Advocates of the US system, on the other hand, would argue thatpreviously unheard of cost pressures on network carriers haveforced them to review the cosy capacity purchase deals of thepast, and to now insist on only the most efficient andoperationally slick regional operators.


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FLEET OPERATIONS: Engine leasing

The niche business of engine leasing used to be somewhat counter-cyclical, as lessors exploitedhard times to buy assets and drive sale and leaseback deals. However, more leasing companieshave entered the market and many airlines were either unwilling or unable to offload spareengines in the recent recession. Alex Derber looks at the consequences.

RECESSIONS USUALLY PROVE TO BE CATALYSTS FORdeal-flow in the spare engine market, as airlines seek to

bolster balance sheets by selling and renting backpowerplants. That is exactly what occurred during the firstdownturn of this century and many lessors were expecting to addto their asset base in the run-up to the second. That the latestdrop in the cycle coincided with the worst financial meltdown inliving memory would have only heightened their appetite.

However, far fewer engines than expected were offered for saleand leaseback deals. Low interest rates and fuel prices, allied tothe fact that many airlines had already off-loaded spare enginesin the previous recession, meant there was far less incentive foroperators to sell, and far less liquidity pressure on airlines thanthere had been in the past.

“When we hit this particular recession, there were somedifferences in how airlines handled their on-balance-sheet enginefleets. Airlines horded cash because they were not clear how andif banks would lend to them. There was never a sudden influx ofengine sale-leaseback opportunities, but rather a steady flowthat did not exhibit any market pressure. Airlines were also usingdifferent means to raise cash like signing up to credit card andreceivables deals,” says Abdol Moabery, CEO of the aircraft andengine lessor, GA Telesis (GAT).

Since the recovery began, the situation has improved. Britishcomponent support specialist, AJ Walter Aviation (AJW), movedinto engine leasing in early 2011. Its director of aircraft engineservices, Steve Williams, describes “a growing trend to moveengines off the balance sheets”, particularly among start-upairlines which traditionally outsource non-core activities. Assistingthis trend, he says, has been a rise in funding opportunities thatallow lessors to pursue sale and leaseback deals.

A return to profit for many airlines in 2010 also saw tentativecapacity increases, increasing the need for spare engines. BobbyJanagan, general manager of the lessor, Rolls-Royce and PartnersFinance (RRPF), says: “Sale-leaseback is picking up. It’s not up to2007/8 levels because people are taking new deliveries andthere’s always a time-lag between the economic recession andthe aviation recession so we are only now coming out of thatbottom line.”

Rates and residualsTight availability of some engine lines during the downturnmeant that their lease rates held up better than expected.Janagan reports a disparity between widebody and narrowbodyengine trends, with widebody engines continuing to commandpre-crisis rents throughout the downturn due to a shortage ofsupply, while the opposite held true for narrowbody powerplants.

“In the narrowbody market there were a lot of speculators, bothindependents and airlines that bought engines, so there wasovercapacity in that market, and that forced rental factors downin 2009/10,” he says.

Despite the setback, Janagan says that narrowbody engine leaserates have now almost completely recovered. This is even true ofolder engine types, according to Williams at AJW. “There is ashortage of good quality lease engines in the market andcompanies are reluctant to invest in the overhaul of lease enginessuch as the CFM56-3 because they are not sure of the futuredemand profile. This then places an additional premium on theengines that are currently in circulation,” he says.

Residual values for older engines have also recovered, despite the approaching introduction of new technologies such as Pratt& Whitney’s geared turbofan and a new variant of the best-selling CFM56.

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Project5_Layout 1 19/05/2011 14:52 Page 1



Until aircraft get parked and torn down,

spare engines are required to support the

fleet so values are likely to hold. Therefore we

don’t see a major deterioration in

asset prices because the A320neo is coming.

– Bobby Janagan, general manager, RRPF

“

According to Moabery, lease factors – the cost of rent as aproportion of the engine value – remain under one per cent fornewer engines, and between one and two per cent for older types.

“Residual values for narrowbody engines have endured overall,”he comments. “While there were some distressed situations in2008 and 2009 that led to low-priced engine availability, almostall have recovered, including the CFM56-3 and JT8D-200 series,which were hit the hardest in that period.”

There may also be little near-term danger of new equipmentdamaging residuals, as Janagan points out: “Until aircraft getparked and torn down, spare engines are required to support thefleet so values are likely to hold. Therefore we don’t see a majordeterioration in asset prices because the A320neo is coming.”

The leasing marketTraditionally, engine leasing has been dominated by three largeindependent players: Engine Lease Finance, GA Telesis, and WillisLease Finance plus manufacturer-affiliated lessors such as RRPFand GECAS Engine Leasing. In recent years, there have beenseveral smaller entrants to the market, including AJW, Aercap

(via its Aeroturbine subsidiary), Aersale and Macquarie Aviation Capital.

One of the ‘big three’ independents, Florida-based GA Telesis hasa portfolio of roughly 65 engines, including: CFM56-3C1;CFM56-5A1/F; CFM56-5B; CFM56-5C3/F; CF34-3A1; CF34-3B1;CF6-80C2B1F; CF6-80C2A2; CF6-80C2A5; CF6-80C2B6F;PW4056; PW4077; JT8D-219; and V2500.

GAT, which also leases aircraft and provides component support,offers short- and long-term leases ranging from 60 days to 60months. Moabery says that the company currently has eightengines off lease.

A perceived problem for independent lessors in the past has beentotal care maintenance. On selling engines to airlines – often at aheavy discount – OEMs would seek to tie their customers into all-inclusive repair contracts. However, this made it difficult for anairline to sell and lease back an engine because the lessor wouldalso demand a maintenance reserve to compensate for the hoursand cycles burned off an engine, effectively forcing the airline topay twice.

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Despite the rise of total care, however, Moabery appearsunconcerned: With so many emerging markets, it is likely thatyounger airlines do not want to deal with engine fleetmanagement, so it can make sense to hand that over to an OEMor third party. On a dollar for dollar basis, an airline is definitelybetter off not going with a total care programme as it limits fleetflexibility and the maintenance reserves are built in, and paid overthe long-term. I don’t think airlines look at total care as analternative to leasing and paying maintenance reserves. In fact,we have leases with maintenance reserves with airlines undertotal care programmes.”

With a portfolio of 350 engines, RRPF is among the largestengine lessors in the world. A 50:50 joint venture between Rolls-Royce and GATX Capital, RRPF sources its engines from the openmarket and directly from Rolls-Royce the manufacturer “at fulllist price”, according to Janagan. One-third of the company’sportfolio supports Rolls-Royce’s total care business, whichguarantees spare engine support, while the rest are leaseddirectly to third parties.

That split may alter as airlines struggle to raise finance for newengines from banks that are more willing to lend to a stableoperating lessor than an operator exposed to the myriadpressures and crises of the air transport industry. “Rolls-Royceused to bundle together spare engine services with engine sales.Now we are trying to do a separate lease so the engine can besold to whomever,” says Janagan.

Unlike GECAS Engine Leasing, which stocks non-GE lines, RRPFonly offers Rolls-Royce and IAE engines. “Engines need a lot oftechnical understanding in terms of pricing, maintenance and risk– we don’t want to speculate by being on other engine typeswhere we don’t have that much knowledge,” explains Janagan.

In other ways, though, Janagan notes the similarities betweenRRPF and other types of lessor: “We’re all doing one job, whichis financing assets for airlines, and the market is getting biggerbecause the price of engines is going up and banks are reluctantto lend directly to airlines. It’s about who offers the best package,which is a combination of the return conditions, maintenancerequirements and the cost of the rent.”

Since launching its engine leasing business in January 2011, AJWalter Aviation has built its portfolio to 20 powerplants, allCFM56 variants. Of these, half are on conventional leases, whilehalf are running off ‘green time’. Though the company isconcentrating on the CFM56 in the short-term, it plans to addCF680, V2500 and PW4000 engines in the future.

To support its new leasing business, AJW announced in February2011 that it was opening an engine services division in Wales.The company’s CEO, Christopher Whiteside, said at the time thathe anticipated $50m worth of business within the division’s first12 months.

CompetitionDespite the small influx of players such as AJW, engine leasingremains a niche market, requiring expert financial, technical andrisk analysis. As such, it is unlikely to ever attract the glut ofprivate equity and institutional-capital backed vehicles thatentered the aircraft leasing market in the mid-2000s.

GAT’s Moabery describes some of the pitfalls awaiting speculativeinvestors: “Securing an engine on lease is very different to doingso with an aircraft. If a transaction is not structured properly aninvestor can lose control or ownership of their engine in certainjurisdictions. There are also issues like performance management,foreign object damage and PMA parts.”

Parts manufactured by parties other than the enginemanufacturer (PMA parts) continue to be a divisive issue: PMAsuppliers see lessor acceptance as a vital step towards industryacceptance, but lessors normally insist that no PMA parts (or DERrepairs) are installed on their assets in case they damage theresidual value.

“All of our leases say there shouldn’t be any PMA parts. As anoperating lessor we put greater focus on our residual value andthat is factored into the lease rental. If we allow people to put inPMA parts then the rental has to go up to offset the reduction inresidual value,” says Janagan at RRPF.

Another bone of contention is withholding tax, presently appliedto engine leases but not to aircraft. Janagan outlines theirfinancial impact: “As more people are starting to lease enginesit’s becoming a major issue and cost to the airline. In somecountries it’s five per cent and in some countries it goes to 20 percent. That’s quite a lot to pay each month on top of rentals.

“If aircraft are treated as an exempt category for withholding taxpurposes, why not treat the next most expensive asset class –spare engines – the same?”

Unsurprisingly, the ubiquitous CFM56 provides one of the deepest markets for lessors, whoreport that even older variants of the type are holding their values well.


FPA_check 110_ATEM 110 21/02/2011 09:29 Page 3


FLEET OPERATIONS: Airline alliances

AN INVESTIGATION BY THE EUROPEAN COMMISSIONinto two Star Alliance codeshare relationships has raisedconcerns not only over competition but of the true value

of such alliances. Who really benefits from codeshares and is iteven possible for airlines to go it alone nowadays?

The European regulators are examining flight agreementsbetween Lufthansa and Turkish Airlines, and Brussels Airlines andTAP Portugal, namely the three trunk routes of Frankfurt-Istanbul, Munich-Istanbul and Brussels-Lisbon. The body isconcerned that the operators ought to be competing againsteach other on these routes. “This form of free-flow, parallel, hub-to-hub codeshare agreement may distort competition leading tohigher prices and less service quality for customers,” thecommission said.

The well-polished argument is that codeshares offer a betterservice to passengers, streamlining long-haul journeys andoffering a wider choice of routes. But who really prospers fromthese arrangements and would different collaborations bettersuit the customer?

In a codeshare, airlines benefit from selling more flights under theguise of it having more routes – it will trade ‘off the back’ ofanother airline’s network, pretending – to the unwise customer–that it has a greater scope. Although rules demand that ticketsellers must disclose which airline operates the flight, in theconfusion of their travel plans, unseasoned travellers oftenoverlook this important detail until they reach the airport wherethey find they are flying with another airline, will receive adifferent service, and perhaps a poorer level of safety.

Robert Crandall, who was chairman and CEO of AmericanAirlines when, in 1996, it applied for anti-trust immunity for analliance with BA, told the Telegraph: “Any objective observerwould have to look very hard to find a way in which allianceshave benefited consumers”.

AIRLINE ALLIANCES:CAN AIRLINESGO IT ALONE?

New codeshare agreements are introduced almost daily and they have become part of the fabricof international airline operations. Yet, with so many airlines entering this type of agreement,the flaws are becoming evermore apparent. Mary-Anne Baldwin examines the pros and pitfalls ofthese increasingly popular collaborations.

Global airline alliancesHorst Findeisen, VP of business development at Star Alliance told Routes Online that global airline alliances offer: “A win-win situation for airlines and customers, as they [customers]have a one-stop shopping experience to connect to over 1,000destinations.” However, in listing the benefit to airlines, hisresponse was notably longer: “From a network perspective,airlines are connected to a network that spans the globe, sothey can sell destinations that they can’t reach themselves. It’snot really feasible to launch [a] service to a secondary airporthalf way around the world, but you can build a connectionthere in an alliance. So, economically, it’s a valuable propositionin an airline’s network portfolio.

“Flying from your home base into an alliance partner’s hubcreates hub-to-hub routes, which network planners lovebecause flights tend to be much fuller, with higher yields andmore traffic flow. Other major benefits include tapping into anenormous frequent flyer base, which is good for attractingpremium traffic. Carriers can also benefit from inclusion inbroader corporate alliance agreements,” he continued.

AFM73_Airline alliances_AFM73 18/05/2011 15:44 Page 22



Jaan Albrecht, CEO of Star Alliance hands a welcomegift to Theodore Vassilakis, president of Aegean




Robert Golden, director of sales, US and Canada at MalevHungarian Airlines believes: “The benefit of alliances really isfocused on corporate and global business.” We can clearly seethe benefit of alliances to airlines, but says Golden, the pros doextend to passengers – though perhaps only the “executive airwarrior”, or business-class frequent flyer whom airlines are soeager to have onboard. However, Golden believes it is notconnectivity that most benefits the hardened traveler, ratherfrequent flyer programmes. Each of the three airline alliancesoffer their customers the ability to collect frequent flyer points onany flight operated by airlines under their umbrella. Businessflyers are further rewarded with access to any of the memberairlines’ airport lounges. This is great if you are a seasonedtraveler, but what about everyone else – such as the typical familymember who flies perhaps once or twice a year?

Theoretically, alliances make check-ins and connections easierand quicker for passengers travelling on connecting flights.Passengers purchase just one ticket and check their bags andclear security just once however, this service is not restricted toalliances or code-sharing but are aspects of interlining,something the US did many years ago and something that IATAbrought in as standard.

It seems little can be said about the benefit to the ‘average flyer’.Indeed, the converse argument is that, in relation to codeshares,it is the average flyers who is most likely to be confused andinconvenienced by cross-pollinated operations. “But I bookedwith BA,” the passenger might say. “Now I’m travelling part ofthe journey with American. I don’t like American and I have topay for food!”

Is it fair to assess that airlines are out for themselves? Findeisenbelieves airports benefit too: “If there is a good workingrelationship between the airport and the alliance home airline,

collectively they will build a growth engine from which allstakeholders will benefit.” He adds: “Some airports are alsoworking very well with their hub carrier. Munich, for example,has embraced the concept of Lufthansa in Star Alliance and it hasa new dedicated terminal designed to co-locate Star carriersunder one roof, so that they are closely connected and withinshort walking distances. We are seeing a similar dynamic inTokyo-Narita, with a dedicated Star terminal… Unfortunately,airlines and airports aren’t working closely in all cases.” And hereis the crunch – as alliances gather more clout, otherorganisations, including airlines, aviation bodies and airports, willbe expected to tow the alliances’ lines.

Yet it is only with co-operation from airports that alliances canpromote their ideal of ‘seamless’ travel with honesty. “The word‘seamless’ has been used far too loosely in alliances,” voicesGolden. Alliances may be seamless in concept, even seamless intheir business operations, but until they become so to thetraveler, they are little more than a marketing tool that bringsstrength in numbers.

Star Alliance’s answer for airlines and passengers to “move underone roof” (by which it means airports should create a hub fromwhich all of its alliance member airlines operate and inter-connect) is a nice ideal, but it is likely to cost the airportinconvenience and a hefty bill – indeed some deem it toounreasonable a request.

Alliances also have significant influence over the allocation ofslots. Airports are swayed to favour member airlines to thedetriment of smaller or newer airlines. In this respect, alliancesand their members have the control. Able to unduly influenceairports, and in theory (if not in practice) collude to set prices andstandards, alliances work much like cartels.

With most of the world’s large airlines connected to one of thesealliances, have regulators failed to prevent oligopoly and theinevitable temptation that brings – driving smaller businesses toruin and then raising prices?

Another type of alliance is the smaller pairing of airlines that aregranted immunity to co-ordinate fares, sales, flight schedules,and frequent flyer programmes. Essentially a loop-hole in anti-competition laws, immunity is being granted to many airlines thatwish to team-up with the premise that they offer an advantageto customers. Officials have granted immunity in many caseshowever, they now doubt airlines’ claims and the EuropeanCommission has since investigated many alliances. Perhapsrealising that it has been lax, it is thought the commission willintroduce fines of up to 10 per cent of an airline’s revenue if itcannot prove the benefits customers.

Competition“Alliances have great benefits especially for the smaller carriers

that cannot leverage business on their own accord,” says Golden.For these carriers, an alliance offers the ability for it to trade to awide number of travellers and be a part of much wideroperations. An example of this, says Findeisen, is ANA, whichflourished from being a domestic airline to being globallyrecognised under Star Alliance.

However, Juergen Barthel, former head of marketing at ErfurtAirport notes that many competing airlines, in particular thesmaller ones, suffer as a result of these coalitions. “What chancedoes a small airline have… Look at oneworld, SkyTeam and Star[Alliance]… Where do they overlap? Where are commerciallyinteresting routes that are not dominated by the one, or other, ortwo, or all three of them?”

Theoretically, alliances make check-ins and

connections easier and quicker for

passengers travelling on connecting flights.

Passengers purchase just one ticket and

check their bags and clear security just once …

…

SkyTeam flight crew celebrate the alliance’s tenth anniversary




He adds that smaller or new entrant airlines have little chance todevelop routes in order that they can prosper and becomecompetitive on a large scale. “Air Berlin was only able to becomea major player as it grew in charter [operations]. Only with theacquisition of DBA [the German domestic airline, bought outrightby Air Berlin in 2006] and a strategic expansion in scheduledflying, [did they] suddenly become a competitor to Lufthansa.”

Perhaps the answer is not to beat, but to join them. Counter tothe argument that alliances are detrimental to minor carriers isthe small Romanian airline, TAROM. By joining SkyTeam it hasachieved a global network. The benefit to the alliance of addingsmaller airlines is that it can deliver routes to uncovered markets.What each alliance wants is a network covering the entire globe– essentially global dominance, and it is a battle to get there first.

Markets still relatively untouched by alliances include India (withthe exception of Kingfisher entering Star Alliance), Russia (withexception of oneworld’s S7) and the Middle East. So far, SaudiArabian Airlines is the only United Arab Emirates (UAE) carrier tohave joined an alliance, this being SkyTeam. Saudi does bringSkyTeam enviable routes to the UAE however, it is not one of ‘bigthree’ UAE airlines – Emirates, Etihad, and Qatar. None of thesehas chosen to join an alliance, believing instead that they areunusually well-positioned to service the entire globe from theircentral geographic point. With such an advantage, these airlinesdesire their own global network, not one patch-worked fromother airlines.

Mergers: the other optionAlliances were initially focused on code-sharing; now theyencompass co-locating at airports, sharing IT systems and othertechnology and joint investment. They have become sointerwoven, and so beneficial to airlines, that one could arguethey bypass the need for mergers.

By far the more cumbersome option, mergers can take years toagree, they are often prohibitively expensive and are restricted bylaw. For example, US law limits foreign ownership of an airline to 25 per cent. Alliances can now provide the same benefitswithin existing regulatory framework – but that then begs the question; if alliances are mergers in all but name, why do theyescape scrutiny?

Yet it seems even with the dominance of alliances, mergers willcontinue – though there may not be many big ones left.According to US Airways’ CEO, Doug Parker, there is only one bigairline merger left, and that will include US Airways. In a pressevent in early April, Parker hinted that should United, Delta orAmerican be interested, US might quite like to merge with them.Such a statement is an open invitation, however Parker was quickto assure the press that should it not get any interest, US washappy to go it alone.

US has already missed out on a number of collaborations andinstead watched from the sidelines as Delta bought Northwest,United merged with Continental, and most recently, Southwestbought AirTran. It appears that coalitions, whichever form theymake take, are the way forward – and US is eager not to beleft out.

US already benefits from being a member of Star Alliance, so itmust see additional value propositions in a merger – particularlyas a merger with any party seems fraught with complexity. BothUnited and Delta are awkward exes of US. United toyed with USin a game of ‘will they, won’t they’ for three years but ditched thedeal at the last minute and chose Continental instead. Similarly,US was set to takeover Delta as it struggled with insolvencyhowever, Delta opted for Northwest.

Another airline slow to join the fold is Virgin – and it has sufferedfor its independence. CEO of Virgin Group, Sir Richard Branson,was highly vocal about the impact IAG would have on his airline,claiming the merger between its rival BA and Iberia and theirtransatlantic pact with American Airlines, would create hugelyunfair competition. His protests were ignored and it seems Virginhas little option but to team-up, or loose market share.

In February, AFM reported that Air France-KLM and Delta wereattempting to woo a reluctant Virgin Airlines into SkyTeam.Entering an alliance would of course make Virgin morecompetitive but it appears that SkyTeam is not the only option.Although Lufthansa has not stated formal interest, it is likely towant to purchase shares in Virgin so that it can bring it to the rivalconsortium, Star Alliance.

But Branson finds alliances so unpalatable that he is consideringselling his stake in the airline instead. Singapore Airlines, whichowns 49 per cent in the carrier, has said it will sell its stake if it canbroker the right deal. If not, Branson may sell some of his 51 percent majority stake, which is thought to be worth $800-$1.5bn.

Singapore is unlikely to sell its stake to Air France or Lufthansa aseither would benefit from Virgin’s European slots, making themstronger competition. Of course, the airline has said it is open tooffers ‘at the right price’, and it may be willing to sell to eitherairline at a premium. Another candidate is Etihad, which alreadyexpressed an interest in buying Virgin, and according to reports,it has called in Bank of America Merrill Lynch and Deutsche Bankto advise on the possible deal.

Even if a global alliance is not to Branson’s liking, this much isclear – alliances of some form are not just fashionable, they areessential to survival. As a result, the market is getting smaller,more competitive, and harder to enter. Whichever way you coatit – with the title of alliances, codeshares or mergers – it is all partof the trend to consolidate.

Bruce Ashby, CEO ofoneworld

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FLEET OPERATIONS: Cargo conversions

FREIGHTER CONVERSION REPRESENTS ONE OF THEmost interesting and challenging economic decisions forany owner of a commercial jet, whether the aircraft is a

narrowbody or a widebody.

Factors such as the state of the cargo market, the availability ofaircraft for conversion, and what makes an aircraft a suitablecandidate (i.e. its age and operating history) are all highly impor-tant. These must be considered with aircraft residual values, thecost of conversion, the availability of financing, and even thestate of the spare-parts market. Furthermore, when an operatordoes choose to convert a freighter, it must decide whether toown the aircraft or to lease it.

For instance, when it comes to choosing between buying andconverting an existing widebody aircraft versus leasing aconverted freighter from a third-party: “One of the counter-vailing issues is the lack of ability to get financing,” notes RobertAgnew, president and CEO of Morten Beyer & Agnew. “There isnot a lot of credit around. You have to buy the aircraft, sit on itfor 120 days [while it is being converted] – more if it is awidebody – and all that while you have committed capital andyou have to pay for the conversion. It’s a costly process.”

A basic economic equation governs whether and when apassenger aircraft is suitable for freighter conversion. It must beold enough – or have accumulated enough flight cycles – for theaircraft’s residual value to have declined to the point at which theacquisition price, plus the cost of any maintenance checks, plusthe cost of conversion, leaves the owner with an aircraft that itcan either sell for a profit, or lease at a rental that will achieve asuitable return on the owner’s investment over a given time.

The right time for conversionIn most cases, that ‘given time’ is 10 to 15 years for anarrowbody or 15 to 20 years for a widebody. Commonlyaccepted wisdom is that, in order to be suitable for a conversion,a narrowbody aircraft needs to remain in operation for 10 yearsor more after being converted, says Usman Ahmed, senioranalyst with IBA Group. For widebody aircraft, the expectation isthat the converted aircraft will remain in service much longerthan 10 years, because the widebody typically will not haveaccumulated as many flight cycles as a narrowbody jet beforeconversion, so its useful remaining life will be longer. Calculationson conversion candidacy often use the 50,000-cycle figure as arough estimate for an aircraft’s overall economic life, as structuralsafety rules on various ageing-aircraft use this mark as a startingpoint for much stricter inspection regimes that quickly eat into anaircraft’s economic viability.

CARGOCONVERSION:CHOOSING THERIGHT TIME

For owners of commercial jets, deciding to convertpassenger aircraft to freighters is an importanteconomic move that involves several key variables.These can make a ‘yes’ decision compelling – or ‘no’ theonly sensible option. Chris Kjelgaard reports.

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AFM73_Cargo Conversions_AFM73 18/05/2011 10:08 Page 28



In many cases, residual values and cycle accumulation will createa sweet spot for freighter-conversion suitability when an aircrafthas been in service from 15 to 20 years since new. The suitable-age range can even be as much as 22 or 23 years, depending onan aircraft’s flight-cycle accumulation, according to Lars Becker,CEO of Airbus Freighter Conversions. In the 15- to 20-year agerange, many narrowbodies have completed 30,000 to 35,000cycles and many widebodies far fewer, so they still have 15,000cycles or more to go until they reach the critical 50,000-cycle mark.

At the low utilisation rates at which cargo airlines typicallyoperate – particularly cargo integrators such as FedEx or UPS – aremaining useful life of 15,000 cycles can keep an aircraft inoperation for well over 20 years. The life of a potential freightercan be so long that the reasons for it becoming uneconomic tooperate are not dramaticly increased maintenance costsassociated with ageing-aircraft inspections, but increasing fuelprices and stricter noise legislation.

Historically, notes Agnew, the ‘magic number’ at which theconversion of a widebody aircraft to a freighter used to makeeconomic sense was when the aircraft was 20- to 25-years-old.

“[Now] it seems to be a moving target – and it’s moving earlier,”he says. This is due to factors such as fuel price – in the heydayof the 747-400, jet fuel cost a small fraction of what it does nowand operators now want twin-engine widebodies for most long-haul routes – and to the growth of export credit financing tobecome a primary funding mechanism, which has made newpassenger aircraft widely available to smaller carriers. Suchairlines have become less interested in 15- to 20-year-old

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widebodies and for a time the residual values of largewidebodies fell sharply.

Until recently, that is. Because of a strong resurgence in the cargomarket following the crash of the industry, 747-400s havebecome treasured candidates for freighter conversions. “All of asudden, [values] bounced back to a significant percentage oftheir old values,” says Agnew. “We saw a 20 per cent value jumpas people went back for 747s to convert to freighters.”

All things being equal, many 15- to 20-year-old passengeraircraft will still be able to begin second lives as cargo aircraft andmake money for their owners and operators for long enough tojustify the costs of conversion. But not all things are equal. Forinstance, notes Owen Geach, commercial director of IBA Group,various developing countries have adopted regulations thatprevent imports of aircraft older than a certain age. India usuallybans imports of aircraft more than 15-years-old, while Chinabans aircraft older than 20-years-old and Nigeria older than 22-years-old.

Another problem specific to and increasingly affecting the 757, isthat carriers and lessors have rushed to have their aircraftretrofitted with blended winglets. The 757 now seems to havebeen ahead of its time. Boeing stopped producing the aircraftnot long before it took on a new lease of life with major airlinesas a transatlantic jet. The 757 remains in widespread passengerservice and the blended winglet adds enough performance tomake most passenger carriers want to have their 757 fleetsmodified. As a result, more than 300 757s have now been fittedwith blended winglets.

Robert Agnew, Presidentand CEO, Morton Beyer& Agnew

Owen Geach, commercialdirector of IBA Group




However, says Brian McCarthy, VP of marketing and sales forPrecision Conversions:

“The alarming part for the afterlife of the airplane is that, rightnow, you cannot convert a winglet-modified aircraft.” PrecisionConversions holds a 757-conversion supplemental type certificate(STC) and is currently converting its 30th 757 to freighterconfiguration. But through Aviation Partners, Boeing controls allthe engineering data on the 757’s blended winglet and to datehas not made it available to any of the three 757 freighter-conversion STC holders so they can perform the analysisnecessary to demonstrate that their STCs are compatible with themajor structural modification that the installation of blendedwinglets represents.

“I would be quite concerned if I were an owner,” says McCarthy.“Precision Conversions is working on a solution, but [the wingletissue] is somewhat alarming for the value of the airplane. Ownersshould pay special attention to that.” If they wait too long toconvert their 757s to freighters and in the meantime haveblended winglets installed, “residual values will collapseimmediately to scrap.”

“When certain 757s and 737 Classics get to the right age forfreighter conversions, the owner also has the option to part themout,” notes Geach. This is particularly true for owners wishing torealise a prompt return on their assets. IBA Group estimates that,in the current market, for every two owners wanting to converttheir 15- to 20-year-old 737-300s or other aircraft to freighters,10 are choosing to tear their aircraft down to release the valueinherent in engines and aircraft parts. As a result, many aircraft

Brian McCarthy, VPmarketing and sales,Precision Conversions

suitable for conversion – ‘feedstock’, as they are collectivelyknown – will never become candidates.

“Another trigger to sell a passenger aircraft” for freighterconversion is if its passenger cabin requires a majorreconfiguration or refurbishment, says Wolfgang Schmid, EADSEFW’s VP of sales, marketing and customer support. This is a job that can cost $12m or more for a widebody, he says. If theoperator decides the aircraft is not worth such a majorinvestment, a clear alternative is to convert it to a freighter.

It’s all in the timing For freighter conversion to make sense, the amount of availablefeedstock – the supply side of the equation – must align withcustomer demand. The process must also take into account atemporal offset that depends on the date of the conversion slotbooked by the customer and the duration of the conversionprocess, which can vary from four to seven months depending onthe lead time for parts and whether the aircraft being convertedis a narrowbody or a widebody. McCarthy says PrecisionConversions has now seen at least two cycles of mismatchbetween supply and demand, during which plenty of customerswant freighters but the feedstock is not available for conversion.Then the scales tip to having too many aircraft available but fewcustomers who want them.

Even when the stars do align, institutional owners of convertedwidebody freighters still can face an uphill battle in competingagainst the economics of longer-lived new freighters if they do notbuy or convert their aircraft at the right time, says Dan da Silva, VPof freighter conversion for Boeing Commercial Airplanes.

Summary of the conversion costs and down time

Models Conversion Providers Aquisition Cost Conversion Cost (US$) Resale Value

727 PF Aeronautical Engineers $0.3m - $0.75m $1.2m (2007) $1.5m - $2m

Avborne Heavy Maintenance $0.3m - $0.75m $1.090m (2002) $1.5m - $2m

Hamilton Aviation $0.3m - $0.75m $1.2m (2002) $1.5m - $2m

737-200 Aeronautical Engineers $0.3m - $0.75m $1.7m (2010) $1.5m - $2m

Stambaugh Aviation and Universal Cargo $0.3m - $0.75m $1.7m (2010) $1.5m - $2m

DC-9-30 Pemco World Air Services $0.3m - $0.75m unknown

L-100-20/30 Lockheed unknown

Individual Operators unknown

TU-204-100 Tupolev $0.3m - $0.75m Factory Built

Narrowbody


737-300 AEI, IAI Bedek, Pemco $2m - $5m $2.3m - $2.5m (2010) $5.9 - $8m

737-400 AEI, IAI Bedek, Pemco $3.5m - $6m $2.9m - $3.2m (2010) $8.5m - $9.9m

MD-80 Aeronautical Engineers $0.5m - $3.75m $2.2m (2010) $2m - $4.5m

757-200 Boeing, Pemco, Precision conversions $6m - $10m (1986-1992) $4.9m (2010) $14m - $18m

A320 Airbus $6m - $13m (1988-1995) $4.1m (2010) $13m - $20m

A321-100 Airbus $13m - $19m (1994-2001) $4.5m (2010) $20m - $26m

Widebody


A310-300 EADS $4.5m - $10m $8.5 - $9m (2011) $9 - $11.5m

(1985 - 1992)

A300-600 EADS, B/E Aerospace $6.8m - $18.8m (1988-2002) $9.5m (2011) $18.5m +

767-300ER IAI Bedek, ST Aerospace $12.5 - $22m (1990-1998) $10m - $13m $27m - $38m

777-200ER Boeing $50m - $69m (1997-2002) $35m N/A

747-400 Boeing, IAI Bedek $18m - $27m (1989-1995) $25m - $30m $47m - $57m


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Today, the overall cost of buying and converting a 13- to 20-year-old Boeing 767-300ER can range from $27m to $38m, accordingto Ahmed, but da Silva says the cost might average $35m for anaircraft with 15 years of economic life remaining. For a lessor tomake its business case stick at a 15 year life assumption, “Thelease rate would have to be $450,000 [a month],” says da Silva.

“The obvious difficulty for the market is that you can’t get$450,000 for a 767-sized freighter. You can get $350,000 to$375,000.”

What this means, he says, is that because Boeing (or IAI Bedek) isnever going to discount its 767 conversion price by more thanabout 10 per cent, and so customers will never find major savingsthere. Customers must wait until the residual values of suitable767-300ERs drop considerably before they buy their aircraft orrelease them from passenger service.

Continuing high 767-300ER residual values point to anotherproblem affecting the freighter-conversion industry in recenttimes. Although Boeing launched its 767-300ER conversionprogramme with All Nippon Airways (ANA) in 2006 knowing it was doing so ahead of the market, the company believed that,by the time the ANA conversion programme ended in late 2010,767-300ER values would have fallen to where many aircraftwould be suitable for, and available for, conversion. However,says da Silva, delays to the 787 and A380 productionprogrammes, and Airbus’ false start with the A350 in 2005,made airlines want to hang on to their 767-300ERs.

“We hope the 767 market comes sooner rather than later,” saysda Silva. “With the 787 delivering this year, we expect the valuesof 767s and the appetite of airlines to renew and extend theirleases on older 767s to definitely go down. At the meeting [ISTAT in March, 2011], the interest from leasing companies intalking to us about 767 conversions had grown exponentiallysince the meeting in Munich [in October, 2010]. Then, it was the 747-400 they were interested in. Now, those deals areconsolidating, and we expect the same with the 767.”

What comes next?Customers are keenly watching three other conversionprogrammes, one of which has already started. Dresden-basedAirbus Freighter Conversion (AFC) has launched the A320 andA321 conversion programme with an order from AerCap for 30conversions in 2011 to 2015. The company – a joint ventureinvolving EADS EFW, Airbus and Russia’s United AircraftCorporation and Irkut – is also in discussions with other potentialcustomers for slots from 2012 onwards as it seeks to ramp-upproduction to 15 to 20 aircraft a year. Along the way, AFC hopesto launch the A321-100 conversion programme in 2013, saysBecker, noting AFC is in discussions with two potential customersto provide A321-100s for prototyping the conversion. Eventually,AFC expects to convert as many A321s as A320s.

Becker says a number of good candidates are becoming availableamong older A320s with residual values from $7m to $10m andsoon A321-100 candidates with values from $12m to $15mshould be available. AFC sees prime A320 feedstock as beingaircraft that are 18- to 20-years-old. “We are getting somerequests between 12 and 14 years but these are exceptions,” hesays. “The most interesting thing is that the narrowbody aircraftis getting a second life after 20 years. This supports the level ofvalues for the aircraft… it creates a certain demand, allowing thevalue to hold and not dramatically decrease.”


Ahmed believes the sizable number of A320s likely to reach themarket for conversion during the next few years may make itextremely difficult to establish an eventual conversion market for737NGs. Once the A320 programme is established, hundredsmore A320-family aircraft will continue to become available forconversion over time, impacting 737NG freighter demand.

Agnew sees older A320s as being natural freighter competitorsfor 737-400s, saying: “I think that’s going to be the race. [The737-400] offers one more container than the -300 for essentiallyzero cost.” However, one big variable that could dramaticallyimpact the market for 737-300 and 737-400 conversions is howthe new FAA-mandated inspection regime for 737 Classics withmore than 30,000 cycles plays out following the SouthwestAirlines fuselage-rupture on April 1.

EADS EFW, meanwhile, is seeing a resurgence in A300-600Rconversions as up to six of the 32 former American Airlinesaircraft are signed for conversion (the rest of the fleet is too run-out to be suitable) and many of the 18 A300-600Rs that JapanAirlines formerly owned, and the four it formerly leased, arechecked in. EADS EFW is also expected to announce a significantnew conversion deal on ex-JAL aircraft. Once these aircraft areconverted, A300 conversions will end. Meanwhile, A310-300conversions will remain at best a niche market, says Schmid.However, some customers are close to signing A310-300conversion deals, he says.

But the programme everyone has their eyes on is the A330-300,an aircraft with no true competitor. “It’s below the 777 andabove the 767,” notes Schmid. “It’s the most-demandedaircraft and there will be some pretty good candidates in two tothree years’ time. In the beginning, the airframes are prettyexpensive – but this is always the case, and then they getcheaper and cheaper.” Given a three-year developmentprogramme, Schmid hopes EADS EFW will be able to offerA330-300 conversions from 2014 or 2015. The only problem is

“demand is so high there might not be enough A330-300s. It’sdefinitely a hot item.”

The company is not actively pursuing A330-200 conversions – ithas no wish to “interfere” with Airbus’ solid market for new A330-200Fs and in any case no A330-200 is yet old enough to makesense as a candidate – but Schmid notes that, “once we’ve donethe A330-300, the smaller aircraft is an easy jump.” However,while EADS EFW has had some institutional-customer interest inconverting A340-300s (and the job would be essentially the sameas that for the A330-300), Schmid says the company sees no end-user market at present and would not accept any A340-300conversions until operator interest did become evident.

Another programme of great interest is the 777-200ER. “Somecarriers would love the 777BCF in a couple of years, but theydon’t want to pay the prices”, says da Silva. Originally, Boeinglooked at converting non-ER 777-200s first, but there are so fewof these (and almost all are operated by United) that it quicklyturned its attention to the more capable model. A timingproblem is that while there are some 415 potential 777-200ERcandidates, only a few are in the oldest batch, completed from1995 to 1997. “A large number of 777-200ERs at prime age willbe available later in the decade,” and this is once the 787-9 andthe A350 XWB enter service, da Silva notes. He says Boeingexpects to have the first conversion slots available from about2016, following three years of engineering development.

Usman Ahmed, senioranalyst with IBA Group



FLEET OPERATIONS: On-line sales

THE AIRLINE INDUSTRY HAS EMERGED FROM Atumultuous past decade almost completely changed.Skyrocketing fuel costs made capacity and load factors

the highest priority for most carriers. At the same time, the pro-liferation of successful low-cost airlines held fares in check andthe global recession put a staggering damper on demand.Ancillary revenues, derived from unbundling standard airfare andcommissions from third-party products and services, became themost promising route for growth in earnings.

With this in mind came perhaps the most important develop-ment in the last 10 years – the migration of airline operations toon-line platforms. Airlines are still in the business of transportingpassengers, and interaction between airlines and their customersis still at the heart of any given transaction, yet increasingly, thisis preformed on-line.

The web is not simply a cyber haven for travel bookings orconvenient check-in, it is the single most important sales channelin terms of both the central product (seats) and the all-importantancillary revenue streams. In terms of brand interaction, it is oftenthe first encounter a passenger has with an airline. In terms ofmerchandising, it is the most effective platform for introducingextra products and services. And in terms of overall operations, itis the lifeblood of most airlines.

All of this is old news to most airline operators. On-line bookingshave covered the majority of sales for some years now andairlines have taken great strides toward optimising theirproprietary websites and overall web presence. Airlines recognisethat the internet resists categorisation as a narrow revenuestream; it is a dynamic, shifting space that they must continuallyexpand, explore, and improve upon.

Furthermore, the importance of the internet implies that airlinesought to view themselves as e-commerce entities with an airlinecomponent. This may seem radical, but it is where the industryis heading.

Finding valueOn-line revenues are inexorably tied to an airline’s website. Whilethere are opportunities to generate revenue through third-partysites, the development and establishment of a proprietarywebsite that can attract and retain even casual passengersremains one of the most important components of a strong on-line strategy. Certainly, an airline can sell seats through a third-party on-line travel agency (OTA) and reap the distributionbenefits that come with such a tactic, but if this is all it does, theairline looses the opportunity to make ancillary revenue throughits own website.

It is important to remember that a travel booking company (forexample Orbitz) receives commission (for example on a hotelbooking) regardless of which airline flies the passenger to theirdestination. The question is whether the increase in sales receivedby an airline that places its inventory with an OTA outweighs thepotential revenue it could otherwise make from ancillary services.A good inventory distribution mix mitigates this dilemma, buthaving a good mix implies having a strong proprietary website.A survey by SITA, an aviation IT and communications specialist,found that 74 per cent of leisure travelers booked their flights on-line. A survey by Business Travel News found that 68.5 per centof US domestic air tickets in 2009 were booked on-line – andboth figures have no doubt increased greatly since then.

But simply steering this sizable pool of customers towards awebsite is not enough. The website must offer something thatmakes consumers part with more cash, or at least become betteracquainted with the brand. This can be accomplished byintegrating the overall travel experience and the on-boardexperience with the on-line or booking path experience.

Airlines have long incorporated aspects of the travel ecosystemwith their websites and have historically been adept at offeringpassengers the ability to book hotel rooms, rent a car, and

In many cases, the internet is the only portal through which the customer has contact with anairline before boarding the aircraft. As such, airlines must optimise their on-line services tomeet passenger expectations and increase revenue. Fortunately, these are not mutually exclusiveconcepts but airlines must become more than just flight operators if they are to succeed in theiron-line sales strategy; they must embrace and understand the e-commerce model. Raphael Bejar,CEO of Airsavings discusses a strategy.

Raphael Bejar, CEO of Airsavings

AIRLINES: MASTERING ON-LINE SALES

AFM73_Online Sales_AFM73 18/05/2011 11:54 Page 34


FLEET OPERATIONS: On-line sales

purchase trip insurance through their website – netting acommission for each in the process. Only in the last few years,however, have airlines also begun to focus on the on-boardexperience, such as offering passengers the option to purchaseextra leg-room or choose a seat.

A relatively new option available to travelers is Wi-Fi – here wefind a service that can generate revenue through multiple means.On-board Wi-Fi access can be sold to a passenger pre-flight in thebooking path, but the same passenger might opt into a travelinsurance bundle that includes Wi-Fi access at their destinationthrough a partnership with a third-party Wi-Fi provider. Byproviding the traveler with what he or she perceives as oneancillary service, the airline has earned a commission from twothird-party entities.

Commission based profitsThe key to growth potential in the example of offering Wi-Fi is itscommission-based nature. While many compulsory fees arelevied on-line, for example checked baggage charges, these feesdo not present a growth opportunity. Commission-basedancillaries have continuous potential as they are based onchanging customer desires and can be used to sell numerousproducts and services from numerous external companies. In thecase of Wi-Fi access, the demand is more pronounced than, forexample, the ability to book a hotel room but value remains atthe heart of commission-based ancillaries, and commission-basedancillaries remain at the heart of on-line sales.

The SITA leisure traveler survey cited earlier found that 38 percent of fliers booked their hotel rooms through an airlinewebsite, an increase of 17 basis points on 2009. This means thatat least one of the ‘big three’ ancillary revenues (hotel, car hire,travel insurance) is still enjoying substantial growth exclusivelythrough the on-line channel. Airlines need to focus on growthareas such as this to optimise their on-line revenues in addition toexpanding their commission-based offerings.

One next-generation ancillary offering to have generatedsignificant excitement involves a flexible ‘concierge’ service. Thisprovides travelers with a hotel, restaurant, event locator, taxi andtransfer reservations, access to a doctor for non-emergencymedical care abroad, and assistance re-scheduling in the event ofdisrupted travel. Here is a programme designed to strip theanxiety out of travel, and airlines – once the very source of thatanxiety – are earning a commission providing it!

There are many similar innovations, from weather insurance to‘bundled’ ancillaries (for example covering many types of travelinsurance). Others apply a retail model to the in-cabin shoppingexperience, while others still collaborate with airports and travel-related agencies to provide service options at every step in thejourney. Each of these has a strong on-line component and mostrely on position within the booking path to work effectively.

Mobile web technology Having the right ancillary revenue stream is clearly paramount toincreasing on-line sales. In today’s environment, however, it isinstructive to look at how the on-line channel is evolving andhow airlines can best position themselves to take advantage of it.

Most conversations about the on-line channel presuppose the consumer uses a computer. This supposition is aging. Thepopularity of Smartphones and tablet computers has given rise toa plethora of mobile applications. Mastering the presentation ofon-line services through mobile technology is vital to forming asuccessful on-line sales strategy.

For airlines, this means optimising the website for mobile use,incorporating new aspects to its content, and making sales moreconducive to mobiles. Airlines should be first to capitalise onmobile web technology as the industry is primed for mobile sales;travelers are by definition less able to access the web – so airlinesshould be rushing to meet them.

Airlines will do well to incorporate more forward-looking tacticsinto their overall web strategies, primarily the effective tracking andmanagement of customer data and the automatic presentation ofadditional high-adoption-potential offerings. This technology isalready available and waiting to be used by the industry.

Success is reliant on mastering the basics while still embracing thenext big developments. Airlines must welcome commission-basedancillaries as these are the only on-line revenue streams with bonafide growth potential. New and value-driven ancillaries should alsobe examined, including bundled services and high-demand,consumer-centric services. And crucially, airlines should lookforward to the next wave of technology created by the evolutionof Smartphones. Only those airlines flexible enough to accomplishall these prerequisites will be able to create a competitiveadvantage for themselves both now and in the future.

“

”

Airlines will do well to incorporate more

forward-looking tactics into their overall web

strategies, primarily the effective trackingand management of customer data and the

automatic presentation of additional high-adoption-potential offerings.

AFM73_Online Sales_AFM73 18/05/2011 11:55 Page 35


TRADING, LEGAL & FINANCE: 777

FOR FINANCIERS OF COMMERCIAL AIRCRAFT, THERE AREimportant differences between financing smaller, moreprolific aircraft – such as the 737 or A320 Family – and larger,

more expensive aircraft – like the A330, A340, A380, 747, 767,787 and 777. The majority of airline routes are served usingsmaller jets as passengers are typically airborne for under twohours. Also, schedules are built around a frequency of serviceprimarily designed to appeal to the business traveller, whichdictates the use of smaller aircraft so load factors remain highenough to generate satisfactory yields. A notable exception iswhen serving high densities of traffic between two major destin-ations. Such city-pairs are best served using widebodied aircraft.

Ascend indicates that there are around 1,600 operators of today’s22,700 commercial aircraft. While over 17,000 are single-aislesoperated by more than 1,400 operators, there are only 5,000widebodied aircraft flown by fewer than 500 operators. Oncesubdivided by aircraft size, one might reasonably conclude thatthe market for widebodied aircraft is considerably less liquid asthere are fewer remarketing opportunities.

The principal risk of financing such aircraft is that a default mayoccur. IATA believes that airlines worldwide lost $9.9bn in 2009,made $16bn in 2010, and will see this reduced to around $8.6bnin 2011. As a result, it is generally perceived that the risk of airlinedefault has diminished compared to two years ago.

It can be argued that widebodied aircraft operators haveincreasingly better credit, meaning there is less chance of defaultand more stability in aircraft values. However, the high capital cost,high transition costs and reduced remarketing opportunitiesassociated with widebodied aircraft suggest that the severity ofany default would be much greater for a single-aisle type.Appraisers’ base and market values implicitly assume an aircraft inhalf-life maintenance condition is ‘market-ready’, but it isimportant that financiers and investors do not underestimate theup-front costs of maintenance and cabin reconfiguration requiredto achieve this ‘market-ready’ status. The value of the aircraft isone thing, but the value to the seller may slide by many millionsof dollars because of these transition costs.

Competitive positionThe 777 would become remarkable for being the first twin-engine aircraft capable of serving routes over 7,000nmi. However,Boeing had to compete with two major aircraft manufacturers –Airbus and McDonnell Douglas. All manufacturers believed themarket needed an aircraft capable of seating around 300passengers in three classes to replace and expand the market atthat point served by the ageing DC-10 and L-1011 tri-jet.

Few large aircraft programmes have enjoyed thefairytale success of the 777. Over time, various airlinescommented that the 747 was “too big” or that the 767-300ER was “too small”. So in the late 1980s, theindustry welcomed the prospect of a new aircraft typethat was – in true Goldilocks tradition – ‘just right’. Butfinding favour from airlines is not enough – they mustwin over the financial and investment community ifthey are to command good liquidity and value in themarket. Simon Finn, SVP, aviation finance at DVB Bankgives his detailed financial analysis of the aircraft type.

AFM73_financing 777_AFM73 18/05/2011 10:34 Page 36



FINANCING THEFAMILY

Airbus split the market into long-range and regionalwidebody offerings. The result was the A330-300 and A340,which shared the same fuselage cross-section as thepreceding A300/A310 Family of widebodies. However,wing, systems and engines were all new, giving the newaircraft the range and efficiency required to enter the newmarket segment with the MD-11.

Airbus believed that twin-jet economics suited widebodiesfor flights that averaged 3,000 to 4,000nmi, a surprisingconclusion given the consortium’s A300/A310 develop-ment history. For the long-range market, Airbus selected atraditional four-engine solution. Hindsight suggests thatthis was not the optimal decision but it is easy to forgetthat airlines and regulators were unconvinced by the useof twin engine aircraft for long-range flights. Also, bychoosing the CFM56-5C to power the A340, Airbusbelieved it had calculated a weight advantage over thetwin-engine solution. However, the A340’s climbperformance and cruise speed would eventually prove tobe a competitive disadvantage and four-engine

maintenance costs would also have their effect on theaircraft’s operating economics.

Although Boeing’s board had authorised the 777programme in 1989, the competing aircraft had enteredservice while Boeing was still determining the design.Boeing had planned to deliver two variants of the initial777 series, followed by a longer-range development. Thefirst of the two variants was to supply what Boeing calledthe ‘A market’ and would replace DC-10-10 and L-1011-1aircraft, as well as satisfy growth demand. The ‘B market’demand would be for an A340 competitor in the long-range market. In the early 1990s, Boeing had alreadyspoken publicly on the possibility of stretching its Amarket aircraft for its Asian customers. Unlike thecompetitors, the 777 would be an all-new design – newfuselage, new wings (offered with a folding wingtipoption never selected by the airlines), new General Electric(GE), Pratt & Whitney (P&W), and Rolls-Royce powerplantsand Boeing’s first commercial implementation of a fly-by-wire flight control system.




These features and the essential certification for Extended TwinEngine Operations (ETOPS) would make the 777 an expensivedevelopment programme but ultimately these decisions wouldreward Boeing with strong overall market share.

There is further competition. Airbus offers the A350XWB type. The-900 series will offer long-range capability for 314 passengers andthe -1000 version will be smaller than the largest 777 series aircraftbut with arguably better economics. Boeing has postulatedanother 787 series called the -10, which would be approximatelythe same size as the 777-200 Series and might also therefore,bleed market share away from the 777. In fact, given the con-siderable efficiencies of the new 787, even the smaller 787-9 mayoffer seat-mile costs that make it a competitor to the 777-200ER.

The 777-200The 777-200A was the original name for the A market 777offering, now known as the 777-200. It entered commercialservice with United Airlines in June 1995. Boeing marketed thisinitial offering with either two-class seating for 375 passengers orthree-class seating for 305 passengers. A variety of weightschedules was developed with the lowest schedule offering amaximum take-off weight (MTOW) of 506,000lb for a range of4,100nmi and the highest MTOW of 535,000lb giving a range ofup to 5,210nmi.

To date, relatively few 777-200 aircraft have been remarketed –a process that is further complicated by Boeing’s decision to offerengines from all three major manufacturers on the initial 777Family. The fleet of just 87 777-200 aircraft with only 12operators would be a tough remarketing prospect but asoperators of one original equipment manufacturers’ (OEM)engines are usually unwilling to accommodate the expense ofintroducing a second OEM’s product, sellers are left targeting amarket that is split between the three OEMs, not all of whichoperate the same engine type. Otherwise, they may try to expandthe operator base by attracting a new operator.

Boeing’s 777-200 Increased Gross Weight (IGW) was envisagedto serve the B market and offer competition against the A340-300 and MD-11. If the design choices for the 777 may havehindered its success in the A market against the mid-range A330-300, the all-new wing, engines and fuselage seemed to lend along-term advantage to the 777 once the long-range marketswere the target.

Boeing presented an aircraft capable of seating 301 passengersin three classes. The IGW variants featured MTOWs ranging from580,000lb to 632,500lb with corresponding variation in rangefrom around 5,800nmi to 7,300nmi. Later developments of the777 wing and structure led to further evolution of the weightschedules, until an ultimate MTOW of 656,000lb was offered,extending the range of the aircraft to over 7,700nmi. Boeingsubsequently renamed all versions of the 777-200 featuring anMTOW of 580,000lb or more as the 777-200 Extended Range(ER). This enormous variation of weights and capabilitieshighlights the flexibility of the 777s design. The new weights alsodemanded more powerful engines to facilitate runway andaircraft climb-out performance.

Today, with most orders for the 777-200ER seemingly placed,Rolls-Royce appears to have won the engine OEM market sharebattle from GE, with P&W having the smallest share. Operatinglessors were more confident of 777-200ER liquidity and BOCAviation, GECAS and ILFC have all ordered the type over thecourse of its programme.

Very few MD-11 passenger aircraft are listed in the table above,as following the merger of McDonnell Douglas and Boeing,operators lost confidence in the type and market values collapsed.The majority of the MD-11 fleet was converted to freighters.From DVB’s perspective, passenger configured MD-11s are theleast liquid of the types shown. For all their efficiency andflexibility, remarketing of the 777-200ER suffers from thedecision to offer a tri-source engine supply from each of themajor manufacturers. This disadvantage must be weighedagainst the greater popularity and perceived efficiency of the777-200ER fleet, of which few are stored and for which a smallorder backlog still exists.

Many banks have withdrawn from the sector and many thatremain prefer to contemplate business on a credit basis. In bettertimes, an asset-based lender would prefer to finance the 777-200ER than the A340-300, as many Airbus operators are thoughtto be examining fleet replacement plans. With fuel pricesescalating, the economics of the 777-200ER make it lessvulnerable to early retirement. Clearly, some care over theairframe-engine combination is advisable as there are so fewoperators. This will present something of a challenge forremarketing. Avoiding too much exposure to a single operator’slarge fleet is desirable.

The 777-300In March 1993, Boeing was rumoured to be in talks with CathayPacific to switch some of its orders from the shorter A market777-200 to a new larger or stretched 777. Boeing was thoughtto have held further discussions with ANA, JAL and Thai AirwaysInternational. The talks resulted in the launch of the 777-300Series featuring a fuselage stretch that increased the marketedthree-class seating capacity to 368 passengers or 451 passengersin a two-class layout. A commensurate increase in belly holdcargo also came, which pushed the maximum optional MTOW to660,000lb giving the -300 a range of just over 6,000nmi. As withthe shorter -200 Series, all three engine OEMs offered power forthe 777-300 but, airlines selected only the PW4098 and Trent895, deeming the GE90 unsuitable.

The precedents for high-capacity regional aircraft are mostlyfrom the Asian market. It was unlikely that the 777-300 wouldattract broad market acceptance, nor did it. Today, just sevenairlines (all operating into Asia) carry the small global populationof 60 777-300s. Ascend data shows that ILFC, BOC Aviation and Pembroke collectively own eleven Rolls-Royce-powered 777-300 aircraft. While the specifics of the transactions are notknown, it is unlikely that there is significant residual value riskfor the lessors who, rather like a bank, are likely to rely on the credit of the lessee and the integrity of the long-termlease revenue.

The 777-300 is unusually difficult for its small operator base toreplace. The niche nature of high-capacity regional services doesnot encourage manufacturers to build aircraft specifically forsuch range and ‘misusing’ long-range aircraft is theoreticallyunattractive as operating costs are sub-optimal for the airlines.While harbouring no illusions regarding the liquidity or resalevalue of the 777-300 fleet, it seems the aircraft remainsfinanceable largely due to its airline operators. Without this, theaircraft would rely on its asset characteristics alone and as themarket indicates, these are not sufficient to qualify the 777-300for pure asset-based finance. Finally, while it has been possibleto compare other 777s with competitors on the basis of relativeseat-mile costs, comparable seat capacity and range capability,when measured in this way, the 777-300 has no competition.


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JSA_Update_PrintAd_UBM_Final_out.pdf 5/13/11 11:53:41 AM


In June 1999, Boeing announced it was studying longer rangederivatives of the 777 and on February 29, 2000 the boardapproved the launch. To achieve the additional range, theaircraft would feature aerodynamic improvements in the form of6.5ft raked wingtips to reduce takeoff field length, increaseclimb performance and reduce fuel burn. A new and improvedgear was required to cope with the heavier weight schedulesand a semi-levered gear would enable the 777-300ER to takeofffrom fields with a limited runway length. In a departure from itsprevious position on the 777 Family, Boeing gave GE sole enginesupplier status on the second generation aircraft, upsettingairlines that had selected P&W or Rolls-Royce on first generationversions but gaining a formidable risk-sharing partner for thelonger-range 777 programme. For its part, GE developed a newversion of its GE90 able to supply either 110,100lb or 115,300lbthrust depending on airframe requirements.

The first of this new generation, the 777-300ER entered servicewith Air France on April 29, 2004. The 777-300ER offers a three-class seating capacity of 365 passengers and a range of upto 6,240nmi for the basic version and up to 7,930nmi forthe version with the maximum optional weight schedule.


It seems overly generous, based on today’s data, to describe the comparison as competition. One unkind (and unnamed)commentator was moved to describe the A340-600 as “road-kill”. While undoubtedly harsh, it is hard to deny the dominanceof the 777-300ER. The picture may change given the A350XWBprogramme and the undefined nature of the A350-1000.However, Boeing and GE have worked hard to achieve thisdominance and are likely to introduce ongoing improvements tomaintain the competitiveness of the 777-300ER. Without thecomplication of a multi-source engine supply, the 777-300ER hasmuch greater remarketing potential than any preceding 777Family member and thanks to a significant fuel burn advantageover the A340-600, its sales volume has been sufficiently robustto suggest better-than-average residual value retention goingforward. As well as depth, the 777-300ER market is also broadwith 34 operators having this version either in service or on order.With 101 777-300ER orders, Emirates’ fleet concentration maybe an issue for financiers. Some caution over advance levels mayalso be advisable, as pricing seems to have been highly variabledepending on the nature of customers and their orders activity.

The 777-200LRThe 777-200 Long-range (LR) is marketed by Boeing with a threeclass seat capacity of 301 passengers and a range of up to8,240nmi for the basic version and up to 9,450nmi for theversion with the maximum optional weight schedule. The 777-200LR entered commercial service with Pakistan InternationalAirlines in February 2006.

Perhaps it pales in contrast to the larger 777-300ER butsomehow the orderbook for the 777-200LR variant disappoints.The payload/range performance results from incorporating thestructural changes made for the -300ER to the shorter airframeof the -200 Series. But unsurprisingly, airlines were alreadypleased with the performance of the very flexible -200ER andwhile many did not feel the need for the additional range orbelly-freight payload advantage of the -200LR, relatively fewroutes demanded the performance of the new 777-200LR. Usingthe -200LR on routes that can also be served using the -200ER isanother ‘no-no’ as the LR’s extra structure and weight mean thatthe -200ER may be more economical.


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Another complication is that more routes support use of the larger777-300ER and as long-range routes offer limited opportunity forfrequency (airport slot timing is often key), demand for the -200LRlooks likely to remain constrained. Airbus’ competitor offering –the A340-500 – found a similar indifference for ultra-long-rangecapability but also suffered more noticeably in the financial crisis assome airlines cancelled orders or realised that their requirement forthe A340-500 no longer remained. Neither of these is easy tofinance on the basis of the asset alone but the A340-500 suffersfrom four-engine economics in an increasingly environmentallyconscious world, whereas the 777-200LR benefits from itsassociation with the overall success of the twin-engine 777 Family.As with the A market versions of the original 777 Family, the 777-200LR is not considered suitable for pure asset-based finance but may be considered in combination with an appropriateairline/lessor credit. Further pressure will come from the A350-900and 787-9 which are expected to offer seat-mile costs that will bevery competitive for the -200LR. Lastly, the 777-200LR may have

more potential for a life-extending role-change to cargo usage inthe future provided that market appetite for conversions does notdwindle in the long-term and provided Boeing’s conversion costscan be economically attractive.

The A market 777s are an entirely different proposition. Theseaircraft are generally not suited to pure asset-based finance asthey rely on strong market conditions for their liquidity and value.In a weak market, the aircraft’s ongoing appeal to investors and financiers is largely dependent on the creditworthiness of the counterparty. The smaller quantity of A market 777 sales,condensed over a shorter period also suggests that the A marketversions will have a shorter serviceable life than the more popularand long-range versions. As the quality of the operator base is socrucial to maintaining widebodied aircraft values, the olderaverage age of the A market fleet is already prompting some ofthe original operators to divest numbers of these aircraft fromtheir fleets. The resulting value volatility may well reduce the levelof advance in financings and prompt more conservative residualvalue assumptions for lower balloon positions at the end of theloan term.

So thanks to the 777-300ER in particular, the 777 Family’s fairy-tale continues and while dark murmurings about the possibleimpact of the A350-1000 have begun, whether or not the fairy-tale eventually becomes ‘Grimm’ will depend on Boeing’s ability to protect the Family with technological advancementsand by ensuring that the 777-300ER and future derivativesmaintain their competitiveness. For today’s long-range marketsthough, the 777-300ER blend of range and capacity remains‘just right’ and the aircraft is a firm favourite with financiers oflarger aircraft.

As the quality of the operator base is so crucial to maintaining widebodied

aircraft values, the older average age of the A market fleet is

already prompting some of the original operators to divest numbers of these

aircraft from their fleets.

“

”


Scary, isn’t it?

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FLEET FINANCE – Deals reportAircraft transactions March 1 to 19, 2011

Boeing737-2q8 Nas Air Georgian Star Intl 21960 Jt8d-15 1980-02 Sale-L/Back 2011.03.02737-2t5 Georgian Star Intl Ave.Com 22395 Jt8d-15 1980-12 Sold 2011.03.01737-232 Global Aircraft Solutions Pamir Airways 23077 Jt8d-15a 1983-10 Returned 2011.03.19737-3t0w Orient Thai AS & L LLC 23375 CFM56-3b1 1986-02 Leased 2011.03.01737-306 GS/MC Leasing Air Slovakia 23545 CFM56-3b1 1987-01 Returned 2011.03.01737-3s3 Velvet Sky Safair 24059 CFM56-3b2 1988-01 Sub-Leased 2011.03.20737-322 Midamerican Aerospace Wells Fargo 24250 CFM56-3c1 1988-11 Sold 2011.03.14737-322 Chanchangi Airlines Jordan Aviation 24662 CFM56-3c1 1990-04 Sub-Leased 2011.03.01737-3q8 Viva Aerobus Celestial Aviation 24962 CFM56-3c1 1991-09 Leased 2011.03.17737-3m8 Aero North Intl Southern Aircraft 25040 CFM56-3b2 1991-02 Sold 2011.03.10737-3m8 Kalstar Aviation Aero North Intl. 25040 CFM56-3b2 1991-02 Leased 2011.03.10737-33a Trans Air Congo Wells Fargo 25138 CFM56-3b2 1991-10 Leased 2011.03.02737-33a Aircraft & Engine Support Air Austral 27452 CFM56-3b1 1994-11 Sold 2011.03.09737-33a Wells Fargo Aircraft & Engine Support 27452 CFM56-3b1 1994-11 Sold 2011.03.21737-36m Danube Wings Ames-Camo 28333 CFM56-3c1 1996-07 Leased 2011.03.01737-4u3 Indonesian Air Force Garuda 25714 CFM56-3c1 1993-09 Sold 2011.03.09737-4u3 Indonesian Air Force Garuda 25719 CFM56-3c1 1993-10 Sold 2011.03.09737-4y0 GE Capital Pamir Airways 26088 CFM56-3c1 1993-05 Returned 2011.03.19737-4q8 Tombo Aviation Merpati Nusantara 26280 CFM56-3c1 1992-02 Returned 2011.03.01737-430 Flyfirefly ACS Leasing 27001 CFM56-3c1 1992-06 Leased 2011.03.08737-48e ILFC Air One 27632 CFM56-3c1 1997-01 Returned 2011.03.18737-4m0 Celestial Garuda 29206 CFM56-3c1 1998-07 Returned 2011.03.13737-4m0 Celestial Garuda 29207 CFM56-3c1 1998-09 Returned 2011.03.13737-53a Aircraft & Engine Support Air Austral 24877 CFM56-3b1 1990-10 Sold 2011.03.09737-522 Apollo Aviation Air Ivoire 25001 CFM56-3c1 1990-10 Returned 2011.03.16737-524w Utair Aviation BLF 28905 CFM56-3c1 1997-08 Leased 2011.03.21737-54k Hokkaido Intl ANAWings 28993 CFM56-3c1 1998-09 Sub-Leased 2011.03.15737-7bk CIT CIT 30617 CFM56-7b22 2001-03 Sold 2011.03.01737-7bkw Aeromexico CIT 30617 CFM56-7b22 2001-03 Leased 2011.03.18737-73v BOC Easyjet 32421 CFM56-7b20 2003-07 Returned 2011.03.01737-73v BOC Easyjet 32422 CFM56-7b20 2003-07 Returned 2011.03.10737-7bdw Southwest Airlines Boeing 36726 CFM56-7b24 2011-02 Delivered 2011.03.18737-76jw Air Berlin Boeing 36874 CFM56-7b24 2010-11 Delivered 2011.03.08737-700w Boeing Business Jets Boeing -1 CFM56-7b27 - Cncl-Order 2011.03.01737-85p Aircastle Air Europa 28382 CFM56-7b26 1999-03 Returned 2011.03.07737-81q Aeromexico Wells Fargo 29052 CFM56-7b26 2000-04 Leased 2011.03.10737-883 SAS Moskovia Airlines 30468 CFM56-7b26 2000-09 Returned 2011.03.21737-8bkw CIT CIT 30620 CFM56-7b26 2001-10 Sold 2011.03.07737-8bkw Sun Country Airlines CIT 30620 CFM56-7b26 2001-10 Leased 2011.03.07737-8q8w Caribbean Airlines ILFC 30661 CFM56-7b26 2002-07 Leased 2011.03.11737-8q8w Air Jamaica Caribbean Airlines 30661 CFM56-7b26 2002-07 Sub-Leased 2011.03.12737-8q8w Unknown ILFC 30671 CFM56-7b27 2003-03 Sold 2011.03.18737-86nw Celestial Pegasus Airlines 32732 CFM56-7b26 2002-01 Returned 2011.03.19737-8k5w Tabarak Aviation Travel Service Airlines 32907 CFM56-7b27b1 2002-03 Sub-Leased 2011.03.21737-8asw Okay Airways Wells Fargo 33557 CFM56-7b24 2003-12 Leased 2011.03.21737-8asw Airline Taimyr RBS 33559 CFM56-7b24 2004-01 Leased 2011.03.11737-8asw Okay Airways Wells Fargo 33560 CFM56-7b24 2004-01 Leased 2011.03.21737-8asw RBS Ryanair 33561 CFM56-7b24 2004-02 Returned 2011.03.11737-8asw RBS Ryanair 33562 CFM56-7b24 2004-02 Returned 2011.03.14737-8few IGAF VBNC 34167 CFM56-7b26 2005-03 Sold 2011.03.18737-8few Virgin Blue IGAF 34167 CFM56-7b26 2005-03 Leased 2011.03.18737-8few Bali Australia VBNC 34168 CFM56-7b26 2005-04 Sold 2011.03.18737-8few Virgin Blue Bali Australia Leasing 34168 CFM56-7b26 2005-04 Leased 2011.03.18737-8f2w Anadolujet Turk Hava Yollari 34409 CFM56-7b26 2006-03 Sub-Leased 2011.03.01737-8f2w Anadolujet Turk Hava Yollari 34410 CFM56-7b26 2006-04 Sub-Leased 2011.03.01737-8f2w Anadolujet Turk Hava Yollari 34412 CFM56-7b26 2006-05 Sub-Leased 2011.03.01737-8f2w Anadolujet Turk Hava Yollari 34413 CFM56-7b26 2006-05 Sub-Leased 2011.03.01737-8k5w Thomson Airways Sunwing Airlines 35134 CFM56-7b27b1 2006-12 Returned 2011.03.15737-8k5w Thomson Airways Sunwing Airlines 35138 CFM56-7b27b1 2008-01 Returned 2011.03.17737-86nw GE Capital AMC Airlines 35220 CFM56-7b26 2007-09 Returned 2011.03.01737-85cw Xiamen Airlines Boeing 37153 CFM56-7b26 2011-02 Delivered 2011.03.08737-8k5w TUI Boeing 37253 CFM56-7b27b1 2011-02 Delivered 2011.03.01737-8k5w Amentum Capital TUI 37253 CFM56-7b27b1 2011-02 Sold 2011.03.01737-8k5w Thomson Airways Amentum Capital 37253 CFM56-7b27b1 2011-02 Leased 2011.03.01737-8k5w TUI Boeing 37254 CFM56-7b27b1 2011-02 Delivered 2011.03.21737-8k5w ACG TUI 37254 CFM56-7b27b1 2011-02 Sold 2011.03.21737-86jw RBS Air Berlin 37743 CFM56-7b26 2009-02 Sold 2011.03.05737-86jw Izmir Airlines RBS 37743 CFM56-7b26 2009-02 Leased 2011.03.05737-86nw Brookdell Celestial 37884 CFM56-7b26 2010-03 Sold 2011.03.11737-86nw Norwegian Air Brookdell 37884 CFM56-7b26 2010-03 Leased 2011.03.11737-86nw GE Capital Boeing 38015 CFM56-7b26 2011-02 Delivered 2011.03.04737-86nw Xiamen Airlines GE Capital 38015 CFM56-7b26 2011-02 Leased 2011.03.04737-8jpw Norwegian Air Boeing 39005 CFM56-7b26 2011-02 Delivered 2011.03.08


AIRCRAFT DEALS REPORT

Equipment New Owner/ Previous Owner/ Serial No. or No. of Date of Manf orModel Operator Operator (Orders)/(Options) Engine Model First Exp Deliv Equipment Date

AFM73_Deals _AF&NM Special Feature 18/05/2011 10:05 Page 44



737-8jpw SMFL Aircraft Corp Boeing 39005 CFM56-7b26 2011-02 Sold 2011.03.08737-8jpw Norwegian Air SMFL Aircraft Corp 39005 CFM56-7b26 2011-02 Leased 2011.03.08737-8jpw Norwegian Air Boeing 39006 CFM56-7b26 2011-02 Delivered 2011.03.17737-8jpw DY2 Boeing 39006 CFM56-7b26 2011-02 Sold 2011.03.17737-8jpw Norwegian Air DY2 39006 CFM56-7b26 2011-02 Leased 2011.03.17737-8ctw ACG Boeing 39092 CFM56-7b26 2011-02 Delivered 2011.03.15737-8ctw Westjet ACG 39092 CFM56-7b26 2011-02 Leased 2011.03.15737-8fzw Babcock & Brown Boeing 39319 CFM56-7b26 2011-02 Delivered 2011.03.02737-8fzw MAS Babcock & Brown 39319 CFM56-7b26 2011-02 Leased 2011.03.02737-824 Continental Airlines Boeing 39998 CFM56-7b26 2010-12 Delivered 2011.03.16737-824 Continental Airlines Boeing 39999 CFM56-7b26 2011-01 Delivered 2011.03.18737-89lw Air China Boeing 40026 CFM56-7b26 2011-02 Delivered 2011.03.15737-8h6w MAS Boeing 40131 CFM56-7b26 2011-02 Delivered 2011.03.15737-8knw Flydubai Boeing 40243 CFM56-7b26 2011-02 Delivered 2011.03.17737-8v3w Copa Airlines Boeing 40666 CFM56-7b26 2011-02 Delivered 2011.03.03737-82rw Pegasus Airlines Boeing 40724 CFM56-7b26 2011-02 Delivered 2011.03.09737-8jpw Norwegian Air Boeing 40867 CFM56-7b26 2011-02 Delivered 2011.03.01737-8jpw SMFL Aircraft Corp Boeing 40867 CFM56-7b26 2011-02 Sold 2011.03.01737-8jpw Norwegian Air SMFL Aircraft Corp 40867 CFM56-7b26 2011-02 Leased 2011.03.01737-8q8w ILFC Boeing 33 CFM56-7b26 2012-08 Ordered 2011.03.07737-8fverx US Navy Boeing 40595 CFM56-7b27 2010-12 Delivered 2011.03.02737-9gperw Lion Air Boeing 37279 CFM56-7b27 2011-02 Delivered 2011.03.08737-924erw Continental Boeing 11 CFM56-7b27 2012-01 Ordered 2011.03.02747-446d Wells Fargo JAL 25214 Cf6-80c2b1f 1991-09 Sold 2011.03.15747-446d Wells Fargo Wells Fargo 25214 Cf6-80c2b1f 1991-09 Sold 2011.03.18747-446 Aersale JAL 26346 Cf6-80c2b1f 1991-12 Sold 2011.03.16747-412 Orix Singapore Airlines 27068 Pw4056 1993-09 Returned 2011.03.10747-412 Wells Fargo Wilmington Trust 27068 Pw4056 1993-09 Sold 2011.03.10747-446 Wells Fargo JAL 27645 Cf6-80c2b1f 2000-11 Sold 2011.03.07747-89l Air China Boeing 5 Genx-2b67 2014-11 Ordered 2011.03.01757-230 Vim Airlines Air Bashkortostan 25439 Pw2040 1992-02 Returned 2011.03.11757-236 Wells Fargo Air Greenland 25620 Rb211-535e4 1992-03 Sold 2011.03.17757-28aetops ILFC Air Finland 25622 Rb211-535e4 1993-02 Returned 2011.03.09757-28aetops Guggenheim ILFC 25622 Rb211-535e4 1993-02 Sold 2011.03.11757-204bwetops Air Finland Allegiant Air 26963 Rb211-535e4 1992-03 Sub-Leased 2011.03.14757-23netops Airco Flycorp 30735 Rb211-535e4-B 2000-05 Sold 2011.03.01757-23netops Icelandair Airco 30735 Rb211-535e4-B 2000-05 Leased 2011.03.02767-246 Au7 JAL 23212 Jt9d-7r4d 1985-04 Sold 2011.03.09767-246 Dynamic Jetlease Au7 23212 Jt9d-7r4d 1985-04 Sold 2011.03.09767-2j6er Air Transport Intl Cargo Aircraft Mgmt 23307 Jt9d-7r4e4 1985-08 Leased 2011.03.01767-2eyertt Italian Air Force Boeing 33687 Cf6-80c2b6fa 2005-01 Sold 2011.03.11767-33aer Aerosvit Airlines Royal Brunei Airlines 25532 Pw4056 1992-06 Leased 2011.03.01767-33aer Aerosvit Airlines Royal Brunei Airlines 25534 Pw4060 1993-01 Leased 2011.03.12767-343er Condor GECAS 30009 Cf6-80c2b6f 1999-03 Leased 2011.03.01767-316erw LAN Argentina LAN 34628 Cf6-80c2b7f 2006-06 Leased 2011.03.01777-223er American Airlines Wells Fargo 31478 Trent892-17 2002-02 Sale-L/Back 2011.03.14777-3dzer Qatar Airways Boeing 38245 Ge90-115b 2011-02 Delivered 2011.03.17777-323er American Airlines Boeing 2 Ge90-115b 2013-02 Ordered 2011.03.17777-367er Cathay Pacific Boeing 10 Ge90-115bl2 2014-02 Ordered 2011.03.09777-3dzer Qatar Airways Boeing 2 Ge90-115b 2012-07 Ordered 2011.03.17AirbusA300b4-622r Wells Fargo JAL 730 Pw4158 1994-02 Sold 2011.03.10A300b4-622r JAL Signet Lease 836 Pw4158 2002-05 Lease-Buyout 2011.03.10A300b4-622r Maximus Air Cargo JAL 837 Pw4158 2002-07 Sold 2011.03.02A310-304 Saga Airlines Ariana Afghan Airlines 562 Cf6-80c2a2 1990-11 Returned 2011.03.01A318-111 Avianca Wells Fargo 2358 CFM56-5b8/P 2004-11 Leased 2011.03.08A318-111 Avianca Wells Fargo 2367 CFM56-5b8/P 2004-12 Leased 2011.03.18A319-112 Avianca Wells Fargo 2662 CFM56-5b6/P 2006-01 Leased 2011.03.04A319-112 Karthago Airlines Koralblue Airlines 3171 CFM56-5b6/P 2007-06 Returned 2011.03.03A319-112 Eden Leasing Koralblue Airlines 3171 CFM56-5b6/P 2007-06 Returned 2011.03.03A319-112 Germania Unknown 3818 CFM56-5b6/3 2009-02 Leased 2011.03.03A319-111 Whitney Leasing Armavia 3834 CFM56-5b5/3 2009-03 Repossessed 2011.03.01A319-111 Easyjet Airbus 4624 CFM56-5b5/3 2011-02 Delivered 2011.03.09A319-111 Easyjet Unknown 4624 CFM56-5b5/3 2011-02 Sale-L/Back 2011.03.09A319-132 Turk Hava Yollari Airbus 4629 V2524-A5 2011-02 Delivered 2011.03.11A319-111 Easyjet Airbus 4635 CFM56-5b5/3 2011-03 Delivered 2011.03.16A319-111 Easyjet Unknown 4635 CFM56-5b5/3 2011-03 Sale-L/Back 2011.03.16A319-111 Easyjet Airbus 4640 CFM56-5b5/3 2011-03 Delivered 2011.03.15A319-115x Genting Singapore French Air Force 1485 CFM56-5b7/P 2001-05 Sold 2011.03.01A319-115x Senegal Air Force French Air Force 1556 CFM56-5b7/P 2001-08 Sold 2011.03.01A319-115lr S7 Airlines ILFC 2279 CFM56-5b7/P 2004-08 Leased 2011.03.03A319-115x Comlux Aviation Airbus 4622 CFM56-5b7/3 2011-03 Delivered 2011.03.11A319-115x Comlux Malta Comlux Aviation 4622 CFM56-5b7/3 2011-03 Leased 2011.03.11A319-100x Unknown Airbus 1 2015-07 Ordered 2011.03.01A320-214 AFS Philippine Airlines 1210 CFM56-5b4/P 2000-03 Returned 2011.03.08A320-214 Celestial AFS 1210 CFM56-5b4/P 2000-03 Sold 2011.03.08A320-214 Hello Celestial 1210 CFM56-5b4/P 2000-03 Leased 2011.03.08A320-214 Celestial Air Jamaica 1390 CFM56-5b4/P 2000-12 Returned 2011.03.09A320-231 Sky Airline Wells Fargo 179 V2500-A1 1991-08 Leased 2011.03.07



Source: OAG Fleet iNET, 2011

A320-214 Interjet ILFC 2048 CFM56-5b4/P 2003-06 Leased 2011.03.02A320-232 Cyprus Airways CIT 2334 V2527-A5 2004-11 Leased 2011.03.11A320-232 CIT China Southern Airlines 2343 V2527-A5 2004-12 Returned 2011.03.09A320-212 Donbassaero Aercap 235 CFM56-5a3 1991-08 Leased 2011.03.01A320-231 Myanmar Airways Cyprus Airways 295 V2500-A1 1992-01 Sold 2011.03.02A320-232 Wizz Air Hungary Wizz Air Bulgaria 3562 V2527-A5 2008-07 Returned 2011.03.01A320-231 Khors Air Wells Fargo 362 V2500-A1 1992-09 Leased 2011.03.18A320-231 SAS Wells Fargo 369 V2500-A1 1992-09 Sold 2011.03.14A320-214 Alafco Wataniya Airways 3739 CFM56-5b4/3 2008-12 Returned 2011.03.16A320-214 Alafco Wataniya Airways 3791 CFM56-5b4/3 2009-02 Returned 2011.03.16A320-216 Orix Unknown 3831 CFM56-5b6/3 2009-03 Sold 2011.03.09A320-216 Alitalia Orix 3831 CFM56-5b6/3 2009-03 Leased 2011.03.09A320-211 Travel Service Airlines Smartlynx Airlines 384 CFM56-5a1 1992-11 Sub-Leased 2011.03.12A320-216 Orix Unknown 3885 CFM56-5b6/3 2009-04 Sold 2011.03.09A320-216 Alitalia Orix 3885 CFM56-5b6/3 2009-04 Leased 2011.03.09A320-214 ILFC Wataniya Airways 3907 CFM56-5b4/3 2009-05 Returned 2011.03.16A320-214 Alafco Wataniya Airways 4049 CFM56-5b4/3 2009-09 Returned 2011.03.16A320-231 Unknown IAI 405 V2500-A1 1993-01 Leased 2011.03.01A320-232 Aegean Airlines Olympic Air 4094 V2527-A5 2009-11 Sub-Leased 2011.03.01A320-214 Easyjet Easyjet 4196 CFM56-5b4/3 2010-02 Sub-Leased 2011.03.11A320-214 Aerventure Wataniya Airways 4235 CFM56-5b4/3 2010-02 Returned 2011.03.16A320-214 Aerventure Wataniya Airways 4304 CFM56-5b4/3 2010-05 Returned 2011.03.16A320-214 Aerventure Wataniya Airways 4411 CFM56-5b4/3 2010-08 Returned 2011.03.16A320-232 Hainan Airlines Airbus 4482 V2527-A5 2011-01 Delivered 2011.03.02A320-214 Spring Airlines Airbus 4499 CFM56-5b4/3 2011-02 Delivered 2011.03.09A320-214 Gulf Air Pembroke 4502 CFM56-5b4/3 2010-11 Sale-L/Back 2011.03.02A320-214 China Southern A/lines Airbus 4507 CFM56-5b4/3 2011-03 Delivered 2011.03.15A320-214 Gulf Air Pembroke 4541 CFM56-5b4/3 2010-12 Sale-L/Back 2011.03.02A320-214 Avianca Airbus 4599 CFM56-5b4/3 2011-02 Delivered 2011.03.01A320-214 Wells Fargo Airbus 4599 CFM56-5b4/3 2011-02 Sold 2011.03.01A320-214 Avianca Wells Fargo 4599 CFM56-5b4/3 2011-02 Leased 2011.03.01A320-214 Air France Airbus 4601 CFM56-5b4/3 2011-02 Delivered 2011.03.09A320-214 Air France ALC 4601 CFM56-5b4/3 2011-02 Sale-L/Back 2011.03.09A320-214 Air France Airbus 4604 CFM56-5b4/3 2011-02 Delivered 2011.03.09A320-214 Air France Safe N03 4604 CFM56-5b4/3 2011-02 Sale-L/Back 2011.03.09A320-214 ACG Airbus 4610 CFM56-5b4/3 2011-02 Delivered 2011.03.08A320-214 Bank Of Utah Airbus 4610 CFM56-5b4/3 2011-02 Sold 2011.03.08A320-214 Virgin America Bank Of Utah 4610 CFM56-5b4/3 2011-02 Leased 2011.03.08A320-232 Jetblue Airways Airbus 4612 V2527-A5 2011-02 Delivered 2011.03.07A320-214 Air Berlin Airbus 4613 CFM56-5b4/3 2011-02 Delivered 2011.03.01A320-214 ICBC Air Berlin 4613 CFM56-5b4/3 2011-02 Sold 2011.03.02A320-214 China Southern Airlines ICBC 4613 CFM56-5b4/3 2011-02 Leased 2011.03.02A320-232 Indigo Airbus 4614 V2527-A5 2011-02 Delivered 2011.03.03A320-232 Indigo MCAP Europe 4614 V2527-A5 2011-02 Sale-L/Back 2011.03.03A320-232 Qatar Airways Airbus 4615 V2527-A5 2011-03 Delivered 2011.03.10A320-214 ACG Airbus 4616 CFM56-5b4/3 2011-02 Delivered 2011.03.17A320-214 Bank Of Utah Airbus 4616 CFM56-5b4/3 2011-02 Sold 2011.03.17A320-214 Virgin America Bank Of Utah 4616 CFM56-5b4/3 2011-02 Leased 2011.03.17A320-214 Swiss Intl Airbus 4618 CFM56-5b4/3 2011-02 Delivered 2011.03.18A320-232 ILFC Airbus 4619 V2527-A5 2011-02 Delivered 2011.03.15A320-232 Sichuan Airlines ILFC 4619 V2527-A5 2011-02 Leased 2011.03.15A320-232 Wizz Air Airbus 4621 V2527-A5 2011-02 Delivered 2011.03.16A320-232 Wizz Air HKAC 4621 V2527-A5 2011-02 Sale-L/Back 2011.03.16A320-232 Wizz Air Airbus 4628 V2527-A5 2011-02 Delivered 2011.03.17A320-232 Wizz Air HKAC 4628 V2527-A5 2011-02 Sale-L/Back 2011.03.17A320-214 Air Berlin Airbus 4631 CFM56-5b4/3 2011-03 Delivered 2011.03.14A320-214 Air Berlin Celestial 4631 CFM56-5b4/3 2011-03 Sale-L/Back 2011.03.14A320-214 Belair Airlines Air Berlin 4631 CFM56-5b4/3 2011-03 Sub-Leased 2011.03.14A320-214 Easyjet Airbus 4636 CFM56-5b4/3 2011-03 Delivered 2011.03.09A320-214 AWAS Airbus 4641 CFM56-5b4/3 2011-03 Delivered 2011.03.17A320-214 AWAS Airbus 4641 CFM56-5b4/3 2011-03 Sold 2011.03.17A320-214 Frontier Airlines AWAS 4641 CFM56-5b4/3 2011-03 Leased 2011.03.17A320-214 Jazeera Airways Airbus -25 CFM56-5b4/3 - Cncl-Order 2011.03.01A321-211 Royal Air Maroc Atlas Blue 2076 CFM56-5b3/P 2003-10 Returned 2011.03.01A321-232 Air China Airbus 4617 V2530-A5 2011-02 Delivered 2011.03.08A321-231 Macquarie Free Bird Airlines 771 V2533-A5 1998-01 Returned 2011.03.03A321-211 GATX A321 Partners Aigle Azur 823 CFM56-5b3/P 1998-04 Returned 2011.03.01A321-232 Turk Hava Yollari Airbus 10 V2530-A5 2014-01 Ordered 2011.03.08A330-223hgw Korean Air Lines Airbus 1203 Pw4170 2011-02 Delivered 2011.03.07A330-243 Echo Leasing One Zamrid 365 Trent772b-60 2000-10 Sold 2011.03.04A330-243 Virgin Blue Echo Leasing One 365 Trent772b-60 2000-10 Leased 2011.03.04A330-343e Iberworld Airlines Aerolinea Principal Chile 1097 Trent772b-60 2010-02 Returned 2011.03.07A330-343e Virgin Atlantic Airbus 1206 Trent772b-60 2011-02 Delivered 2011.03.15A330-343e Virgin Atlantic Aercap 1206 Trent772b-60 2011-02 Sale-L/Back 2011.03.15A330-343e China Airlines Virgin Atlantic 1206 Trent772b-60 2011-02 Sub-Leased 2011.03.15A330-342 ILFC Dragonair 132 Trent772-60 1996-03 Returned 2011.03.04A330-342 Air Transat ILFC 132 Trent772-60 1996-03 Leased 2011.03.04A330-342e Cathay Pacific Airbus 15 Trent772-60 2014-02 Ordered 2011.03.15A380-841 Lufthansa Airbus 061 Trent970-84 2010-08 Delivered 2011.03.15





AIRPORTS & ROUTES: Regional airports

THE GOOD NEWS TENDS TO BE PRETTY MARGINALthese days. According to Eurocontrol, European Organ-isation for the Safety of Air Navigation, the total number of

flights in Europe grew last year, but only by 0.8 per cent to 9.49million – and there were 175,000 cancellations, 100,000 of thema result of airspace closures due to volcanic ash. The AirportsCouncil International (ACI) Europe, however, recorded a drop of0.2 per cent in movements, though the number of passengersincreased by a reasonably robust 4.2 per cent.

Association of European Airlines (AEA) members, who had seentheir passenger numbers slump from nearly 363 million in 2007to fewer than 326 million in 2009, enjoyed something of arecovery, but last year’s figure of 335 million passengers was onlyslightly better than the total for 2005. No doubt the figure wouldhave been better but for the effects of wobbling economies,volcanic eruptions and heavy snow toward the end of the year,compounded by industrial action that the AEA recognises wasoften a reaction to national austerity measures implemented inresponse to the recession.

Members of the European Regions Airlines Association (ERAA)suffered from the same adverse factors. Its airlines carried 73.9million passengers in 2007, but just 70.6 million in 2009, beforerecovering last year to reach 72.4 million. Passenger numbers atmost regional airports told a similar story, making the achievementsof those that bucked the trend all the more remarkable.

At the same time, 20 years after deregulation opened the way forlow-cost carriers (LCCs) to operate continent-wide, new nationaltaxes are starting to distort the competitive landscape withpotentially alarming consequences for those facing cross-bordercompetition from rivals in tax-free jurisdictions. And despite apromising start to the year, with passenger numbers up 7.5 percent in January and 5.3 per cent in February at the 173 airportsit tracks, ACI Europe highlights other challenges to airports’commercial activities.

Probably most serious are the political turmoil on the other side ofthe Mediterranean and the associated escalation in oil prices. Lessobvious is the effect of airlines enforcing single-bag rules. Underthese guidelines, passengers must pay extra to take airportpurchases onboard with consequent damage to airports’ retailincome. Additionally, despite the pressure to reduce their chargesto airlines, costs such as security, air traffic and safety are drivenby regulation, and airports generally have little control overthese costs.

REGIONAL AIRPORTSUCCESS STORIES

Airports have been blighted by natural hazards and economic crises and just a few of Europe’sregional airports have managed to consistently increase traffic through these hard times.Looking ahead, they are further threatened by national passenger taxes however, some regionalairports are managing to hold tight to their market. Bernard Fitzsimons reports on the industry.

Government supportBrussels South Charleroi Airport recorded more than 30 per centgrowth in both 2009 and 2010, taking its passenger total fromjust short of three million in 2008 to nearly 5.2 million last year;traffic in the 1Q of this year was up a further 22 per cent. Theairport’s growth has gone hand-in-hand with that of Ryanair,which launched its first route to Dublin in 1997 when the airporthandled just 200,000 passengers. The number had grown to800,000 by 2001 when the Irish carrier made Charleroi its firstmainland base. By the start of this year, Ryanair had 13 737-800sbased at the airport and Jetairfly another two, along with Wizzairand Jet4you.

So how did they do it? David Gering, the airport’s commercialaviation, PR and communication director, points to the newterminal, which opened three years ago and built after carefulconsultation with the low-cost airlines. The government ofFrench-speaking Wallonia, which owns the airport, wanted aterminal to match their needs, he says, and one that was alsopleasant for passengers without undue opulence.

“They came up with this shoe-box sized terminal which is veryefficient,” Gering says. “If you use web check-in and you don’tneed to check luggage, you can get from the parking lot in frontof the terminal to your seat in the aircraft in 15 minutes.”Operationally, it was designed to support a 25-minuteturnaround.

The incumbent operators, in turn “offer exactly what thecatchment area wants,” he says. “The catchment area for a low-cost airport is about two hours’ drive. Within that two-hour drivezone around Charleroi we have 15 million inhabitants... Thatgives us a very stable pattern of incoming and outgoingpassengers, which is obviously good for airlines. That stimulatesthem to develop further, and then you get more passengers. Weattract the airlines with low rates – thanks, among other things,to the very cost-efficient new terminal – and make sure theairport is very accessible and an easy and pleasant surroundingfor passengers so they come back.”

Noise is unlikely to be a constraint in the future, Gering says, theWalloon government having decided 20 years ago to invest inCharleroi as a passenger hub while developing Liege for cargo.

“The government has made sure that the conditions for peopleliving around those airports are acceptable,” he explains. Thegovernment has spent “huge amounts of money” to either buyresidents’ houses and offer them an alternative place to live, or


AFM73_Regional Airports_AFM71 18/05/2011 11:59 Page 47

insulate them thoroughly. “We have a curfew so during the nightwe are closed… It will never be a 24 hour operation here.”However, he adds that due to the government, it has had veryfew issues with local inhabitants.

The airport installed a Cat III instrument landing system two yearsago. “That was a big improvement for the airport becauseCharleroi is in a very foggy area,” Gering comments. Plansinclude an underground railway station offering a 25-minuteconnection to Brussels Midi, with its Eurostar and Thalesinternational high-speed rail services, plus direct links to Colognein Germany as well as Liege in Belgium. That is still eight yearsaway, he says: “It’s a huge project because at the beginning ofthe 20th century this airfield was built in the middle of a swamp,so it’s technically very complicated.”

In the meantime, Gering says, Charleroi is adapting to the arrivalof less frill-free airlines: “In a way, we are doing the opposite ofmost major European airports, which have traditional carriers andtraditional infrastructure. They have to adapt to welcome LCCsand that is not easy if you don’t have new infrastructure and ifyou have to modify your whole organisation. We have a terminal,which was designed for LCCs. The people who work here havebeen used to Ryanair for 10 years, so they know the low-cost wayof doing things.”

The TUI Group, however: “offers a whole different product thanRyanair, so now we have to adapt to the other side and build aVIP lounge and have personal assistance for people withcorporate travel cards. But it’s an interesting development andwe’re quite happy to go that way.”

One potential cloud on the horizon is passenger taxes. “That is anightmare scenario which crops up once in a while,” Gering says.

“The entire Belgian travel industry, everybody together, stood upand lobbied very fiercely to show the government that it [taxesproposed two years ago] was not a good idea. We had theadvantage that we could show them how things went inScandinavia and in Holland, and in the end they decided not togo ahead.”

Recent rumours suggest these proposals may resurface. “It’sdefinitely something very negative for the development of theairport and if such a tax would be imposed in Belgium thenobviously Brussels Charleroi would feel the impact very quicklyand very fiercely,” he believes.

Weeze and the great tax debateAn example of just how quickly and fiercely can be seen a little over100 miles to the northwest of Charleroi at Weeze, in the populousand prosperous German state of North Rhine-Westphalia. Weeze isanother airport that has seen Ryanair grow its presence and hashad a succession of record years with passenger numbers climbingto 2.9 million in 2010. The former Laarbruch military air base, justover 50 miles northwest of Dusseldorf, was acquired by AirportNetwork, a subsidiary of Netherlands–based Marigot Holding in2001. It started commercial operations in 2003 with three dailyRyanair flights to London.

Marketing manager, Holger Terhorst, says Ryanair is clearly themain reason for the impressive growth of passenger volumes atWeeze. Having launched the first flight in May 2003, the airlinestarted a base operation in 2007, which grew to nine aircraft by2010. Of the 10.6 million passengers to have used the airport,approximately 9.5 million were Ryanair customers. The carriercurrently bases seven based aircraft at the airport and flies to 55destinations each week.

The airport attracts operators with a catchment area of 10 millionliving within 30-minutes, including the cities of Duisburg andDüsseldorf in Germany plus Arnhem, Nijmegen and Venlo in theNetherlands. “We offer an extremely professional service at alow-cost price level,” Terhorst says. “Our passengers love theatmosphere of a small airport with its short distances fromparking to the aircraft.”

Ryanair had threatened to pull out of Weeze in 2009 after thestate higher administrative court ordered restrictions on itsoperating hours. That threat was withdrawn when the ruling wasoverturned. But the passenger tax introduced in Germany at thebeginning of the year will hit the airport hard, says Terhorst:


AIRPORTS & ROUTES: Region airports

Weeze is just one regional airport affected by taxes



The impact of the passenger tax was, of course, compounded bythe economic crisis. But originating traffic declined at the main hub,Amsterdam Schipol, while transfer traffic continued to rise. Andwhile the tax had a minimal impact on the supply of flights offeredat Groningen and Rotterdam, further to the north and east,Eindhoven saw its growth restricted and Maastricht Aachen Airport,near the borders to both Germany and Belgium, lost a substantialnumber of flights.

KiM surveyed 3,000 people about their choice of airports. A fifth ofthem were unaware of the tax’s existence, but 14 per cent said ithad changed their travel behaviour, with half cancelling a proposedflight or choosing to travel by car or train and the others opting forforeign airports, the most popular being Düsseldorf, Weeze andBrussels. Although Dutch travellers had already been using thoseairports in increasing numbers, the institute estimates that the taxsaw an additional one million passengers fly from foreign airports.

The big question is, will they come back? It is too soon to say, KiMadmits the trend toward using German and Belgium airportspredated, but was accelerated by the tax, and passengers who havediscovered the alternatives and had a good experience are likely tocontinue using foreign airports. But improved supplies of flights,lower costs and improved accessibility to Dutch airports wouldencourage them to revert to Dutch airports.

Denmark was one of the first countries to implement a passengertax, but the DKK75 ($15) levy saw Danish passengers defecting toMalmö and Gothenburg, Sweden, and the negative effects on thecountry’s economy and tourism industry led the government tohalve it in 2006 and drop it altogether in 2007.

Aalborg Airport in northern Jutland was a prime beneficiary.Aaalborg-Copenhagen is the country’s busiest domestic route, anda resurgence in domestic traffic continued through the recessionwith traffic growing 7.5 percent in 2009 and another 19.5 per centin 2010 to exceed 1.34 million. The majority travelled on the 48daily flights offered by SAS, Cimber Sterling and Norwegianbetween Aalborg and the capital, and while the number of businesstravellers remained static last year, the number of leisure travellersdoubled.

On-line marketing manager, Martin Andersen, says there is a simplereason for Aalborg’s success in recent years, summed up in the age-old saying, “Know your market.” The airport carries out extensivemarket analysis in co-operation with a polling agency, he says: “Thisshowed us our market potential and gave us a clear idea of theareas where we could maximise our growth with the least amountof resources. We are not quite done picking the lowest-hangingfruits yet, but when we are, market analysis will show us where tocontinue our marketing efforts and hence our growth strategy.”

Aalborg is owned by the six major municipalities in the region. Itsgoal, Andersen says, is to maintain its position as the third largestairport in Denmark, and to develop its route map to facilitategrowth in passenger numbers from 2010’s 1.35 million to twomillion in 2015. “Later this year, we will start expanding our physicalsurroundings so that we can handle all the passengers we expect togain in the coming years,” he adds. When the work is finished,Aalborg will have an annual capacity of around 2.6 millionpassengers.

“We have seen increasing passenger numbers in times that havebeen characterised by a financial crisis and a subsequent recession,”Andersen adds. “We expect an easier market, when this has passed.”But there is still that inescapable cloud on the horizon: “Anincreased tax on airline tickets sold in Denmark, which may getpassed politically, will have a negative effect on our passengernumbers.”

“There is no tax at Dutch airports and low-cost tickets areparticularly affected by the tax of €8 ($11) per departing passenger.Ryanair has cancelled flights to 13 destinations in response. Weanticipate 2.3 million passengers in 2011, which means asignificant loss after the 2.9 million we saw in 2010. Germanpoliticians say the tax will be re-checked in 2012 – we do hope thatthe negative economic effects of the tax will lead to its abolition.”

Borderline decisionsThe Netherlands was the source of 52 per cent of Weeze’s trafficin 2010. But the Dutch, after imposing their own passenger tax of€11.25 ($15.85) on short-haul flights in 2008, dropped it the following year after finding the €300m ($423m) it raised wasdwarfed by costs to the overall economy of more than €1bn($1.41bn).

One airport that stands to benefit is Eindhoven, across the Dutchborder just 35 miles to the west of Weeze. Ryanair, Wizz Air andTransavia all operate from Eindhoven, which has seen passengernumbers increase from 1.63 million in 2008 to more than 2.14million last year. The abolition of the passenger tax in 2009 led tothe launch of several new routes, and scheduled traffic grew 30per cent in 2010 as the number of destinations increased from 23to 32. This year the airport expects to see overall growth of afurther 15 per cent.

On the other hand, a recent report by the Netherlands Institutefor Transport Policy Analysis (KiM), part of the Dutch ministry ofinfrastructure and the environment, queries whether Dutchtravellers who have discovered German airports will returnbecause of the tax. It says the three most important factorsinfluencing passengers’ choice of airport are time spent on pre-flight transport, frequency of flights and ticket prices. Pre-flightcosts such as parking charges and the duration and directness offlights also have an influence. But there are less rational factorsas well, such as habitual behaviour, unfamiliarity with possiblealternatives, risk aversion behaviour and failure to access all theinformation regarding alternatives.

AIRPORTS & ROUTES: Regional airports

Aalborg airport claims its success is due to knowing the market


AIRPORTS & ROUTES: Route development

THE GROWTH POTENTIAL OF REGIONAL AIRPORTS ISsubstantial. Between 2005 and 2011, 57 per cent of newcapacity in Western Europe was added at regional airports,

primarily small and mid-sized regional airports. Clearly, thissegment of the aviation industry warrants close attention.

It is important to note that regional airports are those not withinthe hub city, which is often but not always the capital city. Forexample, Frankfurt is the hub city within Germany. As such, allGerman airports except Frankfurt and Hahn are consideredregional airports.

There is a clear difference in the relative size of various Euro-pean regional air markets. Germany, Spain and Italy have adecentralised, federal type structure. As a result, regional airportsaccount for 70 per cent or more of overall scheduled capacity.These countries include major regional airports (or airportsystems) such as Munich, Dusseldorf, Berlin, Barcelona and Milan– all of which have much in common with some primary airports.

In contrast, the regional air market is less prevalent in morecentralised countries such as France and the UK (about 40 percent of the overall scheduled market). Smaller countries also tendto have more limited regional markets as the wider marketcannot sustain multiple airports. Exceptions to this includecountries where geography makes surface modes of traveluncompetitive, such as Norway.

GOING LOCAL: REGIONALROUTE DEVELOPMENT

Regional travel is a major part of Europe’s aviation sector. About 80 per cent of scheduled intra-European air passengers start or end their flight at a regional airport. Of these, more than one-third fly between two regional points. Jonathan Naylor, director at the aviation consultancy,AviaSolutions, discusses the market.

The pros and cons of regional marketsRegional airports serve their local market in a variety of differentways. They typically undergo a similar evolutionary pattern as theirpassenger base grows. Firstly, they provide links to the capital city, which in turn offers onward connections. These are oftensupplemented by charter services to popular sun and ski resorts.

Secondly, they secure direct international services to a widerrange of primary airports, including alternative hubs. Leisureroutes can also be introduced on a more regular, scheduled basis.Lastly, they develop long-haul routes to major cities, for exampleNew York, or places where there are strong cultural links tospecific markets.

Airlines are attracted to regional markets for numerous reasons.Often, competition from other airlines is relatively limited.However, significant demand may already exist on currentlyunserved routes – for example, passengers may be travelling viaa transfer hub or by road or rail to alternative airports.Additionally, regional airports can typically offer slot availability atall times of the day as they are relatively uncongested airports.This lower level of traffic also means quick turnaround times andlow airport charges.

However, there are challenges. These include greater seasonalityand lower yields compared to primary markets. The power offrequent flier programmes and corporate travel policies alsomean some passengers will continue to use indirect routings ortravel by road, rail or sea to less convenient airports – particularlyin long-haul markets.


AFM73_Regional Routes_AFM71 18/05/2011 12:05 Page 50


AIRPORTS & ROUTES: Route development

A more general challenge for domestic (and other short sector)routes is the combination of improving rail networks (mainly inFrance, Spain, Germany, Italy and the UK) and additional taxation(notably within the UK, Germany, Austria). Regional airports areoften disproportionately impacted as better rail networks have thetwin impact of capturing a share of the local travel market andimproving access to primary airports, thus impacting other routes.

Departure tax on domestic routes is charged at both ends, typicallyrepresenting a higher proportion of the fare than for internationalroutes. Also, regional airports tend to have a higher proportion ofroutes where travel by road, rail or sea is a viable alternative.

The role of LCCs Over the last 10 to 15 years, the low-cost carrier (LCC) segmenthas become an increasingly important player across the Europeanaviation sector. The regional aviation market is no exception. LCCsor hybrid airlines often play a key role in a regional airport’sevolution. It is not generally in a flag carrier’s interest to developservices that bypass their hub and therefore cannibalise existingconnecting traffic. Furthermore, flag carriers often lack the aircraftequipment and cost base to profitably serve regional markets with a lower yield.

Traditional full-service and regional airlines continue to be a vitalpart of regional aviation in many parts of Europe. Nevertheless,recent growth has been delivered predominantly by the LCC andhybrid / leisure airline sectors.

Hybrid airlines can also be appropriate for regional markets. Themixed full-service / low-cost model has the ability to serve thebusiness market effectively. Depending on the nature of the route,hybrid airlines offer high frequency, some frills (such as loungesand frequent flyer programmes) and tend to avoid less convenientsecondary airports. Air Berlin and Flybe are two examples of largehybrid airlines that serve the regional market extensively,competing both on price and convenience for business passengers.

With their point-to-point focus, LCCs bring a competitive costbase and brand presence at both ends of the route, as such theyare a natural fit for many regional markets. The low fares andstrong marketing associated with this sector can lead tosubstantial stimulation of traffic on new routes.

New routes are the principal driver of growth at regional airportsand attracting and retaining the right airline for a particularmarket can be the key differentiator between rapid traffic growthand stagnation. Between 2005 and 2011, the majority of growthcame from the introduction of new services, with pre-existingroutes providing only 14 per cent of growth. This poses someinteresting questions about the relative importance of demandand supply-side factor. Boeing suggests that some 20 to 40 percent of traffic growth is derived from supply-side factors, and it islikely that the figure for regional markets is higher.

Regional airport growth rates tend to be higher than those forprimary markets. There is usually significant scope for marketstimulation from improved schedule offerings due to new routes,better frequencies or lower fares. Improved schedules also enablethe airport to capture more of its local catchment traffic, reducing‘leakage’ to nearby airports with more developed networks. Betterair access can also lead to the development of in-bound tourism.

Opportunities for airlines and airportsThe key opportunity for airlines looking to develop their regionalnetwork is to identify regional markets that are growing Forexample, cumulative demand growth can lead to a tipping pointat which previously unserved routes become commercially viable.

Other opportunities may come from capturing traffic fromcompeting local airports that currently have a stronger routenetwork. Alternatively, there may be potential with the rightproduct and regional stakeholder support, to achieve a step-change in in-bound tourism.

The long-haul market is under-represented at regional airportsand for obvious reasons. Nevertheless, long-haul growth hasbeen higher at regional airports than primary ones. New aircrafttechnology, such as Boeing’s 787, has the potential to transformthe economics of long, thin routes.

Airports can do much to give themselves the best possible chanceto attract the right airlines for their market. Firstly, the airportneeds to understand the market potential – and which airlinesare best placed to help them exploit it. This can be anuncomfortable process and it may require some difficult andfinely judged decisions.

For example, in seeking to attract LCCs that may deliver strongtraffic growth, there is a risk that existing, full-service and charterairline traffic will be cannibalised. The current airport cost basemay not support airport charges at the level needed to securemajor LCCs.

Once a strategy has been developed, the next step is to approachairlines. The characteristics of specific regional markets are notnecessarily clear to airlines. Robust and transparent trafficprojections, based on a clear demonstration of the size andquality of existing demand, are essential.

The structure and level of airport tariffs and start-up incentivesmust be aligned with the needs of different airline sectors whilemaking financial sense to the airport.

Finally, engagement with local stakeholders can be verypowerful. This demonstrates commitment by the region as wellas proving potential airlines with practical help. It can be vital inpersuading an airline to develop services and, perhaps mostimportantly, help any subsequent routes to be successful. Suchsupport can include financial aid for the first two to three yearsof a new route; joint marketing of new routes in conjunction withtourism authorities; commitments from local businesses for aminimum number of seats per flight; surveys of travel patternsfor local businesses; and organising dialogue with key travelagents, including corporate travel agencies.

AFM73_Regional Routes_AFM71 18/05/2011 12:05 Page 51

European airlines will spend $14bn on MRO this year. Butwhat types of work are they spending the money on andhow will the balance of expenditure change over the next10 years? Bernard Fitzsimons answers these questions.

AS THE EUROPEAN FLEET GROWS OVER THE NEXTdecade, the profile of support will also change. To helpMROs and OEMs anticipate requirements in the years

ahead, the OAG Fleet and MRO Forecast Suite analyses thecontinent’s fleet and predicts changes in its composition and theresulting impact on MRO expenditure.

The forecast suggests that the turbine-powered commercialaircraft fleet will grow from its current level of just under 6,000to more than 7,800 by 2020. This year, the fleet will cost $14bnto maintain but growth across the various segments of MROactivity will not be consistent. Engine maintenance, for example,will more than double in value from the 2011 figures butairframe maintenance will decline and other areas will seerelatively consistent if modest growth throughout the decade.

Fleet dynamicsThe 2011 installed base of 5,900 commercial jets is dominated bynarrowbodies. The A320 family accounts for around 30 per centof the total fleet, with 892 A320s, 580 A319s (including 42corporate jet versions), 313 A321s and 40 A318s (six of whichare CJs). The 979 737NGs, 603 737 Classics and 19 business jetsamount to another 27 per cent of the total, and there are also203 757s and 142 MD-80/90s.

Substantial regional jet fleets include 176 BAe146s, 175E135/140/145s, 159 CRJ-100/200s, 133 CRJ-700/900/1000s,125 E190/195s, 68 Fokker 100s, 65 E170/175s and 40 Fokker70s. Notable widebody fleets are the 218 A330-200/200F/300s,188 777s, 184 747-400s plus 26 747 Classics, 177 A340s, 150767s and 43 MD-11s.

This year, fleet growth is expected to reach nearly six per cent andnew arrivals will outnumber retired aircraft by 10 times. There willbe just 38 aircraft retirements, including 12 MD-80s and no morethan a handful of any other type.

Two thirds of the new arrivals will be 737NGs (at 145 aircraft) andA320 family members (111). Bombardier will enter about 25 CRJ-700/900/1000 25 aircraft; Embraer 22 E190/195s and Sukhoi 12SSJ-100 Superjets.

The number of retirements will rise for the remainder of thedecade, apart from a slight dip in 2017, as the number of ageingaircraft grows in line with the rate of deliveries two or threedecades earlier. Altogether, says OAG, the 10 years through 2020will see 1,262 retirements, with the annual number passing 50next year, 150 in 2015 and 200 in 2019.

The 3,198 new deliveries anticipated over the same period willresult in a 2020 fleet of 7,836 aircraft, almost one third biggerthan today’s. But the distribution of new deliveries will not bespread evenly throughout the decade: while there will be morethan 350 deliveries annually in 2011 to 2013, the number fallsbelow 350 in each of the next two years to fewer than 300 ineach of the following five.


MAINTENANCE OPERATIONS: MRO Europe

AFM73_MRO_AFM71 19/05/2011 12:57 Page 52



EUROPEAN

MROFORECAST

2011-2020 European MRO spend by expense category

Source: OAG

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

EngineMaintenance

Airframe HeavyMaintenance

Line Maintenance

Modifications

Components(warranty included)

$

AFM73_MRO_AFM71 19/05/2011 12:57 Page 53



0

50

100

150

200

250

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

0

50

100

150

200

250

300

350

400

450

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Implications to MROIn terms of expenditure, engine maintenance will account for 34per cent of Europe’s $14bn total MRO spend, or $4.82bn, in2011. Line maintenance is worth $3.06bn, components –including warranty work – $2.83bn, airframe heavy maintenance$2.2bn and modifications $1.1bn.

Going forward, the OAG figures suggest that the amount spenton engine maintenance will grow in each of the next two yearsto reach $5.8bn in 2013. A dip in 2014 will be followed byfurther strong growth to reach a peak of $7.6bn in 2018, thenanother decline over the next two years will reduce the spend to$7.2bn in 2020, representing a compound annual growth rate of4.8 per cent.

Yen-Pu Paul Chen, OAG Aviation’s business development director,explains that it is natural for the engine and airframe spend tofluctuate over the years. “We forecast on the basis of events suchas engine overhauls and airframe heavy maintenance visits, andeach model of airframe or engine has different intervals.”

For the PW4000 that powers the 747-400 for example, there arefour different shop visit intervals, Chen says: “The first one couldbe 17,000 flight hours and the next three may be every 15,000flight hours. Depending on how utilisation changes over the next10 years and the age of the aircraft, you will see ups and downsin the planning horizon.”

The age of aircraft is another factor, he says. “Typically, duringthe last year of an aircraft’s service, airlines and operators don’tdo any engine overhaul for that aircraft. That’s one of the factorswe put in when we model this forecast.” Another factor is theinterval between an aircraft’s delivery and the need for heavymaintenance or engine overhaul: “Typically, if there’s a deliverypeak of certain aircraft then five or six years later there will be apeak in terms of engine maintenance.” So, the anticipated spikein deliveries of the 737NG and A320 around 2012 to 2013 willbe followed by a peak in engine maintenance costs in 2018.

On top of that, Chen points out, every airline is different. “Not allairlines go by the same maintenance intervals recommended bythe OEM,” he says. To account for the variations, OAG Aviationrelies on a group of OEMs and maintenance providers. “Theyprovide their input according to their experience in terms

intervals, shop visits and the cost of labour andmaterials. Then we compile this input, decide

which numbers we want to use andput them into the model.”

Source: OAG

Source: OAG

AFM73_MRO_AFM71 18/05/2011 11:50 Page 54

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Line maintenance, the OAG forecast suggests, will grow graduallyfrom its current level of $3bn to reach $3.9bn by 2020. That moreor less reflects the 33 per cent growth in the overall fleet size,Chen says, as line maintenance costs are typically carried out in-house and include many minor events rather than the occasionalmajor effort required for airframe or engine overhaul.

“In line maintenance we cover the transit or turn checks, the dailyovernight checks, the weekly checks and the A checks,” Chensays. “Line maintenance typically has the highest share of in-house [work] as opposed to being outsourced, because it is stillconsidered a core activity among airlines.”

The cost is a function of utilisation, he says, “and the intervals areso short that it’s not going to cause any major ups and downs.For an A320, the C check is every 18-20 months, whereas Achecks are roughly every 500 hours, which is about every monthto six weeks, so you’re not going to see any major fluctuations.”

As well as the number of aircraft, line maintenance requirementsare affected by fleet utilisation, he adds: “If the airplanes are notflying enough then you don’t have a lot of A checks. As long asit’s flying you’re going to have overnight and weekly checks, thecalendar-based checks are going to be there no matter what, butthe frequency of flight hour-based checks will depend onutilisation – the more you fly the sooner you will incur the flighthour-based line maintenance activities such as A checks andtransit or turn checks.”

Utilisation of older types such as the MD-80, DC-9 and ERJ is falling,and the 50-seat regional jets are also flying less. But given equalutilisation there is little variation in the cost of line maintenance forolder or newer types, Chen says: “The overnight checks and turnchecks are a small amount of money, A checks across the board areat similar intervals. There are just a lot of activities.”

Components and modificationsThe value of component work, including warranty work, will growat a higher rate, exhibiting a compound annual growth rate (CAGR)of 3.9 per cent to overtake that of line maintenance by 2019. TheOAG forecast looks at components by Air Transport Association(ATA) chapter (ATA numbers provide a common referencingstandard for all commercial aircraft documents) and considers workoutside scheduled checks, so the spend is a function of reliability.Chen says: “Every once in a while it’s going to break and you’regoing to have to fix it, it’s all based on probability.”

The forecast covers 20 ATA chapters, he says, and in westernEurope the largest expense will come from ATA 32 (wheels andbrakes) followed by ATA 49 (auxiliary power units), ATA 73(engine fuel and control), in-flight entertainment components(which have no chapter), ATA 78 (thrust reverser) and ATA 34(navigation). Together, these six account for just over half of allcomponents spending. “Growth in expenditure on componentsshould be pretty constant,” Chen says.

The value of modifications will fluctuate as it trends upward,demonstrating a modest CAGR of 1.4 per cent. “In terms ofmodifications we cover five areas,” Chen says. The biggest isinterior modifications, with avionic and system modifications thesecond largest.

“Interiors are pretty pricey,” Chen comments. “Some first classseats could be $100,000 a piece, so interior modificationsaccount for the largest share of all the modifications.” Not allairlines upgrade their cabins on a regular basis, so the forecastaccounts for variations in airline policy, he says: “We segment theairlines and we look at each individually to predict when they’regoing to do it next.” Avionics modifications are usually the resultof regulatory mandates, and are consequently a function of thenumber of aircraft in service.

Then comes either in-flight entertainment (IFE) installation orpassenger to freighter conversion (P2F), both of which vary fromyear to year. “P2F is based on demand,” Chen says, whereas IFEupgrades tend to happen every few years depending onindividual airline policy. The final modifications activity is painting,which represents a relatively small spend.

OAG’s clients use the forecast primarily for strategic planning,Chen says. “Some are MRO providers, some are airframe, systemsor component OEMs, and they use the forecast for their strategicplanning typically once a year. They look at the future trends andsee where the opportunities may be or where the risks may be.”

He cites the hypothetical example of a company maintaining CF6engines for the DC-10: “The DC-10 is going to retire pretty soon.So if this company is an MRO provider that only does DC-10maintenance then they’re going to have to look to the future tosee how rapidly DC-10s are going to retire, how soon they’regoing to lose their business and, when that happens, what theyare going to do about it. Are they going to look for otheropportunities close to their current capability, or expand theircurrent capability to something else so that they can maintaintheir revenue streams?”

Western Europe is the second largest region after North Americain terms of MRO spend, he adds, but it has some distinctivecharacteristics. “The European airlines, their operation and theirbehaviours have differences from North America and Asia, butoverall the trends are very similar. The fleet composition may bedifferent, but overall the maintenance activities are quite similar.”

The most striking difference is the cost structure, he says. “If youlook at airlines that do their own maintenance, the cost is thehighest in the world,” he says. “If you go to some of the majorMRO providers in Asia, they all have a lot of business that comesfrom Europe and North America, whereas I don’t think a lot ofairlines in the US would outsource their maintenance work toEurope because of its cost structure. If you look at $40-50 perman-hour in Asia, you’re looking at $80 per man-hour in Europe.Nobody’s going to come to Europe for that.”

AFM73_MRO_AFM71 18/05/2011 11:50 Page 56

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Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks16/02/2011 4594 Airbus A320 210 (CFM) OE-LEH GE Capital Corp Niki Purch'd - sale/l.back on del16/02/2011 41039 BAE SYSTEMS (Jetstream) Jetstream 41 G-MAJP Eastern Airways Eastern Airways Purch'd off lease/fin term comp.16/02/2011 28901 Boeing 737 (CFMI) 500 Winglets N17640 BLF BLF Purch'd. Park'd16/02/2011 28901 Boeing 737 (CFMI) 500 Winglets N17640 Continental Airlines Continental Airlines Purch'd. Park'd16/02/2011 21790 Boeing 737 (JT8D) 200 Advanced ZS-SIT Outsourcing for Africa Africa Charter Airline Purch'd off lease/fin term comp.16/02/2011 7028 Bombardier (Canadair) CRJ RJ 200LR N403SW Bombardier Bombardier Services Corp Purch'd. Park'd16/02/2011 7029 Bombardier (Canadair) CRJ RJ 200LR N405SW Bombardier Bombardier Services Corp Purch'd. Park'd16/02/2011 561 Bombardier (de Havilland) Dash 8 300MPA JA728A Sojitz Avisys Japan Coast Guard Purch'd16/02/2011 14500978 Embraer ERJ-135 Legacy 600 P4-KUL Cortal Limited PremierAvia Purch'd16/02/2011 DC-868B Fairchild (Swearingen) Metro 23 N654AR EP Aviation EP Aviation Purch'd17/02/2011 4605 Airbus A319 130 (IAE) CC-BCC Bandurria Leasing LAN Airlines Purch'd - sale/l.back on del17/02/2011 4456 Airbus A320 210 (CFM) B-6737 ICBC Leasing China Southern Airlines Purch'd - sale/l.back on del17/02/2011 4589 Airbus A320 210 (CFM) F-HBAO Celestial Aviation Aigle Azur Purch'd - sale to SPC by lessor on del17/02/2011 4603 Airbus A320 230 (IAE) VT-IEA ORIX Aviation IndiGo Airlines Purch'd - sale/l.back on del17/02/2011 E2200 BAE SYSTEMS (HS) 146 200 G-BTVT BAE Systems BAE Systems Purch'd. Park'd17/02/2011 23375 Boeing 737 (CFMI) 300 Winglets N14324 AS&L AS&L Purch'd. Park'd17/02/2011 23375 Boeing 737 (CFMI) 300 Winglets N14324 Continental Airlines Continental Airlines Purch'd. Park'd17/02/2011 25138 Boeing 737 (CFMI) 300 N552MS Trans Air Congo Trans Air Congo Purch'd. Park'd17/02/2011 37252 Boeing 737 (NG) 800 Winglets D-ATUI Amentum Capital TUIfly Purch'd - sale/l.back on del17/02/2011 20279 Fokker 50 PK-ECD Sky Aviation Sky Aviation Purch'd17/02/2011 UE-395 Hawker Beechcraft 1900 D C-GWWK West Wind Aviation West Wind Aviation Purch'd18/02/2011 12300 Boeing (McDonnell-Douglas) DC-3 BT-67 C-GVKB Kenn Borek Air Kenn Borek Air Purch'd off lease/fin term comp.18/02/2011 22947 Boeing 737 (CFMI) 300 N307SW Infinity Trading & Solutions Infinity Trading & Solutions Purch'd. Park'd18/02/2011 25841 Boeing 737 (CFMI) 400 ZS-OTH Newshelf 1083 Kulula Purch'd - subject to lease18/02/2011 27204 Boeing 757 200 (P&W) N410JR Brickell Asset Management Brickell Asset MGMT Purch'd. Park'd18/02/2011 27204 Boeing 757 200 (P&W) N410JR Aerolease Aerolease International Purch'd. Park'd18/02/2011 19010 Bombardier (Canadair) CRJ1000 RJ 1000EL NextGen F-HMLF Constellation Brit Air Purch'd - sale/l.back on del18/02/2011 120160 Embraer EMB-120 Brasilia ER N919EM Phoenix Evernham Motorsports Purch'd - subject to lease18/02/2011 120195 Embraer EMB-120 Brasilia N109EM Phoenix Evernham Motorsports Purch'd - subject to lease21/02/2011 4584 Airbus A320 230 (IAE) ZK-OJQ ALC Air New Zealand Purch'd - sale/l.back on del21/02/2011 25534 Boeing 767 300ER (P&W) V8-RBH Pennylane Aerospace MGMT Capital Purch'd. Park'd22/02/2011 4570 Airbus A321 230 (IAE) PT-MXH Nomura Babcock & Brown TAM Linhas Aereas Purch'd - sale/l.back on del22/02/2011 48486 Boeing (McDonnell-Douglas) MD-11 Freighter (M) (P&W) N643FE FedEx FedEx Purch'd. Park'd22/02/2011 49658 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N873GA Sunrise Asset MGMT Allegiant Air Purch'd - sale/l.back22/02/2011 53467 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N877GA Sunrise Asset MGMT Allegiant Air Purch'd - sale/l.back22/02/2011 39046 Boeing 737 (NG) 800 Winglets LN-DYK JSA International Norwegian Purch'd - sale/l.back on del22/02/2011 39412 Boeing 737 (NG) 800 Winglets LN-NOR AWAS Norwegian Purch'd - sale to SPC by lessor on del22/02/2011 633 Bombardier (de Havilland) DHC-6 TO 300 N6161Q Twin Otter Support Services Twin Otter Support Services Purch'd22/02/2011 3165 Fairchild/Dornier 328JET PK- Aero North International Aero Nusantara Indonesia Purch'd22/02/2011 UC-121 Hawker Beechcraft 1900 C-1 ZS-PKX Plenthan Investments CemAir Purch'd23/02/2011 4595 Airbus A320 230 (IAE) N607NK BOC Aviation Spirit Airlines Purch'd - sale to SPC by lessor on del23/02/2011 49643 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N874GA Sunrise Asset MGMT Allegiant Air Purch'd - sale/l.back23/02/2011 49761 Boeing (McDonnell-Douglas) MD-80 88 N401NV Sunrise Asset MGMT Allegiant Air Purch'd - sale/l.back23/02/2011 49764 Boeing (McDonnell-Douglas) MD-80 88 N403NV Sunrise Asset MGMT Allegiant Air Purch'd - sale/l.back23/02/2011 49765 Boeing (McDonnell-Douglas) MD-80 88 N404NV Sunrise Asset MGMT Allegiant Air Purch'd - sale/l.back24/02/2011 729 Airbus A300 620R (P&W) N3729 Aircraft Solutions (Offshore) Universal Asset MGMT Purch'd. Park'd24/02/2011 2918 Airbus A318 110 (CFM) F-GUGN FI Maple Limited Air France Purch'd - sale/l.back24/02/2011 1195 Airbus A330 340HGW (RR) G-VSXY AerCap Virgin Atlantic Airways Purch'd - sale/l.back on del. Park'd24/02/2011 20175 Boeing (McDonnell-Douglas) DC-3 C-47TP N145RD Priority Air Charter Priority Air Charter Purch'd24/02/2011 49555 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N416NV Sunrise Asset MGMT Allegiant Air Purch'd - sale/l.back24/02/2011 49556 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N862GA Sunrise Asset MGMT Allegiant Air Purch'd - sale/l.back24/02/2011 49557 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N861GA Sunrise Asset MGMT Allegiant Air Purch'd - sale/l.back24/02/2011 53246 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N408NV Sunrise Asset MGMT Allegiant Air Purch'd - sale/l.back24/02/2011 53297 Boeing (McDonnell-Douglas) MD-80 81 N821TH Grandmax Group Orient Thai Airlines Purch'd - subject to lease. Park'd24/02/2011 7119 Bombardier (Canadair) CRJ RJ 200LR C-GGDW Bombardier Bombardier Purch'd. Park'd24/02/2011 110399 Embraer EMB-110 Bandeirante P1 N64CZ Piper East Wiggins Airways Purch'd. Park'd24/02/2011 110451 Embraer EMB-110 Bandeirante P1 N36AN Piper East Wiggins Airways Purch'd. Park'd24/02/2011 AC-617 Fairchild (Swearingen) Metro III N617BT Career Aviation Co Career Aviation Co Purch'd. Park'd24/02/2011 UE-142 Hawker Beechcraft 1900 D EP-828 Peruvian Army Peruvian Army Purch'd24/02/2011 UE-229 Hawker Beechcraft 1900 D N10675 Antrak Air Ghana Antrak Air Ghana Purch'd. Park'd24/02/2011 UE-229 Hawker Beechcraft 1900 D N10675 Rangeflyers Antrak Air Ghana Purch'd - sale/l.back. Park'd25/02/2011 0376 Airbus A320 230 (IAE) N376BV Undisclosed Undisclosed Purch'd - subject to lease. Park'd25/02/2011 45826 Boeing (McDonnell-Douglas) DC-9 15RC (stg 3 Hkits) N229DE Sierra American Corp Sierra American Corp Purch'd25/02/2011 49401 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N884GA Sunrise Asset MGMT Allegiant Air Purch'd - sale/l.back25/02/2011 49423 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N891GA Sunrise Asset MGMT Allegiant Air Purch'd - sale/l.back25/02/2011 53486 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N879GA Sunrise Asset MGMT Allegiant Air Purch'd - sale/l.back25/02/2011 53460 Boeing (McDonnell-Douglas) MD-90 30 HB-JID SAS Hello Purch'd off lease/fin term comp.Park'd25/02/2011 53524 Boeing (McDonnell-Douglas) MD-90 30 B-2251 Delta Air Lines China Southern Airlines Purch'd - sale/l.back25/02/2011 26555 Boeing 747 400 (P&W) 4X-ELH El Al El Al Purch'd. Park'd25/02/2011 4024 Bombardier (de Havilland) Dash 8 400 5Y-VVZ Blue Bird Aviation Blue Bird Aviation Purch'd. Park'd25/02/2011 454 Bombardier (de Havilland) Dash 8 200 N454YV ASL Lux Aircraft Trust ASL Lux Aircraft Trust Purch'd. Park'd25/02/2011 3160 Fairchild/Dornier 328JET N821MW Geshaft Und Starke Asset Petra Aviation Purch'd - sale/l.back28/02/2011 4606 Airbus A320 210 (CFM) D-ABFP GE Capital Corp airberlin Purch'd - sale/l.back on del28/02/2011 4609 Airbus A320 230 (IAE) VT-IEB Avolon Aerospace IndiGo Airlines Purch'd - sale/l.back on del28/02/2011 1201 Airbus A330 340HGW (RR) G-VKSS AerCap Virgin Atlantic Airways Purch'd - sale to SPC by lessor on del. Park'd28/02/2011 414 Airbus A340 310 (CFM) OE-IAN AMES-CAMO Iberia Purch'd - subject to leasePark'd28/02/2011 45966 Boeing (McDonnell-Douglas) DC-8 73CF N866UP AerSale AerSale Purch'd. Park'd28/02/2011 46074 Boeing (McDonnell-Douglas) DC-8 73F (M) N874UP AerSale AerSale Purch'd. Park'd28/02/2011 47291 Boeing (McDonnell-Douglas) DC-9 33F (Stg 3 Hkits) N933AX Kalitta Charters II Kalitta Charters II Purch'd. Park'd28/02/2011 49786 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N860GA Sunrise Asset MGMT Allegiant Air Purch'd - sale/l.back28/02/2011 24538 Boeing 737 (CFMI) 300 N369UA Brickell Asset MGMT Brickell Asset MGMT Purch'd. Park'd28/02/2011 27830 Boeing 737 (CFMI) 400 N198SF Speed Star Speed Star Purch'd. Park'd28/02/2011 29083 Boeing 737 (NG) 700 Winglets OY-JTZ Elviria Leasing Jet Time Purch'd - subject to leasePark'd28/02/2011 32423 Boeing 737 (NG) 700 Winglets N423AM MASL Macquarie Airfin Purch'd. Park'd28/02/2011 24399 Boeing 747 200SF (GE) EK- Aerospace Consortium Veteran Avia Purch'd. Park'd28/02/2011 7500 Bombardier (Canadair) CRJ RJ 200ER VQ-BJZ AK Bars Aero AK Bars Aero Purch'd. Park'd28/02/2011 7500 Bombardier (Canadair) CRJ RJ 200ER VQ-BJZ Magpie Aviation Leasing AK Bars Aero Purch'd - sale/l.backPark'd28/02/2011 554 Bombardier (de Havilland) Dash 8 300 N837CA Global Pripal Global Pripal fin Company Purch'd. Park'd28/02/2011 3058 Fairchild/Dornier 328 100 N570EF US Air Force US Air Force Purch'd. Park'd28/02/2011 11371 Fokker 100 N371MX Jetran Jetran International Purch'd. Park'd

AIRCRAFT TRANSACTIONS – Boeing, Airbus, ATR, and Bombardier. 16 Feb to18 Apr 2011


INDUSTRY DATA: FLEET FINANCE, FIRM ORDERS, AIRCRAFT TRANSACTIONS, LIST PRICES AND LEASE RATES

AFM73_Data_AFNM 18/05/2011 09:38 Page 58

Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks28/02/2011 UE-155 Hawker Beechcraft 1900 D N155ZV Skyline Enterprise Skyline Enterprise Corp Purch'd. Park'd01/03/2011 4599 Airbus A320 210 (CFM) N599AV Celestial Aviation Avianca Purch'd - sale to SPC by lessor on del01/03/2011 19391 Boeing 727 100 (stg 3 Hkits) N502MG Roush Air Roush Air Purch'd01/03/2011 22015 Boeing 727 200F(M)Adv.(stg3Hk) N899AA Cargo Aircraft MGMT Capital Cargo International Purch'd off lease/fin term comp.01/03/2011 30617 Boeing 737 (NG) 700 N126AM CIT Leasing Corp CIT Aerospace Purch'd. Park'd01/03/2011 37253 Boeing 737 (NG) 800 Winglets G-FDZU Amentum Capital Thomson Airways Purch'd - sale/l.back on del01/03/2011 40867 Boeing 737 (NG) 800 Winglets LN-DYL SMFL Aircraft Capital Corp Norwegian Purch'd - sale/l.back on del01/03/2011 129 Bombardier (de Havilland) Dash 8 100 C-FDND Regional 1 Airlines Regional 1 Airlines Purch'd01/03/2011 434 Bombardier (de Havilland) Dash 8 200 N434YV Manuf. & Traders Trust Co Mesa Airlines Purch'd - subject to lease01/03/2011 436 Bombardier (de Havillandd) Dash 8 200 N436YV Manuf. & Traders Trust Co Mesa Airlines Purch'd - subject to lease. Park'd01/03/2011 590 Bombardier (de Havilland) Dash 8 300 PK-TUB Travira Air Travira Air Purch'd01/03/2011 493 Bombardier (de Havilland) DHC-6 TO 300 C- 402677 Alberta Ashe Aircraft Enterprises Purch'd. Park'd02/03/2011 0295 Airbus A320 230 (IAE) M-ABDB Undisclosed Undisclosed Purch'd. Park'd02/03/2011 3906 Airbus A320 210 (CFM) EI-DTF AWAS I Alitalia Purch'd - subject to lease02/03/2011 49623 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N405NV Sunrise Asset MGMT Allegiant Air Purch'd - sale/l.back02/03/2011 7114 Bombardier (Canadair) CRJ RJ 200LR VQ-BGH UTair UTair Purch'd. Park'd02/03/2011 7114 Bombardier (Canadair) CRJ RJ 200LR VQ-BGH PL Panorama Leasing UTair Purch'd - sale/l.back. Park'd02/03/2011 114 Bombardier (de Havilland) DHC-6 TO 100 N129PM Freefall Adventures Freefall Adventures Purch'd02/03/2011 UE-229 Hawker Beechcraft 1900 D 9G-HNH Antrak Air Ghana Antrak Air Ghana Purch'd off lease/fin term comp.03/03/2011 3846 Airbus A320 210 (CFM) EI-DTD AWAS Ireland Leasing Five Alitalia Purch'd - subject to lease03/03/2011 4614 Airbus A320 230 (IAE) VT-IEC MCAP Europe IndiGo Airlines Purch'd - sale/l.back on del03/03/2011 49660 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N894GA Sunrise Asset MGMT Allegiant Air Purch'd - sale/l.back03/03/2011 49667 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N895GA Sunrise Asset MGMT Allegiant Air Purch'd - sale/l.back03/03/2011 29053 Boeing 747 400F (GE) N582UP UPS Airlines UPS Airlines Purch'd. Park'd03/03/2011 30735 Boeing 757 200 (RR) TF-FIC Airco Ehf Icelandair Purch'd - sale/l.back. Park'd03/03/2011 30735 Boeing 757 200 (RR) TF-FIC Icelandair Icelandair Purch'd. Park'd03/03/2011 535 Bombardier (de Havilland) Dash 8 300 LN-WFS Siemens Financial Services AB Wideroe Purch'd - sale/l.back03/03/2011 553 Bombardier (de Havilland) DHC-6 TO 300 C-GIGZ Erwin Aero International Erwin Aero International Purch'd. Park'd03/03/2011 11375 Fokker 100 N375MX Jetran Jetran International Purch'd. Park'd04/03/2011 47925 Boeing (McDonnell-Douglas) DC-10 30F (M) N605GC Intl Trading Comp. Yukon Intl Trading Co. Yukon Purch'd. Park'd04/03/2011 47929 Boeing (McDonnell-Douglas) DC-10 30F (M) N606GC Intl Trading Comp. Yukon Intl Trading Co. Yukon Purch'd. Park'd04/03/2011 7011 Bombardier (Canadair) CRJ RJ 100ER N912CA Avmax Aircraft Leasing Avmax Aircraft Leasing Purch'd. Park'd04/03/2011 7038 Bombardier (Canadair) CRJ RJ 100ER N932CA Avmax Aircraft Leasing Avmax Aircraft Leasing Purch'd. Park'd04/03/2011 11348 Fokker 100 N348MX Jetran Jetran International Purch'd. Park'd06/03/2011 020 ATR ATR 42 300 PR-TTG MAP Linhas Aereas MAP Linhas Aereas Purch'd07/03/2011 27452 Boeing 737 (CFMI) 300 N270AE Aircraft & Engine Support Aircraft & Engine Support Purch'd. Park'd07/03/2011 30620 Boeing 737 (NG) 800 Winglets VH-VOA CIT Leasing Corp CIT Aerospace Purch'd. Park'd07/03/2011 27645 Boeing 747 400 (GE) N921MM SB Leasing Ireland Sberbank Leasing Purch'd. Park'd07/03/2011 176 Bombardier (de Havilland) DHC-6 TO 200 (Floats) N137JR J R S Sky J R S Sky Purch'd. Park'd07/03/2011 766 Bombardier (de Havilland) DHC-6 TO 300 N67SA Unity Group Unity Group Purch'd. Park'd07/03/2011 11285 Fokker 100 N285MX Jetran Jetran International Purch'd. Park'd08/03/2011 4613 Airbus A320 210 (CFM) B-6775 ICBC Leasing ICBC Leasing Purch'd08/03/2011 641 BAE SYSTEMS (Jetstream) Jetstream 31 LN-SVZ Bromma Air Sales Bromma Air Sales Purch'd. Park'd08/03/2011 39005 Boeing 737 (NG) 800 Winglets LN-DYM SMFL Aircraft Capital Corp Norwegian Purch'd - sale/l.back on del08/03/2011 29053 Boeing 747 400F (GE) N582UP CC & EI UPS Airlines Purch'd - sale/l.back. Park'd08/03/2011 11336 Fokker 100 N336MX Jetran Jetran International Purch'd. Park'd08/03/2011 UE-135 Hawker Beechcraft 1900 D VH-EKG Chrishine Nominees Pty Shine Aviation Purch'd09/03/2011 3831 Airbus A320 210 (CFM) EI-DTC ORIX Aviation Alitalia Purch'd - subject to lease09/03/2011 3885 Airbus A320 210 (CFM) EI-DTE ORIX Aviation Alitalia Purch'd - subject to lease09/03/2011 4601 Airbus A320 210 (CFM) F-HBNC ALC A320 4601, Air France Purch'd - sale/l.back on del09/03/2011 4604 Airbus A320 210 (CFM) F-HBND ALC A320 4604, Air France Purch'd - sale/l.back on del09/03/2011 503 ATR ATR 42 500 PP-PTV Nordic Aviation Capital TRIP Purch'd - subject to lease09/03/2011 510 ATR ATR 42 500 PP-PTW Nordic Aviation Capital TRIP Purch'd - subject to lease09/03/2011 606 ATR ATR 42 500 I-ADLQ Oberbank Aircraft Leasing Oberbank Aircraft Leasing Purch'd. Park'd09/03/2011 22080 Boeing 727 200F(M)Adv.(stg3 Hk) HS-SCK Transmile Air Transmile Air Purch'd09/03/2011 24877 Boeing 737 (CFMI) 500 N487AE Aircraft & Engine Support Aircraft & Engine Support Purch'd. Park'd09/03/2011 120215 Embraer EMB-120 Brasilia ER ZS-STR Runway Asset Management Runway Asset Managment Purch'd. Park'd09/03/2011 120296 Embraer EMB-120 Brasilia ER ZS- Unconfirmed S.African Operator Unconfirmed S.African Operator Purch'd. Park'd09/03/2011 3066 Fairchild/Dornier 328 100 HB-AER Zweite Asset Investment Zweite Asset Investment Purch'd09/03/2011 11347 Fokker 100 N347MX Jetran Jetran International Purch'd. Park'd10/03/2011 730 Airbus A300 620R (P&W) N4730 Aircraft Solutions (Offshore) Universal Asset MGMT Purch'd. Park'd10/03/2011 23212 Boeing 767 200 (P&W) N769DA AU7 AU7 Purch'd. Park'd10/03/2011 8073 Bombardier (Canadair) CRJ RJ Challenger 850 OY-NNA A & NN Aviation Limited ExecuJet Europe Purch'd10/03/2011 11305 Fokker 100 N305MX Jetran Jetran International Purch'd. Park'd11/03/2011 49477 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N451AA AeroTurbine AeroTurbine Purch'd. Park'd11/03/2011 37884 Boeing 737 (NG) 800 Winglets LN-NOJ Brookdell Norwegian Purch'd - subject to lease11/03/2011 25622 Boeing 757 200 (RR) N Guggenheim Aviation Partners Guggenheim Aviation Partners Purch'd. Park'd11/03/2011 24075 Boeing 767 300 (GE) N125DL Fly-Z/C Aircraft Delta Air Lines Purch'd - subject to lease11/03/2011 24080 Boeing 767 300 (GE) N130DL Fly-Z/C Aircraft Delta Air Lines Purch'd - subject to lease11/03/2011 25583 Boeing 767 300ER (P&W) C-FMWP Fly-Z/C Aircraft Air Canada Purch'd - subject to lease11/03/2011 27111 Boeing 767 300ER (P&W) N184DN Fly-Z/C Aircraft Delta Air Lines Purch'd - subject to lease11/03/2011 3066 Fairchild/Dornier 328 100 HB-AER Centaurium AG SkyWork Airlines Purch'd - subject to lease11/03/2011 11304 Fokker 100 N304MX Jetran Jetran International Purch'd. Park'd12/03/2011 29206 Boeing 737 (CFMI) 400 OE-IAP Celestial Aviation GECAS Purch'd. Park'd14/03/2011 0369 Airbus A320 230 (IAE) N369MX SASOF TR-37 Apollo Aviation Group Purch'd. Park'd14/03/2011 4631 Airbus A320 210 (CFM) HB-JOZ Celestial Aviation Belair Airlines Purch'd - sale/l.back on del14/03/2011 53461 Boeing (McDonnell-Douglas) MD-90 30 HB-JIE SAS Hello Purch'd off lease/fin term comp. Park'd14/03/2011 24250 Boeing 737 (CFMI) 300 N346UA MidAmerican Aerospace MidAmerican Aerospace Purch'd. Park'd14/03/2011 31478 Boeing 777 200ER (RR) N761AJ GAIF II Investment Seventy-Six American Airlines Purch'd - sale/l.back14/03/2011 3162 Fairchild/Dornier 328JET ZS-AAK Avex Air Avex Air Purch'd14/03/2011 24 General Dynamics (Convair) 580 (SCD) XA- Unconfirmed Mexican Operator Unconfirmed Mexican Operator Purch'd. Park'd15/03/2011 1485 Airbus A319 CJ (CFM) VQ-BKK Genting Singapore Aviation TAG Aviation Asia Purch'd. Park'd15/03/2011 1556 Airbus A319 CJ (CFM) 6V-ONE Government of Senegal Government of Senegal Purch'd15/03/2011 4507 Airbus A320 210 (CFM) B-6738 ICBC Leasing Co China Southern Airlines Purch'd - sale/l.back on del15/03/2011 1206 Airbus A330 340HGW (RR) B-18391 AerCap China Airlines Purch'd - sale/l.back on del15/03/2011 307 ATR ATR 72 200 OM-VRC Vip Wings Confort Airlines Purch'd off lease/fin term comp.15/03/2011 49857 Boeing (McDonnell-Douglas) MD-80 83 (MDC) UR-CJE Khors Air Khors Air Purch'd. Park'd15/03/2011 21960 Boeing 737 (JT8D) 200 Adv.(stg 3 Hkits) 4L-NAL Georgian Star International Nasair Purch'd - subject to lease15/03/2011 22632 Boeing 737 (JT8D) 200 Adv.(stg 3 Hkits) 4L-NAM Georgian Star International Nasair Purch'd - subject to lease15/03/2011 40131 Boeing 737 (NG) 800 Winglets 9M-MXD Undisclosed Malaysia Airlines Purch'd - sale/l.back on del





Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks15/03/2011 25214 Boeing 747 400D (GE) N897DB CF6-80 Parts TES Aviation Group Purch'd. Park'd15/03/2011 30024 Boeing 767 300ER (P&W) N668UA United Airlines United Airlines Purch'd off lease/fin term comp.15/03/2011 10322 Bombardier (Canadair) CRJ700 RJ Challenger 870 NG N872DC RBS Asset fin Dow Chemical Purch'd - sale/l.back on del15/03/2011 4262 Bombardier (de Havilland) Dash 8 400 P2-PXS Air Niugini Air Niugini Delivered - purchase of used/demo. 15/03/2011 19000177 Embraer 190 Lineage 1000 PT-SDD Embraer Embraer Purch'd off lease/fin term comp. Park'd15/03/2011 11253 Fokker 100 ZS- Undisclosed AirQuarius Aviation Purch'd. Park'd15/03/2011 11254 Fokker 100 ZS- Undisclosed AirQuarius Aviation Purch'd. Park'd15/03/2011 11256 Fokker 100 ZS- Undisclosed AirQuarius Aviation Purch'd. Park'd15/03/2011 20118 Fokker 50 Freighter (LCD) SE- Amapola Flyg AB Amapola Flyg Purch'd off lease/fin term comp. Park'd15/03/2011 UE-143 Hawker Beechcraft 1900 D ZS-SSX Awesome Flight Logistics Awesome Flight Services Purch'd. Park'd15/03/2011 UE-267 Hawker Beechcraft 1900 D 5Y- Global Air Connection Global Air Connection Purch'd. Park'd15/03/2011 325 Saab 340 B VH-KDQ Regional Express Holdings Rex - Regional Express Purch'd - subject to lease16/03/2011 4621 Airbus A320 230 (IAE) HA-LWH Hong Kong Aviation Capital Wizz Air Purch'd - sale/l.back on del16/03/2011 41014 BAE SYSTEMS (Jetstream) Jetstream 41 SX-SEH Sky Express Airlines Sky Express Airlines Purch'd16/03/2011 49258 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N246AA Air Capital Group Air Capital Group Purch'd. Park'd16/03/2011 26346 Boeing 747 400 (GE) N346AS AerSale AerSale Purch'd. Park'd16/03/2011 485 Bombardier (de Havilland) Dash 8 300 C-FIAI Air Inuit Air Inuit Purch'd16/03/2011 UE-74 Hawker Beechcraft 1900 D ZS-OKM Lefito Turbine Services Air Ghana Purch'd - subject to lease17/03/2011 4628 Airbus A320 230 (IAE) HA- Hong Kong Aviation Capital Wizz Air Purch'd - sale/l.back on del17/03/2011 4641 Airbus A320 210 (CFM) N209FR AWAS Aviation Trading Frontier Airlines Purch'd - sale to SPC by lessor on del17/03/2011 39006 Boeing 737 (NG) 800 Winglets LN-DYN DY2 Leasing Norwegian Purch'd - sale/l.back on del17/03/2011 40243 Boeing 737 (NG) 800 Winglets A6-FDP General Electric Capital Corp FlyDubai Purch'd - sale/l.back on del17/03/2011 25620 Boeing 757 200 (RR) N701AX European Air Transport European Air Transport Purch'd. Park'd17/03/2011 19012 Bombardier (Canadair) CRJ1000 RJ 1000EL NextGen F-HMLG Constellation Finance Brit Air Purch'd - sale/l.back on del17/03/2011 585 Bombardier (de Havilland) DHC-6 TO 300 Vista Liner N226SA Seaplane Holdings Seaplane Holdings Purch'd. Park'd17/03/2011 585 Bombardier (de Havilland) DHC-6 TO 300 Vista Liner N226SA Reed Group Reed Group Purch'd. Park'd17/03/2011 19000416 Embraer 190 LR OH-LKP Finnair Aircraft Finance Finnair Purch'd - sale/l.back on del17/03/2011 14501102 Embraer ERJ-135 Legacy 600 G-PGRP ECC Leasing ECC Leasing Purch'd. Park'd18/03/2011 30671 Boeing 737 (NG) 800 Winglets N858AM Aircraft 73B-30671 ILFC Purch'd. Park'd18/03/2011 25214 Boeing 747 400D (GE) N897DB Aircraft Solutions Airframe 2010 Universal Asset MGMT Purch'd. Park'd18/03/2011 28138 Boeing 767 300ER (P&W) TJ-CAC Camair Camair Purch'd. Park'd21/03/2011 E1252 BAE SYSTEMS (Avro) RJ Avroliner RJ70 VT- MDLR Airlines MDLR Airlines Purch'd. Park'd21/03/2011 893 BAE SYSTEMS (Jetstream) Jetstream 31 Super N479UE ADA - Aerolinea de Antioquia ADA - Aerolinea de Antioquia Purch'd. Park'd21/03/2011 37254 Boeing 737 (NG) 800 Winglets G-FDZW Aviation Capital Group Thomson Airways Purch'd - sale/l.back on del21/03/2011 8102 Bombardier (Canadair) CRJ RJ Challenger 850 B-3570 Asia United Business Aviation Asia United Business Aviation Purch'd. Park'd22/03/2011 4637 Airbus A320 230 (IAE) VT-IEE ORIX Aviation IndiGo Airlines Purch'd - sale/l.back on del22/03/2011 28160 Boeing 757 200 (P&W) 09-0016 US Air Force US Air Force Purch'd. Park'd22/03/2011 38407 Boeing 777 300ER (GE) ZK-OKO BBAM Air New Zealand Purch'd - sale/l.back on del22/03/2011 7119 Bombardier (Canadair) CRJ RJ 200LR VQ-BGI PL Panorama Leasing UTair Purch'd - sale/l.back. Park'd22/03/2011 7119 Bombardier (Canadair) CRJ RJ 200LR VQ-BGI UTair UTair Purch'd. Park'd22/03/2011 7130 Bombardier (Canadair) CRJ RJ 200LR C-GGEV Bombardier Bombardier Purch'd. Park'd22/03/2011 357 Saab 340 B ZK-VAB Vent Aviation Vent Aviation Purch'd. Park'd23/03/2011 4638 Airbus A321 230 (IAE) B-6753 Aircastle Investment China Eastern Airlines Purch'd - sale/l.back on del23/03/2011 455 ATR ATR 72 200F Bulk Freighter VT-DEA Deccan 360 Deccan 360 Purch'd. Park'd23/03/2011 48485 Boeing (McDonnell-Douglas) MD-11 Freighter (M) (P&W) N642FE FedEx FedEx Purch'd. Park'd23/03/2011 53462 Boeing (McDonnell-Douglas) MD-90 30 HB-JIF SAS Hello Purch'd off lease/fin term comp. Pkd23/03/2011 24643 Boeing 737 (CFMI) 400 LN-BRE Wood Creek Aircraft Holding SAS Purch'd - subject to lease23/03/2011 23212 Boeing 767 200 (P&W) N769DA Dynamic JetLease Dynamic Aviation Group Purch'd. Park'd23/03/2011 26935 Boeing 777 200ER (P&W) N789UA T7 Aviation Leasing T7 Aviation Leasing Purch'd. Park'd23/03/2011 409 Saab 340 B AEW UAE Air Force UAE Air Force Purch'd24/03/2011 1208 Airbus A330 240 (RR) N974AV GE Capital Corp Avianca Purch'd - sale/l.back on del24/03/2011 1211 Airbus A330 320HGW (P&W) HL7795 AerCap Ireland Asiana Airlines Purch'd - sale to SPC by lessor on del24/03/2011 40868 Boeing 737 (NG) 800 Winglets LN-DYO DY2 Leasing Norwegian Purch'd - sale/l.back on del24/03/2011 17000150 Embraer 170 LR OE-LMK Altenrhein Luftfahrt People's Vienna Line Purch'd24/03/2011 8085 Fairchild/Dornier 228 200 N402VA Vision Asset Co Vision Airlines Purch'd - subject to lease25/03/2011 0373 Airbus A320 230 (IAE) N304ML Jetran Jetran International Purch'd. Park'd25/03/2011 603 ATR ATR 42 500 SP-EDG Undisclosed EuroLOT Purch'd25/03/2011 E3162 BAE SYSTEMS (HS) 146 300 G-UKAG Aviation Capital Solutions Aviation Capital Solutions Purch'd. Park'd25/03/2011 24519 Boeing 737 (CFMI) 400 EI-CZK Verto Aviation Transaero Purch'd - subject to lease25/03/2011 24540 Boeing 737 (CFMI) 300 N371UA Apollo Aviation Group Apollo Aviation Group Purch'd. Park'd28/03/2011 25226 Boeing 737 (CFMI) 400 N196SF Fast Brilliant Investment Fast Brilliant Investment Purch'd. Park'd28/03/2011 21069 Boeing 737 (JT8D) 200 Advanced N583CC OH Capital assets OH Capital assets Purch'd. Park'd28/03/2011 25212 Boeing 747 400 (GE) HS- Unconfirmed Thai Airline Unconfirmed Thai Airline Purch'd. Park'd28/03/2011 494 Bombardier (de Havilland) Dash 8 200 N801VA Dynamic Aviation Group Dynamic Aviation Group Purch'd29/03/2011 23371 Boeing 737 (CFMI) 300 N14320 AS&L AS&L Purch'd. Park'd29/03/2011 23371 Boeing 737 (CFMI) 300 N14320 Continental Airlines Continental Airlines Purch'd. Park'd29/03/2011 26966 Boeing 757 200 (RR) G-LSAM Sunrise Asset MGMT Allegiant Air Purch'd. Park'd29/03/2011 31477 Boeing 777 200ER (RR) N760AN GAIF II Investment Seventy-Eight American Airlines Purch'd - sale/l.back29/03/2011 20277 Fokker 50 PK- Sky Aviation Sky Aviation Purch'd30/03/2011 0354 Airbus A320 230 (IAE) N354BV AeroTurbine AeroTurbine Purch'd. Park'd30/03/2011 0354 Airbus A320 230 (IAE) N354BV Airfinancial MGMT Airfinancial Management Purch'd. Park'd30/03/2011 4630 Airbus A320 230 (IAE) VT-IED HKAC Leasing IndiGo Airlines Purch'd - sale/l.back on del30/03/2011 25126 Boeing 747 400 (GE) Undisclosed Undisclosed Purch'd. Park'd30/03/2011 35542 Boeing 777 300ER (GE) F-GZNC ALC Air France Purch'd - sale/l.back30/03/2011 033 Bombardier (de Havilland) Dash 7 C- Trans Capital Air Trans Capital Air Purch'd. Park'd30/03/2011 077 Bombardier (de Havilland) Dash 7 C- Trans Capital Air Trans Capital Air Purch'd. Park'd30/03/2011 343 Bombardier (de Havilland) Dash 8 100 LN-WIV Wideroe Wideroe Purch'd30/03/2011 AC-649 Fairchild (Swearingen) Metro III N649KA JODA JODA Purch'd. Park'd31/03/2011 0325 Airbus A320 210 (CFM) EY-622 Eastok Aviation Eastok Aviation FZE Purch'd. Park'd31/03/2011 4657 Airbus A320 230 (IAE) CC-BAL Bandurria Leasing LAN Airlines Purch'd - sale/l.back on del31/03/2011 53528 Boeing (McDonnell-Douglas) MD-90 30 N958DN Delta Air Lines Delta Air Lines Purch'd. Park'd31/03/2011 39413 Boeing 737 (NG) 800 Winglets VH-YFC AWAS Virgin Blue Airlines Purch'd - sale to SPC by lessor on del01/04/2011 39973 Boeing 777 300ER (GE) F-GZNI Jackson Square Aviation Air France Purch'd - sale/l.back on del02/04/2011 546 ATR ATR 42 500 D-BMMM Blue Islands Blue Islands Purch'd. Park'd02/04/2011 19000424 Embraer 190 AR VH-ZPR Undisclosed Virgin Blue Airlines Purch'd - sale/l.back on del04/04/2011 25189 Boeing 737 (CFMI) 500 JA351K ANA - All Nippon Airways ANK - Air Nippon Purch'd off lease/fin term comp. Park'd04/04/2011 32796 Boeing 737 (NG) 800 Winglets N859AM unknown ILFC Purch'd. Park'd04/04/2011 24836 Boeing 747 400 (GE) Undisclosed Undisclosed Purch'd. Park'd





Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks05/04/2011 29588 Boeing 777 200ER (RR) N784AN Undisclosed American Airlines Purch'd - sale/l.back05/04/2011 3019 Fairchild/Dornier 328 100 D-CSUE Tec Aircraft Leasing Tec Aircraft Leasing Purch'd. Park'd06/04/2011 39093 Boeing 737 (NG) 800 Winglets OO-JAD Aviation Capital Group JetAir Fly Purch'd - sale/l.back on del06/04/2011 28480 Boeing 757 200 (P&W) N592SH FedEx FedEx Purch'd. Park'd06/04/2011 110201 Embraer EMB-110 Bandeirante P2 VH-OZF Aerolink Air Services Aerolink Air Services Purch'd off lease/fin term comp. Park'd07/04/2011 711 Airbus A300 620R (P&W) N7151 European Air Transport European Air Transport Purch'd. Park'd07/04/2011 724 Airbus A300 620R (P&W) N1724 European Air Transport European Air Transport Purch'd. Park'd07/04/2011 740 Airbus A300 620R (P&W) N3637 European Air Transport European Air Transport Purch'd. Park'd07/04/2011 235 Bombardier (de Havilland) DHC-6 TO 300 TF- Unconfirmed Icelandic Airline Unconfirmed Icelandic Airline Purch'd. Park'd07/04/2011 369 Saab 340 B VH-EKH Regional Express Holdings Rex - Regional Express Purch'd off lease/fin term comp.07/04/2011 848 Viking Air DHC-6 Twin Otter 400 (Floats) C-FPPL Planes & Parts Trans Maldivian Airways On order - sale/l.back arranged08/04/2011 062 Airbus A380 840 (RR) VH-OQJ QF ECA Qantas Purch'd - sale/l.back on del10/04/2011 120280 Embraer EMB-120 Brasilia ER ZS-TAA Undisclosed TAB Charters Purch'd11/04/2011 1215 Airbus A330 340HGW (RR) B-18392 AerCap China Airlines Purch'd - sale/l.back on del11/04/2011 21958 Boeing 727 200F(M)Adv.(stg3Hk) CX- Unconfirmed Uruguay Airline Unconfirmed Uruguay Airline Purch'd. Park'd11/04/2011 40721 Boeing 737 (NG) 800 Winglets TC-AHP GE Capital Corp Pegasus Airlines Purch'd - sale/l.back on del12/04/2011 40877 Boeing 737 (NG) 800 Winglets TC-AIP GE Capital Corp Pegasus Airlines Purch'd - sale/l.back on del12/04/2011 24784 Boeing 747 400 (GE) N287AS AerSale AerSale Purch'd. Park'd12/04/2011 14 Bombardier (de Havilland) DHC-6 TO 100 N121PM Freefall Adventures Freefall Adventures Purch'd12/04/2011 120330 Embraer EMB-120 Brasilia ER N393SW CB Aviation CB Aviation Purch'd. Park'd12/04/2011 AC-756 Fairchild (Swearingen) Metro III C- Unconfirmed Canadian Operator Unconfirmed Canadian Operator Purch'd. Park'd13/04/2011 26273 Boeing 757 200 Winglets (P&W) N556CM Cargo Aircraft MGMT Cargo Aircraft MGMT Purch'd. Park'd14/04/2011 49945 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N787TW Sierra American Corp Sierra American Corp Purch'd. Park'd15/04/2011 059 Airbus A330 300 (GE) EI-ORD GECAS Asset MGMT GECAS Asset Management Purch'd. Park'd15/04/2011 38706 Boeing 777 300ER (GE) F-GZNJ Avolon Aerospace Air France Purch'd - sale/l.back on del




Data supplied courtesy of Ascend Online Fleets / Ascend V1 database.

FIRM ORDERS – 16 Feb – 18 Apr 2011

Airbus A319 110 (CFM) Aircraft Purchase Fleet Ltd 15/03/2011 Type Swap 2 CFM56-5B6/3 110 (CFM) CFM56-5B6/3Airbus A319 CJ (Engines Unannounced) Unannounced non-commercial customer 01/03/2011 Order 1 Unannounced CJ (Engines Unannounced) UnannouncedAirbus A320 210 (CFM) Star Flyer 15/04/2011 Order 2 CFM56-5B4/3 210 (CFM) CFM56-5B4/3Airbus A320 200 (Engines Unannounced) AerCap 15/03/2011 Type Swap 1 Unannounced 200 (Engines Unannounced) UnannouncedAirbus A321 230 (IAE) Turkish Airlines (THY) 08/03/2011 Order 10 V2500-2533-A5 230 (IAE) V2500-2533-A5Airbus A330 340HGW (RR) Cathay Pacific 15/03/2011 Order 15 Trent-772B-60EP 340HGW (RR) Trent-772B-60EPAirbus A330 200F (Engines Unannounced) Turkish Airlines (THY) 08/03/2011 Order 3 Unannounced 240F (RR) Trent-772B-60EPAirbus A330 240 (RR) AirAsia X 28/02/2011 Order 3 Trent-772B-60EP 240 (RR) Trent-772B-60EPAirbus A380 800 (Engines Unannounced) Skymark Airlines 17/02/2011 Order 4 Unannounced 800 (Engines Unannounced) UnannouncedBoeing 737 (NG) 800 Winglets Turkish Airlines (THY) 31/03/2011 Order 10 CFM56-7B26/3 800 Winglets CFM56-7B26/3Boeing 737 (NG) 800 Winglets Unannounced commercial customer 31/03/2011 Order 2 CFM56-7B26/3 800 Winglets CFM56-7B26/3Boeing 737 (NG) 900ER Turkish Airlines (THY) 31/03/2011 Order 5 CFM56-7B26/3 900ER CFM56-7B26/3Boeing 737 (NG) 900ER El Al 22/03/2011 Order 4 CFM56-7B26/3 900ER CFM56-7B26/3Boeing 737 (NG) 800 Winglets ILFC 07/03/2011 Order 33 CFM56-7B26/3 800 Winglets CFM56-7B26/3Boeing 737 (NG) 900ER Unannounced commercial customer 02/03/2011 Order 11 CFM56-7B26/3 900ER CFM56-7B26/3Boeing 747 8F (GE) Korean Air 18/03/2011 Order 2 GEnx-2B67 8F (GE) GEnx-2B67Boeing 767 200ER Tanker (Engines Unannounced) US Air Force 07/03/2011 Order 4 Unannounced 200ER Tanker (Engines Unannounced) UnannouncedBoeing 777 300ER (GE) Unannounced commercial customer 31/03/2011 Order 1 GE90-115BL 300ER (GE) GE90-115BLBoeing 777 300ER (GE) GECAS 30/03/2011 Order 10 GE90-115B 300ER (GE) GE90-115BBoeing 777 300ER (GE) Unannounced commercial customer 25/03/2011 Order 2 GE90-115BL 300ER (GE) GE90-115BLBoeing 777 300ER (GE) Qatar Airways 17/03/2011 Order 2 GE90-115B 300ER (GE) GE90-115BBoeing 777 300ER (GE) Unannounced commercial customer 17/03/2011 Order 2 GE90-115BL 300ER (GE) GE90-115BLBoeing 777 300ER (GE) Cathay Pacific 09/03/2011 Order 10 GE90-115BL 300ER (GE) GE90-115BLBoeing 777 200ER (GE) Aeroflot Russian Airlines 28/02/2011 Order 2 GE90-90B 200ER (GE) GE90-90BBoeing 777 300ER (GE) Aeroflot Russian Airlines 28/02/2011 Order 6 GE90-115BL 300ER (GE) GE90-115BLBoeing 777 300ER (GE) TAM Linhas Aereas 25/02/2011 Order 2 GE90-115B 300ER (GE) GE90-115BBombardier CL-415 Unannounced non-commercial customer 28/03/2011 Order 4 PW100-123AF PW100-123AFBombardier Dash 8 400 NextGen Porter Aviation Holdings 29/03/2011 Order 2 PW100-150A 400 NextGen PW100-150AEmbraer 190 CDB Leasing Company 12/04/2011 Order 10 CF34-10E5 CF34-10E5Embraer 190 LR Hebei Airlines 12/04/2011 Order 10 CF34-10E5 LR CF34-10E5Embraer 190 ST KLM cityhopper 04/04/2011 Order 5 CF34-10E5 ST CF34-10E5Embraer 190 Lineage 1000 South African Air Force 03/04/2011 Order 2 CF34-10E7-B Lineage 1000 CF34-10E7-BEmbraer 190 LR TRIP 01/03/2011 Order 3 CF34-10E5A1 LR CF34-10E5A1Lockheed Hercules C-130J-30 Israel Air and Space Force 08/04/2011 Order 1 AE 2100-D3 C-130J-30 AE 2100-D3Lockheed Hercules C-130J-30 US Air Force 31/03/2011 Order 1 AE 2100-D3 C-130J-30 AE 2100-D3

Mfr & Type Variant Customer Order Order/ Number Engines at Order Variant at delivery Engines at deliverydate Type Swap


ENGINE DATA CHANGES 15 Feb to 18 Apr 201115 Feb 2011 18 Apr 2011 15 Feb 2011 18 Apr 2011 15 Feb 2011 18 Apr 2011

Type Engine Full-life value Full-life value % Current half-life Current half-life % Mkt lease Mkt lease %mkt value mkt value change rate rate change rate rate change

Data supplied courtesy of Ascend Online Fleets / Ascend V1 database

Equipment Type Jun 2010 Jul 2010 Aug 2010 Sep 2010 Oct 2010 Nov 2010 Dec 2010 Jan 2011 Feb 2011 Mar 2011 Apr 2011 May 2011

HISTORICAL STORED AIRCRAFT BY EQUIPMENT TYPE as of May 11, 2011

A300 76 70 66 65 66 67 69 70 71 73 69 69A320 56 52 87 88 91 90 81 83 81 66 58 58A330 36 31 30 30 27 25 25 25 24 24 21 21A380 1 1 1 1 1 1 1 1 1 1 1 1ATP 15 15 15 15 14 13 12 11 11 11 11 11ATR 38 37 37 34 31 26 24 24 23 22 23 23B707 8 8 9 9 10 10 8 7 8 7 7 7B717 7 7 7 7 7 5 14 23 23 23 23 23B727 52 51 51 50 50 48 46 46 46 44 43 43B737 291 287 286 280 272 264 244 250 254 253 252 252B747 94 93 82 74 69 69 64 63 60 60 62 62B757 40 41 45 46 44 41 38 38 35 33 34 34B767 49 47 44 47 48 42 40 38 35 33 30 30B777 4 4 4 4 4 2 2 2 2 1 1 1B787 13 15 17 17 20 20 20 19 19 19 19 19BAE146 71 72 71 69 70 70 70 66 66 65 64 63BAE3100 28 28 27 27 26 25 25 25 21 20 20 20BAE4100 11 11 11 11 10 10 10 10 10 10 10 9BD100 1 1 1 1BERIEV20 1 1 1 1 1 1 1 1 1 1 1 1BN2 18 17 16 16 17 19 19 19 20 19 17 17C46 4 4 4 4 4 4 4 4 4 4 4 4CITATION 12 12 11 11 11 11 10 9 5 5 8 8CRJ 76 76 88 92 98 102 101 100 98 95 93 92DC10 39 43 42 39 37 37 37 34 33 32 32 32DC8 31 33 31 28 28 24 24 22 20 18 18 18DC9 331 331 332 327 327 328 329 321 318 316 313 312EMB110 11 10 10 10 10 10 10 10 18 18 18 18EMB120 31 30 29 28 28 28 27 26 25 24 24 24EMB145 79 76 109 106 105 101 101 102 100 98 98 98ERJ170 5 5 5 4 4 3 3 3 3 3 3 3F27 31 31 32 34 30 39 35 36 33 33 33 32F28 75 75 85 80 82 81 79 75 74 64 61 60FALCON10 2 2 2 2 2 2 2 2 2 2 2 2FALCON20 15 14 14 14 14 14 14 13 13 3 3 3FALCON50 1 1 1 1 1 1 1 1 1 1 1 1IAI1125 1 1IL114 2 3 3 3 3 3 3 3 3 3 3 3IL18 2 2 2 2 2 2 2 2 2 2 2 2IL62 3 3 3 3 3 3 3 3 3 3 3 3IL76 21 21 21 21 18 17 17 17 17 17 17 17IL86 14 14 14 14 14 14 14 20 20 20 20 20IL96 2 2 2 2 2 2 2 2 2 2 2 2L1011 12 12 12 12 11 11 9 9 9 9 9 9L188 3 3 2 2 2 1 1L382 28 28 27 27 27 27 29 29 28 28 27 27L410 22 22 22 21 21 20 20 20 20 20 20 20LEARJET 45 41 41 41 40 38 37 37 35 35 39 39

B737-300 CFM56-3B1 $2.33m $2.18m -6.4% $0.80m $0.70m -12.5% $0.030m $0.030m 0.0%B737-400 CFM56-3B2 $2.53m $2.38m -5.9% $1.00m $0.90m -10.0% $0.032m $0.032m 0.0%B737-500 CFM56-3C1 $2.93m $2.58m -11.9% $1.40m $1.10m -21.4% $0.035m $0.035m 0.0%A321-200 CFM56-5B3/P $8.19m $8.19m 0.0% $6.20m $6.20m 0.0% $0.075m $0.075m 0.0%A319-100 CFM56-5B5/P $6.49m $6.49m 0.0% $4.50m $4.50m 0.0% $0.055m $0.055m 0.0%A340-300 CFM56-5C4/P $7.25m $7.25m 0.0% $5.00m $5.00m 0.0% $0.058m $0.058m 0.0%B737-600 CFM56-7B22 $6.81m $6.81m 0.0% $4.90m $4.90m 0.0% $0.059m $0.059m 0.0%B737-700 CFM56-7B24 $7.11m $7.11m 0.0% $5.20m $5.20m 0.0% $0.062m $0.062m 0.0%B737-800 CFM56-7B26 $7.51m $7.51m 0.0% $5.55m $5.55m 0.0% $0.065m $0.065m 0.0%B737-900ER CFM56-7B27 $7.96m $7.96m 0.0% $6.00m $6.00m 0.0% $0.067m $0.067m 0.0%CRJ-200 CF34-3B1 $2.05m $2.05m 0.0% $1.00m $1.00m 0.0% $0.020m $0.020m 0.0%CRJ-700 CF34-8C1 $3.85m $3.85m 0.0% $2.20m $2.20m 0.0% $0.027m $0.027m 0.0%E170 CF34-8E5 $4.33m $4.33m 0.0% $2.68m $2.68m 0.0% $0.033m $0.033m 0.0%B767-200ER CF6-80A2 $4.69m $4.69m 0.0% $1.50m $1.50m 0.0% n/a n/a

A300-600R CF6-80C2A5 $7.13m $7.13m 0.0% $3.75m $3.75m 0.0% n/a $0.050m n/aMD-11 CF6-80C2D1F $7.91m $7.91m 0.0% $4.40m $4.40m 0.0% $0.070m $0.070m 0.0%A330-200 CF6-80E1A3 $14.07m $14.07m 0.0% $9.35m $9.35m 0.0% n/a n/aB777-300ER GE90-115B $26.77m $26.77m 0.0% $20.70m $20.70m 0.0% $0.210m $0.210m 0.0%A320-200 V2527-A5 $7.32m $7.32m 0.0% $5.20m $5.20m 0.0% $0.058m $0.058m 0.0%MD-82 JT8D-217C $1.70m $1.70m 0.0% $0.60m $0.60m 0.0% $0.023m $0.023m 0.0%B747-400 PW4056 $7.34m $7.34m 0.0% $3.75m $3.75m 0.0% $0.060m $0.060m 0.0%B767-300ER PW4060 $7.69m $7.69m 0.0% $4.10m $4.10m 0.0% $0.065m $0.065m 0.0%A310-300 PW4152 $6.84m $6.84m 0.0% $2.80m $2.80m 0.0% $0.055m $0.055m 0.0%B757-200 RB211-535E4 $7.52m $7.52m 0.0% $3.90m $3.90m 0.0% $0.050m $0.050m 0.0%Fokker 100 RB183 Tay 650-15 $2.50m $2.50m 0.0% $1.40m $1.40m 0.0% $0.026m $0.026m 0.0%A340-600 Trent 556-61 $13.38m $13.38m 0.0% $8.14m $8.14m 0.0% $0.110m $0.110m 0.0%A330-300 Trent 772B-60 $13.78m $13.78m 0.0% $8.60m $8.60m 0.0% $0.120m $0.120m 0.0%B777-200ER Trent 895 $20.29m $20.29m 0.0% $14.00m $14.00m 0.0% $0.155m $0.155m 0.0%ERJ-145 ER AE3007-A1P $2.50m $2.50m 0.0% $1.40m $1.40m 0.0% $0.030m $0.030m 0.0%B717-200 BR715A $3.33m $3.33m 0.0% $2.00m $2.00m 0.0% $0.045m $0.045m 0.0%



Data supplied courtesy of OAG iNET


Data supplied courtesy of Ascend Online Fleets / Ascend V1 database

Mfr & type Fleet Stored Total Fleet Fleet Stored % Seats Stored Total Seats Seats Stored%

STORED AIRCRAFT 18 Apr 2011

ATR ATR 42 35 356 9.83 1,556 13,735 11.33ATR ATR 72 29 496 5.85 1,820 30,327 6.00Aerospatiale 262 11 14 78.57 53 53 100.00Airbus A300 87 370 23.51 17,253 40,629 42.46Airbus A310 39 191 20.42 5,215 23,257 22.42Airbus A318 8 68 11.76 754 6,348 11.88Airbus A319 35 1,281 2.73 3,140 165,224 1.90Airbus A320 126 2,533 4.97 19,452 402,930 4.83Airbus A321 12 639 1.88 2,451 120,404 2.04Airbus A330 24 774 3.10 6,444 210,351 3.06Airbus A340 25 370 6.76 5,138 98,266 5.23Airbus A380 2 49 4.08 924 23,130 3.99Avcraft 328JET 2 2 100.00 20 20 100.00BAE SYSTEMS (Avro) RJ Avroliner 38 163 23.31 3,495 14,878 23.49BAE SYSTEMS (BAC) One-Eleven 3 12 25.00 70 315 22.22BAE SYSTEMS (HS) 146 76 167 45.51 6,851 12,143 56.42BAE SYSTEMS (HS) 748 20 66 30.30 344 713 48.25BAE SYSTEMS (HS) ATP 17 54 31.48 456 716 63.69BAE SYSTEMS (Jetstream) Jetstream 31 80 247 32.39 1,335 4,262 31.32BAE SYSTEMS (Jetstream) Jetstream 41 28 93 30.11 815 2,583 31.55Boeing 707 47 196 23.98 1,903 5,584 34.08Boeing 717 27 155 17.42 2,644 17,716 14.92Boeing 720 1 1 100.00 0 0Boeing 727 159 437 36.38 8,821 15,820 55.76Boeing 737 (CFMI) 277 1,763 15.71 35,352 222,447 15.89Boeing 737 (JT8D) 220 485 45.36 23,125 47,992 48.19Boeing 737 (NG) 77 3,590 2.14 8,655 553,069 1.56Boeing 747 189 944 20.02 43,343 207,874 20.85Boeing 757 90 1,006 8.95 14,567 154,489 9.43Boeing 767 84 932 9.01 14,154 177,680 7.97Boeing 777 7 924 0.76 1,743 272,562 0.64Boeing (McDonnell-Douglas) C-17 1 230 0.43 0 0Boeing (McDonnell-Douglas) DC-10 37 202 18.32 3,054 6,801 44.91Boeing (McDonnell-Douglas) DC-3 14 75 18.67 493 2,748 17.94Boeing (McDonnell-Douglas) DC-8 49 90 54.44 68 161 42.24Boeing (McDonnell-Douglas) DC-9 177 296 59.80 10,693 20,145 53.08Boeing (McDonnell-Douglas) MD-11 6 192 3.12 100 5,143 1.94Boeing (McDonnell-Douglas) MD-80 281 946 29.70 40,379 136,002 29.69Boeing (McDonnell-Douglas) MD-90 50 108 46.30 7,598 15,934 47.68Bombardier (Canadair) 580 1 2 50.00 0 0Bombardier (Canadair) CL-415 20 70 28.57 0 0Bombardier (Canadair) CL-44 1 1 100.00 0 0Bombardier (Canadair) CRJ Regional Jet 141 1,034 13.64 6,461 48,334 13.37Bombardier (Canadair) CRJ700 Regional Jet 1 339 0.29 70 22,949 0.31Bombardier (Canadair) CRJ900 Regional Jet 11 248 4.44 860 20,178 4.26Bombardier (Shorts) 330 4 47 8.51 0 60 0.00Bombardier (Shorts) 360 13 105 12.38 346 1,001 34.57Bombardier (Shorts) SC.5 Belfast 1 1 100.00 0 0Bombardier (Shorts) SC.7 Skyvan 10 61 16.39 54 129 41.86Bombardier (de Havilland) DHC-5 Buffalo 15 51 29.41 0 38 0.00Bombardier (de Havilland) DHC-6 Twin Otter 66 547 12.07 1,135 8,224 13.80Bombardier (de Havilland) Dash 7 6 57 10.53 248 2,364 10.49Bombardier (de Havilland) Dash 8 65 958 6.78 3,418 50,494 6.77CASA 212 57 248 22.98 940 3,272 28.73CASA C-295 2 78 2.56 0 0CASA CN-235 8 187 4.28 168 470 35.74Carstedt Aviation CJ600 1 1 100.00 0 0Embraer 170 7 187 3.74 460 13,558 3.39Embraer 190 6 345 1.74 592 33,467 1.77Embraer 195 1 72 1.39 108 8,375 1.29Embraer EMB-110 Bandeirante 66 264 25.00 759 1,753 43.30Embraer EMB-120 Brasilia 62 266 23.31 1,798 7,126 25.23Embraer ERJ-135 59 309 19.09 1,864 7,037 26.49Embraer ERJ-145 52 683 7.61 2,585 33,390 7.74Fairchild F-27 3 3 100.00 44 44 100.00Fairchild (Swearingen) Metro 53 487 10.88 652 5,094 12.80Fairchild/Dornier 228 31 180 17.22 480 2,084 23.03Fairchild/Dornier 328 21 100 21.00 632 3,070 20.59Fairchild/Dornier 328JET 59 109 54.13 1,733 3,029 57.21Fokker 100 58 231 25.11 5,532 22,647 24.43Fokker 50 45 188 23.94 2,110 8,416 25.07Fokker 70 5 47 10.64 354 3,577 9.90Fokker F.27 34 131 25.95 1,106 3,473 31.85Fokker F.28 54 94 57.45 3,440 5,957 57.75General Dynamics (Convair) 580 15 70 21.43 43 437 9.84Gulfstream Aerospace Gulfstream I 17 46 36.96 151 366 41.26Handley Page Jetstream (HP/Scottish) 3 3 100.00 18 18 100.00Harbin Embraer Aircraft Industry ERJ-145 1 40 2.50 50 2,000 2.50Hawker Beechcraft 1900 44 620 7.10 816 9,738 8.38Hawker Beechcraft 99 8 144 5.56 43 321 13.40Hindustan Aeronautics 748 1 65 1.54 0 96 0.00Hindustan Aeronautics Saras 1 1 100.00 14 14 100.00Indonesian Aerospace 212 11 68 16.18 221 828 26.69Indonesian Aerospace CN-235 8 48 16.67 254 406 62.56Israel Aerospace Industries Arava 15 73 20.55 19 116 16.38Lockheed Galaxy 4 111 3.60 0 0Lockheed Hercules 193 1,543 12.51 0 244 0.00Lockheed L-1011 TriStar 14 28 50.00 3,131 5,196 60.26Lockheed L-188 Electra 8 20 40.00 89 89 100.00NAMC YS-11 15 39 38.46 399 399 100.00Saab 2000 2 58 3.45 100 2,712 3.69Saab 340 100 405 24.69 3,259 11,745 27.75




Average CMV Dry Lease RateManufacturer List Price Type Oldest Newest %Change Oldest Newest %Change

LIST PRICES AND LEASE RATES

Airbus $120.15m A300-600R $7.00m $13.50m 0.0% $0.140m $0.180m 0.0% 267

Airbus $57.00m A310-200 $2.00m $2.00m 0.0% $0.070m $0.070m 0.0% 210

Airbus $81.50m A310-300 $4.50m $8.00m 0.0% $0.100m $0.120m 0.0% 210

Airbus $62.50m A318-100 $12.00m $24.50m -11.9% $0.125m $0.185m -15.1% 108

Airbus $77.70m A319-100 $11.80m $31.10m 0.0% $0.125m $0.265m 0.0% 124

Airbus $85.00m A320-200 $5.40m $38.90m 0.0% $0.070m $0.320m 0.0% 150

Airbus $56.00m A321-100 $11.95m $18.75m 0.0% $0.150m $0.180m 0.0% 185

Airbus $99.70m A321-200 $19.20m $43.10m 0.0% $0.195m $0.375m 0.0% 185

Airbus $200.80m A330-200 $43.00m $84.00m 0.0% $0.440m $0.755m 0.0% 250

Airbus $222.50m A330-300 $27.00m $92.75m 0.0% $0.330m $0.835m 0.0% 300

Airbus $127.50m A340-200 $18.00m $18.00m 0.0% $0.320m $0.320m 0.0% 280

Airbus $228.00m A340-300 $20.00m $59.75m 0.0% $0.275m $0.580m 0.0% 295

Airbus $261.80m A340-500 $56.00m $79.50m 0.0% $0.525m $0.760m 0.0% 280

Airbus $275.40m A340-600 $61.00m $91.00m 0.0% $0.575m $0.835m 0.0% 350

Airbus $236.60m A350-800 - - - - - - 270

Airbus $267.60m A350-900 - - - - - - 314

Airbus $375.30m A380-800 $146.00m $185.00m 0.0% $1.450m $1.745m 0.0% 525

Boeing $40.00m B717-200 $7.90m $11.45m 0.0% $0.105m $0.145m 0.0% 117

Boeing $40.00m B737-300 $2.50m $6.45m 0.0% $0.055m $0.090m 0.0% 134

Boeing $44.00m B737-400 $4.00m $7.55m 0.0% $0.090m $0.120m 0.0% 144

Boeing $34.50m B737-500 $2.70m $5.50m 0.0% $0.055m $0.075m 0.0% 104

Boeing $56.90m B737-600 $11.00m $19.50m 0.0% $0.150m $0.200m 0.0% 103

Boeing $67.90m B737-700 $15.30m $32.10m 0.0% $0.160m $0.280m 0.0% 134

Boeing $80.80m B737-800 $19.50m $40.50m 0.0% $0.235m $0.350m 0.0% 160

Boeing $71.75m B737-900 $18.90m $23.05m 0.0% $0.190m $0.220m 0.0% 180

Boeing $85.80m B737-900ER $32.90m $44.40m 0.0% $0.310m $0.375m 0.0% 215

Boeing $250.00m B747-400 $19.00m $59.25m 0.0% $0.350m $0.670m 0.0% 412

Boeing $317.50m B747-8 - - - - - - 467

Boeing $79.80m B757-200 $6.00m $20.60m 0.0% $0.120m $0.230m 0.0% 188

Boeing $144.10m B767-200ER $4.50m $14.50m 0.0% $0.160m $0.230m 0.0% 158

Boeing $164.30m B767-300ER $9.50m $58.90m 0.0% $0.205m $0.520m 0.0% 190

Boeing $186.50m B777-200 $22.00m $38.25m 0.0% $0.350m $0.430m 0.0% 313

Boeing $232.30m B777-200ER $42.00m $117.75m -5.8% $0.560m $0.995m 0.0% 313

Boeing $262.40m B777-200LR $90.00m $135.00m 0.0% $0.810m $1.045m 0.0% 313

Boeing $222.00m B777-300 $44.00m $65.50m 0.0% $0.575m $0.705m 0.0% 382

Boeing $284.10m B777-300ER $86.00m $147.00m 4.9% $0.860m $1.285m 0.0% 350

Boeing $185.20m B787-8 - - - - - - 243

Boeing McDonnell Douglas $119.10m MD-11 $11.70m $13.10m 0.0% $0.190m $0.190m 0.0% 285







Bombardier (Canadair) $24.20m CRJ-100/200 $3.00m $8.65m 0.0% $0.040m $0.080m 0.0% 50

Bombardier (Canadair) $35.57m CRJ-700/705 $10.80m $22.05m 0.0% $0.110m $0.225m 0.0% 70

Bombardier (Canadair) $40.81m CRJ-900 $14.30m $25.55m 0.0% $0.150m $0.245m 0.0% 86

Bombardier $15.70m Q200 $3.70m $8.50m 0.0% $0.055m $0.085m 0.0% 37



Embraer $17.14m ERJ-135ER $4.70m $5.25m 17.1% $0.050m $0.050m 11.1% 37

Embraer $22.25m ERJ-145ER $4.80m $8.70m 0.0% $0.060m $0.085m 0.0% 50

Embraer $34.18m E170 LR $13.80m $23.05m 0.0% $0.150m $0.230m 0.0% 70




Fokker $24.50m Fokker 70 $3.50m $3.50m 0.0% $0.055m $0.055m 0.0% 79

Fokker $31.60m Fokker 100 $3.15m $4.00m 0.0% $0.060m $0.070m 0.0% 108

ATR $16.90m ATR42-500 $5.20m $14.60m 0.0% $0.065m $0.130m 0.0% 48

ATR $20.50m ATR72-500 $5.30m $18.25m 0.0% $0.070m $0.180m 0.0% 70

Seating*(Typical C+Y)

Data supplied courtesy of Ascend Online

Region Net Delivered Leased Purchased Fleet as of Orders new 2nd hand 6 May 2011

WORLDWIDE FLEET SUMMARY BY REGION — March to May 2011

Undisclosed 2 3 NA 7 44Africa 4 5 16 20 2572Asia-Pacific 88 62 59 64 7410Central America NA 5 15 26 1268Europe 33 87 135 106 8089Middle East 34 23 26 6 2018North America 163 100 122 349 17605South America 8 13 29 25 3196

Source: OAG Fleet iNET, May 2011




Agency: BKV Client: Delta TechOps Publication: Airline Fleet Management MayAd size: trim: 10.95 x 8.27 bleed: 8.5 x 11.18Color: CMYK

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AFM73 Airline Fleet Management

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