Iran deal sends airline shares soaring; GE engines ice warning in FAA AD; while snow threatens revenue

Dino D'Amore
By Dino D'Amore November 27, 2013 16:08

Iran deal sends airline shares soaring; GE engines ice warning in FAA AD; while snow threatens revenue

As predicted by this news service, the recent deal between the US and Iran to curb sanctions and a compromise on nuclear power generation has resulted in oil prices plummeting by almost 3% and boosting airline share prices. So did you short oil? Of course the other thing we mentioned is to get ready to service Iranian aircraft needs. If Iran can keep the political map stable, a feat by no means certain as the country opens-up, then doing business would be advantageous as the risk factor would be average. The six-month deal is only a probation period where in return for compromising on its nuclear programme, the US will not demand further cuts to the limit of one million barrels of oil per day. This will not have any immediate impact on the flow of Iranian oil to the west, however, and analysts have said that the markets are over-reacting. Nevertheless on Monday, airline shares gained on the news that oil may become cheaper in the future. easyJet gained 2% to 1426.59p and British Airways’ parent International Airlines Group shares rose 2.8% to 372.59p.

The US-Iran deal certainly paves the way for a more expansive agreement to be made next year that could include relief on oil sanctions and open up access to Iranian oil reserves.

Although the oil price fell 2% on the news of the deal, it then stayed well within predicted ranges. Nonetheless, analysts are stating that airlines should start to consider locking in lower oil prices with hedges and of course as oil falls, so it is inevitable that some airlines with hedges locked-in will find themselves on the wrong side of prices.

Meanwhile, the US Federal Aviation Administration (FAA) has finally issued the AD that we have all been waiting for this week:

Airworthiness directive 2013-24-01 / DI 2013-NM-209-AD effective immediately concerns Boeing Models 747-8 and 747-8F series and 787-8 airplanes powered by GEnx engines. This AD requires revising the airplane flight manual to advise the flight crew of potential ice crystal icing (ICI) conditions at high altitudes, and to prohibit operation in moderate and severe ICI conditions. The AD also requires inspecting the engine after any ICI event is detected by the flight crew. This AD was prompted by reports of engine damage and thrust loss events as a result of flying in high altitude ICI conditions. So this AD warns crews of possible unrecoverable thrust loss on multiple engines.

This is nothing new – the (GE) CF6-80 series engines have been subject to similar rulings for some time. Ice build-up affecting the gore gas flow path of the engine has been noted on GEnx-2B powered 747-8 and 747-8F aircraft in 2013 along with GEnx-1B powered 787-8 aircraft. The new events that prompted this AD, however, have occurred during the cruise phase of flight and caused permanent damage (beyond maintenance manual limits) to the engine compressor. In all thrust loss events, data indicate that ice crystals entered and collected in the initial stages of the compressor. Engine temperature data indicate small ice accretions were shed through the core of the engine. All of these ICI events occurred during cruise at 33,000 feet or above, either within or after the airplane traversed a large Mesoscale Convective System (MCS). MCSs are areas where several thunderstorms have merged, with a continuous cloud larger than 100 kilometers (62 miles) across.

As of today there have been nine events on Model 747-8 airplanes and Model 787-8 airplanes. During two events on Model 747-8F airplanes, two engines experienced thrust losses during the cruise phase of flight. In one of these events, one of the engines recovered to idle but would not accelerate and was left at idle for the rest of the flight. The other engine recovered and operated normally for the rest of the flight. In both airplane events, subsequent inspections of all four engines revealed compressor damage on both of the event engines as well as damage to a third engine that had not experienced a thrust loss.

In four other events–one on a Model 787-8 airplane and three on Model 747-8 airplanes–uncommanded engine decelerations (i.e., thrust losses) of approximately 20 seconds in duration occurred. All engines automatically recovered commanded thrust without crew action and operated normally for the rest of the flight.

In three other events on Model 747-8 airplanes, at least one engine showed elevated vibrations on the low-speed engine spool (N1) while in ICI conditions. The vibrations stopped after the airplanes exited the weather system, and the engines operated normally for the rest of the flight.

This AD requires revising the Certificate Limitations and Operating Procedures chapters of the AFM to advise the flight crew of potential ICI conditions at high altitudes, and to provide procedures to prohibit flight into those conditions.

This AD also requires engine inspections after any event where the flight crew reports the appearance of the ”ENGINE THRUST” message on the engine indication and crew alert system (EICAS) for any engine. The intent of the inspection requirement is to verify the airworthiness of the airplane for future flights. Because of thrust requirements on the different airplane models, the inspection is required before further flight on a minimum of three engines on Model 747-8 and 747-8F series airplanes, and on both engines on Model 787-8 airplanes.

This AD is a final rule that involves requirements affecting flight safety and was not preceded by notice and an opportunity for public comment The FAA is working with Boeing and GE to monitor the situation and as they develop a permanent solution.

Boeing spokesman Marc Birtel said: “To reduce chances of ice crystal conditions, Boeing recommends that operators fly at least 50 nautical miles from thunderstorms that may contain ice crystals.” GE has stated that it is working with Boeing to modify the engine control system software in a bid to eliminate the problem.

In the meantime expect costs to increase as flight paths are changed and inspections increased.

This story comes at a bad time for the mention of the word “ice” in the USA as of course right now many customers will feel that this AD is linked to the white stuff they see on the ground, which it is not.

The real story for airlines at the moment is one of loss of Thanksgiving revenue. 2013 was all set to be the best thanksgiving holiday ever with forward bookings at record levels, but with airlines across the USA cancelling vast swaths of flights the going looks poor for this key period.

Dino D'Amore
By Dino D'Amore November 27, 2013 16:08
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