That E190 glut on the market

Dino D'Amore
By Dino D'Amore June 16, 2016 14:08

That E190 glut on the market

The editorial here regarding the Embraer E190 creating a possible headache for NAC following the Virgin Australia news yesterday with a glut on the market has resonated with many lessors and bankers. So for those who say “there is no problem” here follows a wake-up call:
As of four weeks ago, 60-80 E190s were readily available with close to 50 parked.
Jetscape had an agreement in place to purchase six of the Virgin Australia E190s at “very favorable rates” but, after two deliveries, the other four had to be deferred as the lessor could not find homes for them. Taking these six aircraft out of the equation, Virgin Australia would still have 12 E190s hitting the market soon. On top of that there are 15 aircraft at Republic Airways in the USA, which is it is considering returning as part of the bankruptcy process unless it can squeeze lessors for concessions. Three of the Republic E190s are already at AMX owned by GMT and are for sale. These aircraft, sources say, have seriously flawed return conditions, but that cannot be confirmed. Then there is Finnair, which wishes to release all of its regional aircraft within the next three years. That puts another 12 E190s onto the market. Then there is the Indonesian KalStar, which is currently in default on all of its lease agreements, which should lead to another three Embraer aircraft coming onto the market. Then look at Delta! Delta has the 19 ex-Air Canada E190s that they purchased as part of the 737 deal with Boeing, every last one of these aircraft are parked. Delta is trying to sell them as a fleet in the $14m range but if that doesn’t happen Delta can afford to simply cut its losses on the parking fees and push them onto the market at a massive reduction in value while still turning a profit on each aircraft. Then we have the eight parked ex-Mandarin aircraft we mentioned yesterday.
On top of all this, there are the current uncertainties in the market surrounding the E-Jets, including rumors that Jetblue is considering a move to the Bombardier C-series and Azul is looking hard at moving even more E190s and E195s out of its fleet. Helvetic may also go over to the C-Series, with J-Air is only using E-Jets as a stop gap until the MRJ delivers. There are financial issues at TAME, while on top of all this the new CEO at Austral is said to not be a fan of Embraer aircraft. One staunch fan though, Air Costa, is now under serious pressure from AirAsia India.
So should Virgin Australia keep its E190s and deploy them until this glut in the market is past? And should NAC take the opportunity to start tearing down E190s to hold up lease rates and values?
Everyone involved with the E190 right now is pinning their hopes on Alitalia, which is interested in swapping out its E170s for E190s – this deal alone will take 60 or more E190s off of the market, but it will put 15+ E170s onto the market.
This is not a dark stormy time for the E190, the silver lining is Alitalia, which as it stands should be able to obtain a very good deal indeed.

Meanwhile, spot jet fuel has increased about 30% year-to-date (but remains down 22% year-over-year). It should be remembered that any increase in fuel prices suits the business model of the ULCC airlines, as such maybe the likes of Spirit are showing signs of value for 2016 thus far.

Our sincere thanks for all those dear friends that contacted us over the past 24 hours.

Dino D'Amore
By Dino D'Amore June 16, 2016 14:08