The EU, ISTAT, interest rates and a bit of singing.

Victoria
By Victoria March 13, 2013 13:06

The EU, ISTAT, interest rates and a bit of singing.

EU airlines that cancel flights will have to book passengers on a rival carrier if they cannot offer an aircraft of their own within 12 hours. This rule is buried within EU261 a consumer charter going through the EU Parliament now. Some of the smaller airlines without back-up aircraft to hand could be hit hard by these rule changes and it is worth looking out for the final draft of EU261.

At ISTAT USA this year there was no real news from the show either on or off stage, in fact everyone did a pretty good job of making our industry seem boring giving the impression that things are ticking along nicely save for the 787 and nothing has changed since December 2012. Nothing much changes; everyone thinks that the aircraft they are remarketing is worth a little bit more than it actually is – a usual theme, which is this time backed by strong airline demand for older aircraft in readiness for the summer season. Everyone thinks the EETC market will have a record year, which depends on the 787 being delivered in no small part. The week was dominated by the close of the ILFC closed a $1.25bn unsecured debt deal at 4.125%. And in anticipation of a number of non-US airline EETCs in US$ everyone was talking up the market. Airbus has not changed its stance that it has 300 remaining A320 delivery slots to fill while Boeing has all but filled the Boeing NG delivery slot allocations gap as it transitions to the Max.
So what was news? There is one thing on the horizon that is set to impress: Be on the lookout for a deal between a US boutique lessor and ATR in the coming weeks. The lessor (who I am asked not to name but have narrowed down for you) is set to take the plunge on a rather large ATR deal with significant funds coming by way of a BAML lead financing package. We are bound not to tell you the lessor yet but we will be the first to let you know once the deal goes through. What we can say is that the ATR aircraft will be sought at the soonest opportunity and as such the lessor plans to get involved in sale and leasebacks on aircraft currently on order with ATR, so for airlines reading this with ATRs on the order books this could be a significant development for you – email me directly for contact information. This deal will send ATR towards another record year.
The fact is the world economy is deteriorating but more people are taking to the skies than ever before. Last year’s expansion failed to keep pace with demand globally and yet prices in all regions other than APAC (thanks to LLCs) and the Middle East (thanks to Turkish Airlines) are rising.

Has the consumer gone mad or is it the fact that businesses feel they must meet face to face to secure a deal and the stress of life has led others to go on holiday and try to get away from it all? The fact is that we in aviation are, from the ground-up in all areas, being fed by global interest rates being on the floor. The growing worry for all is when the music will stop and interest rates begin to return to normal levels. Would those airlines financing deliveries in five years-time be able to compete with those financing deliveries at this time? This dynamic will play out in very interesting fashion in years to come, and those financing in this favourable period will at least be partially buffered from future rises and will be able to pass down the lower cost of financing to the customer or take the higher margin. Now we all know that interest rates cannot surely rise within the next three years or more (we hope) but that should not stop airlines forecasting what potential differences in delivery costs between them and their competitors will mean for breakeven points on direct competing routes.

By the way: Phil Seymour – If you think you got away with that singing at Club ISTAT without mention then you are very much mistaken….. Five hours of after-conference mixed drinks did not fortify me half enough for what awaited behind the doors of that golf pavilion. In all fairness to Phil though he was roped into it and sat very worried about the same all day in front of the conference hall. Well done to him.

Victoria
By Victoria March 13, 2013 13:06
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