THY – Finally A330 aircraft are released into the market

Eleanor Steed
By Eleanor Steed November 29, 2016 15:59

THY – Finally A330 aircraft are released into the market

Well here we are on the cusp of December and no doubt a very interesting 2017. Next year, what are the main issues we should be worrying about? Well, the same things that we usually worry about: political instability and regulatory effects on the industry, but more than that we also need to worry about the underlying health of the airlines.

Oil prices are creeping ever so slowly upwards; oil prices bottomed out in Q1 2015 and since then the trend has been an upward one. Even so, airline fuel prices did not bottom out until mid-2016, airlines are right now enjoying what many traders think is the best it will get on fuel prices. Given that airline utilisation figures are weakening rapidly, should we not argue that we are only safe so long as: a) governments continue to prop-up airlines, or b) fuel prices remain low? If either of these factors were to change, a great many airline brands may fall by the wayside. At the front of the queue might well be Turkish Airlines (THY). THY needs to reduce its fleet due to declining demand. However, there are reports that the airline is under pressure to renew/extend agreements to keep up appearances. The airline has been experiencing a fall-away in passenger traffic but this has so far been shielded by dropping utilisation rates, which is keeping load factors steady. This chain of events is unbalancing THY as a high-quality brand and there are concerns it will be back to the old days of full government control.

The flight of tourists from Turkish boarders is not likely to improve in 2017, it may in 2018 but something very drastic indeed will have to occur right now in December 2016 to save forward holiday booking figures for summer 2017 from both Russian and European consumers. As THY passenger traffic falls, we should expect to see an improvement for the likes of Emirates and Etihad, but we are not, we are seeing poor figures on the back of reduced premium passenger traffic for Emirates. If these trends continue, will we see a price war between Emirates, THY and Etihad that will in the event be fuelled by the Turkish government propping-up its flag carrier? We have seen all this before in all regions with virtually all flag carrier airlines. Are we going to see it on a massive scale in 2017 and 2018 on key routes such as LHR and CDG? The only winners in the here and now are those airlines serving Spain and the Canary Islands and, of course, the lessors.

But there is a ray of hope today from THY: the airline is finally going to start churning their fleet and they have gone to the remarketing company of the moment: Cabot Aviation, which has had a wonderful 24 month period leading the way in many tricky remarketing deals and winning an Aviation 100 Award in the process. Cabot Aviation has been exclusively authorised by Turkish Airlines to remarket eight Airbus A330-200s for sublease – either dry or wet. All eight aircraft are between 2007 and 2011 vintage to a common specification with passenger seats in a 24J + 255Y configuration, with PW4168A-1D engines on wing and a 233-tonne maximum take-off weight (MTOW). It is a delight to see that THY has listened to Cabot and are remarketing aircraft in groups making a deal far more likely, but will lease rates on A330-200s be falling in the near term as a result? You would expect them to come under immediate pressure that is for sure as Cabot move to secure homes at speed.

See Cabot Aviation at the Airline Economics Aircraft Investor Days in London next week in what is always a very frank assessment of where the market is for certain aircraft types.

Eleanor Steed
By Eleanor Steed November 29, 2016 15:59