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Friday 12th October 2018

The Talent Challenge
Hiring and retaining skilled personnel is flagged by aviation industry chief executives as one of their top three challenges for the coming year. Leasing companies specifically seem to be feeling the pressure of hiring from graduate to skilled roles. For the past three years, Airline Economics and Horizon Executive Search have been researching the market to gain a clearer perspective on the most prevalent recruitment challenges. The research continues in 2018 with a new survey on the topic. Please click here to register your opinion and click here to view past results and analysis from the 2017 and 2016 surveys.

Orix Aviation
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AV Corp International
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Technology News
ADSoftware partners with ATR
ADSoftware has announced an official partnership with aircraft manufacturer ATR, which will begin this month. ATR has chosen ADSoftware to manage its MRO and CAMO activities, via ADSoftware’s pack of maintenance information systems.

Talking about the partnership, Patrick Massicot, Head of Airframe & MRO Services, praised ADSoftware’s customer management and quick response times, saying: “As our ATR Part 145 and Part M/CAMO teams work not only in our Francazal (Toulouse) maintenance base but also in very remote areas, connectivity and high availability of the MIS are a must-have. Listening skills, technical skills and agility to meet ATR specifications and demonstrate or implement new features were just some of the key reasons for ATR’s partnership with ADSoftware, deploying the full IT suite which is now ongoing.”

In addition to MRO and CAMO management, ADSoftware will work alongside ATR to develop new processes and methods to integrate and manage key technical data, including migration to new aircraft and phase-in/phase-out processes.

MTU Maintenance
Pratt and Whitney
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Airline News
Delta Air Lines announces 2018 September quarter profit
Delta Air Lines has confirmed its adjusted pre-tax income for the September quarter 2018 was $1.6 billion, and adjusted earnings per share were $1.80, at the high end of guidance. Adjusted earnings per share were up 16 percent compared to the prior year quarter, driven by revenue momentum, tax reform benefits and a four percent lower share count. Results reflect a $30 million negative impact from Hurricane Florence.

“Our solid eight percent revenue growth, combined with flat non-fuel unit cost performance, helped offset 85 percent of the $655 million fuel cost increase in the quarter. These achievements are a testament to the strength of the Delta business model and the hard work of the Delta people, and I am pleased to recognize their performance with an additional $395 million toward 2018 profit sharing,” said Ed Bastian, Delta’s Chief Executive Officer. “Our commercial momentum and improved cost trajectory give us confidence that we are on a path to deliver continued top-line growth and expand margins as we move into 2019.”

Delta’s adjusted operating revenue of $11.8 billion for the September quarter improved eight percent, or $912 million versus the prior year. This quarterly revenue result marks a record for the company, driven by improvements across Delta’s business, including a nearly 20 percent increase in premium product ticket revenues and double-digit percentage increases in cargo, loyalty and Maintenance, Repair and Overhaul revenue.

Total unit revenues excluding refinery sales (TRASM) increased 4.3 percent during the period driven by strong demand and improving yields. Foreign exchange benefit of approximately half a point was offset by the impact of Hurricane Florence.

“We generated record revenues in the September quarter on strong demand across the business and a favorable yield environment. In the December quarter we expect total unit revenue growth of three to five percent, driving full year revenue growth to eight percent, the high end of our guidance,” said Glen Hauenstein, Delta’s President. “The benefits of our brand, industry-leading network, and relentless focus on the customer are driving revenue growth, improving margins and accelerating the pace of our recapture of higher fuel costs.”

Despite an expected 30 percent increase in fuel price, Delta expects pre-tax margins to stabilize in the December quarter driven by continued top-line growth and improving cost performance.

Total adjusted operating expenses for the September quarter increased $1.0 billion versus the prior year quarter, with more than half of the increase driven by higher fuel prices.

CASM-Ex was flat for the September quarter 2018 compared to the prior year period, a three-point improvement from the June quarter. Efficiency gains successfully offset cost pressures from higher revenue-related costs and product and employee investments.

“The September quarter marked an important inflection point in changing our non-fuel cost trajectory, and we expect to deliver on our full-year target of one to two percent non-fuel unit cost growth,” said Paul Jacobson, Delta’s Chief Financial Officer. “Continued focus on cost control, along with incremental efficiency gains from refleeting and One Delta, give us confidence in our ability to keep our non-fuel unit cost growth below two percent next year.”

Adjusted fuel expense increased $655 million, or 35 percent, relative to September quarter 2017. Delta’s adjusted fuel price per gallon for the September quarter was $2.22, which includes $12 million of benefit from the refinery.

Adjusted non-operating expense improved by $30 million versus the prior year, driven primarily by pension expense favourability. The company expects 2018 full-year adjusted non-operating expense to be approximately $300 million, representing a $160 million improvement over prior year due to favourable interest and pension expenses, offsetting reduced partner earnings due to higher fuel.

Adjusted tax expense declined $221 million for the September quarter primarily due to the reduction in Delta’s book tax rate from 34 percent to 23 percent.

Delta generated $1.5 billion of operating cash flow and $655 million of free cash flow during the quarter, after the investment of $865 million primarily for aircraft purchases and modifications.

For the September quarter, Delta returned $566 million to shareholders, comprised of $325 million of share repurchases and $241 million in dividends.

In the September quarter, Delta received reaffirmation of an investment-grade credit rating by S&P Ratings.

Alaska Air Group reports September 2018 operational results
Alaska Air Group has reported September and year-to-date operational results on a consolidated basis for its mainline operations operated by subsidiary Alaska Airlines and for its regional flying operated by subsidiary Horizon Air Industries and third-party regional carriers SkyWest Airlines and Peninsula Airlines.

On a combined basis for all operations, Air Group reported a 0.6 percent increase in traffic on a 3.2 percent increase in capacity compared to September 2017. Load factor decreased 2.1 points to 80.8 percent.

Mainline reported a 0.3 percent decrease in traffic on a 2.4 percent increase in capacity compared to September 2017. Load factor decreased 2.2 points to 81 percent. Mainline also reported 85.2 percent of its flights arrived on time in September 2018, compared to 83.9 percent reported in September 2017.

Regional traffic increased 9.7 percent on an 11.4 percent increase in capacity compared to September 2017. Load factor decreased 1.4 points to 78.2 percent. Alaska’s regional partners also reported 83.4 percent of its flights arrived on time in September 2018, compared to 82.7 percent in September 2017.

Maintenance News
Triumph awarded five-year contract with national carrier for component MRO work
Triumph Group was awarded a five-year contract for maintenance, repair and overhaul (MRO) work on CFM56-7B nacelle components for the 737NG aircraft operated by a US airline operator. Under the contract Triumph Product Support will service thrust reversers, fan cowls and inlet cowls on the CFM56-7B engines on the carrier’s 737NG fleet.

“We are proud of our long history supporting the global airlines’ nacelle component MRO requirements and extremely pleased to solidify our leading position in the industry with this five-year agreement,” said Bill Kircher, executive vice president for Triumph Product Support.

For more than a decade Triumph’s Product Support business unit has provided airline carriers with superior customer service, on-site rotable assets and implemented cost reduction measures to the benefit of their customers. Triumph Product Support provides full life cycle solutions for commercial, regional and military aircraft for OEMs and operators. Its full suite of post-delivery value chain services simplifies the MRO supply chain and provides customers with global, integrated planeside repair solutions.

Cargo News
MIA welcomes Amazon Air
Miami International Airport is now part of Amazon Air’s cargo flight operations. The company has launched double-daily freighter service at MIA to destinations across the US. The new cargo service is being operated by Atlas Air Worldwide with Boeing 767-300F aircraft, and includes an onsite facility to sort packages bound for their next destination.

“I proudly welcome Amazon Air’s expansion to Miami-Dade County, and appreciate its commitment of two daily flights at MIA,” said Miami-Dade County Mayor Carlos A. Gimenez. “I wish them continued success and growth within our community.”

“We are excited to launch the Miami gateway to support our growing air operation,” said Sarah Rhoads, Director of Amazon Air. “Amazon has enjoyed being a part of the Miami-Dade community and are thrilled to continue our relationship.”

Amazon already operates four warehouses in Miami-Dade County, all within 12 miles of MIA – the largest of which is a new 885,000-square-foot fulfillment center at Miami-Opa locka Executive Airport just completed this year.

“Amazon Air’s two daily flights will add a significant boost to our domestic cargo traffic, which is already up 17 percent through August,” said Miami-Dade Aviation Director Lester Sola.

Corporate Jets
Jetcraft annual 10-Year business aviation market forecast
Jetcraft, which specialises in business aircraft sales and acquisitions, has published its annual market forecast that reaffirms that steady growth in the private jet industry is set to continue, with predictions of 8,736 unit deliveries over the next 10 years, representing $271bn in revenues (based on 2018 pricing). North America will once again take the lead, accounting for 60% (5,241) of predicted new unit deliveries over the forecast period, with Europe expecting 18% (1,572), and Asia-Pacific 13% (1,136).

Jahid Fazal-Karim, Owner and Chairman of the Board at Jetcraft, says: “2018 has been a real turning point for business aviation, as we have now successfully navigated through our industry’s most difficult period. This year’s forecast predicts the continuation of our current business cycle of steady and healthy growth, driven by an increase in wealth creation and the demand for larger and more expensive aircraft.”

The increase in wealth creation over the past decade has spurred growth in family offices that are now offering a wide variety of specialized services, including business aviation. Together with the increase in block charter and fractional programs, this is exposing more UHNWIs to the industry than ever before.

However, despite continued economic growth, Fortune 500 companies have yet to return to historical aircraft transaction levels, due to maintaining a focus on other financial priorities, such as share buybacks and paying down debt. This customer segment is unlikely to restart aircraft purchasing programs until well into the cycle.

The forecast predicts that the large jet category, comprising super large, ultra long range and converted airline segments, will constitute 32% of total units (2,778) and 64% of total revenue over the next decade. All new aircraft model programs, both announced and projected, during the forecast period are exclusively widebodies.

Fazal-Karim adds: “Predicted unit deliveries in the large jet category account for a huge proportion of total revenues in the industry, demonstrating the trend towards larger, long range aircraft to support today’s global business needs.”

While the industry is set to embark on a period of substantial growth, its resilience during the challenges of the previous business cycle has prepared it well for expansion.

Fazal-Karim concludes: “We’re confident that the lessons we’ve learned over the past decade will ensure sustainable growth for business aviation in the years to come. Ours is an enduring industry, and one with a buoyant future ahead.”

Jetcraft’s full 2018 10-year Business Aviation Market Forecast is available to download at

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Airline News
SpiceJet takes delivery of its first 737 MAX
Boeing and SpiceJet have celebrated the delivery of the carrier’s first 737 MAX 8. The airline plans to use the 737 MAX to expand and standardize its fleet.

“We are excited to take delivery of our very first 737 MAX 8,” said SpiceJet Chairman and Managing Director Ajay Singh. “The induction of our first MAX is a huge milestone in SpiceJet’s journey. These new airplanes will enable us to open new routes, while reducing fuel and engineering costs, as well as emissions. The 737 MAX will dramatically reduce noise pollution and greenhouse gas emissions. Passengers will benefit from a large number of premium seats and, for the first time in India, broadband internet on board.”

This is the first of up to 205 737 MAX airplanes SpiceJet has announced with Boeing.

SpiceJet’s new 737 MAX airplanes arrive at a time when India’s commercial aviation market continues to grow at significant rates. According to industry data, domestic air traffic in India has grown about 20 percent in each of the past four years with an upward growth trajectory going forward.

“India is a fast growing market for commercial airplanes and services,” said Ihssane Mounir, senior vice president of Commercial Sales & Marketing for The Boeing Company. “The 737 MAX for SpiceJet is the perfect airplane for this market and it will become a key ingredient for long-term success, especially as oil prices continues to put pressure on airlines. The market-leading efficiency and reliability of the MAX will pay immediate dividends for SpiceJet’s commercial operations.”

In preparation for its new 737 MAX, SpiceJet has signed up to leverage Boeing Global Services’ tailored flight simulator and maintenance training, which will help train SpiceJet’s pilots and mechanics in all areas of 737 MAX flight operations. The airline also employs Onboard Performance Tool, powered by Boeing AnalytX, which allows flight crews and ground personnel to perform real-time calculations based on current weather and runway conditions, improving efficiency and maximizing payloads.

Leasing News
BOC Aviation places three new A320ceo aircraft with Saudi Arabian Airlines
BOC Aviation has placed three new Airbus A320CEO aircraft to Saudi Arabian carrier Saudi Arabian Airlines (Saudia), all of which are scheduled for delivery in 2018. The aircraft will be operated by Saudia’s low cost subsidiary, flyadeal.

“We are pleased to add Saudia as a new customer and to work with its exciting low-cost unit, flyadeal, as it continues its rapid expansion,” said Robert Martin, Managing Director and Chief Executive Officer of BOC Aviation. “Demand for low cost travel is expanding rapidly in the Middle East and flyadeal is well-placed to capitalise on this trend.”

Con Korfiatis, CEO of flyadeal said, “flyadeal commenced flying a year ago with the focus of providing low airfares in the Kingdom of Saudi Arabia. The strong and positive response we have seen is key to our fleet growth and network expansion. We are pleased to be working with BOC Aviation to add three new Airbus A320CEOs to our fleet. This brings our total commitment to 11 new Airbus A320 CEO aircraft – a great achievement for our first year of operation.”

Maintenance News
Air India aircraft hits wall on take-off
An Air India 737 aircraft, flight IX 611, which was carrying 130 passengers and six crew members, was diverted to Mumbai when it was revealed that the aircraft may gave come into “contact with the airport perimeter wall” during take off from Trichy airport in southern India. The aircraft landed safely but has sustained some damage, according to media reports. The two pilots have been grounded pending an investigation, say the airline.