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Friday 21st July 2017
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Air France launches a Millennial airline; Goshawk PP breaks records
Arguably all airlines should, by now, be targeting millennial’s as the next generation of flyers, but Air France has launched its marketing campaign for new budget carrier Joon as specifically targeting the millennial generation – aged between 18-35. It the hot new focus for most marketing shops and the millennial phenomenon has spurred any number of white papers from consultancy shops on how firms can attract and retain millennial talent and how to sell to this generation of individuals weaned on smart phones and social media. Their short attention spans seem to dominate many theses but Air France’s initial blurb on Joon rather draw attention to their “positive state of mind” and “opportunistic” nature, who “know how to enjoy every moment and are in search of quality experiences that they want to share with others”. Few details have emerged on how exactly Joon will attract this pool of flyers – selfie sticks as standard? Virtual flight attendants? Thankfully, over 40s will be allowed to fly, one spokesperson is quoted as confirming! (See the next issue of Airline Economics, which features its annual 40 under 40 list, which celebrates the most outstanding millennials from the commercial aviation industry).

Seriously though, Joon is part of a new wave of start-up carriers from flag carriers seeking to overturn the established low-cost giants in Europe. Since the new French carrier will use a combination of single-aisle Airbus A320s and long-range twin-aisle A340s and A350s, its likely to compete with Norwegian and Level on long haul routes. It will be interesting to see how it fares in this competitive marketplace.

Meanwhile, Goshawk has completed its second issuance of unsecured notes to institutional investors in the US private placement market. The deal was launched as a $100 million senior notes issuance but was upsized to $566.5million thanks to strong market demand. This is understood to be the largest ever US Private Placement issuance by an aircraft lessor.

The average tenor was over 8.5 years, with four tranches split between 7, 8, 9 and 10 year tenors. The pricing of the transaction was completed late June with closing and funding in early July. Proceeds from the notes will be used for aircraft acquisitions and general corporate purposes.

The joint lead agents were Citibank, Crédit Agricole CIB, Natixis and HSBC. BNP Paribas was a co-lead agent. O’Melveny & Myers acted as Goshawk’s legal counsel while Greenberg Traurig Maher LLP acted as the investors’ legal counsel.

Anand Ramachandran, CFO of Goshawk, says “We are delighted to have completed our second issuance of notes in this market. We achieved all our objectives with this transaction. Several new as well as a number of existing institutional investors participated which is important as we aim to continue to increase the number of reliable sources of capital for our business. The transaction is attractively priced and the debt term of over 8.5 years closely matches the company’s average lease term.”

Goshawk was established in November 2013 as an aircraft leasing platform to focus on building an asset portfolio of young, new technology, in-production aircraft with a large and diversified asset-type and operator base. With support from its shareholders, Chow Tai Fook Enterprises Limited and NWS Holdings Limited, the Goshawk portfolio has grown to 83 delivered aircraft since inception. Together with the planned aircraft in the pipeline, the total asset value of Goshawk is estimated at approximately US$5.6 billion.

Philip Tozer-Pennington
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AIRCRAFT FOR SALE/LEASE
Aircraft Type Engine MSN DOM Available From For sale / Lease Contact
A319-100 CFM56-5B6/P 1963 2003 Jun-18 Lease Bobby Nishi
A320 CFM56-5B4/P 1860 2002 Apr-18 Lease Bobby Nishi

CLICK HERE – to download the full listing and contact details

CLICK HERE – to download the full listing and contact details

Charles Taylor Aviation Asset Management
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AERFIN
ISTAT

Airline News
Air France launched Joon
Air France has launched its new airline, Joon, which will start operating medium-haul flights from Paris-Charles de Gaulle this autumn, followed by long-haul flights in summer 2018.

Air France says Joon is especially aimed at “a young working clientele, the millennials (18 to 35 year-olds), whose lifestyles revolve around digital technology”. The marketing release says that this new brand has been entirely designed to meet their requirements and aspirations, with an authentic and connected offering that stands out in the world of air transport.

Joon will offer original products and services that reflect those of Air France. Joon is a lifestyle brand and a state of mind – it is not clear yet what those products will be.

Joon’s visual identity is based on an electric blue colour code “symbolizing the airline’s dynamic attitude, as well as the sky, space and travel. The uniform of Joon’s flight attendants will be inspired by the new fashion codes of “basic and chic”.

“We started with our target customer segment, the millennials, to create this new brand that means something to them. Our brief was simple: to find a name to illustrate a positive state of mind. This generation has inspired us a lot: epicurean and connected, they are opportunistic in a positive sense of the word as they know how to enjoy every moment and are in search of quality experiences that they want to share with others. Joon is a brand that carries these values,” said Caroline Fontaine, VP Brand at Air France.

“With Joon, we have created a young and connected brand that will give the Group a new impetus. Designed for our millennial customers, it will offer more than just a flight and a fare, it will offer a global travel experience. We’ll provide a further update in September, with more details on the brand’s content, products, services, destinations and range of fares,” said Dominique Wood, EVP Brand and Communications at Air France.

This new airline will be managed by Jean-Michel Mathieu, CEO of Joon. As such, he will join the Air France Executive Committee.

“The creation of a new airline is a historic moment in many ways. Joon is another step in the deployment of the Trust Together strategic project. Its creation will improve the profitability of the Air France Group, enabling it to reduce its costs and ensure the sustainability of its business model. Jean-Michel Mathieu, who has taken part in the development of this new airline since the start, today becomes its CEO. With all the Group’s teams, we are concentrating our energy on the successful launch of Joon,” said Franck Terner, CEO of Air France.

Leasing News
AviaAM Leasing sells fourth Airbus A321 with lease attached
AviaAM Leasing has sold 4th Airbus A321 aircraft from its fleet with lease attached. The ownership of the aircraft was transferred to the new lessor together with operating lease contract with Small Planet Airlines Poland.

On the 20th of July, AviaAM Leasing sold one Airbus A321-211 aircraft (MSN 2342) with lease attached. This was the 4th aircraft on lease with Small Planet Airlines that had been sold to the new owner within the last months. All four aircraft came in the configuration of 220 economy seats. The most recent sale of Airbus A321 aircraft completes the deal in respect to sale of total four Airbus A321s on lease with Small Planet Airlines.

“We’ve been in close partnership with Small Planet Airlines lately and this is a splendid end of one of many voluminous projects. We will be ready to continue our cooperation any time in the future and support the carrier’s bold expansion plans with the demanded aircraft type or specific configurations. All the best for them!” shared Tadas Goberis, Chairman of the Board and CEO of AviaAM Leasing.

Small Planet Airlines will further operate Airbus A321s on its most popular routes connecting passengers to the Mediterranean Sea resorts and other holiday destinations.

Finance News
KLM Cityhopper and Air Nostrum secure EIB funds
The European Regions Airline Association (ERA) has announced that two of its member airlines, KLM Cityhopper and Air Nostrum, have had financing approved in principle for fleet renewal by the European Investment Bank (EIB).

This financing is part of a €1bn euros pilot created by the bank which follows a period of collaboration between ERA, its members and the EIB to provide more access to finance for regional aircraft and airlines.

ERA’s Director General Simon McNamara comments: “I’m delighted that the European Investment Bank has approved this lending for KLM Cityhopper and Air Nostrum. This represents a significant milestone in regional fleet financing and ERA is looking forward to working with more members to encourage them to pursue similar financing from the €1bn pilot that the bank has apportioned for regional fleet renewal.”

McNamara continues: “We worked very closely with the EIB as they developed this new lending guideline specifically for regional types and we applaud the EIB for its forward-thinking policy that puts regional connectivity by air as a key part of ensuring EU territorial integrity. This is great news not only for our members that seek to fly modern, more environmentally friendly and fuel efficient aircraft, but also for passengers, who will enjoy the benefits of higher comfort levels on newer aircraft connecting key parts of Europe.”

Hear more from Simon McNamara in the forthcoming issue of Airline Economics.

Maintenance News
AerFin take delivery of first Embraer EJET 170LR
AerFin has taken delivery of the first of fifteen Embraer E170LR aircraft MSN 17000158 from Saudia. AerFin announced in May the acquisition of the fleet of fifteen Embraer EJet’s from the Middle Eastern carrier including all the spare parts, engines, tooling and equipment necessary to support the entire fleet.

The first delivery is significant in AerFin’s preparations for the launch of its Beyond Fleet Services venture for the EJET product line, which will provide complete nose-to-tail support solutions for Embraer EJET operators. It is expected that the first EJet E170 delivery MSN 17000158 will be delivered to a new regional operator under a complete flight hour package agreement, following transition work in Tarmac Aerosave’s facility in Teruel.

AerFin CEO, Bob James, said: “AerFin are delighted to have secured the entire fifteen E170LR fleet from Saudia as this acquisition provides the critical mass to allow us to offer full suite of services to EJet operators, from comprehensive flight hour agreements and spares and tooling support programs through to the leasing of whole EJet aircraft and engines”

Regulatory News
Ryanair welcomes German court decision over Cheaptickets.de
Ryanair has welcomed the Regional Court of Hamburg (Landgericht Hamburg) ruling against Travix – which operates the CheapTickets.de website – ordering the cessation of its unlawful and misleading pricing of Ryanair checked bags, as it continues to sell Ryanair flights at inflated fees without any commercial agreement with the airline.

The Court ordered Travix to refrain from displaying pricing for checked baggage which is higher than the actual fee charged by Ryanair. Furthermore, the Court also prohibited Travix from referring to an “airline fee” (“Zahlungspauschale Lowcost Airlines”) which does not exist, says Ryanair.

Ryanair has no commercial agreement whatsoever with Travix/Cheaptickets.de, which continues to sell Ryanair’s flights with hidden surcharges. Ryanair has no issue with OTAs who display Ryanair’s fares in a transparent manner, and licences several OTAs to display its fares for price comparison purposes only, and again Ryanair urged all customers to book directly on the Ryanair.com website for the guaranteed lowest fares.

Ryanair’s Robin Kiely said: “We welcome this Regional Court of Hamburg decision ordering CheapTickets.de to stop its unlawful and misleading pricing baggage practices, where it attempted to pass off its own surcharges as Ryanair’s. This is an important victory for consumers, particularly those who have been subjected to additional fees from screenscraper websites such as CheapTickets.de and we will continue to take action to prevent Europe’s consumers from being misled. We again urge customers to avoid screenscrapers such as CheapTickets.de and book directly on the Ryanair.com website.”

IATA Urges Mexico to Embrace Global Standards for Slot Management
The International Air Transport Association (IATA) has called on Mexico to apply global standards for the management of airport slots to maximize the country’s air infrastructure and ensure its flourishing air industry remains competitive.

The recently-proposed slot system by Mexico’s Federal Economic Competition Commission COFECE deviates from global standards in the following ways:

• The auctioning of slots to the highest bidder by the regulator could limit competition by preventing less well-established and smaller air carriers from entering or expanding in the marketplace, because they may lack the financial wherewithal to acquire slots. Limiting competition in this way will have an adverse impact on consumers by reducing choice and potentially increasing fare levels.

• The confiscation of 10% of existing slots from air carriers at congested airports will weaken route networks, reducing air traveler options in terms of frequency and destinations, while imposing real financial damage on airlines.

• The withdrawal of slots based on punctuality criteria undermines the ability of airlines to make long term commitments to serve markets and ignores the tremendous competitive and financial incentives that airlines have to maintain on-time operations. Moreover, there is no evidence that linking punctuality to slots will improve punctuality at an airport. Uncontrollable delays will always exist, and therefore the biggest likely outcome will be disruption to established schedules.

• The imposition of a “use-it-or-lose-it” threshold of 85% is inconsistent with the global standard of 80% utilization to retain a slot.

Consumer interests are served by airlines operating efficiently based on global standards. The IATA Worldwide Slot Guidelines (WSG), are the global standard for slot allocation and use. The WSG ensures that individual airlines can operate their schedules under the same set of rules on all of the routes in their network. And that assurance translates into consumer benefits through efficient and reliable operations.

“The full implementation of WSG is needed to manage the precious capacity at the key Mexico City hub as well as other Mexican airports. WSG brings efficiencies that are critical for all airports—especially those with severe capacity constraints such as Mexico City. Aviation is vital to Mexico—contributing a million jobs and $38 billion annually to the country’s economy. The full and immediate implementation of WSG is critical to ensure that Mexico can benefit even more from aviation,” said Peter Cerda, IATA’s Regional Vice President for the Americas.

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Finance News
ALAFCO secures financing for four A320neos
Stellwagen Finance has announced the closing of a commercial loan to ALAFCO in the financing of the first of four Airbus A320 NEOs on operating lease to Air India. Stellwagen Finance was the sole arranger sourcing financing from an Asian financial institution as senior lender. Vedder Price (London) acted for the lender.

“We are pleased and delighted to have finalized the commercial loan for the financing of four A320 NEOs on operating lease to Air India. The completion of the deal is a direct result of the dedication and efforts of Stellwagen as lead arrangers and ALAFCO, who have worked tirelessly to get this over the line,” commented Adel Al-Banwan, Deputy CEO of ALAFCO

“I am proud to have closed this first deal with ALAFCO, one of the major Middle Eastern Lessors. Thanks to a good cooperation with ALAFCO, we have been able to put together a slightly new structure that will be reused by ALAFCO in the future,” commented Marc Bourgade, CEO of Stellwagen Finance.

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Airline News
Fitch affirms Spirit Airlines long-term rating
Fitch Ratings has affirmed the Long-Term Issuer Default Rating for Spirit Airlines at ‘BB+’. The Rating Outlook is Stable. Fitch has also affirmed the ratings on Spirit’s 2015-1 series of enhanced equipment trust certificates.

The rating is supported by Spirit’s solid profitability, healthy liquidity, and low cost structure. Spirit’s cost advantage over its peers remains a significant ratings factor as it provides the company a meaningful cushion to operate through potential future economic downturns while maintaining adequate financial health. The ratings are also supported by an improving unit revenue environment among U.S. air carriers.

Fitch’s primary rating concerns include leverage and cash flow metrics that have weakened beyond the agency’s prior expectations driven by steep unit revenue declines over the past two years. The carrier continues to grow at a rapid pace, and heavy capital spending on new aircraft and higher debt balances may cause credit metrics to deteriorate modestly in the near-term. Continued increases in leverage due to heavier than expected borrowing, deteriorating margins from increased competition, or failure to manage future capacity growth could lead to negative rating actions. These concerns are offset by Fitch’s longer-term expectations for these metrics to trend in a positive direction. Other concerns include a difficult competitive environment among US carriers and ongoing labor negotiations with Spirit’s pilot union that will likely drive wages higher in the near-term.

Leasing News
WEST III rated by Kroll
As announced yesterday, Willis Lease Finance has issued its fourth asset backed securitisation with Willis Engine Structured Trust III (WEST III), which issued two-tranches of notes to secure a portfolio of 56 engines. The deal is being arranged by BofA Merrill Lynch, Deutsche Bank is acting as the trustee, operating bank and security trustee, while BNP Paribas is providing the nine month liquidity facility. Willis remains as the servicer and administrative agent, while Wilmington Trust is the owner trustee.

Kroll Bond Rating Agency (KBRA) has assigned preliminary ratings to two classes of notes. The 293.7m A notes have an initial leverage ratio of 70% and are rated A by KBRA; and $42m B notes with an LTV of 80% are rated BBB by KBRA.

The portfolio of 56 engines includes 51 engines that are on lease to 27 lessees located in 20 countries, along with five engines currently not subject to a lease agreement. The majority of the portfolio is comprised of CFM56-7B engines (24 engines) and CFM56-5B types (12 engines). The portfolio has an initial value of approximately $419.6 million, based on the average of the half-life base values provided by three appraisers as of May 31, 2017 and adjusted for maintenance conditions as determined by ICF SH&E, Inc. as of April 2017.

Key structural features of WEST III include a scheduled amortization profile, where the notes amortize 4.5% for the first four years of the transaction and then amortize 5.5% per year through the expected final payment date. Supplement principal payments are required for any aircraft that are added as replacement assets prior to the expected final payment date. At closing if the deal, the initial funding for the maintenance reserve account will be approximately $5.0 million and will build to a $10.0 million floor. The structure also incorporates rapid amortization events to be triggered in certain instances.


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Airline News
Philippine Airlines takes delivery of its first 86-seat Q400
Bombardier Commercial Aircraft delivered the world’s first dual-class, 86 seat turboprop aircraft to Philippine Airlines at its facility in Toronto, Canada, where the aircraft is manufactured.

“We congratulate Philippine Airlines for taking delivery of the world’s first dual-class, 86-seat Q400 aircraft, and are confident that the airline will continue to benefit from the outstanding performance of Bombardier turboprops,” said Fred Cromer, President, Bombardier Commercial Aircraft. “This delivery is an example of how Bombardier’s Q400 is an ideal solution for airlines that require higher-performance and larger turboprops as they develop regional routes to meet increasing passenger demand. Bombardier is proud to have the only commercial turboprop available today to offer up to 90 seats.”

“With its superior performance capabilities, unmatched profitability advantages and exceptional passenger experience, the new Q400 aircraft will enable Philippine Airlines to increase its competitiveness and set a new standard for turboprops in the region,” said Jaime J. Bautista, President and Chief Operating Officer, Philippine Airlines. “We are excited to bring this new aircraft back to the Philippines, and are confident that the Q400 aircraft will continue to play a significant role in positioning Philippine Airlines as a five-star airline and in regaining its dominance in the domestic market.”

Philippine Airlines’ new Q400 aircraft is configured with 86 seats in economy and premium economy classes with a 29-inch and 33-inch seat pitch respectively. The aircraft is scheduled to enter into service in two weeks.

This milestone aircraft is part of Philippine Airlines’ purchase agreement announced on December 8, 2016 – which included a firm order for five Q400 aircraft and purchase rights for an additional seven. Following the exercise of the purchase rights announced at the 2017 International Paris Air Show, Philippine Airlines now has firm orders for 12 Q400 aircraft.

Technology News
Asiana Airlines A350s take off with Panasonic Avionics
Asiana Airlines has begun revenue service with its first A350 aircraft using Panasonic Avionics Corporation’s (Panasonic) industry-leading inflight entertainment and connectivity (IFEC) solution. This first aircraft, which was line fit with Panasonic solutions by Airbus, entered passenger service on May 15th having been delivered to the carrier on April 26th.

Panasonic’s eX3 system delivers a premium passenger experience through features including audio and video on demand, and a massive content library that can offer over 50 movies, 60 TV shows, games, music and more.

The aircraft will also offer Panasonic’s global connectivity service – the only broadband inflight connectivity service operating in every country in the world today – enabling passengers to access the internet via broadband inflight Wi-Fi, and to send and receive calls and text messages.

Hideo Nakano, Chief Executive Officer for Panasonic Avionics said: “We are delighted to announce this partnership with Asiana Airlines. Our word-class systems provide their passengers with a globally available and premium inflight entertainment and connectivity experience.”

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