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*12th April 2019*

Jet Airways grounds 10 more aircraft; cancels international flights
Jet Airways grounded a further ten aircraft on April 11, and appears to have suspended all its international flights, which is unsurprising since the airline is only operating 14 aircraft. Indian carriers must operate a fleet of more than 20 aircraft to fly internationally.

Singapore’s Changi Airport confirmed that Jet Airways had “suspended its services to and from Singapore until further notice”, while London Heathrow has confirmed that Jet Airways’ flights to Mumbai and Delhi today will not operate.

According to report, the consortium of lenders led by SBI have started accepting bids from potential investors, but all the signs are that Jet Airways does not have the financial capital to continue to operate.

Meanwhile, SpiceJet announced today that it is inducting 16 Boeing 737-800NGs on dry lease into its fleet and has applied to the Directorate General of Civil Aviation (DCGA) for a No Objections Certificate (NOC) to import the aircraft. Subject to approvals, the aircraft will begin joining the SpiceJet fleet in the next ten days.

Ajay Singh, chairman and managing director of SpiceJet said: This is the first lot of Boeing 737s that we are inducting in our fleet. The sudden reduction of aviation capacity has created a challenging environment in the sector. SpiceJet is committed to working closely with the government authorities to augment capacity and minimise passenger inconvenience.”

SpiceJet says that the new inductions will bring down flight cancellations to nil while also helping its international and domestic expansion plans.

It doesn’t say so in the release, but the aircraft are almost certainly from lessors that have pulled their aircraft out of Jet Airways in recent months. Moving to an Indian carrier means that the aircraft do not have to be deregistered from India, which assists the lessors in keep replacement costs down.

Also in India, it has been revealed that Tata Sons Ltd and Singapore Airlines Ltd have infused a combined INR900 crore (approx.. $130 million) in Vistara with two rights issues in December 2018 and March 2019. The cash is required to fund new aircraft deliveries and to strengthen its current financial position. Tata Sons will purchase 255 million equity shares of Tata SIA Airlines at INR10 each, while Singapore Airlines will buy 245 million shares, reports MINT.

In China, Reuters is reporting that Hong Kong Airlines is facing difficulties. The news services writes in an exclusive report that the shareholders of the airline are asking to view the 2018 accounts before considering providing at least HK$2 billion ($255 million) requested by the airline, which is needs to retain its license. Hong Kong’s Air Transport Licensing Authority (ATLA) demanded the airline to improve finances. Reuters reports that the airline losses reached HK$3bn last year. The airline has not publicly confirmed the Reuters report.

As Hong Kong Airlines sits on the brink of collapse, we have to wonder what the mandatory opening up of the accounts will reveal. Is the airline being propped-up by stakeholders and are the operating losses far worse than they seem? Either way the airline is in trouble.

A few months ago I had the silly idea of adding tailfins of lost airlines over the past few months to the cover of Airline Economics, since then the cover has been changed three times as logos have been added. This is not a rout of airline brands – what we are seeing out there at the moment is a shakeout of the shabby business models that were never going to make it. Airlines that have been in trouble for some time. FlyBe in the UK is the exception. I have to ask: how did it come to this?

Then we have Jet Airways. The moment Etihad pulled its cash support, it was clear the airline was running down the clock. The business model has always been questionable, it is very much like Kingfisher in so many ways. We called out the weakness of the business model right here 12 years ago, but when Etihad pilled-in as part of its deranged global invest-in-anything-close-to-collapse scheme, the airline was given a reprieve and a seemingly powerful international partner for global connections. During that period of reprieve, the airline management could have restructured the airline. It could have deployed those Investec and Aergo ATRs as Air Deccan once did, keeping the frequency and therefore the slots but cutting capacity to fill the aircraft and turn a profit; and in the process off-load the larger jet aircraft, which were so obviously running at a loss. Jet deployed the ATRs but kept the larger lossmaking aircraft flying, in effect the airline did nothing to cut its cost base even though it was losing money – such a model seems nonsensical. Now all lessors have a stark choice – try and offload the Jet aircraft to SpiceJet or the like and keep the India risk, or deregister the aircraft and try to get them back out of India before Jet completely folds. If in that scenario Jet collapses before the aircraft are out of India, the lessors will have the awful trouble getting them out. If during that time Jet receives a financial reprieve then the aircraft have a good chance of getting back to lessors intact. It is a gamble either way.

Vistara has had to have a cash injection; GoAir has seen extreme pressure on margins; even the mighty IndiGo has seen pressure on margins. The Indian market is tough and a high risk country for lessors, it always has been and will be until bureaucracy is cut and that will take a strong government willing to completely reorganise the regional state system and its powers over aviation and airfields. The Indian government should move to federalise all aspects of aviation at speed, but alas this is not on the horizon. What we are seeing is continued cash injections into Air India, which continues to stifle competition across the Indian market. I wonder just how strong SpiceJet can be at this time. Can SpiceJet really take on all of those 737s this month and turn a profit on them? If at any time there is a mention of “taking up the slack left behind from Jet Airways” then do not believe the story as at no time were those Jet Airways aircraft full and at no time were the ticket prices achieved high enough to cover the running costs. SpiceJet has the cash right now but what has changed with regard to its business model over the past five years? Take a closer look. With these new 737 aircraft, any changes for the better have been totally erased and the model is going right back to that of some five years ago. Once the investors have had enough of seeing their cash go up in smoke, they too will pull the plug. As things stand it is a question of not if, but when.

There is some good news this week, however, in the shape of JetBlue, one of the best airline models in the world. The announcement of Heathrow to NYC flights this week is great news and the airline should be able to make this pay. I would argue though that they would be far better off connecting to Manchester in the UK where they can link-up with Emirates and Etihad far more easily and cheaply to fill flights. People seem to forget that Manchester has a local population within 1.5 hours of some 7 million and Delta, United and American all charge a premium on flights from the airfield due to the lack of competition and frequency. IAG saw this and has been filling transatlantic Aer Lingus flights from Manchester to Dublin for years now. JetBlue could come in and raise its prices and still be half the cost of Delta and United and faster than Aer Lingus (due to the Dublin stopover). Now that is worth thinking about. Norwegian has certainly missed a trick there that has cost it dear.

Orix Aviation
AV Corp International
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Airline News
Turkish Airlines adds route to Sharjah
Turkish Airlines has started scheduled flights to Sharjah, United Arab Emirates.

As Turkish Airlines’ third flight destination in the UAE after Abu Dhabi and Dubai, flights to Sharjah will be conducted on the Istanbul-Sharjah-Istanbul route.

During the launch of the inaugural flight, Turkish Airlines Chief Marketing Officer (CMO) Ahmet Olmuştur stated the following; “With Istanbul Airport, a new era has begun for Turkish aviation and tourism sectors. With having such a monumental facility as our home base, now we have an unmatched advantage to further accelerate our network expansion performance. As part of this performance, today we are highly pleased to add Sharjah as our third destination in the United Arab Emirates after Abu Dhabi and Dubai to ever-expanding flight network of Turkish Airlines.”

Finance News 
Avolon prices investment grade rated $2.5bn senior notes offering
Avolon has priced its $2.5bn private offering by its wholly owned subsidiary, Avolon Holdings Funding Limited. The offering comprises $750 million of 3.625% three-year senior notes with a yield to maturity of 3.650%; $1 billion of 3.950% five-year senior notes with a yield to maturity of 4.064%; and, $750 million of 4.375% seven-year senior notes with a yield to maturity of 4.454%. The notes will be fully and unconditionally guaranteed by Avolon.

The offering was significantly upsized from an initial launch size of $1.8 billion, reflecting institutional investors’ demand, says the lessor. The offering is expected to close on or about April 16, 2019, subject to customary closing conditions. Proceeds from the offering will be used for general corporate purposes, including the repayment of outstanding legacy secured debt, consistent with a commitment to reduce the level of secured debt in Avolon’s capital structure to 30% of total assets.

Moody’s Investors Service has upgraded Avolon’s corporate family and senior unsecured ratings to investment grade (Baa3). Fitch Ratings and S&P Global Ratings have also announced their intention, on successful completion of the offering, to upgrade Avolon’s issuer and senior unsecured debt ratings to investment grade (both BBB-).

Andy Cronin, Avolon CFO, commented: “Today represents a significant milestone for Avolon and marks the delivery of a key corporate objective for 2019. Our achievement of an investment grade rating, ahead of the expected timeframe, reflects the progress we have made to increase the level of unencumbered assets within the business and our metrics as an industry leader in terms of scale, asset quality and airline customer diversification.

An investment grade rating will provide us with even greater financial flexibility and access to a deep pool of capital. The strong market demand for this offering reflects confidence in Avolon’s credit profile and the long-term prospects for the business.”

Cargo News
Turkish Cargo posts February performance
Turkish Airlines’ air cargo brand, Turkish Cargo, managed to increase its cargo tonnage by 9.6% in February despite the shrinking in the global air cargo sector.

Turkish Cargo posted a 9.6% increase in its tonnage despite the 5.8% shrinkage in the air cargo market along with 5.7% fall in the demand according to IATA (International Air Transport Association) reports during January and February.

Turkish Cargo increased its market share in the sold tonnage by 0.6 points in the first two months of the year compared to last year and reached a growth of 4.3%, while increasing its cumulative market share by 0.4 points to 4.1% and achieved sustainable growth.

Turkish Airlines Chairman of the Board and the Executive Committee, M. İlker Aycı stated: “We are happy about the continuous rise of Turkish Cargo in the global air cargo market. We can’t say that the success we achieved during the first two months of 2019 was a surprise. We continuously experience these exciting achievements especially in recent years. For instance, in the last two years, we rose from 12th place to 7th place after surpassing five big global air cargo brands from Europe and Far East. Especially considering that the shrinkage in the demand for the market causes gloom in the sector with disappointing numbers, this success brightens the future of Turkish Cargo even more.”

People News
Airbus names Julie Kitcher EVP Communications and Corporate Affairs
Airbus has appointed Julie Kitcher as Executive Vice-President Communications and Corporate Affairs, effective immediately. In this role, she joins the Airbus Executive Committee leading all external and internal communication activities, reporting to Guillaume Faury, Airbus Chief Executive Officer (CEO).

In her new role, Kitcher will steer and co-ordinate the transformation agenda of Airbus and manage Audit, Performance Management, Responsibility and Sustainability and Environmental Affairs, in addition to her position as the Chief of Staff to the CEO.

Previously, Kitcher was Head of Investor Relations and Financial Communication at Airbus, a role she held since May 2015.

“Julie brings the right mindset, skills and background to lead Airbus’ global communication activities and further strengthen the Company’s brand and reputation worldwide,” said Guillaume Faury, Airbus CEO. “As Head of Investor Relations and Financial Communication, she proved her ability to build trust within the financial community and deliver clear and timely information to the markets. In her new role, she will coordinate the Company’s transformation efforts to help shape the story of Airbus as we open the next chapter in our journey.”

In her Head of Communications role, Kitcher will take over from Rainer Ohler, who is leaving Airbus after 24 years in the Company, including more than 13 successful years as Head of Communications.

“I’m excited to be appointed in this new role at such an important moment in the history of Airbus,” said Julie Kitcher. “I feel honoured to have the opportunity to lead a world class Communications and Corporate Affairs team that – within the functions I have been entrusted to lead – will boost the dialogue with employees and stakeholders across the globe as well as help shape and transform the Airbus of the future.”

Kitcher joined Airbus in December 2000 as a Financial Analyst in Airbus in the UK and has held a number of roles within Finance since. She is a Chartered Management Accountant (CIMA) with an MSc in Accounting, ESC Skema (Lille).

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Airline News 
Alaska Air Group reports March 2019 operational results
Alaska Air Group has reported March 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, a subsidiary of RAVN Air.

On a combined basis for all operations, Air Group reported a 0.5% increase in traffic on a 1.3% increase in capacity compared to March 2018. Load factor decreased 0.7 points to 84.2%.

Mainline reported a 1.2% decrease in traffic on a 0.2% decrease in capacity compared to March 2018. Load factor decreased 0.9 points to 84.5%. Mainline also reported 81.2% of its flights arrived on time in March 2019, compared to 81.9% reported in March 2018.

Regional traffic increased 18.8% on a 16.4% increase in capacity compared to March 2018. Load factor increased 1.6 points to 81.3%. Alaska’s regional partners also reported 82.4% of its flights arrived on time in March 2019, compared to 86.7% in March 2018.

Maintenance News
AFI KLM E&M signs airframe component support and logistics services agreement with Viva Air  
Air France Industries KLM Engineering & Maintenance (AFI KLM E&M) has entered into an exclusive maintenance agreement with Viva Air Group, a low cost airline based in Colombia and Peru, that includes the support of airframe components and logistical services.

“AFI KLM E&M provides the solutions for the unique operational and logistical challenges we often face in the region. Setting up the program within a very short time period to meet our deadlines and budget. Their quality of service that has come from several years of experience supporting LCC operations makes AFI KLM E&M the right partner for our airline. This partnership will bring even more consistency to our operation, and will allow Viva Air to maintain its very high On Time Performance levels,” says Nicolas Takahashi, Viva Air’s VP of Engineering & Maintenance.

The component support agreement takes advantage of AFI KLM E&M strategic location in the Americas through its Miami-based subsidiary, Barfield.

“We are very proud of the services we will be providing to Viva Air. Our main focus is to provide Viva Air with the best program services available,” says Franck Becker, AFI KLM E&M’s VP of Sales in the Americas.

Technology News
Bombardier delivers one Q400 Aircraft to Qazaq Air  
Bombardier has delivered the first of two Q400 aircraft ordered by Qazaq Air JSC of Kazakhstan (Qazaq Air) in 2017. The order followed Qazaq Air’s successful launch of domestic service in Kazakhstan in July 2015, using three leased Q400 aircraft.

Qazaq Air’s Acting Chief Executive Officer, Adel Dauletbek and the airline’s Head of Public Relations, Sergey Khetsuriani, joined the airline’s flight and acceptance crew during a special delivery ceremony at Bombardier’s Toronto site where the Q400 aircraft is manufactured. H.E. Akylbek Kamaldinov, Ambassador of Kazakhstan to Canada was in attendance as well as Bombardier Commercial Aircraft’s team which included Ross Mitchell, Vice President, Commercial Operations and Mark Gilbert, Director, Sales.

“We are delighted with the performance of our fleet of Q400 turboprops and are excited to welcome the additional aircraft into our operation,” said Dauletbek. “With our larger fleet, our customers will benefit from the expansion of our route network within Kazakhstan, as well as to nearby cities in the Central Asian region.”

“We congratulate Qazaq Air on the growth of its operations and expansion of its network,” said Mitchell.  “The Q400 aircraft continues to prove itself in some of the most challenging locations around the world. The aircraft’s speed, range and fuel efficiency, and especially its certification for operations down to -54°C make it ideal for operations on Qazaq Air’s long routes in the Kazakh market.”

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Maintenance News
APOC Aviation acquires three A320 airframes for part-out in China
APOC Aviation has acquired three A320 airframes for part-out.  MSN 712, 718 and 720 were formerly acquired by CALC Group (China Aircraft Leasing Group) from China Southern Air Leasing earlier this year.

APOC will retain CALC Group’s MRO joint venture, FL ARI Aircraft Maintenance & Engineering Company (FL ARI) to perform the part-out on the Company’s behalf in CALC’s aircraft recycling facility located in Harbin, China. The process is expected to be completed this summer and after which stock will be strategically offered in the Asia market, or partly shipped to APOC’s warehouse in The Netherlands for sale and used to support AOG requirements 24/7 worldwide.

Jasper van den Boogaard – Director Acquisition & Trading and ISTAT Certified Appraiser at APOC Aviation, says: “This is APOC’s first significant deal in China and the acquisition of these three A320 airframes is indicative of our intention to expand our business in Asia. Using local tear-down specialists maximises cost-efficiency from the outset as concurrently we replenish our stock of universally desirable A320 components, retain value in those parts, and sustain competitive prices.”

Mike Poon – Chief Executive Officer at CALC, says: “We are very pleased to work with APOC Aviation. With the expertise and experience of both teams, we will complete the transactions with flexibility and efficiency. This deal has showcased CALC as a complete aircraft value-chain solutions provider thanks to the abundant resources of the Group’s multiple integrated business platforms.”

APOC Aviation is pursuing a fast-growth strategy and a programme of investment is underway as APOC’s new engine trading division builds engine stock for trading, leasing or teardown with a focus on CFM56-3/5A/5B/7B and V2500-A5 engines. The Company is continually adding to commercial aircraft parts stock through targeted purchase of end-of-life narrow-body airframes.