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Thursday 23rd November 2017
Dublin Aviation Summit

Ramki Sundaram officially launches Airborne Capital
Ramki Sundaram, previously Head of Aviation at Natixis, has officially launched his new venture, Airborne Capital, a new aircraft leasing and asset management company that has “aggressive” plans to grow its book to US$5bn in assets under management within give years.

Sundaram will be CEO of Airborne Capital and is joined by a very experienced team, including Anand Ramachandran, the former CFO of Goshawk Aviation, Cian Dooley, Jocelyn Noel, a former Natixis colleague, as well as two more ex-Goshawk corporate finance executives – John O’Flynn and Eugene Lui.

Airborne Capital, which is headquartered in Ireland, and initially with offices in Dublin and London, is backed by FEXCO Group, Ireland’s largest privately owned financial services company, which is a fintech company specializing in multinational payments, financial and business solutions.

Airborne Capital is intended to “act as a bridge between investors seeking bespoke investment solutions in the aviation space, and issuers requiring aviation financing via differentiated capital solutions.” The team are seeking to capitalize on booming aviation finance market, which is predicted to double the size of its fleet in the next 20 years that traditional sources of capital will be hard pressed to meet alone. Airborne Capital says that it will provide solutions to fill this gap, and offer its expertise to new capital providers to meet the aviation industry’s growth needs.

“We are very excited to launch this venture with the strong support of FEXCO,” says Sundaram. “The team at Airborne Capital has rich experience in setting up and managing innovative investment and fund platforms for investors globally who are looking to deploy capital in aviation.”

According to FEXCO, financial services for aviation assets is as an attractive long-term investment opportunity for the group, which has underpinned its decision to invest in Airborne Capital.

“We are delighted to be working with the Airborne Capital team on this important initiative and we look forward to broadening our presence in this dynamic sector of the financial services market,” says Denis McCarthy, CEO of FEXCO. “With the financial support we can provide and the industry expertise of the team we believe this business can grow rapidly to play a major role in the market segments it is targeting.”

The worst kept secret of recent weeks is out, Airborne Capital has launched. Goshawk has been stripped of serval key staff members and Natixis is having to re-group, after just 12 months or so of solidifying the aviation team in London.

This news and the entrance of other firms in recent months has some industry observers concerned that some of these new investors don’t really understand this business. Aggressive growth seemingly at all costs in the leasing industry is a dangerous tactic if growth is based on gaining market share. This drives downs pricing for everyone – great for airlines but for the rest of the market it will likely add even more pressure on lease rates and other deal sweeteners – relaxed covenants, no maintenance reserves… One source is predicting “blood on the streets” in the three years as these deals start going bad and that new money starts to dry up. Additional competition in this market will undoubtedly serve the influx of aircraft delivering over the same window but the consensus is that few are prepared for a default scenario nor a macroeconomic shock. That said, from discussing the market with all players over the past two months for a major industry survey (to be published in January) there are those that just cannot see a correction coming as passenger demand continues to rise. As this continues, and financiers and lessors continue to pursue aggressive growth strategies, the competitive landscape will become even more fraught and there will be casualties.

On the stage at Airline Economics Growth Frontier Hong Kong, we heard how some firms in the sale and leaseback market doing deals at a 0.48 lease rate factor. This seems like craziness in the cold light of day, but in this world of ultra-low interest rates and uncertainty, a 0.48 return pegged against a mobile tangible asset is not too bad, at least for the next five years maybe, after that the money will start to flood out as fast as it flooded in for many in this market. Come what may we are at a point where there is no safety margin for some companies, airlines need to keep growing or the resulting implosion of those asset managers and lessors on the thinnest of margins will see investors lose their shirts.

Philip Tozer-Pennington

Orix Aviation
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Airline News
Thomas Cook reports strong results
Thomas Cook has reported an 8% increase in underlying earnings before interest and tax (EBIT) at £330 million. The travel company credited the turnaround of its German airline Condor and improved customer demand for the rise, highlighting a rise in forward bookings for Turkey and Egypt for summer 2018.

“The strong performance of our Group Airline in what has been a difficult year for European aviation is a particularly encouraging sign of our progress,” said chief executive Peter Fankhauser who praised the rise in Condor’s profits by £24 million, especially in the wake of bankruptcies from Air Berlin, Monarch and Alitalia.

Hop! pilots threaten to strike over Christmas
Pilots with Air France’s budget airline Hop! have threatened to strike during the Christmas period if negotiations over working conditions remain blocked.

The Air France pilots union, SNPL, has voted in favour of striking if negotiations over the working conditions at its regional subsidiary company Hop! do not move forward.

Pilots are protesting over the working hours, particularly concerning whether pilots should be asked to work with less than ten hours of break between the last flight of the day and the first of the morning.

The parties must come to a consensus before the end of November and if they don’t Air France has the right to dictate working conditions.

Air France’s Managing Director Franck Terner has commented that the airline is intent on reaching an agreement in the next few days.

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Airline News
White & Case advises Kenya Airways on $2bn restructuring
Global law firm White & Case has advised Kenya Airways, the Kenyan flag-carrier, on its US$2 billion financial restructuring.

Key features of the restructuring include a reprofiling of payments owed to operating and finance lessors, a conversion of debts into newly issued equity in the company and the provision of a new multi-purpose facility from Kenyan banks. Following the transaction, Kenya Airways has been repositioned for long term growth and is around 90 percent owned by the Government of the Republic of Kenya and a group of 11 local banks.

“Our cross-practice team advised on a significant and multi-faceted transaction involving multiple jurisdictions that ultimately required the agreement of creditors, shareholders, the Kenyan government and other key stakeholders to the business,” said London-based White & Case partner Christian Pilkington, who led the Firm’s deal team. “The leadership and participation of US EXIM Bank was also instrumental to the success of the restructuring.”

“White & Case delivered the combined strength of its experience in African restructurings and aviation finance to successfully execute a complex transaction that ensures the stability of a strategically important national transport resource,” said London-based White & Case partner Justin Benson.

The White & Case team which advised on the transaction was led by partner Christian Pilkington (London) and included partners Justin Benson, Ben Davies, Allan Taylor (all London), Michael Smith (New York) and Richard Kebrdle (Miami), and associates Andrew Harper (London) and Mara Abols (New York).

Maiden flight of SalamAir to Doha
SalamAir has made its inaugural flight from Muscat Hamad International Airport (HIA) to Doha. The first budget airline from Oman, SalamAir will operate five times a week between Muscat and Doha, with connections to Salalah, Suhar, Dubai, Medina, Jeddah, and Sialkot and Karachi in Pakistan. Outside Oman, Qatar is the fourth country to be served by the new airline.

SalamAir chairman Khalid al-Yahmedi said that the company is so happy that they could operate between Muscat and Doha in the very second year of its operations. The new airline was launched last year.

The new route, hoped Yahmadi, would offer travellers convenient timing, affordable travel alternatives and connectivity to a wider network of destinations.

SalamAir plans to operate more flights and routes in the first half of next year as at least four more A320 aircraft would be joining its fleet.

Dana operations grounded
In Nigeria, the National Association of Aircraft Pilots and Engineers (NAAPE) has grounded the operations of Dana Air Limited over the management’s refusal to allow technical personnel, including engineers and pilots, to join unions.

The unions picketed the airline’s operations at the Murtala Muhammed Airport domestic terminal (MMA2), preventing any of its flights from taking off.

The National Association of Aircraft Pilots and Engineers (NAAPE) was joined in solidarity by all affiliates of the United Labour Congress (UCL) to carry out the picketing exercise over the refusal of Dana Air to allow their staff to join the unions.

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Airline News
California Pacific Airlines to launch soon
California Pacific Airlines (CPAir) has been certified by the FAA and intends to begin operations from its main hub at the McClellan-Palomar Airport in Carlsbad, California by April 2018.

The airline plans to offer around 15 daily flights from Carlsbad to mainly domestic flights to Phoenix, Las Vegas, Sacramento, Oakland, San Jose, and one international flight to Cabo San Lucas, Mexico.

The airline was first founded in 2009 with the original plan to be in operation by 2011 but the airline was plagued by delays related to FAA certification and other areas.

Regulatory News
Airlines insurers settle 9/11 claims
Insurers for American Airlines, United Airlines and other aviation defendants have agreed to pay $95 million to settle claims that security lapses led to their aircraft being hijacked in the September 11 terrorist attacks without making any admissions or concessions with respect to liability for the attacks.

The settlement, signed last week, resulted from “extensive, arms-length negotiations” by lawyers “who worked diligently for months.”

Developer Larry Silverstein and World Trade Center Properties have collected more than $5 billion from other defendants through lawsuits. The money has aided the reconstruction of buildings on the 16-acre lower Manhattan site.

Technology News
Lufthansa Systems renews contract with Aerolíneas Argentinas
Argentinian carrier Aerolíneas Argentinas has confirmed that it will continue to use Lufthansa Systems’ Lido/Flight 4D flight planning system and the NetLine/Load weight and balance application for the next five years. Both companies signed the contract renewal in August. Aerolíneas Argentinas has been using both products successfully since 2013.

“Our collaboration with Lufthansa Systems enables us to continue improving our service,” said Mario Dell’Acqua, President of Grupo Aerolíneas. “Our company is focused on growth, optimization and progress. The Lido/Flight 4D and NetLine/Load solutions enable us to equip our team with the right tools to ensure excellence in our flight operations. And our passengers will also continue to benefit from high-quality service.”

The core features of the Lido/Flight 4D flight planning solution are the integrated and continually updated aeronautical database and the so-called optimizer. Lido/Flight 4D calculates the most suitable route for each flight based on all flight-related data, weather conditions and the current airspace situation including any restrictions. Lido/Flight 4D is an enhanced and updated version of Lido/Flight, which has performed successfully in the market for over 20 years.

NetLine/Load weight supports airlines in the perfect distribution of baggage and cargo on board an aircraft. It covers all relevant load control parameters and calculates the optimal trim, load distribution and maximal weights for each flight – in an entirely automatic and individually configurable way. This significantly increases the productivity of load controllers and helps save fuel.

“Lido/Flight 4D and NetLine/Load are a perfect combination,” said Alexandre Santos, Senior Director Latin America South at Lufthansa Systems. “The automatic and continual exchange of what are known as estimate zero fuel weights (the estimated weight of the loaded aircraft without fuel) and fuel amounts enhances the efficiency of flight preparations. This also prevents the inaccuracies that arise from manual entry and, most importantly, helps airlines make fuel savings.”

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Airline News
China Airlines increases non-stop route flight frequency between London Gatwick and Taipei
China Airlines is increasing its non-stop route from London Gatwick to Taipei from four to five flights per week. The national flag carrier of Taiwan will add a fifth flight from March 25, 2018 onwards, with the additional service operating every Tuesday.

The increase follows the announcement that China Airlines is returning to the UK after a five-year hiatus with the launch of a new non-stop service between London Gatwick and Taipei’s Taoyuan International on Friday 1 December 2017.

The new service will operate four times per week from Gatwick’s South Terminal until 25 March 2018, when the additional Tuesday flight will be added. The A350-900 Airbus will carry up to 306 passengers with a three-class configuration, offering Premium Business, Premium Economy and Economy cabins.

“Having only just announced our return to the UK, we are already demonstrating our ambition and commitment to the service by expanding from four to five weekly flights,” says Roger Han, Senior Vice President, Europe at China Airlines.

“This addition to the only non-stop service between Taiwan and the UK will allow even more travellers to experience China Airlines’ impressive 4-star inflight service. Customers will be able to travel more frequently with the knowledge that our network is opening up many routes into Australia, New Zealand and Asia.”

PAL Holdings to launch airline’s longest flight
Philippine Airlines (PAL) will launch a-hour nonstop flight from Manila to New York, which flies over the Polar region early next year. This will be the longest nonstop flight ever taken by a PAL aircraft, which will utilize the A350-900 ULR (ultralong range) aircraft that is due for delivery in midyear 2018.

PAL President and CEO Jaime J. Bautista said: “PAL is scheduled to receive delivery of the first A350-900 URL in March 2018,” adding that three more A350 ULR will arrive in 2018 and two more in 2019 for a total of six A350s.

The distance from Manila to New York via the polar route is 13,691 kilometers (8,507 miles).

Bautista said the carrier is still studying possible non-stop flights to Europe and elsewhere but, at the moment, the rest of the A350 would be fielded to: Seattle, Chicago, Miami and San Diego.

By December 6, PAL will start operating a nonstop thrice weekly service on the Manila-Auckland route.

Technology News
NokScoot expands global distribution with Hahn Air Group
NokScoot has implemented Hahn Air Systems’ H1-Air product, which means that the Thai-based carrier will be available for HR-169 ticketing in all major GDSs worldwide under the reservation code H1. Earlier in 2017, the airline signed an HR-169 interline agreement with Hahn Air, the leading provider of airline distribution services, making NokScoot available under its own XW code in the Abacus/Sabre, Amadeus and Travelsky GDSs.

NokScoot is the 15th partner to benefit from the two products of the Hahn Air Group. As a result of this so called Dual Partnership, NokScoot will benefit from a full suite of services, including scheduling, fare filing, messaging, inventory management, settlements and HR-169 ticketing. This will help to optimise its distribution strategy and commercial reach to over 100,000 travel agencies in more than 190 markets worldwide.

Launched in 2014, NokScoot is the joint venture between Singapore Airlines’ budget airline, Scoot, and the Thai airline, Nok Air. NokScoot, operating out of Bangkok’s Don Mueang International Airport, offers LCC services on medium to long-haul destinations, including Dalian, Nanjing, Taipei, Tianjin, Tsingtao and Shenyang.

“We are thrilled that NokScoot decided to take its indirect distribution to the next level by combining the two products of the Hahn Air Group”, says Alexander Proschka, Head of Hahn Air Systems. “While selling tickets under its own XW designator in its BSP markets, Nokscoot can now rely on H1 for distribution in all of its non-BSP markets and in additional GDSs. By increasing its GDS visibility, the H1-Air partnership will ultimately help the airline to reach new customers and tap into additional revenue streams.”

NokScoot’s Chief Executive Officer, Yodchai Sudhidhanakul, said “As our route network expands, we need to offer the ticketing possibility to travel agents who book traditionally via GDSs. Choosing Hahn Air Systems’ product helped us provide a seamless and cost-efficient solution that ensures our routes are available in all major GDSs worldwide.”

SF Airlines buys two 747s
Two Boeing 747 aircraft have been sold to SF Airlines on Chinese online shopping platform Taobao for the price of $48 million (322 million yuan). The aircraft were previously owned by cargo company Jade Cargo International, but were seized by a court in the Chinese city of Shenzhen after they filed for bankruptcy in 2013.

The aircraft have been put up for auction (offline) six times since October 2015, but failed to find buyers until now. Left with no choice, the courts decided to put them up for sale online in September. This is the first time aircraft have been sold via an online auction in China.