2014 in focus

Dino D'Amore
By Dino D'Amore December 15, 2014 22:07

2014 in focus

As 2014 draws rapidly to a close and the holidays are but a handful of days away we must ask ourselves if this year will be one to remember for good or bad? In the world of aviation finance and leasing, 2014 will for sure be remembered as a very good year when a succession of deals broke the mould and moved the industry forward, notably the Ryanair EMTN, the ABS deals from CastleLake, Apollo and JetScape and a number of other significant deals. In the leasing market, 2014 has seen far more stability from the 2013 bun fight in the sale and leaseback market.

Overall assets are moving, aircraft and engines are worth more now than they were at the outset of 2014 as fuel prices have collapsed and the market is buoyed by new aircraft offerings/ options in the shape of the A330Neo and, although people do not mention the same very often, it is also the case that the close of 2014 brings us that bit closer to a 757 replacement in the form of the A321Neo (it is the closest match out there).

Obviously the question we posed in Airline Economics as the Neo and Max were launched is now well and truly hanging over the market: Can the economics of a Max or Neo compete with those of an NG or Ceo (taking into account purchase price)? The A321Neo is out there on its own as an aircraft that can create new options for airlines as can the Max9 but other Neo/Max types are caught in the vortex of falling fuel prices. This is great news for lessors, however, as those eight year aircraft lease contracts come to an end during this period all of a sudden far more 2nd and 3rd tier customers are coming to the table and the value of such aircraft should increase accordingly.

Then of course there is the Avolon IPO. It priced lower than expectations and a faller so far in trading, down at $18.45 from $20 as I type, even though at 11am EST today someone made a large share purchase of the stock. This Avolon IPO, if nothing else, highlights more than anything the ability of Steven Udvar-Hazy to inform all the right people in all the right places – compare the ALC launch to the AVOL one and you will see what I mean.

Another old question from a few years ago was on the A380 and the prospect of stretching the type. As things stand 2015 may well be the year that the A380Neo comes to pass with a launch order from Emirates. Rolls Royce has been ready for some time, now the pressure on Airbus is building to launch the aircraft. This is another example of engine OEMs being the driving force behind the future shape of the global aviation market.

But will 2014 be the year that SpiceJet faded into the past? The future of the airline now rests firmly in the hands of the Indian government after the airline asked for state support, this request was passed to the aviation ministry which was then bumped last week to the Prime Minister’s office which will have the final say and in effect tell both the finance ministry and the oil ministry what to do on the matter. As mentioned before, SpiceJet should do well in this lower oil price environment if it can be put back on a level footing financially. SpiceJet with its offers in 2014 have cut into the passenger figures for IndiGo, Air India and others, but it remains the case that to make money in India you have to have a network that feeds seamlessly into international flights flying to gambling hubs to be sure of filling seats. SpiceJet hoped to make-up the margin upselling passengers but in the event they just proved what we all thought was the case – The Indian aviation passenger is a very hard sell indeed.

SpiceJet shares fell 7.8% to 13.55 rupees in Mumbai trading today taking the decline to 23% for the year so far.

Dino D'Amore
By Dino D'Amore December 15, 2014 22:07