IBA Newswatch Volume 11 issue 37 - september 30

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IBA's Newswatch, 30th September 2011

including items about Lufthansa's recent order and EU ETS.

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IBA Newswatch Volume 11 issue 37 - september 30

  1. 1. NEWSWATCH 30th September 2011 Volume 11; Issue 37In this Issue: Lufthansa Orders 12 New Aircraft to Meet Soaring Demand  Lufthansa orders 12 new aircraft to The Board members at Lufthansa have approved the order meet soaring of 12 new aircraft as the airline seeks to meet soaring demand demand.  India Leads EU Of the aircraft, two Airbus A380s and one Airbus A330-300 Levy on Airlines will be deployed for Lufthansa German Airlines on long- haul routes for an interim period.  OLeary claims BA The decision was taken by the Board at its meeting earlier. group has sights on stake in Aer Lingus There are also plans to order four Airbus A320s for Lufthansa German Airlines.  Boeing’s first 787 In addition, five new Embraer 195s will augment the Dreamliner lands in Tokyo Lufthansa Regional fleet. The new, modern, fuel-efficient aircraft will be delivered  Finnair To Slash to the Group in stages from 2012. 155 Jobs As It Cuts Costs The order has a list-price value of about one billion euros. Commenting on the decision, Lufthansa Chief Executive  WestJet, Emirates sign co-operation Christoph Franz, said: “The moderate expansion of pact Lufthansa’s passenger fleet will serve primarily to ensure that we can meet short-term requirements while  Tajikistan’s Somon modernising and consolidating our European fleet until Air Receives Its such time as new aircraft technologies are available. First Boeing 737- 900ER “It is the latest step in our ongoing strategy of deploying a modern fleet in terms of fuel efficiency, operating costs,  IBA Group News noise and emissions. “At the same time, the additional order for the Airbus A380 and A330 will underpin our plans on long-haul routes in the medium term. “Along with the aircraft we have already ordered, which will join our fleet over the next few years, it will increase our ability to take targeted action and respond flexibly to IBA Group Ltd. fluctuations in demand or market changes.” IBA House 7 The Crescent The order will be financed from the group’s cash reserves Leatherhead, Surrey KT22 8DY or from external sources. United Kingdom Tel: +44 (0) 1372 224488 Lufthansa was recently recognised as Europe’s Leading Fax: +44 (0) 1372 224489 Airline by the prestigious World Travel Awards. www.ibagroup.com Source: breakingtravelnews.com – 30th September 2011 Page 1
  2. 2. NEWSWATCH 30th September 2011 Volume 11; Issue 37 India Leads EU Levy on AirlinesIndia has gathered with more than 30 nations to create astrategy to oppose the European Union’s Emissions TradingScheme (EU ETS), which will begin imposing charges oncarriers that fly into the 27 member states at the turn of theyear. Indian civil aviation minister Vayalar Ravi questionedhow the EU can dictate terms to other nations. He alsoquestioned why everyone would simply accept that.The EU made the decision in 2008 that airlines should becomepart of its ETS after discharges in Europe grew twice over in 20years. It says emissions from international carriers now IBA’s Comment:account for 2%-3% of global greenhouse gas discharges. The “The ETS hasprogramme already covers more than 11,000 power stations met with a highand factories located within the EU. level ofAirlines that fly into the EU will be made to purchase carbon opposition frompermits from January 2012 if they exceed the emission capsset by the group of member states. Under the scheme, 85% of IATA and somethe emission cap for airlines will be allocated free, and the on-Europeanbalance will be auctioned next year. These benchmarks were countries. It isset this week. European Commission director-general for surprising thatclimate Jos Delbeke says the cost to meet emissions targetscould increase airfares for transatlantic services by between this opposition€2 and €12. has been raisedMeasures by the EU to impose the carbon caps have garnered so late. The ETSprotests from airline groups in the US, China, Russia and the guidelines haveMiddle East. In June, the China Air Transport Association said been in thethat the plan is illegal and unreasonable. The International AirTransport Association (IATA) said earlier this week that it’s the pipeline forEU’s plan to break international law and attack the some time now”sovereignty of other nations. Chief executive Tony Tyler said – David Rushethat the legislation will add $1.2 billion to airline costs nextyear. The organisation has forecasted carriers to make only acombined $4.9 billion profit for the year.Over 30 members of the International Civil AviationOrganization (ICAO) met in New Delhi this week to discuss theEU ETS. The group has 190 members states, including Chinaand the US. Ravi said that his country’s aviation ministry washosting the two-day meeting, but he didn’t name any of thenations that were to participate. He has called the ETS apenalty on all foreign airlines operating to Europe. The Page 2
  3. 3. NEWSWATCH 30th September 2011 Volume 11; Issue 37aviation industry is growing in India, and they can’t bepenalised for that, he added.Binit Somaia, the director of South Asia for the Centre for AsiaPacific Aviation (CAPA), said that, by making the ETS apply tonon-EU carriers, there is a feeling that the EU is stepping overits authority. Retribution may take the form of equivalentretaliation of taxes, restrictions on traffic rights for Europeanairlines and an impact on European planemakers.Source: news.carrentals.co.uk – 30th September 2011OLeary claims BA group has sights on stake in Aer Lingus IBA’s Comment: “A BA stake inThe owner of British Airways may snap up the Irishgovernments quarter stake in Aer Lingus, according to rival Aer Lingus hasairline boss Michael OLeary. been long rumoured andOLeary, chief executive of Ryanair, said International AirlinesGroup, which owns BA and Spanish flag carrier Iberia, appeared would maketo be the most likely buyer of Dublins 25 per cent stake in the sense from BA’sIrish airline. point of view,Ryanair, which owns 29 per cent of its rival, said IAG would, particularlyhowever, only buy Aer Lingus if the companys board made given Aerclear it was not liable for a €400 million (£347.9m) pension Lingus’ strongscheme deficit for Aer Lingus staff. branding in theIAG plans to expand by buying other carriers, but it has not UK and itspublicly expressed interest in buying the Aer Lingus stake and dominance ofdeclined to elaborate on OLearys comments. An IAG the Londonspokeswoman said: "Were not really commenting on it." Heathrow-DublinAer Lingus is understood to be considering joining a route – one oftransatlantic airline venture, such as those involving BA, the world’sLufthansa and Air France-KLM, in the next few years after busiest – whichdropping plans to become a member of a global airline alliance has historicallysuch as Star Alliance. But Aer Lingus has warned the providedgovernment against selling its stake to a larger rival, saying this connections tocould undermine it by damaging existing partnerships. BA long haulIrelands transport minister was quoted as saying last week that flights for Irishthe government had received expressions of interest from passengers”airlines and investment firms in its stake in the former statecarrier. – David Rushe Page 3
  4. 4. NEWSWATCH 30th September 2011 Volume 11; Issue 37Chief Executive Christoph Mueller said Aer Lingus would prefera sale to an institutional investor as it would allow it to stayoutside major alliances and keep several bilateral deals.Ryanair has twice had takeover bids for Aer Lingus rebuffed andsays it would be ready to sell its 30 per cent stake, allowinganother airline to take majority control.Dublin has not yet decided whether to sell its stake, but it hashinted it is open to a sale.Source: Philip Waller, The Scotsman – 30th September 2011 Boeing’s first 787 Dreamliner lands in TokyoThe first 787 Dreamliner to go into service landed in Japanyesterday, greeted by media, excited plane spotters and high “Shinichiro Ito,hopes that Boeing’s gamble on a mid-sized, lightweight aircraftwill pay off. president andThe plane — painted in the blue and white All Nippon Airways CEO of ANA, wholivery with red highlights — touched down at Tokyo’s Haneda travelled on theairport shortly after 9:00 am (0000 GMT), three years after it aircraft from thewas originally promised to ANA. US afterThe delivery comes after a string of technical mishaps anddelays that have cost US-based Boeing billions of dollars in lost receiving it fromor cancelled orders and seen it give ground to fierce rival Boeing, declaredAirbus. himselfBut Shinichiro Ito, president and CEO of ANA, who travelled onthe aircraft from the US after receiving it from Boeing, “delighted” withdeclared himself “delighted” with “the aircraft’s first the aircraft’stouchdown... after a trouble-free flight”. firstBoeing says the twin-aisle 787’s construction, partly from touchdown...lightweight composite materials, means it consumes 20 percent less fuel than comparable planes, an attractive after a “trouble-proposition for airlines facing soaring fuel costs. The company free flight.”has also been touting the larger windows, bigger luggagestorage bins and greater cabin humidity than conventional jets,a factor it says will reduce passenger fatigue. Page 4
  5. 5. NEWSWATCH 30th September 2011 Volume 11; Issue 37“It is an honour to have participated in an historic programmefor ANA and I have been extremely moved,” pilot HideakiHayakawa told a news conference following the arrival.“I feel there is a potential that the aircraft will make changesin the aviation industry,” Hayakawa said, citing its fueleconomy, cost performance and comfort.The windows are 30 per cent larger than those on the similar-sized Boeing 767 and have an electric sunshade function thatenables passengers to control the amount of sunlight coming inat the touch of a button.One of the plane’s more striking features are the toilets which “The mid-sized,are equipped with electric seats with a bidet function long-haul planecommonly found across Japan, but not usually on international — which has anflights. average list“The bidet toilets are actually an option for ANA. But this issomething that obviously Japanese customers are used to price of $202having at their home,” said Rob Henderson, communications million — isdirector at Boeing Japan. crucial to the“So I suppose what we could say is that flying in the air is nowan experience that’s much closer to their homes than it would company’shave been before,” Henderson said. future. It is theThe 787 represents a big bet by Chicago-based aerospace and firm’s first newdefence giant Boeing on cutting-edge technology and materialsfor commercial aircraft. design in moreThe mid-sized, long-haul plane — which has an average list than a decade,price of $202 million — is crucial to the company’s future. It is drawing on hugethe firm’s first new design in more than a decade, drawing on advances inhuge advances in aviation technology. aviationWith seating for up to 330 passengers, the 787 is Boeing’sgamble that airlines will demand mid-size aircraft, rather than technology.”planes in the category of the mammoth A380, Airbus’s star.Its development has been far from smooth — ANA had originallybeen told to expect the first of its 55 ordered planes in early2008.But Boeing says that by the end of July this year it had 827 ofthe new aircraft on order from dozens of carriers and leasingcompanies around the world.ANA president Ito said the new fleet of 787s will play a “keypart” in his plans for international expansion. Page 5
  6. 6. NEWSWATCH 30th September 2011 Volume 11; Issue 37The Japanese carrier is planning to begin the world’s firstcommercial 787 service on the Tokyo to Hong Kong route inOctober, followed by regular flights to Beijing and Frankfurt.ANA, in common with other high-end carriers, is facingincreasing competition from budget airlines and is banking onthe 787 to boost demand and cut costs.Source: main.omanobserver.om – 29th September 2011 Finnair To Slash 155 Jobs As It Cuts CostsFinnair said yesterday it will lay off 155 more workers as itstreamlines operations to cut costs and retain its competitiveedge.The layoffs will mainly be in support functions and themarketing and distribution sectors, the airline said.CEO Mika Vehvilainen said it was necessary to increaseefficiency as "Finnair simply has to change to be able to meetthe increasingly tougher competition and take our share of “Finnair simplymarket growth." has to change toFinnairs share price was down slightly, closing at €2.98 ($4.06) be able to meeton the Helsinki Stock Exchange. the increasinglyIn March, the national carrier announced 450 layoffs intechnical services, and the transfer of dozens of other jobs as it tougheroutsourced services. competition andFinnair has been struggling to cut costs amid declining demand, take our share ofcompetition from budget airlines and overcapacity in the market growth.”European airline sector. It has laid off hundreds of workers andlast year was plagued by several strikes, including by cabin - Mikacrews, that cost it more than €25 million in lost earnings. VehvilainenIt also doubled an annual savings program to €200 million withmost cuts aimed at personnel costs.Last month, Finnair reported a second-quarter loss of €23million and announced a new savings target of €140 million($191 million) by 2014. It said that profitability had notmatched expectations, citing increased competition frombudget airlines as "more efficient business models" had enteredthe market. Page 6
  7. 7. NEWSWATCH 30th September 2011 Volume 11; Issue 37Finnair PLC, which is 56 percent government-owned, flies toabout 50 destinations with a fleet of 65 aircraft. It employs7,500 people — down from 7,600 a year earlier.Source: The Associated Press – 29th September 2011 WestJet, Emirates sign co-operation pactOn Thursday, Emirates said its new “interline” agreementpaves the way for consumers departing on a WestJet flight forToronto to more easily catch Emirates at Pearson InternationalAirport. Bags will be transferred for Dubai-bound travellersmaking such bookings.The deal comes a year after Emirates lost a bid to expand on its “Emirates’own in Canada because of Ottawa’s refusal to grant newlanding rights. Transport Canada has defended the federal partnership withpolicy to restrict Emirates, arguing that there is sufficient WestJet willpassenger seat capacity already between the United Arab allow travellersEmirates and Canada. to explore our“Emirates’ partnership with WestJet will allow travellers toexplore our vast network of diverse and remarkable vast network ofdestinations with added ease and seamless connections,” diverse andEmirates Canadian manager Don McWilliam said in a statement. remarkableEmirates, owned by the Dubai government and Calgary-basedWestJet are independent carriers that don’t belong to an destinations withairline alliance. Air Canada and Germany’s Lufthansa are part added ease andof the Star Alliance, which competes against Emirates fortransatlantic traffic. seamlessEmirates and the UAE feuded last year with Air Canada and connections” -Ottawa over the Dubai airline’s quest to gain more access to Don McWilliamCanada. The foreign carrier operates three round-trips a weekbetween Toronto and Dubai, but wants to boost its Pearsonschedule to a minimum of daily service, as well as targetCalgary and Vancouver in the long term as it expands in NorthAmerica. Earlier this week, Emirates said it plans to start dailyservice to Dubai from Dallas in February and from Seattle inMarch. Page 7
  8. 8. NEWSWATCH 30th September 2011 Volume 11; Issue 37WestJet and Emirates said their commercial deal means thatconsumers will be able to make reservations more easily bycalling their travel agent or securing a single booking throughEmirates instead of separate itineraries.“The new arrangement makes global travel more accessible foroutbound passengers who can now connect to the Emiratesnetwork via WestJet, travelling to Dubai and beyond to any ofthe 114 destinations that Emirates flies,” the carriers said. “The newConsumers can also book through Emirates for flights from arrangementDubai to connect to WestJet’s Canadian network. makes globalWestJet noted that passengers will need to take the train at travel morePearson between its Terminal 3 and Emirates at Terminal 1. accessible forWest Jet’s other interline pacts include those from theOneworld alliance (British Airways, Qantas, Japan Airlines and outboundDragonair), SkyTeam (Air France, Delta Air Lines, China passengers whoAirlines, China Eastern, Alitalia and Korean Air) and can now connectindependent carrier El Al Israel.The Calgary carrier has forged even closer partnerships through to the Emirates“code-sharing” deals with two Oneworld members, American network viaAirlines and Cathay Pacific, and as of this week, SkyTeam’s WestJet,KLM. travelling toOttawa refused demands by Emirates and Abu Dhabi-basedEtihad Airways for new landing rights at Pearson last October. Dubai andThe UAE responded by ousting Canadian soldiers in November beyond to any offrom Camp Mirage, a staging base near Dubai that had beenused for nine years to supply the Afghanistan war. the 114Last December, the UAE imposed visa fees of up to $1,000 on destinations thatCanadian visitors, further escalating tensions between Canada Emirates flies”and the Arab country.Air Canada and Lufthansa are seeking to protect their Frankfurthub, complaining that Emirates is unfairly siphoning offlucrative international traffic by funnelling passengers throughDubai and transferring them to destinations such as India andChina.Source: Brent Jang, theglobeandmail.com – 29th September2011 Page 8
  9. 9. NEWSWATCH 30th September 2011 Volume 11; Issue 37 Tajikistan’s Somon Air Receives Its First Boeing 737-900ERBoeing has delivered Tajikistan-based Somon Air’s first 737-900ER, the carrier becoming in the process the first CentralAsian carrier to operate an aircraft featuring the new BoeingSky Interior.The Boeing 737-900ER delivery also represents Somon Air’s firstdirect purchase of a 737.“This new interior will set Somon Air apart from other regionaloperators by bringing a new, unmatched flying experience toour valued customers,” says Jamshed Rahmonberdiev, chiefexecutive officer of Somon Capital, which owns Somon Air.“Reliability and fuel efficiency are key considerations and the IBA’s Comment:737-900ER will contribute to our financial performance as well “The operatoras help us maintain our high standards of safety in accordancewith international air transportation standards.” base of the 737-“We congratulate Somon Air on becoming the first carrier in 900ER continuesCentral Asia to offer the enhanced 737 cabin experience to its to grow in whatpassengers,” says Marty Bentrott, Boeing Commercial Airplanes’vice president of sales for Middle East, Russia and Central Asia. has been a“We look forward to playing a role in Somon’s future as it strong 12continues to expand its network.” months for theThe Boeing 737-900ER is the newest member of the Next- aircraft. It canGeneration 737 family and is also the highest capacity, longest-range aircraft in Boeing’s single-aisle fleet. The 737 Boeing Sky now be seen asInterior improves the passenger experience by providing new the second mostoverhead bins, LED lighting, new designs for window revealsand sculpted sidewalls. attractive 737NGAs part of Boeing’s Humanitarian Delivery Flights program, asset after theBoeing partnered with Somon Air, the U.S. Department of 737-800”State’s Humanitarian Program and Project HOPE to transportmedical supplies to Tajikistan’s capital Dushanbe. – David RusheThe relief shipment of 2,852 pounds of medical supplies willimprove the quality of medical care for the less-privileged inTajikistan and help alleviate the shortage of medicines neededfor oncology, psychiatric health and in the treatment ofinfectious diseases, according to Boeing.“Boeing, through its Global Corporate Citizenship (GCC)organization, supports humanitarian efforts around the world inpartnership with non-governmental agencies and non-profitslike Project HOPE,” says Liz Warman, director of GCC for the Page 9
  10. 10. NEWSWATCH 30th September 2011 Volume 11; Issue 37 Northwest Region. “Our Humanitarian Delivery Flights program is another way we can continue leveraging our resources to help those in need.” Source: airlinesanddestinations.com – 28th September 2011 IBA Group News Press Releases & Presentations can be viewed in the News & Views section of our website, www.ibagroup.comConference Dates5th – 6th October 2011 – UBM Aviation, Aircraft & Engine Finance & Leasing USA Conference, Chicago – Phil Seymourwill be speaking31st October – 2nd November 2011 – Euromoney Asia Pacific School of International Aviation Finance, Hong Kong –Stuart Hatcher will be presenting3rd – 4th November – 12th Annual Asia Pacific AirFinance Conference – IBA will be speaking7th - 8th November - Aircraft Asset Management Training Seminar, Dublin, Ireland1st – 2nd December 2011 – Aviation Investors Summit, London – Phil Seymour and Owen Geach will be speaking24th – 26th January 2012 – Euromoney 14th Annual International Aviation Finance Conference, Dublin – IBA is sponsoringand will be speakingCountry Visits- Owen Geach and Steve Fisk will be in Tokyo from 25th to 30th September 2011 - Please contact Owen Geach if youwould like to arrange a meeting: owen.geach@ibagroup.com Phil Seymour’s Notes on the WeekSometimes in life it is easy to be fast, and fast can be easy. It can also become confusing. Stelios appears to beputting pressure on Easyjet, which he founded and still owns a considerable slice of, by threatening to create FastJet. We await details but he cannot be serious surely? Is it not easier/cheaper to buy a few more shares and regaincontrol? Perhaps it is too complex an issue for me to comprehend.Meanwhile, the first 787 really did deliver this week. It’s about 3 and a half years later than expected, and a littlebit heavier than envisaged. Let’s see if it delivers the passenger appeal that is promised. In summary, the deliverywas not fast or easy. Publications – 2011 Editions Please contact marketing@ibagroup.com for more information.Aircraft Values Book Published in February 2011 & August 2011 £660 per yearLease Rate Digest Published in February 2011 & August 2011 £360 per yearEngine Values Book Published in April 2011 £650 per yearMaintenance Cost Journal Published Quarterly £200 per year “Newswatch” is a free weekly round-up collated by IBA Group Ltd. Go to our website to find the last year editions of Newswatch archived. To either SUBSCRIBE or UNSUBSCRIBE to this newsletter, please send an email to marketing@ibagroup.com with your request.The items in this document do not necessarily represent the opinion of IBA, and is intended to be for information purposes only. Therefore, IBA assumes no responsibility or legal liability for any action taken, or not taken, by the addressee, or by any other party, with regard to the information and views contained. As a leading independent aviation consultancy, IBA Group Ltd. offers technical advice, commercial business solutions & asset valuations for our worldwide client base. Compiled & Edited by Mike Yeomans www.ibagroup.com Tel: +44 (0)1372 224488 Fax: +44 (0)1372 224489 Page 10
  11. 11. www.everestevents.co.uk NEWLondon AviationInvestors’ Summit 20111-2 December 2011, Cumberland Hotel, LondonCPD Credits Available te ra re d o ce r m tes u o ed 3 ega R r l fo deKey Benefits of attending: Key Speakers Boeing Important Transport Industry Developments and Progress in Airbus Aircraft/Airline Finance Hello AG Analysing what potential investors want to know about active IBA involvement in aviation finance Norton Rose How to support airlines & lessors ECGD Comparisons with other investments, tax implications and type of documentation used, legal costs Etihad Airways All you need to know about profitable aircraft trading KLM Regional Aviation’s Progress Jordan Aviation Industry forecasts And many othersOfficial Publications Bronze Sponsor Bronze Sponsor Sponsor Sponsor

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