Newswatch Volume 11 issue 35 - september 16


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Newswatch Volume 11 issue 35 - september 16

  1. 1. NEWSWATCH 16th September 2011 Volume 11; Issue 35In this Issue: Air France KLM orders 110 new airplanes The Air France KLM Board of Directors, which met on 15  Air France KLM orders 110 new September, approved the Group’s order of 110 long-haul airplanes aircraft (50 firm orders and 60 options), still subject to the finalization of discussions with the manufacturers.  Rolls-Royce Trent This first joint long-haul order by Air France and KLM will 900 selected by Skymark for Airbus be replacing, in the medium term, the aircraft with 200 / A380 350 seats currently present in the fleet and support the Groups growing operations.  Aviation body slams EUs Consistent with the provisional fleet plan, this order will Massive carbon result in the Groups operation of 73 next generation tax aircraft through 2024: 43 Airbus A350-900 and 30 Boeing 787-9. The first aircraft Boeing 787-9 order will enter into  Air India to go service with KLM in 2016 and the first Airbus A350-900 with ahead with Air France in 2018. Later, both airlines will operate both acquisition of Boeing 787s types of aircraft. These new aircraft will reduce fuel consumption by over  Airline survey 15% and will give rise to a significant reduction in noise suggests further and gas emissions, confirming the Groups commitments in order delays for Bombardiers terms of environment and sustainable development. Air CSeries France KLM is a member of the Dow Jones Sustainability Index since 2004 and also leader of the “Transport and  747-8 receives leisure” sector. ICAO ‘Heavy’ designation Within the framework of this order, Air France Industries KLM Engineering & Maintenance, the Group’s aircraft  Emirates SkyCargo maintenance department, is confirming its commitment to leases its third position itself as a key market player for the maintenance Boeing 777 of these aircraft and their engines.  IBA Group News “For its first joint order, the Air France KLM group made its selection after a detailed assessment showing all the IBA Group Ltd. performance characteristics of each aircraft, including IBA House 7 The Crescent their energy and environmental performance” declared Leatherhead, Surrey Pierre-Henri Gourgeon, CEO of Air France KLM. Peter KT22 8DY United Kingdom Hartman, president & CEO of KLM added: “Their Tel: +44 (0) 1372 224488 integration into the fleet will enable the Group to Fax: +44 (0) 1372 224489 continue to operate one of the youngest and most modern fleets in the world”. Source:, 16th September 2011 Page 1
  2. 2. NEWSWATCH 16th September 2011 Volume 11; Issue 35 Rolls-Royce Trent 900 selected by Skymark for Airbus A380Rolls-Royce, the global power systems company, has signed aletter of intent with the Japanese airline Skymark Airlines toprovide Trent 900 engines to power six Airbus A380 aircraft,including TotalCare® long-term engine service and support. Theaircraft will enter into service in 2014. “Skymark cameSkymark is a new customer for Rolls-Royce, and the airline isthe first in Japan to order the Airbus A380. Trent 900 engines to the conclusionpowered the very first A380 to enter service in 2007 and have that the Rolls-now been selected by 11 of 16 airlines who have ordered the Royce Trent 900aircraft. has superior fuelSkymark will benefit from the commitment of Rolls-Royce tocontinually improve the performance and dependability of its burn, reliability,engines. The Trent 900s it has ordered will incorporate economicenhancements in design and materials that will yield almost atwo per cent improvement in fuel efficiency compared with efficiency andthose in service today. aftermarketShinichi Nishikubo, President and Chief Executive Officer, support. This isSkymark, said: “Skymark has been evaluating the engines forthe A380 since it decided to order the A380 in Nov 2010. As a why Skymarkresult, Skymark came to the conclusion that the Rolls-Royce concluded thatTrent 900 has superior fuel burn, reliability, economic the Trent 900 isefficiency and aftermarket support. This is why Skymarkconcluded that the Trent 900 is the most suitable engine for its the mostoperation" suitable engineJim Sheard, Rolls-Royce Senior Vice President – Civil Aerospace, for itssaid: “Skymark is a new customer for Rolls-Royce and we arevery pleased that they have put their trust in our leading edge operation”engine technology and TotalCare support. This latest order, - Shinichifrom a new customer, confirms the Trent 900 as the true Nishikubomarket leader and engine of choice for the majority of A380operators.”The Trent 900 is currently in service with three airlines and hasbeen selected by all A380 customers who have made engineselection decisions this year. Firm and option Trent 900-powered A380 aircraft on order total 129. TotalCare® long-termservice agreements, in place on 90 per cent of Trent engines,are designed to minimise customer financial risk and enhance Page 2
  3. 3. NEWSWATCH 16th September 2011 Volume 11; Issue 35operational performance and reliability, allowing operators toconcentrate on their core business. Source:, 16th SeptemberSource:, 15th September 2011 Aviation body slams EUs Massive carbon taxThe International Air Cargo Association (TIACA) is urging theEuropean Union to suspend implementation of its controversialEmissions Trading Scheme (ETS) for aviation and to insteadpursue a global agreement of aviation carbon emissions throughthe International Civil Aviation Organization (ICAO).In a letter to EU Climate Action Commissioner, ConnieHedegaard, TIACA’s Industry Affairs Committee states fourmain concerns over the upcoming legislation, which fromJanuary 1, 2012, will require any airline landing or taking offinside the EU to take part in the regional blocs emissions “ By directlytrading scheme. regulatingUnder ETS, airlines flying to Europe will be required to conduct outsidepurchase permits to allow them to emit additional tons ofcarbon dioxide above a predetermined cap. According to the of EU airspace,proposals, sanctions for non-compliance will include fines and the EU ETSflight suspensions. encroaches uponWarning that the ETS will impose "massive new taxes onaviation", Hedegaard states that: the sovereign"By directly regulating conduct outside of EU airspace, the EU authority ofETS encroaches upon the sovereign authority of each State over each State overits own airspace. The Chicago Convention also prohibits anylevies on international flights except on a cost basis related to its ownthe provision of facilities and services for civil aviation.” airspace”“According to the International Air Transport Association, the -Conniecost to airlines of purchasing the necessary carbon allowanceswill rise from USD1.3bn in 2012 to USD3.5bn in 2020. There is Hedegaardno requirement that EU member states must use theserevenues to reduce carbon emissions, either from aviation orany other sector – nor that they dedicate the money to anyenvironmental effort at all.”“Ironically, the EU ETS will cripple the industry’s ability tocontinue investing on its own in greener technologies. In recentyears, the industry has made impressive progress in reducing Page 3
  4. 4. NEWSWATCH 16th September 2011 Volume 11; Issue 35emissions, largely through utilization of more efficient aircraftand operating procedures. Furthermore, the industry hasactively supported development of sustainable alternativeaviation fuels and implementation of next-generation, moreefficient air traffic management systems. The cost of EU ETSemissions allowances will divert crucial monies away frominvestment in such initiatives.”In addition, the EU ETS may lead to some unintended “the scheme isconsequences such as encouraging carriers to fly less direct ludicrous asrouting that could increase aviation carbon emissions. Forexample, a direct flight from Hong Kong to Amsterdam has 5% analysis haslower emissions than the same flight with a stopover in showed that on aMoscow. However, the stopover would sharply reduce theairline’s emissions charges – thereby benefiting the airline’s flight, forbottom line, but not the environment.” example, from“Aviation is intrinsically an international industry. It is the San Francisco totransportation mode that ties together the globe most London only 9%expeditiously, and many airlines and aircraft operate acrossborders. The EU has seemingly ignored this reality in taking a of emissions areregional approach [on] the issue.” emitted in EU stAt an aviation seminar held on August 1 , attended by industry airspace; theleaders, the Vice President of Environmental Affairs at the AirTransport Association of America, Nancy Young, noted that the majority insteadscheme is ludicrous as analysis has showed that on a flight, for is emitted in USexample, from San Francisco to London only 9% of emissions are and Canadianemitted in EU airspace; the majority instead is emitted in USand Canadian airspace, but would face the same amount of airspace, buttaxation as an internal EU flight. would face theFurthermore, the issue of double taxation has been raised by same amount ofairlines. Japan, Australia and New Zealand have all announcedthey are considering their own cap-and-trade emissions taxation as anschemes, and China said in July that it planned to commence internal EUregional pilot schemes, with the aim of establishing a nationalcap-and-trade regime by 2015. flight”The EU legislation does provide that an airline will be tax -Nancy Youngexempt for the portion of the trip that a similar tax is imposeddomestically, but its implementation may be problematic, andif another country, or group of countries, were to impose anidentical levy to that of the ETS significant disputes and doubletaxation could indeed arise.The US and China have both placed significant pressure onEuropean ministers. The US considers that by 2020, if Page 4
  5. 5. NEWSWATCH 16th September 2011 Volume 11; Issue 35implemented in its current form, it could cost the US industryUSD3bn. Chinese estimates are more conservative in the short-term but as the domestic industry grows; losses as a result ofthe tax are expected to surpass those in the US.United States airlines have begun legal proceedings, arguingthat the system infringes, for one, the Chicago Convention,which grants individual countries the right to complete andexclusive sovereignty on taxation issues within their territory.The EUs ETS is thought to also infringe bilateral open skiesagreements between the EU and other nations. US authoritiesare reportedly even considering outlawing airlines fromcomplying with the ETS.Source: Ulrika Lomas, - 15th September 2011 Air India to go ahead with acquisition of Boeing 787sAir India would go ahead with the acquisition of Boeing 787Dreamliner aircraft as part of its overall expansion programmeand seek governments nod for it, official sources said on “the Boardthursday. reviewed theA decision to this effect is understood to have been taken by modifiedthe Air India Board which met today in the backdrop of CivilAviation Minister Vayalar Ravis statements that the ailing turnaround planairline did not have enough money to go in for a massive fleet prepared by SBIacquisition plan. Caps, whichWhile the airline has placed orders for 27 Boeing 787s with the suggested "afirst delivery expected later this year, the group of Ministersheaded by Finance Minister Pranab Mukherjee, which is scenario forreviewing its turnaround plan, is likely to take a final decision expansion" if Airin this regard, the sources said. India was toAt the meeting, the Board also reviewed the airlines liquidityposition and infusion of funds from the government, an airline grow as per thespokesperson said, adding that Air India has so far received Rs growth rate of1,200 crore by way of equity infusion in 2011-12. the aviationOn the aircraft acquisition issue, the Board reviewed the market”modified turnaround plan prepared by SBI Caps, whichsuggested "a scenario for expansion" if Air India was to grow asper the growth rate of the aviation market, he said. Page 5
  6. 6. NEWSWATCH 16th September 2011 Volume 11; Issue 35The acquisition of Boeing 787 deal is understood to have beenpart of this modified turnaround plan and expansionprogramme and a presentation on the Dreamliner acquisitionwas made at the Board meeting. The turnaround plan wasbased on the recommendations of the Committee of Officersfrom the Finance and other ministries, which had earliersuggested that "a scenario for expansion should be prepared ifAir India was to grow as per market growth rate".Source: – 15th September 2011 Airline survey suggests further order delays for Bombardiers CSeriesInterest remains high in Bombardiers new CSeries aircraft butmany airlines feel no sense of urgency to place orders, says anRBC Capital Market survey.Most of the 26 airlines surveyed — representing more than athird of airlines around the world who fly similar-sized 100- to149-seat capacity aircraft — had favourable views of the plane,which offers an estimated 20 per cent fuel burn savings and 15 “airlinesper cent lower operating costs. preferred toBut the airlines preferred to take a "wait and see" approach take a "wait andwith placing orders, says the report by analyst WalterSpracklin. see" approachThat sentiment suggests further order delays for the plane, a with placingpoint that was reaffirmed by Delta Air Lines decision this week orders”to delay an order for about 100 mid-sized aircraft.The RBC survey found that fleet commonality was the key -Walterconcern for potential buyers as airlines worry about the costs Spracklinand complexity of introducing another aircraft type to theirfleets.Spracklin said the lack of urgency expressed by airlines andemerging macroeconomic headwinds suggest the Montreal-based manufacturer may not be able to achieve its goal of 300orders by late 2013 when the first plane is set to enter intoservice.Bombardier has received 133 firm orders and 129 options forthe two sizes of CSeries. Page 6
  7. 7. NEWSWATCH 16th September 2011 Volume 11; Issue 35Some observers question, however, whether Republic Airwayswill maintain its US$3-billion order for 40 larger CSeries planesin light of its decision to become launch customer for Airbus Republic – “hasrival A319neo. insisted it plansDelivery of the Bombardier planes to Republic is set to start in to stick with2015. It also has options for another 40 aircraft, that couldraise the contract to US$6.34 billion at list prices. both planes,The airline has insisted it plans to stick with both planes, even even thoughthough they will be powered by different engines. they will beBombardiers shares fell to a new 52-week low Wednesday and powered bythe current pace of CSeries orders might not be enough of a differentcatalyst to propel the stock price significantly higher, Spracklinadded. engines”On the Toronto Stock Exchange, Bombardier shares were up 19cents, or 4.5 per cent, at C$4.39 in morning trading onThursday.Source: Ross Marowits, The Canadian Press – 15th September 2011 747-8 receives ICAO ‘Heavy’ designation The International Civil Aviation Organization (ICAO) has cleared ICAO HEAVY Boeing’s new 747-8 to operate at the same separation distances designation - as its earlier 747-400, after the aircraft was classed as ‘Heavy’ for wake turbulence considerations. “means that An ICAO team of wake vortices experts from the US FAA, airports will be European Organisation for the Safety of Air Navigation able to operate (EUROCONTROL) and EASA analysed both simulated and flight test data for the 747-8, which was assessed for “landing, more efficiently departure, climb/descent and cruise operation” wake vortex and not have to effects on other commercial aircraft, including a former Korean slow down Air 747-400 used during the accreditation process. operations to “The safety case supports the assertion that the Boeing 747-8 is safely categorized as HEAVY. Consequently, the wake accommodate turbulence separation minima specified for HEAVY aircraft this airplane” - should be applied,” ICAO said in a statement. Todd Zarfos Page 7
  8. 8. NEWSWATCH 16th September 2011 Volume 11; Issue 35 Boeing 747 program engineering vice president Todd Zarfos said achieving the ICAO heavy designation was an “important accomplishment for the 747-8 program”, which will allow the aircraft “to operate in the same markets and routes they use for the 747-400″. “We did extensive testing to show that even though the 747-8 is longer, heavier and has a bigger wingspan than the 747-400, it does not create greater wake vortex effects. That means that airports will be able to operate more efficiently and not have to slow down operations to accommodate this airplane,” Zarfos said. Source: – 15 th September 2011 Emirates SkyCargo leases its third Boeing 777Emirates SkyCargo, the freight division of Emirates Airline, hasleased its third Boeing 777 Freighter as it launched its newservice to the Far East and Australasia, it was announced onTuesday. “ This new routeThe leasing was arranged by DAE Capital, the aircraft leasing not only bolstersdivision of Dubai Aerospace Enterprise (DAE) and Deutsche Bank capacity, itand DVB Bank provided financing to DAE. provides ourEmirates SkyCargo uses the Boeing freighter aircraft on its newDubai-Singapore-Sydney-Hong Kong-Dubai route. The aircraft customers withmade its debut flight to Sydney on Monday and has the more optionscapability to carry up to 103 tonnes of freight. and increased“This new route not only bolsters capacity, it provides ourcustomers with more options and increased trade tradeopportunities,” said Hiran Perera, Emirates’ senior vice opportunities”president of cargo planning and freighters.“We currently transport cargo in the belly-hold of 126 -Hiran Pererapassenger flights a week between Dubai and Australia, as wellas 28 Hong Kong flights and 42 Singapore flights, and thefreighter – with a wide main deck door – will increase ourability to carry oversized shipments,” added Perera.Source: Shane McGinley,– 13th September 2011 Page 8
  9. 9. NEWSWATCH 16th September 2011 Volume 11; Issue 35 IBA Group News Press Releases & Presentations can be viewed in the News & Views section of our website, www.ibagroup.comConference Dates18th – 20th September 2011 – ISTAT Europe 2011, 18th European Conference, Barcelona - Phil Seymour will be speaking,James Uniacke and Adrian Lee will be attending26th – 28th September 2011 – SpeedNews 12th Annual Aviation Industry Suppliers Conference in Toulouse - IBA is asponsor and Ben Jacques will be speaking28th – 30th September 2011 – ERA General Assembly, Rome – Ben Jacques will be speaking and Adrian Lee will beattending5th – 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: Phil Seymour’s Notes on the WeekI had a fun week at the Boeing Appraisers sessions in Charleston, South Carolina. A fantastic part of the USA!We looked at some initial data about the 737MAX and hopefully we will see more definitive information in the comingmonths. The CFM LEAP-1B engine should help the aircraft deliver significant fuel savings and or range increases withan in service date sometime in 2017. It will be a while before we are able to put our value curve together, I will letyou know as soon as it is ready!A quick turnaround in London beckons - off to ISTAT in Barcelona on Sunday. See you there?Phil Publications – 2011 Editions Please contact 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 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 Tel: +44 (0)1372 224488 Fax: +44 (0)1372 224489 Page 9