At this year’s MRO Network: Engine Leasing, Trading and Finance conference, James Pozzi spoke to AAR’s director of commercial sales Christophe Giraud about the current state of the engine teardown market and how the aftermarket specialist is adapting to increased competition.
At MRO Network’s Engine Leasing Trading and Finance event in London this week, topics ranging from the growing OEM aftermarket influence to the current state of the part-out market were discussed in a series of panels comprised of industry specialists.
One of the discussions that was of particular interest to me was a talk about the current state of the engine leasing market, involving figures from the world of aviation leasing and finance.
The consensus suggested that the industry finds itself in a healthy state at present, owing much to what panel chair Jon Sharp, president and CEO of Engine Lease Finance, pinpointed as airlines becoming smarter post-2008 financial crisis and better at managing their fleet by using the leasing market to their advantage.
BOC Aviation has priced $750m in 10-year fixed rate senior unsecured notes.
Irish lessor FLY Leasing has closed a $385m blind pool aircraft acquisition facility for the purchase of new aircraft.
BOC Aviation has signed a $500m five-year unsecured syndicated term loan facility, the largest ever secured by the lessor.
The past 12 months have been a period of transformation for AAR. After diversifying its product offering in the 2000s, the largest independent MRO in the US – and the third largest in the world –made the decision to refocus on its core services business.
In March, AAR sold off subsidiary Telair Cargo and put its manufacturing arm up for sale, at the same time the firm has been streamlining its remaining businesses and just two weeks ago announced the closure of its MRO facility in Arkansas, citing overcapacity in the regional aircraft market.
Yesterday (July 13) the MRO published its full year results for 2015 (the 12 months ending May 31) highlighting the financial impact of restructuring. Those costs saw the group post an operating loss of $11.9m for the year, following a $73.2m loss in Q4. In comparison last year AAR made an operating profit of more than $125m.
At the half-way mark for the year, Airbus continues to outstrip its American rival in terms of orders, while Boeing streaks ahead in aircraft deliveries. Results published yesterday (July 6) confirmed that Boeing had delivered 381 aircraft in the first six months of the year – putting it firmly on track to beat last year’s record of 723 commercial aircraft deliveries. Airbus, meanwhile, delivered 304 aircraft up to June 30 revealing that the delivery gap between the two OEMs has widened. It now stands at 77 aircraft while at the end of April it was just 54. More good news for Boeing was that it delivered six 787-9 aircraft in June, topping deliveries of the cheaper -8 version for the first time. Taking a look at the orderbooks following this year’s slow Paris Air Show, however, and it’s not such a positive story for Boeing.
As IATA published its revised and positive profit forecast for 2015, analysts PwC issued a report highlighting the significant challenges that still face the commercial aviation sector.
With demand for air travel set to double over the next 20 years there are significant hurdles to overcome relating to infrastructure, fuel prices and attracting new talent, according to PwC.
In Tailwinds 2015, Jonathan Kletzel, PwC’s US transportation and logistics practice leader, cited “megatrends”, such as shifts in global economic power and demographics, as well as “accelerating urbanisation” in emerging economies as key drivers in increased air travel demand.
Lufthansa Group’s recent imposition of a surcharge on tickets booked via Global Distribution Systems (GDS) such as Amadeus and Sabre marks one of the early skirmishes in what is set to be a long campaign by airlines to rebalance aviation’s skewed value chain.
From September all Lufthansa Group tickets booked through GDS providers – which connect many travel agents and websites to the airlines – will attract a €16 ($18) charge as Lufthansa attempts to recoup some of the “three-digit million euro amount” that such tickets cost it each year
“Ryanair’s influence, combined with its incentives as a competitor to Aer Lingus, would create significant execution risk for airlines considering Aer Lingus as a potential partner.”
So stated the UK Competition and Markets Authority (CMA) in 2013, when it concluded that Ryanair’s 30 per cent shareholding would deter other airlines from buying Aer Lingus.
As a result it ordered Ryanair to sell down most of its stake in the Irish flag carrier. In fact, the first serious offer on the table for Aer Lingus – bar the three Ryanair made itself – has been accepted by the Irish government.