Etihad Airways Plans to Buy 25 percent hold Ireland Flag Airlines, Aer Lingus

Etihad Airways, a quickly growing Middle Eastern carrier, has contacted the Irish government about buying its 25% hold in Aer Lingus, Ireland’s flag airline. This follows the debt-burdened Irish administration saying last month that it’s going to sell its stake in the airline. Transport Minister Leo Varadkar said that he wouldn’t take less than €1 per share for the carrier, which would value Aer Lingus at €529.6 million and the 25% stake at €132.4 million. However, at market close on Friday, the airline’s shares valued the company at €338.94 million and the stake at €84.7 million.

In June, an Irish government report recommended that Aer Lingus and its ports and power stations be sold as part of plans to ease the nation’s debt by €5 billion. The carrier’s large pension deficit, which is estimated to be €400 million, has proven to be a stumbling block for the sale of the stake, but a new actuarial valuation is due by the end of the year. Chief executive Christoph Mueller has welcomed a change in ownership for the airline.

Etihad Airways was founded in 2003 and is based in Abu Dhabi, the capital of the United Arab Emirates. The carrier has close ties to Manchester City, as chairman Sheikh Hamed bin Zayed Al Nahyan’s half-brother, Sheikh Mansour, is the owner of the football club.

It hasn’t been made clear how far Etihad Airways and the Irish government have progressed in their talks, which may not even turn out a deal. Etihad chief executive James Hogan met Irish prime minister Enda Kenny at a Dublin-based investment event – the global Irish Economic Forum – last week. Hogan has announced that they will add 100 new jobs in Ireland for cabin crew. The two sides have declined to comment on the matter as well.

Meanwhile, experts think that International Airlines Group (IAG), which is the parent of British Airways and Spanish carrier Iberia, would be the most likely buyer for Aer Lingus. This comes despite Ryanair having tried twice to take over the carrier, which failed due to objections by the Irish government and European competition regulators. The airline has now ruled itself out of the bidding war.

At the same time, Etihad Airways and Virgin Atlantic have been in talks about a possible partnership to bid for bmi, an unprofitable subsidiary of German carrier Lufthansa. IAG has launched a preliminary offer for bmi, which has valuable takeoff and landing slots at London’s Heathrow Airport. Since British Airways already has a dominant share of the airport’s slots, other carriers want to get in on the action. Etihad wants to use the slots to expand its own long-haul network.

Commercial Aviation History : Airbus Wins Record Order From IndiGo Airline India, Boosting Upgrade A320 jet Engines

Airbus SAS won the biggest order in commercial aviation history, worth $15 billion at list price, from Indian low-fare carrier IndiGo Airlines, a boost for the company’s decision to upgrade its A320 jet with new engines.

The preliminary agreement to buy 180 planes will include 150 of the modernized A320 aircraft, according to a statement late yesterday. Toulouse, France-based Airbus committed to the new variant in December after more than a year of studying the option and expects a firm order from IndiGo within two months.

Success in selling single-aisle jets is critical for Airbus and rival Boeing Co. as they derive most of their earnings from those planes. Airbus’s pledge to offer new engines on the A320 from 2016 has put pressure on Chicago-based Boeing to consider the future of its best-selling model, the 737.

“It’s a strong start,” said Richard Aboulafia, vice president of Fairfax, Virginia-based Teal Group. “Boeing will face more pressure to make a decision on its single-aisle future. The company’s faith in staying the course with its current 737 probably won’t be tenable for more than 6-12 months.”

Airbus dubbed its latest offering the Airbus NEO, which stands for new engine option. Boeing has said that it was capable of offering its 737 with new, more fuel efficient engines, though has held back so far from a commitment, saying it wasn’t sure the business stacked up.

Indian Growth

The new aircraft will help IndiGo boost operations in the world’s second-most populous country. The carrier, owned by InterGlobe Enterprises Ltd., had already ordered 100 Airbus single-aisle jets and operates 32. InterGlobe, headed by Managing Director Rahul Bhatia, also runs hotels, sells business jets and offers technology services.

“The fundamental demand for air travel is only going up,” said Aditya Ghosh, the president of IndiGo, in an interview with Bloomberg UTV. “The gap between capacity and demand is increasing and these planes will extend our order book beyond 2015, when the 100 planes we ordered earlier are delivered.”

India’s economic growth of 8.9 percent in the quarter ended Sept. 30 made it the world’s second-fastest-growing major economy. Prime Minister Manmohan Singh’s government is aiming to sustain more than 9 percent annual economic growth to improve the lives of 828 million people who live on less than $2 a day.

Domestic air travel may surge fourfold to 180 million passengers annually by 2020, Singh predicted last year.

“India is one of the key growth markets of the world for aviation, and we are betting on the winners in India,” Airbus Sales Chief John Leahy said in a telephone interview yesterday.

SpiceJet, Air India

The country will likely need 1,030 new commercial aircraft over 20 years, the plane maker said in March. SpiceJet Ltd., the New Delhi-based discount carrier, last year announced orders for 30 Boeing 737s and 30 Bombardier Inc. turboprop planes. Flag carrier Air India and Jet Airways (India) Ltd. have both ordered Boeing 787 Dreamliners.

The classic Airbus A320 had a list price of $81.4 million in 2010, and Airbus has said the upgraded version would cost $6 million more. The company will start delivering the new versions in early 2016 and predicted a market potential of as many as 4,000 aircraft over 15 years. IndiGo is the first client to commit to the new variant.

Firm Order Pending

Leahy said a firm order will be signed in about two months. IndiGo ordered some standard models because it needed aircraft before the new jets become available. Specific engines for the aircraft will be announced later, according to Airbus.

IndiGo has not yet decided how to finance the order, Ghosh said. “The order is still 5-6 years before kicking in and the company has time to decide on funding options.” he said.

The geared turbofan engine by United Technologies Corp.’s Pratt & Whitney unit and the Leap-X from CFM International, the venture of General Electric Co. and Safran SA of France, are the choices on the new A320. The current IndiGo fleet uses engines from International Aero Engines, a venture led by Pratt & Whitney and London-based Rolls-Royce Group Plc.

The A320 is a twin-engine model that seats about 125 to 185 people. When the company introduced the A320 in the 1980s, the jet included novelties such as fly-by-wire electronic handling, helping Airbus leapfrog Boeing Co. deliveries from 2003 onward.

Doug Runte, a managing director at Piper Jaffray & Co. in New York, said that while the IndiGo order is important for the new A320, the real test will be winning away a Boeing customer.

“IndiGo is a legacy A320 operator so it is not all that surprising that it would choose to stick with the A320 family,” he said today. “The real win for Airbus and for the ‘‘Neo’’ will come if and when they can wrest a legacy 737 customer from Boeing by virtue of their new product.”

Source : Bloomberg.com

Charter Flight Services : New Charter Airline Dynamic Airways Launches with MD-88

Long-established special-mission operator Dynamic Aviation is launching a charter airline called Dynamic Airways, which will start operations with a McDonnell Douglas MD-88 from Smith Reynolds Airport (INT) in Winston-Salem, North Carolina.

Through parent Dynamic Aviation, Dynamic Airways has already taken delivery of its first MD-88, a former Midwest Airlines aircraft (with manufacturer’s serial number 49760) which is being unveiled to the media in the colors of the new airline at INT on October 28. Dynamic Airways began FAA proving flights in September.

Parent company Dynamic Aviation has hired Guy Cannady, a 35-year aviation veteran who began his career as a naval aviator, to run Dynamic Airways as its chief operating officer.

Over the past 20 years, Cannady developed and operated several successful commercial aviation service organizations from the ground up, including International Cargo Xpress in Arkansas, Prescott Support Co. in South Carolina, and Atlanta Air Services in Georgia. He later sold all of these companies.

The new airline expects to begin flying passengers on domestic and international charters in early November. A second aircraft is slated to be delivered in mid-December.

Dynamic Airways expects to bring business and jobs to the Piedmont Triad area by operating charter services for the federal government and a wide array of commercial customers, including corporate travel groups, tour operators, collegiate-athletic teams and other entities requiring customized, reliable jet charter services.

Parent company Dynamic Aviation, which operates its own airfield at Bridgewater, Virginia, provides customized aircraft and services to support a wide range of customers including national defense, military intelligence, federal agencies, state and local governments and private companies. The company operates in five specialist areas: intelligence, surveillance & reconnaissance services; airborne data acquisition; fire management services: aerial application; and sterile insect technique.

Having bought the U.S. Army’s fleet of 124 non-pressurized Beech BE-90 King Airs (most of them were designated as U-21 Ute aircraft) in 1996 and expanding further in the latter half of the 1990s by moving into fire management and airborne data acquisition, Dynamic Aviation now owns more than 150 aircraft and maintains one of the world’s largest inventories of Beechcraft King Air parts.

Global Aviation Industry Future : Airline Industry Expects Economic Recovery

The global airline industry is making a robust economic recovery and will need $3.6 trillion in new aircraft over the next 20 years, Boeing Co. said Thursday, July 15 in its annual long-range forecast.

In all, airlines will need 30,900 new jets between now and 2029, with more than two-thirds of the demand for smaller single-aisle jets such as Boeing’s 737 and Airbus’ A320, Boeing said in its 2010 Current Market Outlook.

Airlines have seen a rebound in passenger and freight traffic this year and should return to profitability in 2011, company officials say.

“For passenger traffic in 2010 we’re expecting to see a 5 to 6 percent improvement over where we were last year; in terms of cargo, somewhere around 14 percent or more,” Randy Tinseth, Boeing Commercial Airplanes vice president for marketing, said in a recent briefing in advance of Farnborough International Air show in Britain.

Airlines have been able to manage their way through the economic downturn fairly well by keeping costs down, Tinseth said. “We’re starting to see more airlines returning to profitability – returning to profitability really before we expected it,” he added Boeing’s 20-year forecast is slightly brighter than last year’s, when it predicted demand for 29,000 aircraft worth $3.2 trillion for 2009-2028. This year’s report says 21,160 single-aisle jets worth $1.7 trillion will be needed, along with 7,100 twin-aisle planes such as the 777, 787 and Airbus’ A330-340 family, worth $1.6 trillion.

The world will need 720 large aircraft such as Boeing’s 747 and Airbus’ superjumbo A380, worth $220 billion, and just 1,1920 regional jets – those under 90 seats – worth $60 billion.

The report, now in its 46th year of public release, is widely regarded as the most comprehensive and respected analysis of the commercial aviation market, and reflects the improving, yet still unstable conditions facing the industry.

It noted that commercial aviation has weathered many downturns in the past. Yet recovery has followed quickly as the industry reliably returned to its long-term growth rate of approximately 5 percent per year. Boeing expects the same resilience in the first half of 2010 as the industry rebounds from the recent severe downturn. Passenger traffic is projected to rise 6 percent for the year, with similar annual growth rates for 2011 through 2014.

Responding to improving demand, global airline financial performance is forecast to improve to the break-even point in 2010, following a $10 billion net loss in 2009. Asia-Pacific airlines, reflecting the region’s strong economic growth, are forecast to lead the world in profits during 2010, followed closely by North American airlines, which are exercising capacity discipline. Emerging markets are expected to be profitable, led by Latin American airlines. Europe is the only region forecast to lose money in 2010, owing to the lagging economic outlook and airspace disruptions from volcanic ash.

Worldwide economic activity, reflected in the global gross domestic product (GDP), is the most powerful driver of growth in commercial air services and the resultant demand for airplanes. The global GDP is projected to grow at an average of 3.2 percent per year for the next 20 years. Reflecting the economic growth, worldwide passenger traffic will average 5.3 percent growth and cargo traffic will average 5.9 percent growth over the forecast period. To meet the demand for commercial aviation services, the number of airplanes in the worldwide fleet will grow at an annual rate of 3.2 percent.

Air transport throughout the world continues to change in response to market opportunities and challenges. New airline business models and the dynamic growth of air travel in the emerging economies throughout the world are diversifying the demand for airplanes. As global air travel declined in 2009, there were still many markets and business models that experienced growth. Over the next 20 years, 77 percent of demand for new airplanes will come from outside North America, with about 34 percent of deliveries going to the Asia Pacific region.

The Boeing forecast continues to predict that the greatest demand for new aircraft, by market value, will come from the United States, followed by China. Remarkably, the United Arab Emirates-with a population of less than 5 million, yet home to several highly competitive airlines-will be the third largest market by value.

The need to replace older, less efficient airplanes accounts for 44 percent of the projected market for new airplanes. The 2010 forecast anticipates 13,490 airplanes will be replaced over the next 20 years. This reflects rising fuel prices and the increasing economic burden of using older, less capable, and less efficient airplanes. At this replacement rate, 84 percent of the fleet operating in 2029 will have been delivered after 2010.

Today, there are 11,580 single-aisle aircraft in operation around the world, representing 61 percent of the total jet fleet. The single-aisle fleet is forecast to more than double, reaching 25,000 airplanes or 69 percent of the total fleet by 2029, largely reflecting the rapid expansion of air services in Asia, the rise of intraregional air travel in emerging economies, and the growth and geographic expansion of the low-cost-carrier model.

Among the 30,900 aircraft to be delivered over the next 20 years, 21,160 (69 percent of the units and 47 percent of the value) will be single-aisle airplanes. Demand for single aisles comes not only from growth markets, but also for replacing older aircraft such as the 737 Classics, A320s, and McDonnell Douglas MD-80/90s. It is forecast that there will be a wave of single-aisle aircraft retirements in the 2015 to 2017 timeframe as many of these older aircraft reach 25 years of age – a typical retirement age for jet aircraft.

The fastest growing market will be for twin-aisle airplanes. This segment is expected to grow at an average annual rate of 4.4 percent. The twin-aisle fleet will grow from 3,500 airplanes in operation today to 8,260 airplanes in 2029. In 20 years, much of the in-service fleet will be newer aircraft, such as the Boeing 787 and 777, which offer more passenger comfort, improved efficiency, and better environmental performance than the airplanes they replace.

The next 20 years will see 7,100 new twin-aisle deliveries, which is about 23 percent of the total number of airplane deliveries for the period and 45 percent of the total market value. About 40 percent of the demand for twin aisles will come from the Asia Pacific region. The imminent introduction of the Boeing 787 Dreamliner and, later of the Airbus A350, is also driving demand, as these new aircraft offer significant efficiency improvements over the aircraft they are replacing.

There is expected to be little change to the size of the large aircraft fleet over the long term. The number of large airplanes in the fleet will grow from about 800 today to 960 in 2029. Nearly all the gain in large aircraft is coming from the freighter market. The number of large passenger airplanes in operation today is around 500. The large airplane passenger fleet will remain at approximately that level over the long term.

The 720 new large airplanes forecast to be delivered represent only 2 percent of the total aircraft deliveries. Yet with a value of $220 billion, large airplanes account for 6 percent of the total market value. About 43 percent of the deliveries will go to Asia, with China and Southeast Asia accounting for most of the delivery demand. The Middle East, with its already substantial backlog of aircraft in this category, accounts for another 23 percent of the large airplane market. More than half of those airplanes are already on order.

Jet Airways to Expand Domestic Capacity by 10-15% in Current Financial Year

Jet Airways, India’s largest private carrier by market share, will expand domestic capacity by 10-15% in the current financial year, the company’s chairman Naresh Goyal said on the sidelines of its annual general meeting.

This would mean Jet Airways will add five Boeing 737s to its fleet this year in what could be the first sign of recovery for domestic aviation companies reeling under heavy debt burden. During last fiscal, Jet Airways had cut capacity by 25% and leased seven wide body Boeing 777 aircraft to foreign carriers.

Mr Goyal also said that an equity dilution of up to 20% is also being looked at. “We have sought FIPB approval and are waiting for the clearance,” he said.

Mr Goyal, through a wholly-owned entity, Tailwinds, holds 80% of equity in Jet Airways. The company is also looking at fund raising options and a qualified institutional placement to raise $400 million is also on the cards. Mr Goyal did not provide a timeline to any such fund raising by the company.

Commenting on the debt-restructuring package for the aviation industry, currently being discussed by the RBI and government banks, Mr Goyal said that Jet was not looking for any debt restructuring. “It is not debt restructuring what we are looking at. We have requested for certain relaxations in the ECB guidelines. We want cost of borrowing to go down as foreign banks are willing to lend to us,” he said. The RBI is looking at that proposal, he said.

Jet Airways has sought exemptions from the regulator on the quantum and the tenure of borrowing and has also wants the external commercial borrowing or ECB be fully guaranteed by the Indian banks. Jet is looking to raise over Rs 3,450 crore through ECBs. The airliner is also close to achieving its targeted savings of $600 million through cost rationalisation, cutting down of expensive routes and fleet rationalisation.

“We will achieve this target by 2011,” its vice president, commercial strategy, K G Vishwanath said. Though he denied any merger with Jet Airways with its low cost arm JetLite, Mr Goyal said, “With JetLite we are looking at improving service, reliability of the product and sprucing of interiors of the aircraft.” JetLite posted operational profits in the last financial year.

Mr Goyal also formally stated that there is no alliance with its competitor airline Kingfisher, as there was no conclusion of any alliance with the Vijay Mallya promoted airliner. Both the promoters had formally announced that they were working together on cost cutting measures in 2008. “We have just normal airline agreements with Kingfisher,” Mr Goyal said.

In its annual report Jet has stated that it will continue to expand its international operations as international inbound and outbound traffic has seen growth. While analysing risks, the Jet Airways’ report said any increase in the air turbine fuel will adversely impact it as will any major deterioration of the Rupee against the Dollar and Euro as outflow in foreign currency for Jet is higher.

Air Charter Sees More Demand as Commercial Airlines Face Continued Setbacks

Air Partner, a global leader in private aviation, recently reported that shares rose 7% in the last weeks due to an increase in air charter and freight traffic. The volcanic ash disabled commercial routes while air charter was able to reroute flights, use smaller airports, and resolve freight and passenger deliveries with greater ease.

The Icelandic catastrophe, which led to mounting organizational difficulties in rescheduling flight routes, demonstrated that commercial aviation is unprepared to deal with unexpected airspace complications. Air charter, however continues to emerge as a preferred conveyance during difficult times and is able to provide logistical solutions for complex scenarios.
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