IBA's Newswatch a small aviation consolidated news mailing. This week, more Mallya, more MAX, more easyJet profits.

1. NEWSWATCH
18th November 2011
Volume 11; Issue 44
In this Issue:
Boeing says huge 737 order is company's
biggest ever
 Boeing says huge
737 order is The Boeing Co. announced a record-breaking deal on
company's biggest Thursday as it amassed customers and commitments for its
ever re-engined 737 Max.
 US airlines sue Boeing signed an agreement with Jakarta-based Lion Air,
Exim Bank over Air which committed to buy 201 of Boeing's 737 Max aircraft
India deal and 29 737-900 extended range jets. The deal is valued at
$21.7 billion at list prices, though airlines rarely pay full
 Airbus enjoys price.
successful Dubai
Air Show with 211 Lion Air's request is both Boeing's largest in terms of the
orders worth number of airplanes and its biggest by dollar value, Boeing
£13billion said. The Lion Air order tops the dollar value of one
announced earlier this week from Emirates. The airline
 Can Vijay Mallya
Keep Kingfisher ordered 50 777s in a deal valued at $18 billion.
Flying? Boeing said Lion Air also took out options for an additional
150 airplanes.
 Qatar drama ends
in Airbus deal "This order is a big deal," RBC Capital Markets analyst
Robert Stallard wrote in a research note to clients. The
 First dividend for deal "gives a meaningful boost to Boeing's backlog."
easyJet as profits
rise Boeing launched its re-engined 737 in August, saying it had
commitments for 496 aircraft. Even before Boeing's board
 IBA Group News signed off on building the updated single-aisle 737 Max,
American Airlines said it would take 100 aircraft. Over the
past few months, Boeing officials have said interest in the
737 Max is growing. No customers beside American had
come forward publicly until Thursday. In addition to Lion,
Aviation Capital Group - a California-based leasing
company - said on Thursday it plans to order 35 Max jets.
The leasing group also signed an order for 20 737-800s.
"These new 737NG and 737 Max airplanes will continue our
long-standing strategy of providing our customers the most
fuel-efficient, most capable airplanes with the lowest
IBA Group Ltd. operating costs," R. Stephen Hannahs, Chief Executive of
IBA House
7 The Crescent
Aviation Capital Group, said in a statement.
Leatherhead, Surrey
KT22 8DY
The Lion Air deal is not a certainty. The airline still has to
United Kingdom complete the order, and it's struggling. The Jakarta Post
Tel: +44 (0) 1372 224488 reported in August that Lion Air was ordered to ground 13
Fax: +44 (0) 1372 224489
www.ibagroup.com planes so it would have more in reserve because it had too
many late flights.
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2. NEWSWATCH
18th November 2011
Volume 11; Issue 44
Boeing introduced the 737 Max in answer to rival Airbus' IBA’s Comment:
updated A320. In late 2010, Airbus announced its plan to re-
engine its single-aisle challenger to the 737. The aircraft is “Given the
called the A320 new engine option, or A320neo. momentum that
Both Boeing and Airbus have announced plans to ramp up Airbus has
production of their 737 and A320 jets to meet customer
gathered with
demand.
the A320Neo,
Chicago-based Boeing hasn't said yet where it will build the 737
Max. The jet maker has built its existing 737s at its Renton the
factory for decades. announcement
On Wednesday, consulting firm Accenture released a study of 2 more MAX
examining possible 737 Max sites, finding that Renton has a
good chance. The study was paid for by government, industry customers is
and labour groups in Washington state. Gov. Chris Gregoire crucial for
called for $9.8 million to boost aerospace training and
Boeing.”
education in the state to win the 737 Max work.
Source: Michelle Dunlop, heraldnet.com – 18th November 2011
– David Rushe
US airlines sue Exim Bank over Air India deal
In a bid to prevent Air India from receiving a $3.4 billion loan
for the acquisition of 30 new aircraft, a trade body for leading
US airlines has sued the US Export-Import (Exim) Bank.
The loan comes at entirely too high a price and ‘puts us at a
competitive disadvantage', the Air Transport Association of
America (ATA) President and CEO Nicholas E. Calio remarked.
The ATA filed a suit with US District Court here, asking the
court to deem the Ex-Im Bank's loan-guarantee unlawful.
According to ATA officials, the Ex-Im Bank has already approved
a $1.3 billion loan for Air India, with an additional $2.1 million
pending consideration; the loans would support the carrier's
acquisition of 30 aircraft, including 27 Boeing 787s for delivery
between 2011-2015.
The lawsuit follows an ATA letter to the Ex-Im Bank earlier this
month, which said that loan guarantees to Air India and other
foreign carriers fail to comply with specific statutory mandates
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3. NEWSWATCH
18th November 2011
Volume 11; Issue 44
and US taxpayers could be left to foot the bill for any default
by a foreign carrier on its loans.
With this lawsuit, ATA officials hope to prevent foreign carriers
from receiving drastically lower - up to 50 percent - financing “loan guarantees
rates than US airlines. After all, an ATA spokesman said, the
to Air India and
discounts afforded to these carriers have certainly added up.
other foreign
"Having received more than $52 billion in US taxpayer-funded
loan guarantees over the last 10 years, foreign carriers have carriers fail to
added capacity and gained market share," he remarked. In fact, comply with
such Ex-Im Bank guarantees have enabled these airlines to
specific
increase their capacity on US routes by 12 percent, he said.
statutory
The overcapacity has also forced some American carriers to
reduce their flight schedules and cut jobs, two actions Calio mandates and US
hopes to prevent with this injunction. taxpayers could
"ATA has no choice but to seek judicial intervention in order to be left to foot
prevent our members from suffering irreparable injury," he said
the bill for any
in a statement. "While we support the goal of expanding US
exports, it cannot come at [this] expense." default by a
"Commercial aviation in the United States drives $1.2 trillion foreign carrier
per year in economic activity and more than 10 million jobs; we on its loans.”
cannot do that if we continue to face a harsh and punitive tax
and regulatory environment that, along with this proposed
action, puts us at a competitive disadvantage," Calio said. "It's
time to level the playing field."
Source: asianage.com – 18th November 2011
Airbus enjoys successful Dubai Air Show with
211 orders worth £13billion
Airbus enjoyed a successful Dubai Air Show, securing 211 orders
worth £13billion
There was outstanding demand for the A320neo, with wings
built at the European plane-maker’s Broughton factory.
Qatar Airways made the single largest firm order (50 A320neo
and five A380s), while there were also contracts signed with
ALAFCO (50) and ACG (30) worth a combined £5billion.
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4. NEWSWATCH
18th November 2011
Volume 11; Issue 44
Spirit Airlines made the largest commitment at the show for 75
A320 Family aircraft (30 A320 and 45 A320neo).
Airbus boss John Leahy said: “The order intake at this airshow
is the second best we’ve ever had at Dubai.
“Our A320neo has again been the star of the show.
IBA’s Comment:
“Despite some storm clouds on the horizon there is still strong
“Order levels
market demand for fuel-efficient aircraft from airlines and
lessors.” across the
By end of the Dubai event sales of the neo reached 1,420 industry
orders and commitments in less than a year after launch, continue to build
making it the fastest selling aircraft ever.
rapidly, which
Meanwhile, it emerged on Wednesday that Brazil needs more
than 700 new passenger aircraft in the next 20 years. contradicts the
According to the Airbus Global Market Forecast (GMF), the sense of caution
South American country will require 701 planes of more than and concern
100 seats before 2030. The 501 single-aisle, 174 twin-aisle
aircraft and 26 very large jets have an estimated value of across the global
£52billion. financial
By 2030, Brazil, the largest and fastest growing passenger markets. Again,
market for Airbus in Latin America, will become the fourth
the Middle East
largest domestic air travel market in the world with an annual
growth rate of 7.4%, following the USA, China and India. and the Pacific
“Brazil has become one of the world’s top 10 markets for new Rim are where
passenger aircraft in terms of aircraft deliveries over the next the bulk of
20 years,” said Rafael Alonso, Executive Vice President of
Airbus for Latin America and the Caribbean. orders are
“With international traffic to and from Brazil doubling over the coming from.”
past decade and showing no signs of slowing, Brazilian carriers – David Rushe
have a tremendous opportunity to gain greater market share.”
In the past 10 years, tourism has contributed to Brazil’s GDP by
nearly 200% and by 2020 it is expected to grow another 60%.
Brazilian tourists are flying in some of the youngest aircraft
fleet in the world. The average age of aircraft in Brazil with
more than 100 seats is seven years, which is three years
younger than the world and the regional average.
Source: Martin Williams, dailypost.co.uk – 17th November 2011
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5. NEWSWATCH
18th November 2011
Volume 11; Issue 44
Can Vijay Mallya Keep Kingfisher Flying?
Vijay Mallya, who calls himself "king of good times," is currently
having a bad time as Kingfisher Airlines, owned by his UB
Group, is on the brink of collapse amid surging fuel costs and
cash constraints.
Kingfisher, which is India's second-biggest airline by market
share, lost 4.69 billion rupees ($93 million) for the second
quarter, compared to a loss of 2.31 billion rupees in the same
period last year. The airline has cancelled more than 200 flights
recently, triggering fears about its financial viability.
Many complained that Mallya's ruthless spending is responsible
for the downfall of Kingfisher, which was named after the “Experts have
famous brand of Indian beer. said Kingfisher
Mallya, 55, lives a flamboyant life and is often compared to needs at least
Richard Branson as they have diversified businesses, own
formula one teams and run airlines. Mallya, apart from owning $150 million
Kingfisher, co-owns the Formula One team, Force India, and investment to
the Indian Premier League team, Bangalore Royal Challengers.
continue its
The king-size life of Mallya whose net worth, according to
operations
Forbes magazine, is more than $1 billion has mesmerized many
Indians. No wonder he has more than 706,000 followers on smoothly and
Twitter. have warned if
Now, Mallya is in rough waters and needs some soul searching Mallya tried to
about his extravagance. The culprit is none other than the
acquisition of Air Deccan that made Mallya a household name. divert funds
Air Deccan became Kingfisher Airlines and soared to popularity from his
due to its good services including good food and personal
profitable UB
screens on domestic flights.
Kingfisher, which is yet to post profit on annual and total cost Group, it would
basis, became a prey to surging jet fuel costs, which as of affect those
November 11 stood at $133.4 a barrel. The airline also bore the businesses.”
brunt of a price war due to severe competition and a falling
rupee, which has made oil imports costlier.
All these issues have been affecting the entire industry, which
is struggling to operate despite India's rapidly expanding
economic growth and 20 percent annual rise in air travel.
Kingfisher's woes have been tied to its low-cost airline
Kingfisher Red, which it decided to end in September to focus
on regular services.
In addition, Kingfisher pays more than 15 percent of its revenue
towards interest payments due to its heavy debt load of $1.5
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6. NEWSWATCH
18th November 2011
Volume 11; Issue 44
billion. Experts have said Kingfisher needs at least $150 million
investment to continue its operations smoothly and have
warned if Mallya tried to divert funds from his profitable UB
Group, it would affect those businesses.
There were rumours of a government bailout. However, Mallya
rebuffed the idea, saying he didn't need taxpayers' money. The
Indian government shells out millions of dollar of money each
year to Air India to keep it flying.
Instead, he sought Foreign Direct Investment (FDI) in Indian
Airlines, lower taxes and allowing airlines to import fuel
directly.
On November 15, Mallya said he had been approached by a
"large Indian investor" for a stake in the airline and the airline
had appointed SBI Capital Markets to review the offer,
according to Times of India.
Amid all these, Mallya is confident and has rubbished reports of
shutting down the airline, saying it is "unfair to write its
epitaph."
Source: Manikandan Raman, ibtimes.com – 17th November 2011
Qatar drama ends in Airbus deal
Qatar Airways booked a multibillion-dollar deal with Airbus for
“He said the
up to 88 aircraft only hours after the airline's chief executive,
Akbar Al Baker, halted talks and ridiculed the aircraft deadlock
manufacturer for "still learning how to make airplanes". involved
The deal - one of the biggest at this year's Dubai Airshow - disagreement
includes a firm order for 50 A320neos and five A380 double- about "two
decker super jumbos, valued at US$6.4 billion (Dh23.5bn).
sensitive issues"
Qatar Airways also has an option for a further 30 A320neos and
three additional A380s. surrounding the
Tuesday’s afternoon's unveiling of the order capped a dramatic A320neo,
day of brinkmanship at the show after Qatar Airways had Airbus's more
previously cancelled an earlier-arranged announcement of a fuel-efficient
deal.
and quieter
Mr Al Baker told reporters who had turned up expecting a big
single-aisle
announcement that negotiations with the European
manufacturer had reached an impasse and he was not hopeful aircraft.”
that the order could be reached during the show. Airbus was
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7. NEWSWATCH
18th November 2011
Volume 11; Issue 44
"still learning how to make airplanes", said the frequently
outspoken airline boss.
At a hastily convened press conference later on, the deal was
signed, with Mr Al Baker saying the impasse had been
overcome.
"Always in contract negotiations there will be impasse where “The latest
both sides are entrenched in their positions," Mr Al Baker said. order means
"If we are in [impasse] for just a few hours, it's not a big deal."
Qatar Airways
He said the deadlock involved disagreement about "two
sensitive issues" surrounding the A320neo, Airbus's more fuel- will be the
efficient and quieter single-aisle aircraft. The issues were not launch customer
related to price, but he declined to be more specific.
of the A320neo”
The drama surrounding the deal overshadowed what was a
second big order by a Gulf carrier at the show, despite a
softening global economy. Emirates Airline kicked off the event
with a bang on Sunday by booking an $18bn order for 50 Boeing
777 aircraft.
Qatar Airways operates a fleet of 102 aircraft and aims to have
170 aircraft by 2016, Mr Al Baker said. Of its current fleet, 74
are Airbus planes. “Despite
The latest order means Qatar Airways will be the launch Tuesday's
customer of the A320neo, which incorporates new engines and
agreement,
large wings tip devices known as sharklets, delivering 15 per
cent in fuel savings. Qatar Airways
The new A380s double the number of the airline's super jumbos and Airbus
already in the pipeline. Deliveries of A380s are due to begin in
remain at odds
two years.
about design
"Qatar Airways supported the development of the Airbus
A320neo very early on," said John Leahy, the chief operating changes to the
officer of Airbus. "We appreciate having built a unique A350-1000, a
relationship with our friends at Qatar Airways over the years."
wide-body
Despite Tuesday's agreement, Qatar Airways and Airbus remain
at odds about design changes to the A350-1000, a wide-body aircraft the
aircraft the airline has ordered. airline has
"We are not happy and they know it," Mr Al Baker said. He said ordered.”
Airbus was "aggressively" seeking to resolve the issue.
The airline was willing to accept a delay of six months on the
A350. Additional delays, however, would not be acceptable, Mr
Al Baker said.
Earlier in the day, Qatar Airways signed an order with Airbus'
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8. NEWSWATCH
18th November 2011
Volume 11; Issue 44
rival Boeing for two 777-200 freighters as part of its expansion
of its cargo operations. The cargo fleet of the carrier based in
Doha is currently made up of three 777s and three Airbus
A300s. Its cargo fleet will increase to 11 freighters over the
next four years.
Source: Tom Arnold, thenational.ae – 16th November 2011
First dividend for easyJet as profits rise
Budget airline easyJet confirmed its first ever dividend payout
on Tuesday, as it revealed a 31.5 per cent surge in annual pre-
tax profits to £248m on the back of a rising number of lucrative
business passengers on its flights.
easyJet, whose biggest shareholder Sir Stelios Haji-Ioannou has
long pushed for a dividend, will dole out £195m to its
shareholders, but warned the payment might be a one-off if
the firm’s financial position worsens next year. Stelios himself
will pocket £51m from the dividend, on top of more than £4m a “The company
year from a deal to licence the “easy” brand name. Sources also said it was
close to him said he was still worried about capital
expenditure, and could still exert pressure. trialling
Chief executive Carolyn McCall tried to play down the dispute allocated seating
with the firm’s founder, telling reporters: “The easyJet team... on some routes
are ruthlessly focused on what we do to deliver. We would
early next year,
obviously listen to our largest shareholder and we would like to
do that in private.” in response to
The firm’s revenues rose 16.1 per cent to £3.45bn in the year demand.”
to the end of September, while ancillary revenues jumped 12.9
per cent to £11.52 per seat.
The firm said this was partly due to its campaign to attract
more business customers, leading to 1m more people using
easyJet flights for business and taking the total to 9.5m for the
year.
The company also said it was trialling allocated seating on
some routes early next year, in response to demand.
The firm expects mid-single-digit revenue growth in the next
half on a “conservative and cautious” outlook.
Source: Marion Dakers, cityam.com – 16th November 2011
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9. NEWSWATCH
18th November 2011
Volume 11; Issue 44
IBA Group News
Press Releases & Presentations can be viewed in the News & Views section of our website, www.ibagroup.com
Conference Dates
20th – 22nd November 2011 – 43rd African Airlines Association Annual General Assembly, Marrakech - Ben Jacques and
Adrian Lee will attend
7th – 8th December 2011 – Managing Aircraft Maintenance Costs Conference, London – Phil Seymour will be speaking
24th – 26th January 2012 – Euromoney 14th Annual International Aviation Finance Conference, Dublin – IBA is
sponsoring and will be speaking - IBA’s Phil Seymour, Owen Geach, Steve Fisk and Dr Stuart Hatcher will attend
7th - 8th February 2012 – 2nd Annual International Corporate Jet and Helicopter Finance Conferrence, London – Phil
Seymour, Owen Geach, Ben Jacques and Mark Wooller will attend
Phil Seymour’s Notes on the Week
Too much aviation tax?
I pose the question because this week’s aviation news includes more fighting and threats of such regarding the EU
Emissions Trading Scheme (ETS). In addition to the US, Russian and Chinese airlines taking a firm stand against the
ETS, there are other new domestic taxes that will only serve as negatives for the airlines. The UK has the potential
introduction of Air Passenger Duty (APD) and we have seen a robust network of airlines that wouldn’t normally be
seen agreeing on anything, coming together against APD. Air Berlin is blaming most of its reduction in profits on the
German passenger departure tax which it says it cannot pass onto the passengers. However, defending our industry
against taxes is one thing but come on - someone has to pay in order for us to bail out the Euro, don’t they/don’t we?
Yours begrudgingly,
Phil
Publications – 2011 Editions
Please contact marketing@ibagroup.com for more information.
Aircraft Values Book Published in February 2011 & August 2011 £660 per year
Lease Rate Digest Published in February 2011 & August 2011 £360 per year
Engine Values Book Published in April 2011 £650 per year
Maintenance Cost Journal Published Quarterly £200 per year
“Newswatch” is a free weekly round-up collated by IBA Group Ltd.
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The items in this document do not necessarily represent the opinion of IBA, and is intended to be for information purposes only.
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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 Alice Gondry
www.ibagroup.com
Tel: +44 (0)1372 224488 Fax: +44 (0)1372 224489
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