ISSUE SIXTYNINE AUGUST-SEPTEMBER 2022

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Where next for aviation?

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 EDITOR’S LETTER

WHERE TO NEXT FOR AVIATION?

The cover for this issue of Airline Economics is a little bleak but the concept
was conceived while travelling through the various airports around the world
from the UK to the UAE, USA and further East, where the one constant was the
noticeable lack of crowds. Travelling in September, after the holiday period that
was characterised by queues, was a very different experience. The queues had
dissipated despite the fact that only one or two security lanes were open at one
time, which were not impacting the journey time through the airport. That said,
the flights I travelled on were full – but in most cases this could be attributed to the
cut in frequencies from the pre-Covid era.

Aviation is a global marketplace but the recovery in the various jurisdictions

VOLUME TWELVE, ISSUE FOUR
remain starkly different. The return of air travel in the US has been consistent
August-September 2022
and profitable for airlines that have cut capacity but raised fares. Moving to the
EDITORIAL TEAM eastern hemisphere and the picture changes dramatically with restraints on travel
Victoria Tozer-Pennington remaining in many cities. At the various Airline Economics conferences held
[email protected]
around the world, one constant plea almost on stage from expert speakers is for
China to reopen to the world , which would change the forecast for the global
SUBSCRIPTION ENQUIRIES industry significantly.
Annual subscription:
£425 (+VAT where applicable) The triple whammy of rising inflation and fuel prices, higher interest rates and
a strong dollar, has yet to have any meaningful impact on the sector but like
ADVERTISING & SPONSORSHIP ENQUIRIES
the wedge of black swans shown flying into storm clouds on the cover, only the
Philip Tozer-Pennington strongest companies will be able to navigate the turbulence of the coming months
[email protected] to reach the sunnier skies above.
Ted Tomlin
Although there are myriad challenges facing the industry, aviation has proven its
[email protected]
resilience time and time again. This current choppy operating environment is only
PRODUCTION AND ONLINE the latest in a series of bumps along the road to recovery, which will helpfully serve
Dino D’Amore to separate the wheat from the chaff and hopefully enable the industry to emerge
stronger in the latter half of 2023.
[email protected]

Cover artwork by Martin Pope Best wishes,

PUBLISHER
Victoria
Aviation News Ltd
Registered in England & Wales: 7351543
Victoria Tozer-Pennington
Registered address: Group editor
Aviation News Ltd, Unit 13, Imex Technology Airline Economics
Park, Bellringer Road, Trentham Lakes South, [email protected]
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the views expressed herein.

www.airlineeconomics.com Airline Economics August - September 2022 1

CONTENTS

1 Letter from the editor 40 Back to growth 46 Success in the Middle East
Where next for aviation? Middle Eastern carriers are pushing Airline Economics returned to the
ahead ramping up international Middle East in October to celebrate
4 News capacity to close to pre-pandemic the best of the best in the aviation
levels to capture maximum pent-up sector in the Middle East & Africa
Finnair begins major restructuring; travel demand. Optimism pervaded Aviation 100 awards.
Hong Kong Airlines files for the stage at Airline Economics
insolvency restructuring; SAS closes Growth Frontiers Middle East & 56 Leading the recovery
$700 million DIP financing; and more Africa conference held in Dubai
global aviation news. in October 2022, from the main Middle East carriers have rebounded
Gulf carriers but also from African strongly following the pandemic, but
start-up airlines eager to build on the has the region’s MRO sector been
recovery in air travel. able to keep pace with the return to
flying? Airline Economics reporter
Swati Kektar investigates.

2 Airline Economics August - September 2022 www.airlineeconomics.com

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NEWS

Finnair begins major restructuring

Finnair’s strategy has long been The airline aims to reduce unit
based on connecting Europe costs by approximately 15%
and Asia via the short northern from the 2019 level, which
route, using Russian air space. will include “enhanced digital
Following Russia’s invasion of offering, competitive products
Ukraine and the subsequent and customer choice”, but
closure of Russian air space, mainly personnel reductions.
flight times to Finnair’s Finnair is in discussions
Asian destinations are now with employees to adjust
considerably longer, weakening employment terms and
the profitability of the company. potentially “outsourcing cabin
Finnair launched a new service” and “certain operational
strategy in late September that activities”. The airline intends to
aims to return the company make further savings through
to profitability regardless of “contract negotiations with
closed Russian air space. As suppliers, structural changes Regardless of the positive PR strict travel restrictions imposed
Finnair is now faced with a in operations, and optimisation spin, the restructuring is a bold by many countries still affected
different competitive situation of premises”. In order to help move for Finnair. Rapid growth passenger traffic figures, and
and the weight of the different the employees that lose their followed by COVID-19 and the it was particularly visible in
markets in Finnair’s business is jobs, Finnair has started a social Russian blockade has torn up the Asian regions. Russian
changing, significant structural support program. The change Finnair’s business model. The airspace closed at the end of
renewal was required to be negotiations are expected to only way today to make money February resulting in route
competitive, according to start by October 5, 2022, and transiting east from Helsinki to and frequency cancellations in
the airline. will take at least six weeks, much of Asia-Pacific is to send Asian traffic. Thanks to robust
“The changesinouroperating Finnair said. Finnair claims passengers to Heathrow and let demand for cargo, Finnair,
environment require a new that about 200 jobs could be oneworld fan them out across however, continued operating
strategy and significant renewal reduced globally if the plan the globe though joint ventures to most of its Asian destinations
of Finnair, especially related to is successfully implemented. and codeshares. despite the longer routings.
costs,” says Finnair CEO Topi Finnair has an employee Finnair’s passenger data Thus, the negative impact of
Manner. “We have, however, an strength of 5,300 globally. for September 2022 clearly the airspace closure on Asian
excellent foundation to build Finnair plans to leverage shows a steady climb of 198.7% passenger traffic figures, which
on: our excellent, differentiating its various partnerships, most compared to September 2021. were already affected by the
product, strong safety culture, notably oneworld alliance and The overall capacity, pandemic, remained moderate
strong brand, our high-quality joint businesses, to strengthen measured in Available Seat in September 2022.
execution capabilities, our distribution, network reach and Kilometres (ASK), increased in Despite the Russian airspace
commitment to sustainability product offering. September 2022 by 117.5% year- closure, most cargo figures
and our track record of adapting “The target is to build a on-year but decreased by 2.3% improved year-on-year and
and renewing ourselves.” leaner Finnair that can return month-on-month. Finnair remained close to August 2022
Finnair’s new strategy to the pre-pandemic levels of operated, on average, 268 daily figures. Available scheduled
focuses on “building a profitability,” says Manner. flights (cargo-only included), cargo tonne-kilometers
competitive airline, with “Reaching this will require which was 86.1% more than increased by 63.2% year-on-
the target of reaching the profound change throughout in September 2021 and 5.9% year and decreased by 7.9%
pre-pandemic comparable the company. Especially during more than in August 2022. month-on-month while the
EBIT level of at least 5% from the hard pandemic years, the Finnair’s traffic, measured in revenue scheduled cargo
mid-2024”. Finnair team has proven its Revenue Passenger Kilometres tonne-kilometers increased by
Aiming to create a more ability to adapt and renew (RPKs), increased by 306.4% 36.8% but decreased by 0.3%
geographically balanced under the most challenging year on year but decreased by month-on-month, both due to
network connecting Europe circumstances, and I am 4.9% month-on-month. The the impact of the COVID-19
to Asia, India and the Middle confident that we will reach Passenger Load Factor (PLF) pandemic on scheduled flights
East, and North America via our target as we now continue increased by 35.2% points in September 2021.
Finnair’s home hub Helsinki, this journey. Together we year on year but decreased by Strong demand for
including a continued strong can rebuild a Finnair that 2.1% points month-on-month cargo capacity continued in
domestic presence, Finnair’s employees, customers and to 75.7%. September 2022 even though
new strategy will require the all Finns can continue to According to Finnair, the the total cargo tonnes decreased
reduction in its current fleet. be proud of.” pandemic impact including the by 4.0% year-on-year.

4 Airline Economics August - September 2022 www.airlineeconomics.com

For what‘s next
in aviation
kpmg.ie/aviation
NEWS

Hong Kong Airlines files for insolvency restructuring

Hong Kong Airlines (HKA) The HNA Group carrier Under the plan, unsecured strengthened and de-levered
filed for debt restructuring stated: “HK Airline is seeking creditors will receive balance sheet, with lower
in late September in the court approval to convene upfront payments of HK$ overall gross debt as well as
Hong Kong and UK courts meetings of its creditors and 960 million estimated to rationalised rental payments.
to avoid insolvency. HKA put forward its restructuring represent a recovery of about Without a successful
is the latest foreign airline proposal, which would include 5% of their claims with cash restructuring process, HKA
to utilise the English courts a significant haircut on the distributions if HKA meets will not be able to demonstrate
for insolvency restructuring outstanding debt. Unsecured its as-yet undefined annual to the authorities that it is
purposes. The airline is creditors and critical lessors targets between 2027-2035. financially viable when it
conc urrently pursuing are expected to recover about Critical lessors will receive applies for the renewal of its
scheme of arrangement in the 5% of the money owed to and upfront payment out of air transport license, which
Hong Kong Courts, with the them, as well as subsequent a pool of approximately HK$ expires March 2023.
same restructuring terms as pro-rata cash payments if the 120 million – again equal to Lw firm Katten has
the UK plan. turnaround succeeds.” about a 5% recovery of their commented in an advisory
HKA, which is linked to Under the restructuring claims – and subsequent cash note on the filing that the
China’s HNA Group, has plan, HKA will cut operations distributions, and for those HKA’s restructuring plan
debts amounting to over $6.2 by about 50% of the current that elect to take new equity, “promises a low short-term
billion. The restructuring capacity. HKA’s current fleet they will receive a pro rata cash recovery to aircraft
proposal needs approval consists of 53 aircraft. Under share of the conversion shares. lessors and vague promises of
from 75% of creditors and the restructuring plan, HKA HNA Aviation along additional payouts that do not
is reported to have secured plans to retain just 20 leased with unnamed joint venture start until well into the future,
approval from about 73%. A aircraft. The other aircraft will (JV) partners – namely a while giving preferential
failure in securing approval be retired or returned to lessors. new special purpose vehicle treatment to certain creditors
will likely lead to an insolvency In the practice statement formed by a current indirect and leaving intercompany
liquidation. However, as a letter, the airline said that the minority shareholder and and related company claims
note from Katten confirms, passenger numbers plunged other unidentified JV intact. Lessors have ample
Financial and operating from nearly 6.9 million from partners – have planned to grounds to question and
aircraft lessors are seeking February 2019 to January inject $380 million to revive object to provisions of the
claims of $2.9bn, bank 2020, to around 217,000 in its operations. The equity restructuring plan. Active
lenders and financial creditors 2021. With this decline, airline investment is a condition of participation in the upcoming
are owed $730 million and revenue tumbled to 85% the restructuring. Court hearings will be
related party creditors have forcing the airline to downsize With the restructuring, important to influencing the
claimed $870million. the workforce by 65%. the airline hopes to deliver a Court’s discretion”.

6 Airline Economics August - September 2022 www.airlineeconomics.com

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NEWS

Wizz Air Malta receives AOC and operating licence Norse Atlantic
receives AOC and
Wizz Air Malta has been granted
an Air Operator’s Certificate OL approvals from
(AOC) by the European Union UK CAA
Aviation Safety Agency (EASA)
and an Operating Licence (OL) The UK Civil Aviation
by the Malta Civil Aviation Authority has granted an Air
Directorate (CAD). Operator Certificate (AOC)
Wizz Air Malta commenced and Operating Licence (OL) to
operations from September 27, Wizz Air already operates of Wizz Air Malta, which will Norse Atlantic Airways. With
2022 with the first flight taking multiple AOCs within its provide opportunities to further these licenses, the airline can
off from Rome Fiumicino business, including Wizz Air diversify our operations and now begin direct flights from
International Airport. The UK and Wizz Air Abu Dhabi, drive growth. Malta’s economic the UK. Norse is keen to operate
new subsidiary is based alongside Wizz Air Hungary. and regulatory regime will flights between London
in Malta with postholder The establishment of Wizz Air enable Wizz Air to strengthen Gatwick and a number of US
roles, and the management Malta, the airline says, will allow its position in the global destinations. This schedule is
team present on-site. Wizz the group to further diversify its market. We would like to thank subject to further regulatory
Air recently appointed operations, providing enhanced EASA and the Maltese CAA for approvals, particularly serving
Diarmuid Ó Conghaile as the flexibility and the potential for their support and expertise, and routes that are currently not
Managing Director of Wizz significant expansion. we look forward to working served by direct flights or lack
Air Malta, who assumes the Wizz Air President, Robert with both regulators and the sufficient capacity.
position in Valetta from 1 Carey, said: “We are pleased to Maltese government over the Bjorn Tore Larsen, CEO of
November 2022. announce the establishment coming years.” Norse Atlantic Airways, said:
“We are proud to be employing
local pilots and cabin crew

Airlink acquires 40% stake in FlyNamibia

at our London Gatwick base
and have established close
working relationships with
Airlink has signed an FlyNamibia will also FlyNamibia Managing the British pilot union BALPA,
agreement to acquire 40% enjoy additional airline Director, Andre Compion, the cabin crew union Unite
strategic equity holding in operations, technical and said: “Namibia’s economy and the American cabin crew
privately-owned Windhoek- commercial skills training, is expanding and has the union AFA. We look forward
based FlyNamibia. This and development support potential to grow rapidly with to ramping up our operations
investment will help flyNambia from Airlink. new offshore drilling and between London and the US
in its post-pandemic recovery Airlink Chief Executive mining, the resurgence in ready for our Summer 2023
and drive the expansion of and Managing Director, tourism, and its establishment schedule.”
scheduled airline services to, Rodger Foster, said: “Namibia as a pioneering producer of Norse Atlantic now holds
from, and within Namibia. is unique with a relatively green hydrogen for the global two AOCs, one in Norway and
The investment, worth an small population compared energy market. To realise its full another in the UK, providing
undisclosed monetary sum, is to the size of its territory. economic potential, Namibia greater flexibility and
underpinned by a commercial With this in mind, we will will depend increasingly upon opportunities for the company
franchise agreement under be well-placed to achieve the air connectivity to move people to expand in the future from
which FlyNamibia will adopt economies of scale to make and goods between markets. European points and the UK,
Airlink’s “4Z” International Air it economically feasible to Airlink and FlyNamibia in line with demand. Norse
Transport Association (IATA) connect and serve Namibia’s will optimise their schedules recently signed a connectivity
designator for its ticket sales smaller towns and cities to provide the most convenient partnership with easyJet,
and scheduled flights while with Windhoek and other connections between their long- Norwegian, and Spirit Airlines
retaining its corporate identity, regional destinations while haul inter-continental flights. offering more choice and
brand and aircraft livery. also providing access to other FlyNamibia currently convenience to customers.
FlyNamibia will gain high markets around the world. operates domestic flights from Norse Atlantic will offer choice
visibility as it will be promoted This will also support our and Windhoek’s Eros Airport to and great value for money to
on Airlink’s computerised Namibia’s shared longer-term Ondangwa, Rundu, and Katima customers while contributing
reservation system and ambition to establish Hosea Mulilo and regional flights to to local economies by boosting
on those of major foreign Kutako International Airport Cape Town operating six times tourism and business travel
airlines that have partnered as the central connecting hub a week from Hosea Kutako across the Atlantic, the
with Airlink. and base.” International Airport. airline said.

10 Airline Economics August - September 2022 www.airlineeconomics.com

AMONG THE MILLIONS
OF STARS, THERE’S
ONLY ONE EARTH.

Together we share this amazing planet, unique in its beauty

and ability to sustain life. It’s our shared responsibility to
preserve and replenish its resources for future generations.
NEWS

Blue Air suspends flights

Romanian carrier Blue Air Tarom aircraft were utilised at the start of October. Once seats on sale, providing new and
suspended all flights out of to repatriate Romanians all the aircraft have been increased low-fare services to
Romania on September 6 after stranded abroad but Wizz Air delivered, Bucharest will have 36 destinations from Romania,
its bank accounts were blocked quickly launched rescues fares a total of 17 based aircraft, and these actions reinforce Wizz Air’s
by authorities for failing to and acted quickly to fill the void Wizz Air will have 2.6 million commitment to the Romanian
pay a €2million fine from left by Blue Air’s suspension additional seats on sale from the market, firmly establishing it
Romania’s National Authority with a “significant expansion in Romania market. as the market leader. We now
for Consumer Protection Romania”, adding five aircraft In addition to the expansion, offer close to 200 routes from
(ANPC) for cancelling more to its base in Bucharest, as well Wizz Air also immediately Romania,” said Evelin Jeckel,
than 11,000 flights between as increasing capacity on flights launched rescue fares for Blue Acting Network Officer.
April 2021 and April 2022. to Bacau, Cluj-Napoca, Iasi and Air customers. Blue Air was eventually
Blue Air challenged the fine Sibiu. As part of this growth, the “Wizz Air is excited to make forced to cancel all operations
but without access to its airline also launched new routes such a significant investment until October 10, after
accounts, it was unable to from Bucharest to Athens, into Bucharest and Romania. initially expecting to suspend
pay suppliers. Prague and Larnaca and We know how important it flights for just one week after
Blue Air entered a debt added frequencies on over 30 is for passengers to be able to the announcement of the
restructuring agreement existing routes. travel, and we want to ensure suspension caused flight ticket
in 2020 due to losses The first of five new Airbus that customers have a diverse sales to fall. The Romanian
inc urred during the A321 aircraft to join the range of options when planning government is now expected to
COVID-19 pandemic. Romanian fleet will arrive their trips. With 13.8 million rescue the stricken airline.

Boeing settles SEC charges that it misled investors about the 737 MAX
The US Securities and Exchange “In times of crisis and tragedy, determined that MCAS posed SEC’s Enforcement Division,
Commission (SEC) has charged it is especially important an ongoing “airplane safety said: “Boeing and Muilenburg
Boeing and its former CEO, that public companies and issue” and that Boeing had put profits over people by
Dennis A. Muilenburg on executives provide full, fair, already begun redesigning misleading investors about
September 22, with making and truthful disclosures to the MCAS to address that issue, the safety of the 737 MAX
“materially misleading public markets. The Boeing Company according to the SEC’s orders. all in an effort to rehabilitate
statements” following the and its former CEO, Dennis Approximately six weeks Boeing’s image following two
fatal crashes of Boeing MAX Muilenburg, failed in this after the March 2019 crash of tragic accidents that resulted
airplanes in 2018 and 2019. most basic obligation. They Ethiopian Airlines Flight 302, in the loss of 346 lives and
The crashes involved misled investors by providing another 737 MAX, and the incalculable grief to so many
Boeing’s 737 MAX airplane assurances about the safety of grounding by international families. But public companies
and a flight control function the 737 MAX, despite knowing regulators of the entire 737 and their executives must
called the Maneuvering about serious safety concerns. MAX fleet, Muilenburg, provide accurate and complete
Characteristics Augmentation According to the SEC’s though aware of information information when they make
System (MCAS). According to order, one month after Lion calling into question certain disclosures to investors, no
the SEC’s orders, after the first Air Flight 610, a 737 MAX aspects of the certification matter the circumstances.
crash, Boeing and Muilenburg airplane, crashed in Indonesia process relating to MCAS, told The SEC’s orders against
knew that MCAS posed an in October 2018, Boeing issued analysts and reporters that Boeing and Muilenburg find
ongoing airplane safety issue, a press release, edited and “there was no surprise or gap . . that they “negligently violated
but nevertheless assured the approved by Muilenburg, that . that somehow slipped through the antifraud provisions
public that the 737 MAX selectively highlighted certain [the] certification process” for of federal securities laws”.
airplane was “as safe as any facts from an official report of the 737 MAX and that Boeing Without admitting or denying
airplane that has ever flown the Indonesian government had “gone back and confirmed the SEC’s findings, Boeing and
the skies.” Later, following suggesting that pilot error and again . . . that we followed Muilenburg consented to cease-
the second crash, Boeing and poor aircraft maintenance exactly the steps in our design and-desist orders that include
Muilenburg assured the public contributed to the crash. and certification processes penalties of $200 million and
that there were no slips or gaps The press release also gave that consistently produce $1 million, respectively. A Fair
in the certification process with assurances of the airplane’s safe airplanes.” Fund will be established for the
respect to MCAS, despite being safety, failing to disclose that In the SEC release, Gurbir benefit of harmed investors, said
aware of contrary information. an internal safety review had S. Grewal, Director of the the SEC.

12 Airline Economics August - September 2022 www.airlineeconomics.com

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NEWS

German Government sells remaining stake in Lufthansa

Logistics entrepreneur Klaus-
Michael Kuehne increased his
stake in Lufthansa to 17.5%,
Kuehne Holding confirmed
in September, after the
German government sold
all its remaining shares in
the airline.
The Economic Stabilization
Fund of the Federal Republic
of Germany (WSF) confirmed
that all the remaining shares
of its holding in Deutsche
Lufthansa had been sold government ahead of schedule the WSF has now also sold Lufthansa next year when
to various investors via an in November 2021. its last remaining shares one the terms of four current
accelerated bookbuilding Following the sale of its year before the deadline. shareholder representatives
process. The WSF last remaining shares, the WSF no This brings the stabilisation are due to expire. Although
held around 6.2% of the longer holds any equity stake of Lufthansa to a successful Kuehne, who also holds 30%
company’s share capital (74.4 in Lufthansa, and as a result, conclusion. Lufthansa is once of shipping company Hapag-
million shares). The WSF all remaining conditions again fully in private hands. Lloyd, has not yet commented
had acquired its original also end. All Lufthansa employees publicly on his reasons behind
shareholding of 20% of the Carsten Spohr, Chairman worldwide will continue to increasing his stake in the
share capital of Deutsche of the Executive Board and work hard to strengthen our German flag carrier, many in
Lufthansa for €306 million CEO of Deutsche Lufthansa position among the world’s the media are speculating that
in the summer of 2020. It AG, said: “The stabilisation of leading airline groups, for this is only the latest move
was agreed at the time that Lufthansa was successful, and example through a broad- from shipping and logistic
the holding would be sold by is also paying off financially based premium product and companies investing further
October 2023 at the latest. for the German government quality offensive.” into air freight – noting
Deutsche Luf thansa and thus for the taxpayer. With such a large CMA CGM’s recent stake in
had already repaid all the We had already repaid the shareholding, Klaus-Michael Air France-KLM and MSC
loans and deposits it had stabilisation loan amounts Kuehne may be offered a seat Mediterranean’s interest in
received from the German earlier than expected; and on the board of Deutsche the air cargo market.

Air Arabia signs JV for new low-cost airline

Air Arabia, the low-cost Air Arabia Sudan will add our nation enjoys a unique Although the
middle eastern carrier, and significant value to the air untapped potential, and we management has not
Dal Group, a conglomerate transport sector of Sudan are therefore steadfastly revealed any details on
from Sudan, have come and directly contribute to the committed to developing the the ownership, work is
together to launch a new growth of the local economy diverse aspects of Sudan’s underway to get the relevant
low-cost airline. The airline and the development of the tourism, travel, cargo approvals and licenses, the
will be based at Khartoum travel and tourism sector.” transport, and aviation airline further added.
International Airport and Air Arabia Sudan will infrastructure sectors. It gives Air Arabia posted a profit
will be called Air Arabia operate a fleet of new Airbus me immense pleasure to join in the second quarter as
Sudan. This move comes A320 and adopt Air Arabia’s hands with Air Arabia Group the number of passengers
in a series of joint venture signature low-cost model, the in this new venture, and we it carried nearly tripled
(JV) agreements signed by airline said. look forward to the launch of during a rebound in air
Air Arabia to launch new Osama Daoud Abdellatif, Air Arabia Sudan.” travel demand. Since then,
budget airlines. DAL Group’s chairman, said: The ticket pricing of the Air Arabia is planning
Sheikh Abdullah bin “Given Sudan’s rich national airline will be “best-in-class robust expansion on
Mo h a m e d Al Thani, cultures, rarely publicised yet and accessible to all income short-haul routes to cash
chairman of Air Arabia, fascinating ancient history, groups”, Air Arabia said in on the pandemic air
said: “We are confident that and breathtaking topography, in a statement. travel demand.

14 Airline Economics August - September 2022 www.airlineeconomics.com

 THE A330neo.

The A330neo shares many of the same

innovations as the groundbreaking

A350 XWB, delivering a 25% saving in

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NEWS

Air India plans capital raise; Tata Group pushes forward with merger plans
Air India is planning to address an immediate need for Vihaan.AI transformation optimise the resources, and
restructure its finances and more capacity and connectivity, plan was unveiled by meet the market competition,
revamp its operations as a and mark a strong step forward.” Wilson along with senior sources reveal.
part of its strategic expansion One of the major challenges management members. This merger is believed to be
plan. According to sources, plaguing Air India is the drop Meanwhile, the TATA a part of Tata Son’s consolidation
TATA Group-led Air India is in its market share over the last Group will be consolidating strategy to save costs, build
planning a cash infusion of $4 decade. During privatisation, the offices of three airlines Air synergies by optimising aircraft
billion to lease new aircraft, Air India’s domestic market India, Air India Express, and utilization and routes, and gain
expand operations, and clear share stood at 11.6% whereas AirAsia India under one roof in market share to better compete
previous debt. at present it is less than 10%, Delhi. The airline has already with IndiGo. The merger may
Although there is no official raising some major concerns. started the process of vacating take about a year to materialise.
statement by the airline or Tata Taking the challenge head-on its offices across the country. The combined valuation
Group, sources close to the Tata is trying to accelerate the As for the fourth airline of Air India and Vistara is
airline have confirmed that the airline growth volumes by under the Tata Group, talks projected to be INR 3000
money will be used to revamp adding a new and advanced of Air India and the Vistara million, as per sources.
the airline and clear some of the fleet, adding newer and merger have remained a hot It is said that post-merger
debts of Air India. more economically viable topic in the aviation industry. Air India and Vistara will
Going ahead the airline is routes, digitising the process, However, since a part of the retain their brand identities but
planning to lease 30 new aircraft and enhancing the overall stakes of Vistara is owned by eventually, one brand will stand
including five widebody Boeing customer experience. Singapore Airlines, its interest out as the dominant one.
and 25 Airbus narrowbody Air India has unveiled has been one of the hurdles Vistara is a 51:49 JV between
planes over the next 15 months. a comprehensive five-year in the merger. Latest sources Tata Sons and Singapore
The new fleet will used for transformation plan called suggest that the Tata Group Airlines. Hence it enjoys
expanding India-US routes. Vihaan.Al, which will focus on and Singapore Airlines have privileges like regular fund
The new aircraft, which will network and fleet expansion, fast-tracked a decision to merge infusions from both partners to
enter service in late 2022, will revamping customer Tata SIA Airlines (Vistara). expand operations. Tata Sons
increase the airline’s fleet by propositions, enhancing In the new joint venture (JV), invested INR 2000 million
over 25 percent. reliability and on-time Singapore Airlines could hold a into Vistara in February 2022
Air India CEO and performance, and taking a minority stake of as much as 25 along with Singapore Airlines,
Managing Director Campbell leadership role in technology, percent in Air India and Vistara which invested almost the
Wilson said: “After a long time sustainability, and innovation, while Air India can hold a stake same amount. Vistara received
without significant growth, Air while aggressively investing in worth INR 50 bn to INR 100bn. an equity infusion of Rs 7bn
India is delighted to resume the best talent in the industry. Currently, talks are ongoing from Tata Sons and Singapore
expanding its fleet and global Over and above Air India between the Tata Group and Airlines in August 2021.
footprint. These new aircraft, plans to increase its market Singapore Airlines on how Prior to that, it received INR
together with existing aircraft share by 30% in the domestic best to leverage the future 4bn from the two owners in
being returned to service, market in the next 5 years. India opportunity in aviation, May 2021.

Air India signs SLB with Willis Lease for 34 CFM engines
Air India has signed a definitive fleet reliability, reduce cost, manage the entire program Willis Lease will provide
sale and leaseback agreement and optimise cash flow.” and all logistics and replacement and standby
with Willis Lease Finance for According to Air India, the transportation involved. spare engines, allowing the
34 CFM56-5B engines on its engines will be covered under This A320 fleet was a airline to avoid potentially
A320 fleet. This move is in sync Willis Lease’s ConstantThrust, part of Air India’s 2006 costly and unpredictable shop
with Air India’s revamp policy which will deliver significant purchase order. visits on engines powering a
to replace old A320 engines to reliability and cost savings “Under the sale side of transitioning aircraft fleet,” Air
reduce maintenance costs and over a traditional MRO the transaction, Willis Lease India said in a statement.
optimise cash flows. (Maintenance, Repair, will purchase 34 engines Air India recently
Nipun Aggarwal, CCO of Air and Operations) shop visit from Air India, powering announced the induction of
India, said: “This transaction program. Willis Lease will 13 Airbus A321 aircraft and 30 new aircraft on lease, five
will allow Air India to de-risk also have an in-country four Airbus A320 aircraft. Boeing 777-200LR, and 25
itself operationally, improve team to coordinate and Through the program, Airbus narrowbodies.

16 Airline Economics August - September 2022 www.airlineeconomics.com

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Boeing to find new buyers for Chinese 737 Max jets China Airlines places
firm order for 16 787-9s
China Airlines has placed a firm
order for 16 long-range 787-9
Dreamliners with the option
for eight additional aircraft. Air
China plans to invest in fuel-
efficient widebody to expand its
passenger and cargo operations,
In mid-September, Boeing new buyers for the planes, aircraft’s return to China and and to meet its long-term
confirmed that it intended to which list at $100 million and to analyse the training plans sustainability goals.
begin to find new buyers for up although airlines routinely for the MAX fleet. “We are excited to introduce
the Boeing 737 MAX aircraft get deep discounts.” CAAC said it would release the 787-9 Dreamliner into
that were built for Chinese Expressing pessimism a revised report when the our operations as we continue
airlines since the Chinese about resuming the deliveries questions raised at the meeting to upgrade our fleet with
aviation regulator still has not to China, Calhoun said: were resolved. However, they more modern, fuel-efficient
cleared the plane to fly after “We’ll do it in a very slow way have not yet provided any airplanes,” said China Airlines
two fatal crashes. The decision because I want to protect our timeline to return the MAX Chairman Hsieh Su-Chien.
was taken since Boeing customers in China but you aircraft to regular service. “Adding the state-of-the-
cannot wait indefinitely while can’t wait forever. You’ve got Currently, over 140 MAX art 787 will help us reduce
political tensions between to move them and there is a aircraft worth $5bn are in carbon emissions, while also
the United States and China big market.” storage in the Boeing facility providing our customers with
snarl deliveries. Boeing’s hopes were raised waiting for a green signal from unmatched levels of comfort.
Boeing hopes that this last December when China’s CAAC. The aircraft have been Our continuous investment
move will reduce its inventory aviation regulator took a in storage for too long and will in fleet modernisation is the
of undelivered Max aircraft, major step toward letting lead to further losses to Boeing cornerstone of our sustainability
which built up while the airlines resume using the Max. if they continue to remain in efforts. The 787’s best-in-class
planes were grounded around In February, Chinese airlines storage. To avoid further efficiency and low operating
the world. China was once the ran flight tests. But the Civil loss, Boeing has undertaken costs will allow us to expand our
biggest market for Boeing’s Aviation Administration of re-painting work on network for years to come.”
Max planes. China has not taken the final some fleets. Ihssane Mounir, Boeing
Boeing confirmed that out steps to allow Max flights and The meeting between senior vice president of
of 290 undelivered airplanes deliveries to resume, which Boeing officials and CAAC Commercial Sales and
in July, half were designated Boeing officials blame on took place at Zhoushan and Marketing, added: “The 787’s
for Chinese customers. COVID-19 lockdowns. included a visit to the Boeing superior fuel efficiency and
Chief Executive Dave China is the last major completion center. The plant, range, combined with China
Calhoun and Chief Financial market where the MAX is still a joint venture of Boeing and Airlines’ existing fleet of 777-
Officer Brian West discussed awaiting approval to fly. COMAC, has been inactive 300ERs, will enable the carrier
the need to remarket some of Shortly before Boeing made since 2019. The plant was to grow efficiently and expand
the planes at separate events. the announcement that it built in 2017 and Boeing its global route network.
During a Morgan Stanley would find new buyers for the delivered its first 737MAX to This is a milestone order in
conference, Brian West said: aircraft, Boeing officials and Air China in 2018. The plant our continuing partnership
“China is an important market China’s aviation regulator, the was supposed to roll out 100 with China Airlines, and the
and Boeing did not make the Civil Aviation Administration aircraft annually but has been market-leading efficiencies of
decision lightly. But we are of China (CAAC), had met non-functional since the fatal the 787 will play an important
confident that Boeing can find to discuss the fate of MAX 737MAX crashes. role in furthering the airline’s
sustainability efforts.”
China Airlines has 22 Boeing

Xiamen Airlines orders 40 A320neos

aircraft on order, including
six 777 Freighters. The airline
currently operates 10 777-
Xiamen Airlines has placed an made the switch to the Airbus the major shareholder of 300ERs (Extended Range),
order of 40 A320neo aircraft aircraft for its fleet growth and Xiamen Airlines, announced which will form a highly efficient
becoming the newest Airbus modernisation plans. the order via a filing with the widebody fleet and complement
customer. Xiamen Airlines China Southern Airlines, Shanghai Stock exchange. its new fleet of 787s.

20 Airline Economics August - September 2022 www.airlineeconomics.com

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NEWS

WestJet places firm order of 64 737-MAX jets

WestJet has firmed up an
order of 42 737-10s with
an option of additional 22
aircraft for network expansion
and long-term sustainability
goals. WestJet launched
operations in 1966 with three
737s and since then has grown
its all-Boeing fleet to over 100
aircraft, including the 737-8
and 787 Dreamliner. Stan Deal, president and Me a nw h i l e , We s t Je t WestJet Group’s application,
“The 737-10 will be a CEO of Boeing Commercial is continuing with the including the preservation
game changer, with one of Airplanes, added: “The 737- regulatory process in its of Sunwing’s brand, the
the lowest costs per seat 10 will provide WestJet with bid to acquire Sunwing commitment to maintain
among mid-range aircraft,” additional capacity and Vacations and Sunwing Sunwing’s Toronto and
said Alexis von Hoensbroech, unrivaled efficiency as the Airlines, which it announced Montreal offices, new
WestJet Group chief executive airline expands its network on March 2, 2022. The flying that will be created
officer. “This will foster our of destinations across Canada Canadian Transportation by retaining Sunwing’s
low-cost positioning and and around the world. We A g e n c y ’s report was aircraft in Canada year-
affordability for Canadians. are proud that WestJet supportive of the transaction round and the resulting new
In addition, with its lower sees the value of the 737 but the final decision employment opportunities.
fuel consumption and MAX family and is adding depends on the Cabinet on T h e t ra n s a c t i o n i s
reduced emissions, the 737- the 737-10 to complement the Minister of Transport’s expected to close by
10 will further improve the the 737-8 for outstanding recommendation, that spring 2023 pending
environmental footprint capability, flexibility, and will consider additional remaining regulatory and
of our fleet.” improved sustainability.” factors presented in the government approvals.

Wizz Air opts for 75 more A321neos

Wizz Air has exercised its tripling the size of its fleet “The combination of Wizz world’s most sustainable
purchase rights for 75 Airbus by the end of the decade Air’s ultra-low cost operation airlines. We remain on track
A321neo aircraft. to become an airline of and the market-leading to become a 500 aircraft
Wizz Air stated that the 75 500 aircraft. Airbus A321neo aircraft airline group by the end of
additional A321neo aircraft, Wizz Air c urrently together create a strong the decade while delivering
most of which are expected has a fleet of 165 modern platform for Wizz Air’s future our commitment to reduce
to be delivered in 2028- Airbus aircraft. growth in the coming decade our already industry-leading
29, underpins the airline’s József Váradi, Wizz Air’s as we further strengthen CO2 emissions by 25%
ambitious goal of more than Chief Executive Officer, said: our position as one of the by 2030.”

Royal Jordanian Airlines orders up to 20 A320s

Royal Jordanian Airlines has aircraft in the coming three-to- and 787-10 jets to add to the The airline said it conducted
signed a deal with Airbus for five years,” said Samer Majali, current fleet.” Starting in the thorough feasibility studies to
20 new factory-built A320neo. CEO of Royal Jordanian second half of next year, Royal decide on the best choice of
The agreement is a part of a Airlines. “Negotiations are Jordanian plans to introduce aircraft to replace the A320ceo
fleet modernisation plan by also underway with Boeing new regional aircraft to give family fleet. According to the
the airline to replace its aging on increasing the number of the airline the flexibility and airline, A320neo will give
A320ceo fleet. 787s in the fleet from seven advantage to grow its flight it an edge as it features the
“The move is part of the to 11 in the coming several frequencies to all primary and latest fuel-efficient engines,
airline’s plan to increase its total years. The airline is also secondary destinations in the large sharklets as well as the
fleet size from 24 to over 40 evaluating the new 787-9 region, Majali added. Airspace Cabin.

22 Airline Economics August - September 2022 www.airlineeconomics.com

NEWS

Aircastle enhances revolving credit facility to $1bn

Aircastle has increased the In addition to BMO,
size of its unsecured revolving the facility’s participants
credit facility to $1bn from consist of nine leading global
$900 million. The revolving financial institutions, with
credit facility of $100 million Citibank, Goldman Sachs, J.P.
comes from a commitment Morgan Chase Bank, Royal
from BMO Harris Bank Bank of Canada, Fifth Third
(BMO). The facility expires Bank, National Association,
in April 2025 and provides Credit Agricole Corporate &
working capital for general Investment Bank, MUFG Bank,
corporate purposes, including BNP Paribas, and Mizuho Bank,
aircraft acquisition. as lenders.
Michael Inglese, Aircastle’s Meanwhile, there has been
CEO said: “We appreciate the a change for Aircastle’s board of Michael Inglese, CEO, Aircastle
commitment of BMO joining directors. Effective September
the strong, ongoing support 26, 2022, Noriyuki Yukawa Mizuho Leasing Company and of Mizuho Leasing. Prior
of our bank group to bring resigned as a member of the appointed a Director. Prior to to joining Mizuho Leasing,
this revolving credit facility to board, which he had held since joining the Board, Okuno was Okuno had over 15 years at
$1 bn. As we pursue exciting March 2020 as well as being Senior Vice President of PNB- ORIX Group in various roles
investment opportunities in a member of the Audit and Mizuho Leasing & Finance including Vice President,
a profitable and disciplined Investment Committees. Corporation and also a Director Global Business Group,
manner, our strong access to Keiji Okuno has become of PNB- Mizuho Equipment & Executive Vice President, and
capital markets is a strategic a member of the Aircastle Rental Corporation. Managing Director.
strength along with our Board as well as the Audit and From January 2019 to Okuno will not receive any
investment grade rating and Investment Committees. Okuno November 2019, Okuno was compensation from Aircastle for
unique ownership structure.” was nominated to the Board by Deputy General Manager his service as a director.

TrueNoord secures US$400 million financing facility

TrueNoord has closed a new Freshstream, BlackRock, Tieleman commented has expanded to encompass
revolving warehouse finance Aberdeen and others. further that TrueNoord’s Porter Airlines in Canada,
facility of US$400 million Legal advisers Clifford specialism in providing Sky High in the Caribbean,
which will be seeded with Chance acted on behalf regional aircraft in the 50–150 CEM Air in South Africa,
17 aircraft already owned by of TrueNoord, Milbank seat class to its customers had Alliance in India and Cobham
TrueNoord and can be extended represented the banks, and been well received by operators in Australia. According to
further by an accordion feature. Flynn O’Driscoll acted as seeking economical solutions Julien Millet, CFO, the team
The facility will be used by the Irish counsel. over the past two years of is working on a multiplicity
specialist regional aircraft “This new revolving fluctuating passenger demand. of opportunities with regional
lessor to finance business warehouse facility will finance “Smaller, modern aircraft with aircraft operators which will
development and expand TrueNoord’s regional aircraft good range capabilities have be supported by this new
its portfolio of 50-150 seat acquisitions going forward. sustained important route warehouse facility. “We are
aircraft which includes jets It will give us the funding networks with great flexibility. very proud to have earned such
and turboprops from Embraer, to react quickly on market Our full portfolio of 60 aircraft healthy financier confidence
ATR, Airbus, MHI-RJ, and De opportunities and build up is currently on lease and we and pleased to further extend
Havilland Canada. a portfolio of new and used are seeing significant fleet our relationship with all four
The new facility is provided aircraft on a flexible basis for expansion worldwide. We banks in this warehouse
by Citibank, Société Générale our customers,” said Anne-Bart plan to capitalise upon this facility. Their continued
CIB, Royal Bank of Canada, and Tieleman, CEO. “These four as we continue to pursue our confidence in TrueNoord’s
NordLB. It will be used to fund banks further augment the disciplined growth strategy.” balanced growth plan and
new acquisitions and supports strong group of financiers and The past twelve months superior servicing capabilities
TrueNoord’s targeted growth investors that are supporting has seen substantial growth is extremely rewarding
strategy which is endorsed Tr u e No o r d ’s dynamic of TrueNoord’s portfolio and for our team, customers,
by cornerstone investors: growth trajectory.” recently its global footprint and stakeholders.”

24 Airline Economics August - September 2022 www.airlineeconomics.com

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NEWS

SAS closes $700 million DIP financing

Scandinavian Airlines (SAS) to achieve the best financing to have been called on to act AerCap. “SAS has been a long-
debtor-in-possession (DIP) outcome for SAS, and we are as special aviation counsel time customer of AerCap, and
financing credit agreement pleased that the Court has for Apollo in this transaction, we wish Anko van der Werff
for $700 million with funds approved it. I’d like to thank involving these complex and all the SAS team every
managed by Apollo Global our employees for their hard collateral asset classes. The success and we look forward
Management closed on work and dedication, as well particulars of the transaction to building on our partnership
September 26. as our business partners for drew upon our extensive for many years to come.”
The airline noted that the their support as we continue experience advising on slot Further, SAS as secured
terms of the DIP financing moving through this process. financing transactions and savings of $200 million
credit agreement are We continue to make progress aviation sector restructurings, through to 2026 from a
“substantially similar” to the with the SAS FORWARD as well conventional asset collective bargaining deal
terms previously announced plan, and our work to build a finance techniques. It was reached with most of its pilots
by SAS on August 14, 2022. competitive and even better a pleasure to advise in our following a two-week strike
The financing is secured airline for our customers.” cross-disciplinar y and in July.
against certain SAS assets Weil, Gotshal & Manges is cross-office team, and to The new collective labour
including take-off and landing serving as global legal counsel partner with Apollo’s other agreements are described
slots, unencumbered aircraft and Mannheimer Swartling advisors, including PJT and as an essential component
and engines, the brand and Advokatbyrå is serving as Akin Gump.” of the SAS FORWARD plan
intellectual property, and Swedish legal counsel to Me a nw h i l e , AerCap – the major restructuring
shares in EuroBonus AB SAS. Seabury Securities and confirmed that it signed of the airline announced in
(which owns the EuroBonus Skandinaviska Enskilda agreements with SAS for the February 2022.
loyalty programme). Banken are serving as retention and lease extension Court documents filed in
SAS stated that the DIP investment bankers, Seabury of six Airbus A320 aircraft. New York as part of the airline’s
financing, along with cash is also serving as restructuring “We are delighted to Chapter 11 proceedings,
generated from the company’s advisor, and FTI Consulting is support SAS as it implements indicated that the airline
ongoing operations, will serving as financial advisor its business transformation had requested the return of
enable the company to to SAS. plan, ‘SAS FORWARD’, 10 more aircraft to lessors to
continue meeting its PJT Partners is acting as through a voluntary chapter reduce its overall expenditure.
obligations throughout the financial advisor to Apollo. 11 process which is expected The aircraft include three
Chapter 11 process. Akin Gump Strauss Hauer & to lead to a financially stable A320neos leased from SMBC
Anko van der Werff, Feld is acting as legal counsel and profitable airline. These Aviation Capital, one A321-
President and Chief Executive to Apollo. Watson Farley & aircraft will help to support 200 from Itochu), three
Officer of SAS, said: “The Williams is acting as special SAS with its objectives of A330-300s from Bocomm
DIP financing agreement aviation counsel to Apollo. being a highly competitive Leasing, two A350-900s
with Apollo followed an Patrick Moore, Partner at and operationally efficient from Fuyo General Lease, and
extensive and competitive Watson Farley & Williams, airline,” said Aengus Kelly, one 737-700 from 18-Pack
process that we conducted commented: “We are pleased Chief Executive Officer, Irish DAC.

Swissport closes refinancing to advance global expansion plans

Swissport has successfully up operations and drives liquidity as we are ramping up The company has also entered
completed a new €600 global growth. operations across our global into a new €200 million
million Term Loan offering “We are very pleased with network and execute our Super Senior Revolving Credit
and entered into a new €200 the outcome of the refinancing growth plans.” Facility / ancillary facility with
million super senior revolving given the challenging capital Radar Topco, Swissport a maturity of March 2027.
credit facility. The proceeds market environment,” said Group’s holding company, The proceeds will be used to
will be used to refinance Ivan Nash Vila, Group Chief announced that Radar Bidco, refinance existing senior and
existing credit facilities and Financial Officer of Swissport a wholly owned subsidiary of super senior credit facilities,
provide the company with International. “Together with Swissport, has completed a which include the €500
additional committed liquidity available cash, the refinancing new Term Loan offering in an million Term Loan maturing
to reinforce its financial secures the Group with an aggregate principal amount December 2024 and the €130
position. Swissport is says that extended debt maturity profile of €600 million with the million revolving credit facility
it is well capitalised as it ramps and provides additional maturity of September 2027. maturing December 2024.

26 Airline Economics August - September 2022 www.airlineeconomics.com

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NEWS

Apollo funds commit to Embraer agreement

Embraer has signed PDP (Progress Delivery “Working closely with moment in Apollo’s wider
a memorandum of Payment) financing and a Embraer, Apollo has created aerospace ambitions, which
understanding with an full suite of leasing options. a range of efficient and cost- already encompass the
affiliate of Apollo, on behalf Funding would be primarily effective financing options established and respected
of its clients and managed available through Apollo’s that offer our customers aviation platform brands
funds, with respect to aviation business, which the individual flexible of Merx Aviation and PK
a US$1.5bn c ustomer encompasses dedicated arrangements they need,” AirFinance. Apollo can make
financing program for inves tment funds, its said Antonio Carlos Garcia, a difference at every point
Embraer’s regional aircraft. aviation lending platform PK Embraer’s CFO. in the customer financing
Apollo, working AirFinance and its leasing Martyn Holmes, CCO journey, from PDPs and
alongside Embraer, will and servicing affiliate Merx Embraer Commercial bridge facilities to long-term
offer a comprehensive range Aviation. Apollo can also Aviation, added, “Embraer leasing and debt products
of innovative and bespoke access additional low-cost is known for its customer across the widest range of
solutions across the spectrum capital across its broader focused, innovative asset types and ages,” said
of customer and delivery investment platform. solution driven approach Gary Rothschild, CEO of
financing. The program also As the first major to the market. Apollo’s Merx and Head of Aviation
includes options to explore transaction under the customer financing program at Apollo. “We are excited
financing for customers’ new initiative, Apollo, on continues Embraer’s drive to work with Embraer
ESG foc used projects, behalf of its clients and to provide our customer to jointly bring efficient
such as the development of managed funds, entered a with even more financing financing solutions to our
green technologies. definitive sale and leaseback solutions, continuously airline customers and to
A p o l l o ’s financing agreement, including PDP raising the bar on focusing further collaborate on other
capabilities encompass financing, for six Porter on what c u s t o m e r ’s investment opportunities,
various debt financing Airlines E195-E2s scheduled really need.” including green
alternatives along with for delivery in 2023. “This is yet another key tech developments.”

Allegiant closes senior secured revolving credit facility

Allegiant Travel Company credit facility,” says Robert emergency relief loan the entirely on leisure travel”
secured a $100 million senior Neal, Senior Vice President company received under the for helping the company
secured revolving credit and Treasurer at Allegiant. Coronavirus Aid, Relief and respond to the unprecedented
facility to be secured by both “MUFG has been a great Economic Security (CARES) challenges that the entire
aircraft and engines via its partner in helping us build Act in April 2020. airline industry faced when
captive lessor entity, Sunrise out a facility that supports our The CARES Act, signed into demand for air travel dropped
Asset Management. orderbook, a key pillar of our law in April 2020, established so suddenly in 2020, as a result
Mitsubishi UFJ Financial overall strategy.” the Payroll Support Program of the global pandemic.
Group (MUFG) acted as “Allegiant is a very to provide assistance to US “We’re so grateful to the
arranger and bookrunner. important client for our companies that were impacted federal government and
The facility provided aviation franchise,” says by the global pandemic. the American people for
Allegiant with the flexibility Benoist de Vimal, Head of The funds helped Allegiant stepping up and assisting
to include both aircraft and Aviation Originations in support the airline’s employee the entire industry when the
engines from its orderbook the Americas at MUFG. salaries and benefits. outlook for the future was so
or from the existing fleet. “We appreciate Allegiant’s Allegiant noted that the uncertain,” said Allegiant’s
The facility features varying collaboration and look forward government assistance, CEO John Redmond. “This
advance rates, borrowing base to supporting the team with coupled with “proactive loan helped us save jobs at a
levels, age requirements, and their needs.” initiatives”, allowed the time when it wasn’t clear how
utilisation requirements that The facility will be actively airline to preserve liquidity the U.S. would emerge from
ensure the assumed risk is utilised by Allegiant to fund and strategically position the pandemic. We’re thrilled
addressed in accordance with its orderbook of 100 MAX the airline to withstand the that demand has increased
the unique circumstances of aircraft, which are set to begin uncertainty surrounding so much in recent months
the corresponding asset. delivering in 2023. the outbreak of COVID-19. that we were able to fulfil our
“We are very pleased with Meanwhile, Allegiant has Allegiant credited its “unique obligation much earlier than
the outcome of this revolving repaid the $24.8 million dollar business model, focused we originally anticipated.”

28 Airline Economics August - September 2022 www.airlineeconomics.com

NEWS

MSC enters the air cargo market

MSC Mediterranean solution would be available its airfreight business Cargo, Emirates SkyCargo
Shipping Company, a global from early 2023, following and further enhances its and DHL, to the company
leader in transportation the delivery of the first of position as a global leader in who will work to develop
and logistics, has started four MSC-branded Boeing transportation and logistics,” its air cargo business and
developing a new MSC Air 777-200F aircraft that said John Dietrich, President to build the team that will
Cargo solution in response to will be operated by Atlas and Chief Executive Officer, implement it.
“customer demand” and as a Air, a subsidiary of Atlas Atlas Air Worldwide. “This Davel was appointed
complementary service to its Air Worldwide. new agreement will allow Vice President Global RFQ
container shipping solutions. Under the terms of the MSC to capitalise on the Management of DHL in
Commenting on the long-term ACMI (aircraft, state-of-the-art ser vice 2008, then promoted to Vice
new initiative, MSC Chief crew, maintenance and solutions provided by our President Global Airfreight
Executive Officer Soren Toft, insurance) agreement, Atlas aircraft and crews, as well as Product Development and
said: “This is our first step Air will operate all four of its the unparalleled air cargo Implementation in Germany
into this market and we plan new and incoming Boeing expertise brought by our and, subsequently, SVP
to continue exploring various 777-200 freighters on a global Atlas team.” Airfreight Americas & USA
avenues to develop air cargo basis for MSC, with the first Toft added: “Atlas Air’s fleet Head of Airfreight. In 2018
in a way that complements delivery being taken in the of 777 freighter aircraft is well- he joined Emirates SkyCargo
our core business of fourth quarter of 2022. Atlas’ suited to support our entry as Vice President Cargo
container shipping.” order of these four aircraft was into air cargo and this strategic Commercial Operation
The company indicated announced in January 2022. initiative will ensure we meet Americas and most recently
that MSC Air Cargo had “We are pleased to the cargo requirements of he has served as Managing
been under development welcome MSC as a new our customers.” Director Commercial
for “several months” and customer, and look forward to Toft also welcomed Jannie Delta Cargo based in
confirmed that the new supporting MSC as it develops Davel, formerly of Delta Atlanta, Georgia.

BBN Cargo Airlines expands cargo operations in Indonesia

BBN Cargo Airlines has the southern hemisphere. logistics industry. Indonesia fulfil the market needs.”
established a new cargo Martynas Grigas, the is the largest and fastest- Currently, BBN Airlines
airline, BBN Airlines commissioner of BBN Cargo growing internet economy Indonesia is in the process of
Indonesia. As a scheduled Airlines Holdings, said: and is expected to account securing its airline business
carrier, BBN Airlines “With the growth of exports for half of all e-commerce license, which is planned to be
Indonesia will manage cargo and imports, and the rapidly transactions in Southeast Asia ready this year and predicted
operations in the Soekarno- expanding e-commerce trend, by 2025. We see this as a great to achieve the AOC (Aircraft
Hatta International Airport, Indonesia has a promising opportunity and are excited Operator Certificate) in the
one of the busiest airports in future for its air cargo and to develop the cargo airline to second quarter of 2023.

30 Airline Economics August - September 2022 www.airlineeconomics.com

Strengthened global expertise
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As an award-winning aviation team, MUFG Aviation Finance combines in-depth industry
knowledge with solid relationships across the global aviation sector. And now, with our
acquisition of DVB Bank’s Aviation Finance lending business, we’re positioned to offer even
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NEWS

SMBC Aviation Capital to offer carbon credits in leasing contracts

SMBC Aviation Capital credits based on energy- SMBC Aviation Capital commitments to buy a total
is now offering its airline efficient cookstove projects. said in a statement that the of 730 aircraft, however,
customers carbon credits Chief Executive Peter scheme, which is certified the company has limited
aligned to the United Barrett said: “In a hard by Gold Standard and options in the short term to
Nations’ Sustainable to abate sector carbon Verra, will reach 3.2 million reduce its carbon footprint,
Development Goal in leasing offsetting was an interim households in Africa, Asia, with most efforts focused on
contracts. SMBC Aviation measure to lower its and the Americas. offsets, more fuel-efficient
Capital will initially invest impac t on greenhouse SMBC Aviation Capital aircraft, and sustainable
$53.3 million in carbon gas emissions.” owns, manages, or has aviation fuel.

SMBC Aviation Capital secures five-year syndicated financing

SMBC Aviation Capital Aviation Capital. “We are interest across the global Oversea-Chinese Banking
has secured $1.725bn five- pleased to have further banking market”, which had Corporation, BNP Paribas,
year syndicated facilities broadened our relationships resulted in terms “reflecting CaixaBank, Cathay United
with a greenshoe option, with both new and existing SMBC Aviation Capital’s Bank, and Industrial and
comprising a $1.294bn term financing partners which status as one of the highest- Commercial Bank of China,
loan and a $431 million include some of the leading rated, Investment Grade acted as mandated lead
revolving credit facility with banks in the Asia-Pacific aircraft lessors”. Six of the arrangers and bookrunners.
a consortium of Asia-Pacific, region, Europe and North 13 banks that entered the Four additional banks,
European, and Nor th America. Together with our transaction are providing including HSBC as a senior
American banks. ongoing parental backing financing to the company for mandated lead arranger,
“ T he scale of this and access to the capital the first time. and Apple Bank, China
transaction and level of markets, this transaction A u s t ra l i a a n d Ne w Ev e r b r i g h t B a n k a n d
interest is testament to the will support our ability Zealand Banking Group KeyBank as mandated lead
strength of SMBC Aviation to execute on our growth (ANZ) and Citigroup Global arrangers, joined at the
Capital’s market position, objectives and continue to Markets Asia (Citi) acted as senior syndication phase.
high-quality portfolio, and deliver long-term value to joint global co-ordinators, General syndication is
investment grade ratings,” our shareholders.” while seven banks, expected to follow shortly to
said Aisling Kenny, Chief The financing is described including DBS Bank, The raise additional funds under
Financial Officer of SMBC as having generated “strong Korea Development Bank, the greenshoe option.

Rolls-Royce takes a step ahead in sustainability

Taking a step ahead in propulsion systems and Architecture Virtually technology. HE-ART will
sustainable aviation, Rolls- this will build on our Engineered Novelly, while focus on demonstrating
Royce will be carrying out existing expertise to help HEART stands for Hybrid enabling technologies for
new research to accelerate accelerate the technological Electric propulsion system hybridization by ground
sustainable propulsion with breakthroughs that could for regional AiRcrafT, and demonstration of a hybrid-
the aid of the European help deliver net zero carbon CAVENDISH for Consortium electric thermal turboprop
Union’s (EU) Clean Aviation by 2050 and transform the for the AdVent of aero- (e-TP) and CAVENDISH will
program. The EU will provide way that we travel.” Engine Demonstration and integrate liquid hydrogen
funding of €700 million for Rolls-Royce will be a aircraft Integration Strategy systems onto a modern donor
20 research and innovation partner in six programs, with Hydrogen. engine for ground testing.
programs across the industry. including the lead The HEAVEN will focus The Clean Aviation
Alan Newby, Director of coordinator in three research to develop the scalable Joint Undertaking is the
Aerospace Technology and undertakings. The three U l t r a Fa n architecture European Union’s research
Future Programmes, Rolls- programs are HEAVEN, and suite of technologies and innovation program
Royce, said: “Rolls-Royce HEART, and CAVENDISH. for future civil aviation for transforming aviation
is focused on advancing H E AV E N stands opportunities and provide towards a sustainable and
sustainable power and for Hydrogen Engine a platform for Hydrogen climate-neutral future.

32 Airline Economics August - September 2022 www.airlineeconomics.com

AVIATION SOLUTIONS ACROSS BORDERS

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our global team of lawyers works seamlessly across
borders and jurisdictions to advise financial institutions,
leasing companies, and airlines on all aspects of aircraft
finance and leasing.

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Tokyo, Hong Kong, Dubai, London, and New York, we will
help keep your aviation matters on course.
K&L Gates LLP. Global counsel across five continents.
Learn more about our Aviation Finance practice at klgates.com/aviation-finance.
NEWS

United doubles down on eVTOLs

United Airlines has announced Michael Leskinen, United’s investment in Eve’s eVTOL aircraft
a $15 million investment with President of United Airlines Eve has been driven in part design uses conventional
Eve Air Mobility as well as a Ventures, said: “United has by confidence in the potential fixed wings, rotors and
conditional purchase for 200 made early investments growth opportunities in pushers, giving it a practical
four-seat electric aircraft, in several cutting-edge the UAM market, but also and intuitive lift-plus-
with options for another 200 technologies at all levels of the by Eve’s relationship with cruise design, which the
aircraft. The first deliveries supply chain, staking out our Embraer, a proven aircraft company states “favours
are expected to begin position as a leader in aviation manufacturer, which will also safety, efficiency, reliability
by 2026. sustainability and innovation. include access to Embraer’s and certifiability ”. The
With this deal, United Today, United is making ser vice centres, parts aircraft will have a range
has become the first major history again, by becoming warehouses and field service of 60 miles (100 km). Eve
airline to invest in two major the first major airline to technicians, paving the way is also creating a new air
electric vertical take-off and publicly invest in two eVTOL for a reliable operation. traffic management solution
landing (eVTOL) aircraft companies. Our agreement Upon entry into service, designed for the UAM
development ventures. with Eve highlights our United could have its entire industry to scale safely.
United recently solidified its confidence in the urban eVTOL fleet serviced by Eve’s As per the agreement,
order with Archer, signed air mobility market and agnostic service and support United and Eve will work on
in February 2021 for 100 serves as another important operations. Moreover, United projects including studies on
eVTOLs, with a $10 million benchmark toward our goal joins the consortium led the development, use, and
pre-delivery payment of net zero carbon emissions by Eve, which will simulate application of Eve’s aircraft
to the California-based by 2050 – without using UAM operations in Chicago and the urban air mobility
eVTOL company. traditional offsets.” from September 12. (UAM) ecosystem.

Air Canada orders 30 ES-30 electric hybrid aircraft

Air Canada has signed generate zero emissions “Air Canada has taken a both as a customer for the
a purchase agreement flying on battery power and leadership position in the ES-30 and as an equity
with Heart Aerospace for yield significant operational industry to address climate partner in Heart Aerospace.”
30 ES-30 electric hybrid savings and benefits. The change. The introduction Anders Fo r s l u n d ,
aircraft to serve regional aircraft is expected to enter into our fleet of the ES-30 founder and CEO of Heart
and commuter routes. Air service by 2028, capable of electric regional aircraft from Aerospace said: “Air Canada
Canada has also acquired a carrying 30 passengers in Heart Aerospace will be a step is a strategically important
US$5 million equity stake in a 2X1 configuration with a forward to our goal of net zero partner for Heart Aerospace.
Heart Aerospace. galley and lavatory. emissions by 2050. We are With the ES-30 we can start
According to Heart Michael Rousseau, reinforcing our commitment cutting emissions from air
Aerospace, the ES-30 President and Chief Executive by investing in revolutionary travel well before the end of
electric hybrid aircraft will Officer of Air Canada said: electric aircraft technology, this decade.”

34 Airline Economics August - September 20221 www.airlineeconomics.com

 NEWS

GlobalX inks Alice with Eviation

Global Crossing Airlines is powered by two magni650
Group (GlobalX), a Miami- electric propulsion units
based provider of passenger by magniX.
and cargo charter jets, has GlobalX began passenger
signed a Letter of Intent operations in August 2021
(LOI) with Eviation Aircraft, and operates seven A320
a manufacturer of all-electric family aircraft serving the
aircraft, for the order of US, Caribbean, and Latin
50 all-electric commuter America. It also has 15 A321
Alice aircraft. The aircraft freighter aircraft under
will open up new routes for lease agreements and will
passenger travel in GlobalX’s commence cargo operations
key markets in Florida, the in Q4 2022. It is hoped that
Bahamas, and the Caribbean, Alice will enable GlobalX to privacy and convenience. for short-haul charter flights
supporting the airline’s plan introduce new, sustainable Alice represents a pioneering across Florida,” said Ed Wegel,
to adopt carbon-free and flight options for growing approach to making this Chair and CEO of GlobalX.
sustainable technologies. markets including Miami, type of aviation sustainable “The Alice aircraft will
Alice is a nine-passenger Orlando and the Bahamas. for generations to come,” allow us to offer sustainable,
electric aircraft, built from GlobalX expects to take said Eviation President regional flights to and from
a clean-sheet design around delivery of its initial Alice Gregory Davis. major markets, and is the
all-electric propulsion, which aircraft in 2027, and is “Eviation’s Alice aircraft first step in our initiative to
produces no carbon emissions, evaluating the cargo aircraft is setting the standard in be a zero-carbon emissions
significantly reduces noise, variant of Alice for supporting sustainable aviation, and we airline by 2050. We are proud
and is claimed to cost a its cargo customer base. plan to offer the aircraft to to be a launch customer for
fraction to operate per flight “Charter travel is attractive our cruise line, tour operators, Eviation and lead the charge
hour compared to light jets to both individuals and leisure travel providers, and in bringing carbon-free air
or high-end turboprops. Alice groups as it offers flexibility, business clients with a need travel to our passengers.”

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NEWS

Tully takes charge as CEO of Jetstar

Stephanie Tully has been Announcing the changes, customer experience. She’s an Executive Manager of Network,
promoted as the new CEO Qantas Group CEO Alan Joyce, outstanding leader and she’ll Revenue Management, and
of Jetstar. She will replace said: “These appointments be leading a very experienced Alliances, responsible for
Gareth Evans who plans come at an important time senior team at Jetstar to keep overseeing a large part of
to step down by the end of for us. The team is working building on the strengths of the commercial strategy for
this year. Tully joined the incredibly hard to overcome that business.” Qantas International and
Qantas group in 2004 and challenges facing the whole With Tully’s promotion, Qantas Domestic.
worked across operational, industry as it gets back on its Markus Svensson will be Tully and Svensson will
commercial, marketing, and feet, and the data shows we’re promoted to the Chief begin transitioning to their
customer loyalty functions almost there. Stephanie has Customer Officer role and new roles shortly with detailed
in progressively more senior worked across several different become a member of the handovers made possible
roles. She has been a Group parts of the airline, from Group Executive Committee by the internal succession,
Executive and Chief Customer crewing to marketing, and reporting to the Group CEO. ahead of a formal handover
Officer since 2019. has a deep understanding of Svensson is currently the in November.

Pieter Elbers takes the helm at IndiGo

Industry veteran Peiter forward to building upon leadership qualities and Italy. After he returned
Elbers assumed charge of this, working together with coupled with his energy to The Netherlands, he was
Indigo as its chief executive the entire IndiGo team. I am and passion, we are ever appointed as the Senior
officer (CEO) with immediate delighted to become a part so confident that under his Vice President of Network
effect from September 6, of the next stage of IndiGo’s stewardship, IndiGo will & Alliances, before he was
2022, some three months incredible journey, further play a pivotal role in this promoted in 2011 as Chief
after he was announced as fulfilling the vision of what growth opportunity,” Rahul Operating Officer. In 2014,
the replacement for outgoing the airline can do and will be Bhatia, Managing Director Elbers was promoted to the
CEO Ronojoy Dutta. for its customers and India.” of IndiGo, said in a statement position of President and
On his appointment “We are thrilled to in May while announcing Chief Executive Officer of
as the next IndiGo CEO announce the appointment Elbers’ appointment. KLM Royal Dutch Airlines.
in May, Elbers had said: of Pieter Elbers as the Chief Fifty-two-year-old Elbers With Elbers assuming the
“What IndiGo’s employees Executive Officer of the started his career at KLM helm, the three-year stint of
and leadership have jointly Company. India promises to in 1992 at its Schiphol hub Ronojoy Dutta as IndiGo’s
built, since its start 16 years be the last bastion of enormous and over time, held several CEO has formally concluded.
ago, is, by any standard, growth globally and given managerial positions in The 71-year-old led the
truly impressive. I am very Elbers’ deep understanding both The Netherlands and carrier through the turbulent
honoured and do look of the business, his legendary overseas in Japan, Greece, period of COVID-19.

Airbus CFO to leave the company in 2023

Dominik Asam, 53, Chief “I am grateful for each to supporting this flagship Dominik has also been a
Financial Officer (CFO) of day I have had the honour of European company for the key contributor to the solid
Airbus, will leave the company working for Airbus so far. It remainder of my tenure by financial performance of Airbus
from March 2023 after almost has been a privilege to be part working with the management – thanks to a highly committed
four years in the position to of the Airbus management to ensure a smooth transition finance team - and to the
pursue a new opportunity as team under the leadership of with the next Airbus CFO.” Company’s transformation
Chief Financial Officer of SAP, Guillaume Faury. Airbus is Airbus CEO Guillaume as we continue to pioneer
the enterprise application now in a better competitive Faury said: “Dominik is an sustainable aerospace.”
software provider. position and I have great faith outstanding CFO. He has Airbus says that it will
Dominik Asam joined in my colleagues’ ability to been a great wingman during now prepare the succession
Airbus as CFO and Member continue writing this unique the challenging and uncertain of Dominik Asam who will
of the Executive Committee in success story,” said Dominik times of the COVID pandemic remain fully in charge until
April 2019. Asam. “I am looking forward and is a key asset to any team. his departure.

36 Airline Economics August - September 2022 www.airlineeconomics.com

AIRCRAFT.
LEASING.
INVESTMENT.

emp-assets.com
NEWS

Morgan Lewis boosts aviation finance team with eight new hires
Morgan Lewis has bolstered to clients within and associated institutions in connection with collaborate. We look forward to
its global aviation practice with the industry engaged aircraft investments, so having collaborating with colleagues
with the addition of an in complex cross-border a coordinated, transactional to hit the ground running.”
eight-lawyer EMEA and Asia- transactions and disputes.” aircraft leasing and James Bradley, who will
Pacific team, including three In addition to the partners, restructuring practice within be resident in Singapore,
partners—Sidanth Rajagopal, two of counsel, Sourabh the United States, London, advises on various aspects
James Bradley, and Manuela Bhattacharya and Terry Chang, the United Arab Emirates, and of financing, leasing, and
Krach—across the firm’s and three associates, Atif Ayub, Singapore further establishes restructuring across a variety
London, Dubai, and Singapore Kevin Pearson, and Jie Hao our resources for clients in the of jurisdictions in relation
offices. Joining from K&L (Ivan) Qiu, are joining the firm. aviation industry.” to aircraft, engines, and
Gates, the team represents a They focus on transactional, Sidanth Rajagopal, who corporate jets. He has extensive
variety of key aviation industry leasing, and restructuring, with will be resident in London, was transaction experience in the
players, with expertise from their experience extending into practice group coordinator of transportation and finance
financial institutions, lessors, project development work, the global banking and asset sectors in Asia, where he has
restructuring specialists and especially in the airports finance group at K&L Gates. He been primarily based for over
airlines. The team focuses on sector. In addition, the team provides key commercial and two decades.
complex cross border financing, works on innovative financing technical advice throughout the Bradley commented:
leasing, and restructuring solutions, including Sharia- deal cycle and counsels clients in “Singapore remains an
issues in the aviation industry. compliant aircraft leasing, the areas of financing, leasing, important hub within the region
“This highly Japanese Operating Lease purchasing, restructuring, for finance, restructuring and
ra n ke d , multifaceted, (JOL) and JOLCO structures and repossessions for both litigation activity, particularly C

multijurisdictional team and other structured commercial and business for the aviation sector, and M

brings a depth of experience to leasing arrangements. aircraft. He also works as a gateway jurisdiction to Y

our aviation capabilities that “We co-counsel today alongside clients on equity into Asia Pacific. The firm’s
already spans the full spectrum with this team on several capital markets and debt strong cross border practices, CM

of issues—from finance and transactional and litigation capital market transactions. especially in the litigious and MY

restructuring, to litigation matters, and there are exciting Rajagopal said: “The debt capital markets spaces, CY

and enforcement, project opportunities for our market- firm has a deep and strong present strong opportunities to
development, and insurance leading US aviation finance bench across the EMEA collaborate and find innovative CMY

and reinsurance recovery, to and UK aviation litigation region and the US in a range solutions for clients.” K

name a few,” said Firm Chair practices to collaborate with of core practice areas that Manuela Krach, who
Jami McKeon. “The aviation our new colleagues who are complement the work we do will be resident in London,
industry is one that depends well-known throughout the from investment management, has experience advising
on sophisticated skill sets EMEA and Asia-Pacific region litigation, corporate to on operating as well as
to navigate disruptions and and beyond,” said Bruce Silvers, name a few, not to mention finance lease agreements
identify opportunities in today’s partner and a leader of the firm’s the existing work the team from the lessee and lessor
market. Our global aviation global aviation finance practice. does in India, which present side, negotiating all aspects
team will be of significant value “We advise over 100 financial significant opportunities to of a transaction.

Rovelli appointed SVP Strategy and Fleet, Ilebrand departs

Christine Rovelli has been role of Senior Vice President, airspace closure,” says Topi I’m excited to take on the new
appointed Senior Vice Finance and Fleet management. Manner, Finnair CEO. responsibility for driving the
President, Strategy and Fleet, “Nicklas has done an “I welcome Christine warmly implementation of Finnair’s
and member of the Executive excellent job in building a world- to the Executive Board. Her new strategy,” says Rovelli.
Board at Finnair as of October class approach to strategy strong background in fleet “Improving our profitability
1, 2022. Nicklas Ilebrand, the and scenario work at Finnair. management and finance are and competitiveness will be
previous SVP Strategy, will This has been vital for us as we a great asset to us as we start key, and we continue to build
leave Finnair towards the end of have first built ourselves a path implementing our strategy on the agile, high-performance
the year, taking on an Executive out of the crisis caused by the for restoring profitability,” teamwork that has been so
Advisor role from October 1. COVID-19 pandemic, and then says Manner. critical to our ability to adapt
Christine Rovelli joined defined the strategic direction “In addition to my role as to market changes in the past
Finnair in 2012, and filled the for Finnair following Russian head of Fleet Management, two years.”

38 Airline Economics August - September 2022 www.airlineeconomics.com

GROWTH FRONTIERS MIDDLE EAST & AFRICA

Back to growth
Middle Eastern carriers are pushing ahead ramping up international capacity to
close to pre-pandemic levels to capture maximum pent-up travel demand. Optimism
pervaded the stage at Airline Economics Growth Frontiers Middle East & Africa
conference held in Dubai in October 2022, from the main Gulf carriers but also from
African start-up airlines eager to build on the recovery in air travel.

A
irlines in the Middle demand for aircraft is increasing. The on international flights due to the
East and African region region is also set to take delivery of a main carriers operating a hub model
have been steadily significant amount of aircraft – both connecting passengers around the
rebounding following narrowbody and widebody aircraft world. The left hand chart in Fig. 2
the pandemic, with types – with a backlog of more than shows that flight market shares are
capacity rising to near-2019 levels and 1,000 aircraft, presenting significant returning back to pre-pandemic levels,
average profits also recovering. Rob financing challenge for the airlines in terms of absolute capacity volume,
Morris, head of consultancy at Ascend in the region but also an opportunity figures still lag some 10% behind 2019
by Cirium painted a positive picture for financiers to invest in the growing capacity levels as of August 2022.
of the aviation market in the region regional fleet. International travel is performing
during the opening presentation at IBA’s Mike Yeoman’s also presented a better at a variance of 7% to 2019
Airline Economics Growth Frontiers positive outlook for the region. During levels, while domestic travel at a 12%
Middle East & Africa conference in his presentation, Yeoman’s highlighted variance for the month of September,
Dubai. Airlines are healthier and the Middle Eastern market’s reliance noted Yeomans.

40 Airline Economics August - September 2022 www.airlineeconomics.com

narrowbody aircraft values have substantially improved to pre-pandemic levels, while widebody
aircraft values are slower to return but are on an upward trajectory.
GROWTH FRONTIERS MIDDLE EAST & AFRICA
narrowbody aircraft values have substantially improved to pre-pandemic levels, while widebody
aircraft values are slower to return but are on an upward trajectory.
Fig.Fig.1 1MMiddle
iddEast
le E&aAfrica
st &passenger
Africfleet
a pcapacity
assenger fleet capacity

Fig. 1 Middle East & Africa passenger fleet capacity

SourSource:
ce: Cirium Fleets
Cirium Fleets Analyzer, Analyzer,
Passenger jets delivered toPassenger jets
/ on order with Africa & Middledelivered
East airlines to / on order with Africa & Middle East airlines
Source: Cirium Fleets Analyzer, Passenger jets delivered to / on order with Africa & Middle East airlines
Fig.Fig.2
2 MMiddle
iddlEastern
e Ea&stAfrican
ern Flight
& ATrends
frican Flight Trends
Fig.2 Middle Eastern & African Flight Trends

Source: IBA Insight

Source: IBA Insight

Sowww.airlineeconomics.com
urce: IBA Insight Airline Economics August - September 2022 41
 GROWTH FRONTIERS MIDDLE EAST & AFRICA

African flight trends show a good

FiFig.
g. 33MMiddle
iddle EastEast&&Africa Africaairlineairlinaverage
e averanet
ge profit
net profit
recovery too (Fig. 3) with the domestic Fig. 3 Middle East & Africa airline average net profit
market now back to around 5% of pre-
pandemic levels with international
traffic still recovering at some 7% lower
than 2019. African airline profitability
suffered a relatively low impact in 2020
compared to other regions. However,
low vaccination rates have stalled the
region’s recovery, but it is expected to
reduce losses down to $0.7bn by the
end on 2022 and continue its recovery
through 2023.
SouSource:
rce: Data from IATA, June 2022
George Uriesi, COO of Ibom Airlines, Data from IATA, June 2022
Source: Data from IATA, June 2022
presented a very positive picture of the Fig. 4 Passenger aircraft delivered to/or order with airlines located in Africa and the Middle East
African market from his perspective FigFig. . 4 P4aPassenger
ssenger aiaircraft rcraft ddelivered
elivered to/or
to/ororder
ordewith
r witairlines
h airlinlocated
es locain
tedAfrica
in Afand
ricathe
andMiddle
the MEast
iddle East
taking Ibom Airlines from start-up in
Nigeria backed by the state in June 2019
with a fleet of CRJ 900 fleet to a growing
airline throughout the pandemic period
as demand required the airline to pivot
to larger capacity aircraft, beginning
with two A220-300s on wet lease from
Egyptair in June 2021 and a following
firm order at the Dubai airshow in 2021
for 10 A220s. Ibom Airlines recently
took delivery of two Airbus A320-200
aircraft from GETJET on a one-year
wet-lease agreement. Uriesi described Source: Cirium Fleets Analyzer
the wet-lease agreements as “ stop-gap SourcSource: Cirium Fleets Analyzer
Fig. 5e:MCairriukemt aFliercertasftAvnaalluyezes r
measures to meet current demands and
accommodate growth” until the A220s FigFig. . 5 Market aircraft values
5 Market aircraft values
commence delivery in the second half of
next year. Going ahead, Ibom Air plans
to ramp up the flight schedule to meet
the rising holiday demands.
Pre-pandemic, Middle East
airlines were operating slightly below
profitability levels. In 2020, it was
moderately impacted compared to
other regions, having suffered losses of
over $9bn. The region has had a good
recovery in 2021, continuing on the
same trend in 2022, when it is expected
to end the year close to 2019 levels, Source: Cirium Values Analyzer, Cirium Fleets Analyzer. Weighted average MV/BV ratio for widebody jets in
according to IBA’s Yeomans. Rather passengSource: er usaCirium
ge. Values Analyzer, Cirium Fleets Analyzer. Weighted average MV/BV ratio for widebody jets in passenger usage.
than disrupting travel, the Russia-
Ukraine conflict actually helped to Midimproveddle East fleet to double in 20 years
to pre-pandemic levels, while size to more than 3,000 commercial
Boeing and Airbus have both predicted a robust growth in Middle East civil aviation market. As per
boost the recovery in the Middle East Boeing’swidebodyforecast, aircraft
airlines in values
the Middle are East
slower to than
will more aircraft
doublevalued at size
their fleet $765bnto more over
thanthe next
3,000
region during the first quarter of 2022, commercial
return but are on an upward trajectory. 20 years
aircraft valued at $765bn over the next 20 years to cater to an exponential growth in to cater to an exponential
which is expected to continue. passenger traffic. Boeing’s projections are very close to growth Airbus, which in predicted
passenger that traffic. Boeing’s
airlines operating
The Middle East fleet has the in the Middle East
MIDDLE EAST wouldFLEET require TO3,020
DOUBLE new passenger
IN 20 and freight aircraft
projections aredeliveries
very closeby 2040towith an
Airbus,
largest concentration of widebody almost YEARS equal split between single aisle and widebody aircraft. which predicted that airlines operating
aircraft, placing an emphasis on the Boeing Boeingpredicts andthat Airbus
the passengerhave both in Middle Eastin
trafficpredicted the Middle
is expected East
to grow at would
4% annuallyrequire
while3,020
importance in the recovery of asset widebody a robust aircraft demand continues to be robust, with 1,290 deliveries supporting a growing aircraft
growth in Middle East civil new passenger and freight
values. Fig. 4 shows data from Cirium network aviation market.routes.
of international As This pergrowthBoeing’s
will demand deliveries by that
single-aisle fleet 2040 with to
is expected andouble
almost
Values Analyzer that shows narrowbody reaching 1,650 airlines
forecast, jets to serve inregional and international
the Middle East destinations.
equal split between single aisle and
aircraft values have substantially will more than double their fleet widebody aircraft.
According to Boeing's Commercial Market Outlook (CMO), more than two-thirds of the upcoming
deliveries will enable growth, while one-third will replace older airplanes with more fuel-efficient
models. The CMO forecasts a global market value of $7.2 trillion for new airplane deliveries, with the
global fleet increasing by 80% through 2041 compared to 2019 pre-pandemic levels. The air cargo
42 Airline Economics August - September 2022 www.airlineeconomics.com
traffic flown by Middle East carriers has continued its substantial growth in recent years; two of the
world’s top five cargo carriers by tonnage are based in the region. To serve future demand, the
 GROWTH FRONTIERS MIDDLE EAST & AFRICA

Boeing predicts that the passenger

Key Aviation ESG Themes
traffic in Middle East is expected to Aviation currently accounts for c.2.5% of global CO2 emissions and contributes up to 5% to global warming. ESG has become a
grow at 4% annually while widebody key focus for investors, regulators and consumers, and now requires aviation ecosystems to adapt to new regulations.
2. Operation efficiencies
aircraft demand continues to be robust,  Estimated reduction of 3% by IATA.
 Airport and ATM improvements – but European Open Skies
with 1,290 deliveries supporting a

Aviation Ecosystem
Considerations
1. Regulation 3. New Aircraft Propulsion Systems
growing network of international • CORSIA • Expected to mainly contribute post 2035
• EU ETS • IATA: reduction from new technologies ~13%
routes. This growth will demand single- •
•
US: SAF tax credits
California: low carbon Fuel
Standard to encourage SAF
aisle fleet that is expected to double usage

reaching 1,650 jets to serve regional and

international destinations. ESG
According to Boeing’s Commercial
6. ESG Financing Options 4. Sustainable Aviation Fuels
Market Outlook (CMO), more than

Investor & Financing

• EU Taxonomy for Aviation (SAFs)

Considerations
Finance • Critical bridge to LT technology
two-thirds of the upcoming deliveries • KPI-Linked Bonds & Loans with
spectrum of not just E but also •
developments.
Reliance estimates for CO2 Emissions

will enable growth, while one-third will S&G targets reductions :

‒ IATA 65%
5. Industry and Investor Expectations ‒ ATAG - Waypoint 61%
replace older airplanes with more fuel- •
•
Climate 100+: $10+ trillion
NZAM Initiative: $61+ trillion
•
•
Biofuels vs synthetic
Significant investment needed

efficient models. The CMO forecasts a •

•
NZBA: 40% of global banking assets.
GFANZ: 500+ membership
All have signed up to !.5% GHG emissions by 2050
global market value of $7.2 trillion for • RMI – CAF to create Aviation framework similar to
shipping’s Poseidon Principles

new airplane deliveries, with the global 1

fleet increasing by 80% through 2041 The Saudi Aviation Strategy is set for focus on the proportion of new generation
compared to 2019 pre-pandemic levels. tripling annual passenger traffic to 330 aircraft in Cathay Pacific’s group fleet and
The air cargo traffic flown by Middle East million by 2030, boosting the number of the gradual increase of SAF use in the
carriers has continued its substantial destinations to 250 from 99 at present carrier’s fuel consumption.
growth in recent years; two of the world’s and establishing a new flag carrier, RIA. Crédit Agricole CIB acted as global
top five cargo carriers by tonnage are This strategy is backed by $100 billion in arranger and sustainability structurer,
based in the region. To serve future investments from the government and facility agent and security trustee and
demand, the Middle East freighter fleet private sector. as a lender.
is projected to reach 170 by 2041, more The development of more sustainability-
than doubling the pre-pandemic fleet. SUSTAINABLE FINANCING linked financing in aviation was a hot topic
Airbus predicts that demand for Etihad Airlines chief executive officer, in stage during the conference. A panel
aviation services in the region will rise Adam Boukadida, shared his experience of aviation finance experts, moderated
from $9bn a year today, to $25bn in 2041, of operating an airline throughout the by Citi’s co-head of aviation Munawar
requiring at least a 10% increase in the pandemic period during an interview with Noorani, introduced the delegation to the
total workforce, including technicians, Airline Economics editor Victoria Tozer- Net Zero Banking Alliance (NZBA) and its
pilots and cabin crews. Boeing predicts Pennington. Etihad has spearheaded a relevance to the aviation industry.
demand for aftermarket commercial successful turnaround, which led to the Environment, Social and Governance
services including maintenance and airline posting a record-breaking core (ESG) issues have become a central focus
repair valued at $275bn. According to operating profit of US$296 million for for investors, regulators and consumers,
Boeing’s Pilot and Technician Outlook, H1 2022, with EBITDA improving by which will require aviation industry
the Middle East region will require more than US$600 million to US$691 participants to adapt to new regulators
202,000 new aviation personnel, million in the same period. Boukadida and expectations.
including 53,000 pilots, 50,000 and the treasury team raised a record The NZBA brings together the world’s
technicians and 99,000 cabin crew amount of financing during the period largest banks to focus on delivering the
members in the next 20 years. and pushed ahead with the development banking sector’s ambition to align its
The Kingdom of Saudi Arabia is also of sustainability-backed financing, climate commitments with the Paris
forecasted to become a major larger raising $1.2bn in October 2021, using Agreement goals with collaboration, rigour,
player in the Middle East aviation the first sustainability-linked loan tied to and transparency. The alliance is working
industry and the country is moving environmental, social and governance on setting its 2030 targets for hard-to-
rapidly ahead realising its Vision 2030. (ESG) targets in global aviation. abate sectors such as oil and gas, power
The Public Investment Fund (PIF), the Sustainability-linked financing is being generation and transportation, including
Saudi Arabian sovereign wealth fund taken up by more airlines and alongside aviation. The intention is to set targets with
with $620bn assets under management, different aviation products. In July 2022, these industries with a view to engaging
aims to invest SR356bn (US$100bn) Cathay Pacific Airways closed the first with the sector and clients’ transition plans
into the aviation sector to 2030 as part sustainability-linked JOLCO in Asia- rather than withdraw from financing those
of Saudi Arabia’s Vision 2030 realization Pacific on one A321neo. The terms of industries. Once those targets are set, the
program. PIF entered the world of aircraft the financing are linked to Cathay Pacific NBZA intends to disclose progress against
leasing earlier this year with the creation achieving certain targets in respect of a board-level transitional strategy that sets
of a new leasing platform, AviLease, led predefined sustainability-linked indicators. out proposed action and climate-related
by chief executive Ted O’Byrne. In this transaction, performance targets sectoral policies.

www.airlineeconomics.com Airline Economics August - September 2022 43

GROWTH FRONTIERS MIDDLE EAST & AFRICA

Speaking as the first local bank in

the Middle East to sign up to net zero
at COP 26, Sarah Pirzada Usmani from
First Abu Dhabi Bank confirmed that
it was critical for the sector to review
its Scope 3 emissions and to ensure
they are working with key clients in
those hard-to-abate industries to help
them transition to net zero without
restricting access to financing.
Scope-3 emissions are all indirect
emissions that occur in the value chain
of a reporting company. For an airline,
they would include the emissions
involved in manufacturing the plane and
in preparing the food that people eat in
flight, for example. For aircraft leasing goals, moving from carbon neutrality and disclose, consistent with the UN-
companies, Scope 3 emissions would this year, to carbon neutrality in all convened Net-Zero Banking Alliance
relate to how their airline customers operations by 2040 and supporting the (NZBA), the degree to which the
use their aircraft, which is difficult. industry toward net zero targets for greenhouse gas emissions from aircraft,
However, some lessors are taking a 2050. This plan includes projects such airlines and lessors that they finance are
more proactive approach here and are as ensuring the company’s production in line with 1.5°C climate targets.
working on building in sustainability- and supply chain is 100% powered by The Working Group is working
linked clauses in their lease contracts. renewable source electricity. Piorino on forging the measurement
Some lessors are also encouraging their expressed doubts that financiers are yet methodologies, emissions benchmarks,
clients to invest in sustainable aviation interested in funding new technology data pathways and governance structure
fuel (SAF) production. projects and are more likely to become of the CAF framework in collaboration
Aviation banks are seeking to meet involved later down the development with existing decarbonisation
their own net zero targets by restricting timeline. Although, Usmani disagreed initiatives. Abramovici is working on the
financing to new technology aircraft, noting that banks needed to be at the aviation roadmap with Citi’s Noorani.
which have the most efficient fuel forefront in funding new technology in Currently, there is only one roadmap
burn statistics, with many engaging the journey toward net zero. covering all institutions, which although
with their airline clients specifically Today, banks can and intend it is considered to be very credible and
regarding their strategy to pivot to the to financing SAF production and recognised by many global NGOs, an
use of SAF and where the banks can infrastructure development, as well as aviation roadmap also needs to be
help in supporting the ramp up in SAF invest in future technology and fuels endorsed and adopted by the aviation
infrastructure and production. such as green hydrogen. industry. Abramovici explained that to
For the aviation industry to have On the same panel discussion, develop a credible aviation roadmap,
any chance of meeting its net zero Jose Abramovici, global head of the industry needs transparency,
targets, SAF production will need asset finance at Credit Agricole CIB, granularity, and the ability to monitor
to be increased substantially. The provided an update on the progress progress and emissions as well as
investment needed will be way beyond made by the Aviation Climate-Aligned facilitate annual reporting. At the base
even such a larger alliance of global Finance Working Group to create level, there is quantity of carbon to
banks and will depend on the backing a collective climate-aligned finance spend between today and 2050, and
from governments. Embraer’s Matheus (CAF) framework. Based on the the debate between aviation bankers is
Piorino explained Brazil’s existing experience gained from the Poseidon whether this quantity of carbon will be
commitment to the production of Principles for maritime shipping spent on a linear basis along a straight
biofuels as well as Embraer’s investment and the CAF agreement for steel, the line, or whether a softer ramp up that
into the development of the production working group was set up in April 2022 would accelerate over time taking into
and increased output of cleaner fuel. with six top lenders to the aviation account that fact that new technology
Embraer has already successfully tested sector - Bank of America, BNP Paribas, is only promised to come online after
its E2 aircraft using 100% ethanol, Citi, Crédit Agricole, Société Générale, 2035, and maybe even not until 2040.
which has now been certified, and the and Standard Chartered - partnering Air cargo also needs to be integrated
manufacturer is continuing with testing with RMI’s Center for Climate-Aligned into the matrix, added Abramovici,
for the development of a hybrid electric Finance to help decarbonise the who noted that these conversations are
and hydrogen propulsion engine. These aviation sector. The CAF framework on-going and the team expects to have
initiatives form part of Embraer’s is a commitment by participating a better vision on the final aviation
ESG Flight Plan with sustainability financial institutions to annually assess roadmap by the end of the year.

44 Airline Economics August - September 2022 www.airlineeconomics.com

CIVIL AVIATION

Elevating human
performance
for a safer world.
More than a vastly experienced leader in flight training and its technologies, today’s CAE
is a high-tech company applying digital immersion innovation to solutions across the
entire civil aviation landscape and far beyond. Standout among these are the industry’s
most comprehensive pilot, crew and technician training and sourcing capabilities; and
the depth and strength of our aircraft technical support services, designed for leasing
companies, airlines, MROs and OEMs worldwide.

www.cae.com

Confidence through
smarter training
AIRLINE ECONOMICS MIDDLE EAST & AFRICA AVIATION 100 AWARDS

Success in the Middle East

Airline Economics returned to the Middle East
in October to celebrate the best of the best in
the aviation sector in the Middle East & Africa
Aviation 100 awards.

AIRLINE ECONOMICS MIDDLE EAST & AFRICA AVIATION 100 AWARDS

African Lease Deal of the Year DAE’s Operating Lease for two 737-800s to Tarco Aviation

Middle East Lease Deal of the Year Flydubai – Sale & Leaseback of Five 737-8 MAXs

Middle East & Africa Editor’s Deal of the Year DAE’s $500m Senior Unsecured Term Loan

Middle East & Africa Supported Finance Deal of the Year Flydubai Finance Lease-backed Term Loan Facility

Middle East & Africa Debt Deal of the Year DAE’s US$1bn Senior Unsecured Revolving Credit Facility

Middle East & Africa Overall Deal of the Year DAE’s Navigator II $850m Limited-Recourse Senior Secured Warehouse Facility

Middle East & Africa Airline of the Year Etihad Airways

Middle East & Africa Lessor of the Year DAE Capital

Middle East & Africa Bank of the Year Standard Chartered Bank

Middle East & Africa Law Firm of the Year K&L Gates

Middle East & Africa CEO/Industry leader of the Year Adel Ali, CEO, Air Arabia

Middle East & Africa CFO/Treasurer of the Year Adam Boukadida, CFO, Etihad Airways

46 Airline Economics August - September 2022 www.airlineeconomics.com

 AIRLINE ECONOMICS MIDDLE EAST & AFRICA AVIATION 100 AWARDS

www.airlineeconomics.com Airline Economics August - September 2022 47

AIRLINE ECONOMICS MIDDLE EAST & AFRICA AVIATION 100 AWARDS

MIDDLE EAST LEASE DEAL OF THE YEAR FLYDUBAI – SALE & LEASEBACK OF FIVE 737-8 MAXS
This sale-leaseback transaction for five 737- aircraft lessor, which is a 100% subsidiary delivery of the aircraft but the Standard
8MAX aircraft formed part of flydubai’s of sole arranger and sole lender on the deal Chartered and Pembroke team overcome
fleet modernisation and transition to new Standard Chartered Bank. all challenges to ensure all of the aircraft
technology, fuel efficient aircraft. All five There was limited time between when were received on time by flydubai during
aircraft were delivered by Pembroke, the the mandate was awarded and the first the first half of 2022.

AFRICAN LEASE
DEAL OF THE YEAR
DAE’S OPERATING LEASE FOR TWO 737-
800S TO TARCO AVIATION

DAE placed two 737-800s on operating

lease to Tarco Aviation in December
2021. Based in Khartoum, Sudan, Tarco
Aviation operates a fleet of 11 aircraft
comprises six 737-300s, three -400s
and one -500. Following this deal, the
airline also now has three 737-800s
in its fleet. Tarco Aviation operates
scheduled passenger flights as well as
charter flights.
The deal represents the first operating
lease into Sudan and the first 737-800s
to be registered in the country.

48 Airline Economics August - September 2022 www.airlineeconomics.com

 AIRLINE ECONOMICS MIDDLE EAST & AFRICA AVIATION 100 AWARDS

MIDDLE EAST & AFRICA EDITOR’S DEAL OF THE YEAR DAE’S $500M SENIOR UNSECURED TERM LOAN
Acting as mandated lead arranger and served to increase the company’s this five-year unsecured facility, with
bookrunner, First Abu Dhabi Bank unsecured debt percentage and limited covenants, were described
(FAB) underwrote the full $500milion available liquidity that was utilised for as “very good”.
senior unsecured term loan for DAE, liability management purposes and Allen & Overy advised FAB,
which removed all syndication and for the repayment of more expensive while Pillsbury advised DAE on
closing risks for the lessor. This facility existing debt. The economic terms for this transaction.

MIDDLE EAST & AFRICA LAW

FIRM OF THE YEAR
K&L GATES

K&L Gates was recognised for its

efforts in the aviation Middle East and
Africa region in the 12 months to end
September 2022. The firm has extensive
experience representing domestic and
international airlines on nearly every
kind of legal and legislative issue.

www.airlineeconomics.com Airline Economics August - September 2022 49

AIRLINE ECONOMICS MIDDLE EAST & AFRICA AVIATION 100 AWARDS

MIDDLE EAST & AFRICA DEBT DEAL OF THE YEAR DAE’S US$1BN SENIOR UNSECURED REVOLVING CREDIT FACILITY
DAE closed its debut Secured Overnight existing loans, for general corporate deal structure efficiently serves the
Financing Rate (SOFR) linked purposes and to meet the company’s company’s objectives and provides the
syndicated transaction in March 2022 working capital requirements. ability to meet its prospective value-
with a $1bn four-year senior unsecured The lenders were FAB, Emirates enhancing goals.
revolving credit facility (RCF). The NBD Capital, Al Ahli Bank of Kuwait, This RCF is one of the largest
transaction, arranged by mandated lead Commercial Bank of Dubai and syndicated facilities to be raised by a
arrangers and joint bookrunners First National Bank of Ras Al Khaimah. leasing company in the Middle East
Abu Dhabi Bank (FAB), NBD Capital Pillsbury Winthrop Shaw Pittman region and attracted substantial appetite
and Ah Ahli Bank of Kuwait, featured advised the borrower, while Allen & from a broad group of banks resulting
a unique accordion option to upsize the Overy advised the lenders. in a significant oversubscription despite
amount of the facility by $350million Amidst the challenging global the challenging market outlook for the
above the $1bn commitment to finance environment, the RCF was arranged global aviation sector.
any future opportunities, as well as by the DAE treasury team in order to For DAE, the successful closing
an extension option to stretch the streamline the lessor’s capital structure of the facility is testament to the
availability period of the funds for one via the optimisation of its existing debt continuous support and confidence that
year. The accordion and extension stack and liquidity profile, to better banks have shown in the company and
options, along with the competitive align it with the post pandemic aviation its future outlook. The facility will also
pricing metrics on the deal, granted and macroeconomic landscape. DAE allow the lessor to continue to optimize
DAE and an added level of flexibility. noted that it had carefully selected the its liquidity planning and to continue to
The proceeds were used to refinance syndicated banks to ensure that the grow the business.

MIDDLE EAST LEGAL ADVISOR

OF THE YEAR
SIDANTH RAJAGOPAL

Sidanth Rajagopal was recognised at

the Airline Economics Middle East &
Africa Aviation 100 Awards for his work
over the past 12 months supporting the
region’s airlines and leasing companies.
Previously at K&L Gates, Rajagopal
recently moved to Morgan Lewis where
he has bolstered the firm’s global
aviation practice with the addition
of an eight-lawyer EMEA and Asia-
Pacific team, which also includes James
Bradley and Mauuela Krach.

50 Airline Economics August - September 2022 www.airlineeconomics.com

 AIRLINE ECONOMICS MIDDLE EAST & AFRICA AVIATION 100 AWARDS

MIDDLE EAST & AFRICA OVERALL DEAL OF THE YEAR

DAE’S NAVIGATOR II $850M LIMITED-RECOURSE SENIOR SECURED WAREHOUSE FACILITY

In September 2022, DAE entered agent and mandated lead arranger, as acquisition vehicle, owned indirectly by
into a second equity investment and well as joint bookrunner with Mizuho PIMCO and DAE.
servicing agreement with PIMCO, Bank, Truist Bank, BNP Paribas and Navigator II is a$850million three-
dubbed Navigator II. The objective of Fifth Third Bank. year revolving facility that can be
this limited-recourse senior secured The warehouse offered premium repaid and redrawn through the entire
warehouse facility is to acquire c. $1.0- terms compared to other products that availability period followed by a four-year
1.5 billion worth of a blend of young were achievable in the market at the time. term out financing after the availability
current and new technology aircraft over The issuers note that these favourable period. This facility provides DAE and
a 36-month investment period. terms were driven by strong interest PIMCO with the ability to invest with
After a couple of rounds of offers and in Navigator franchise created by the scale with no financing contingencies.
negotiation with global lenders, DAE and success of Navigator I – the $716 million Vedder Price acted as the lenders’
PIMCO were able to shortlist a group of asset backed securitisation closed in legal counsel, while Milbank represented
five banks: Citi was the sole structuring November 2021 that acted as an aircraft the borrowers.

MIDDLE EAST & AFRICA SUPPORTED FINANCE DEAL OF THE YEAR

FLYDUBAI FINANCE LEASE-BACKED TERM LOAN FACILITY
FAB acted as sole bookrunner and
mandated lead arranger for the term
loan facility closed in August 2022
for Flydubai.
Flydubai had issued an RFP in
the third quarter of 2021 for delivery
of 15 aircraft and FAB won the
mandate despite of extremely stiff
competition from other banks and
lessors. These aircraft were among the
first secured aircraft financings in the
post-pandemic period.
The term loan structure is based on
finance lease with full recourse to the
airline. Facility proceeds were used to
acquire two new 737 MAX aircraft from
Boeing with security based on market
standard documentation and funds Financial close for first aircraft was mandated for second aircraft which is
disbursed directly to the OEM. reached in August 2022. FAB is also expected to deliver in October 2022.

www.airlineeconomics.com Airline Economics August - September 2022 51

AIRLINE ECONOMICS MIDDLE EAST & AFRICA AVIATION 100 AWARDS

MIDDLE EAST & AFRICA BANK OF THE YEAR STANDARD CHARTERED BANK
Standard Chartered Aviation Finance and debt financing space with airlines Standard Chartered was also a mandated
has transacted and/or been mandated across this region. The bank offers a lead arranger during the fourth quarter
on more than 15 aircraft transactions diverse range of products from leasing, of 2021 on the revolving credit facility
for leasing to, or financing with, Africa / debt financing, DCM (including sukuk) for Etihad. The bank has a broad ranging
Middle East region airlines over the past to advisory and financing solutions. relationship with the airlines in the
12 months, with all bar one mandate Highlights for the bank include the UAE, with relationships with Air Arabia,
secured post 1 January 2022. At the end sale and leaseback of five 737 MAX 8 Emirates, Flydubai, Etihad. Standard
of 2022, Standard Chartered has extended with flydubai, the lease extension of Chartered has been a stalwart of the
over US$2bn in balance sheet support to two A320s with Qatar Airways and the African aviation market and remains
airlines in Africa and the Middle East in the lease extension of five A320s with Qatar a provider of significant and on-going
post-COVID period, with over US$750m Airways, The bank has been mandated support to Kenya Airways as one of
of financing provided during 2022. on a c.$500m aircraft financing deal its principal aircraft financiers of its
Standard Chartered is the only bank with a regional carrier on one widebody Embraer 190 fleet. The bank is also a key
actively participating in both the leasing aircraft to be delivered in October. financier of Ethiopian Airlines.

MIDDLE EAST & AFRICA

AIRLINE OF THE YEAR
ETIHAD AIRWAYS

Etihad Airways was noted as the foremost

airline in the region in recognition of
its successful turnaround, which led to
the airline posting a record-breaking
core operating profit of US$ 296 million
for the first half of 2022, with EBITDA
improving by more than US$600 million
to US$691 million in the same period. The
airline has also made significant inroads
into developing its sustainable financing
products and continues to lead on the
issues of diversity and inclusion throughout
the entire company.

52 Airline Economics August - September 2022 www.airlineeconomics.com

 AIRLINE ECONOMICS MIDDLE EAST & AFRICA AVIATION 100 AWARDS

MIDDLE EAST & AFRICA LESSOR OF THE YEAR DAE CAPITAL

Dubai Aerospace Enterprise (DAE) Commenting on the results, Firoz have committed approximately US$750
has continued to recover following Tarapore, Chief Executive Officer of million in the first half of the year
the pandemic and in the first half of DAE, stated, “Our financial results to acquire assets for both our owned
2002 reported increased profits up by are reflective of the strength of portfolio and our managed portfolios.
186% to US$140.1 million, with cash DAE’s franchise despite emerging We have maintained a robust pace
flows from operating activities up by macroeconomic headwinds. Air travel of asset sales in the current market
36% to US$678.5 million. Even with demand continues to be strong and all environment. We have further cemented
exceptional items including the write-off leading indicators continue to point to our position as a leading global aircraft
before tax of US$576.5 million related a strong summer season for our airline asset manager by securing a mandate
to the loss of control of 19 aircraft that customers. Supply side constraints, to acquire up to US$1.75 billion of
are currently in Russia, DAE remains particularly among airport ecosystems, additional aircraft assets.”
well positioned to capitalise on the as well as inflationary concerns have DAE Engineering recorded its
growing demand for lift in the region not dented demand; however, is likely highest half year revenues in history. We
and the world. going to be a key constraint as airlines remain on course to capture summer
DAE has maintained a strong globally work towards returning to southern hemisphere widebody
liquidity ratio at 667% at the half 2019 levels. maintenance with new additions from
year point, with available liquidity of DAE Capital continues to be active in South America joining our already
US$2.7 billion. the secondary trading market, where we exceptional customer base.”

www.airlineeconomics.com Airline Economics August - September 2022 53

AIRLINE ECONOMICS MIDDLE EAST & AFRICA AVIATION 100 AWARDS

MIDDLE EAST & AFRICA

CFO/TREASURER OF THE YEAR
ADAM BOUKADIDA, CFO, ETIHAD AIRWAYS

Etihad Airways Chief Financial Officer

Adam Boukadida was chosen as the the
Middle East & Africa CFO of the Year
award for the second consecutive year.
Boukadida said: “We’re incredibly
proud to be named Airline of the Year
by Airline Economics, which comes
just before our 19th birthday at Etihad
Airways. This award goes to our entire
organisation and stands as a testament
to the success of our transformation,
in which every member of the Etihad
family played an important role. This
is a great way to celebrate our fantastic
performance over the first nine months
of 2022.”

MIDDLE EAST & AFRICA

CEO/INDUSTRY
LEADER OF THE YEAR
ADEL ALI, CEO, AIR ARABIA
Adel Abdullah Ali is a very well-
known figure in the aviation sector. He
transformed Arab aviation when he set
up Air Arabia in in October 2003, the
Middle East and North Africa’s first
low-cost carrier (LCC).
Drawing on his 28 years of experience
with industry leaders such as Gulf Air
and British Airways, Adel has also been
able to guide Air Arabia to become
amongst the world’s best run Low Cost
Carriers, delivering a profit for eight
years in succession.

54 Airline Economics August - September 2022 www.airlineeconomics.com

MRO MIDDLE EAST

Leading the recovery

Middle East carriers have rebounded strongly following the pandemic, but
has the region’s MRO sector been able to keep pace with the return to flying?
Airline Economics reporter Swati Kektar investigates.

T
he Middle East region in September 2022. Seasonally adjusted traffic expected to grow by 4% annually.
has benefitted from the traffic figures continue to suggest a strong Demand for maintenance, repair and
strong rebound in air travel upwards trend, while traffic between the overhaul (MRO) services is also expected
following the pandemic. Middle East and North America, and to expand in line with the growth of the
Passenger traffic measured Europe continues to outperform. That fleet. Boeing values demand for MRO
in revenue per kilometres (RPK) was boom is set to continue for the rest of the aftermarket services in the region to
up almost two fold in the 12 months year as football fans descend on Qatar reach $275bn by 2041. Oliver Wyman,
to September 2022, based on figures for the FIFA World CUP 2022. in its annual MRO forecast, predicted
from the International Air Transport Boeing also has a bullish view of at the start of 2022 that Middle East
Association (IATA), with growth the region, with its latest Commercial MRO market would expand by 3.2%
outpacing all other regional markets. Market Outlook update on the region, a year to 2032, to total market value
Load factors are also up for Middle East released in September 2022, predicting – incorporating airframe, engine,
carriers, with international load factors the commercial fleet to more than double component and line maintenance – of
up by 27.6ppts from last year to 80.0% in the next 20 years, with passenger $15.6bn from $7.1bn in 2022.

56 Airline Economics August - September 2022 www.airlineeconomics.com

 MRO MIDDLE EAST

experienced by the gulf carriers, the address as whole, ensuring that we work
strategies adopted during the pandemic to make engineering a more attractive
to protect the business while still industry choice and that we commit to
maintaining a level of operation, seem to supporting training programs to ensure
have been vindicated,” says Doherty. that we have a ready supply of talent to
The majority of aircraft in the draw from.”
region are now back in service, and the The problem of skilled Aviation
demand for base maintenance is high. Maintenance Engineers (AMEs)
“It was anticipated that this demand remains a global problem to date.
would surge as destinations opened up,
so Etihad Engineering ensured that FIFA FEVER & MROS
we maintained our operational levels The FIFA World Cup is taking place in
and were able to work with our global Qatar from November 20 to December
customer base to fulfill the return to 18, 2022, with millions of fans pouring
service and scheduled maintenance in from across the globe. Airlines have
needs,” he adds. ramped up their operations with Etihad
Joramco is a perfect example of a Airlines, Air Arabia, and FlyDubai
strong post-pandemic recovery with starting shuttle flights from Dubai to
the highest recorded revenue in 2021. Qatar. The Doha Airport is being re-
“We are on track to improve on our opened for commercial operations
2021 numbers this year,” says Fraser anticipating the demand with over 13
A D Currie, Chief Executive Officer, airlines to start operations at Doha
Joramco. “The revenues confirm that International Airport.
not only have pre-pandemic levels of MROs reeling under the pandemic
business returned but there is increased pressure have geared up to expand in
demand in the market. Joramco Dubai ahead of the World Cup. South
maintained all its resources throughout Africa-based ExecuJet MRO is already
the pandemic which has allowed us to in the final completion stage of its
react immediately to customer demand.” 15,000-square-meter MRO Centre at
Agreeing with the above statements Dubai World Central Airport. Happy
Jim O’Sullivan, Vice President of Sales & to expand operations in Dubai, Nick
Business Development, Europe, Middle Weber, Regional Vice President, Middle
East, Africa, HEICO adds: “MRO East at ExecuJet MRO, says: “Dubai
companies across the region are seeing is a budding hub for global traffic and
a surge in demand for slot availability it merits a large investment in MRO
as airlines return aircraft into service capacity and expertise.”
following lengthy grounding.” “I believe there are contingency plans
in place to cope with this demand but it
CHALLENGES IN COPING WITH THE will certainly test the robustness of these
DEMAND plans as resource availability demands
The increased workload has highlighted continue to prove challenging,” says
the difficulties caused by the workforce O’Sullivan of HEICO when asked if the
shortage for the MROs. “In addition to line and base maintenance facilities in
the specialised inspections and checks the Middle East are equipped to handle
READY FOR GROWTH? necessary to return parked assets to the increased workload.
Middle East carriers have responded airworthy conditions, there is also a The Aviation Service Management
well to the rapid growth in traffic, need for maintenance personnel that (ASM) that caters to fuelling and ground
with little of the turmoil seen in other was deferred during the past 30 months handling services is opening an MRO
markets evident in the region. But how or so,” comments O’Sullivan. “This surge unit that will be a one-stop shop for all
has the MRO sector in the Middle East is impacting capacity as companies aircraft maintenance needs. ASM also
been dealing with the post-pandemic struggle to attract qualified, experienced operates a charter arm and is planning
surge in air traffic? Are the MRO shops personnel who have possibly chosen to operate about 7 to 10 shuttle flights
in the region equipped and ready to cope career changes or a different work/life during the World Cup.
with the rise in demand? balance. I expect this trend to continue The Mohammed Bin Rashid
David Doherty, Head of Sales at Etihad for the foreseeable short term.” Aerospace Hub (MBRAH) recently
Engineering, believes the company is Doherty agrees “The regional inaugurated a 12,000-square-meter
well prepared to meet the challenge. “As shortage of engineering manpower is vertical aerospace complex in Dubai.
evidenced by the current load factors a problem that the industry needs to The complex will offer industrial space

www.airlineeconomics.com Airline Economics August - September 2022 57

MRO MIDDLE EAST

for maintenance-services companies,

aircraft engines and spare parts traders,
as well as aerospace and drone companies
to establish operations. MBRAH aims
to attract foreign direct investments and
become a global hub for various high-
value industries. Speaking at the launch
event held in October, Tahnoon Saif, CEO
of the Mohammed Bin Rashid Aerospace
Hub, said: “By offering a comprehensive
ecosystem, logistics network, and unique
services, the new facility support aerospace
companies in gaining streamlined access
to the region’s vast aviation market.”
Several companies from across the
world have already established themselves
in the facility and due to the high demand,
MBRAH is planning two additional the maintenance visits on the new aircraft ready to accept any aircraft within our
phases of the complex. This sudden present challenges to the MRO, not just capability that is rolling of the production
surge in the MRO activity in Dubai and from an investment strategy, but in terms lines of the OEMs, even if it might
surrounding areas gives a clear mandate of the operational input required. In be some time before they need heavy
of a positive aftermarket recovery in the such a scenario, the MRO becomes more base maintenance.”
Middle East. reliant on pre-planning and scheduling The consensus seems to be that
for the tasks contained within the check the MROs in the region are planning,
THE BOEING FORECAST as the luxury of a longer TAT [turnaround strategising, and preparing themselves
Boeing’s Commercial Market Outlook time] is removed. This may impact shift well in advance for the next surge of
(CMO) 2022 predicted an enormous patterns for certain trades, or require a aviation boom about to come to the
fleet expansion in the Middle East. In more extensive pre-load to be procured to Middle East markets.
the coming two decades, the Middle allow for the replacement of components
East will require a fleet of around 3,400 without risking delivery delays,” he adds. TEARDOWN AND SPARES MARKET
jets worth $765bn to serve fast-growing As newer generation aircraft are CONDITION
passenger traffic as well as cargo demand, reaching the stage where maintenance A robust aviation ecosystem is only as
Boeing said. is due, Jim O Sullivan of HEICO feels good as readily available spares, decent
In his comments, Randy Heisey, that the MRO industry had already USM inventory, and sound supply chain
Boeing managing director of Commercial been anticipating this surge and had to avoid aircraft-on-ground (AOG)
Marketing for the Middle East and Africa strategies in place to facilitate this situations. In the Middle East, spares and
and Russia and Central Asia Regions, but he adds that these plans were teardown have always been a growth area
mentioned that: “the Middle East is a “put on hold in many cases due to the due to the availability of aircraft. Like
popular connection point for international pandemic”. Commenting further, he says: every market, the MROs here too face a
travellers and trade, is also growing as a “Reassessing these strategies is ongoing risk of supply outweighing the demand
starting point and destination for business and will possibly require modification in in certain types. Many MROs are looking
and leisure passengers. The region will order to accommodate these demands. at this branch as a lucrative revenue-
continue to require a versatile fleet that Additionally, the adoption of new generation model, says Doherty: “It is a
meets the demands of airline and air- techniques, and methods and the revenue stream that Etihad Engineering
cargo business models.” increased use of new technologies will is exploring along with a strategic partner
Going ahead Boeing also predicted also be employed.” in the UAE, but with sustainability and
that over two-thirds of these deliveries Most Middle Eastern MROs, environmental impact being one of the
will enable growth, while one-third such as Joramco, have a wide range key focus areas of our business, we want to
will replace older planes with more of capabilities, which are constantly ensure that we are using the best possible
fuel-efficient models. The question updating to be prepared for any change methodologies and processes before
for the industry is whether the MROs required by airlines. Fraser of Joramco embarking on teardown projects.”
in the region are geared up for such prides himself on the company’s strategy Some MROs have witnessed an
robust expansion. to plan well in advance. He says: “As increase in aircraft teardown activity to
“Investment in new aircraft types is with most aviation businesses we have prepare for the post-pandemic surge.
crucial to ensure that we support our to plan well in advance to ensure that Joramco for example has an efficient
customers as our services keep pace with we have any required capabilities in teardown process and the team works in
their fleet upgrades,” says David of Etihad terms of new technology and training parallel with the operators to ensure that
Engineering. “The shorter downtimes of requirements for the personnel. We are only the needed spares are harvested as

58 Airline Economics August - September 2022 www.airlineeconomics.com

Why Cirium?
MRO MIDDLE EAST

per the requirement. Recently, Joramco’s

operations team harvested DAE’s A330
aircraft. “This is a complimentary business
that we offer to operators who require it,
but, base maintenance remains our core
activity,” says Fraser.
“Having an increased pool of spares
from a lifecycle project makes sense as
we have the opportunity to put many
of the removed items through our own
workshops for certification and repair,
before stocking them for sale or for use
on our customer inputs. Like so many
strategic projects, finding the right
opportunity with the right aircraft,
commercial terms and timescale is key to
success,” Doherty concludes.
Global supply chain disruptions were
making it harder for corporate plane
manufacturers to meet the demand for
parts. ExecuJet, which sources most of
its products from original equipment
manufacturers (OEMs), was able to
bounce back rather quickly, says Nick
Weber. “We are about 90-95% back
to normal.”

THE ROAD AHEAD

Various studies agree that the Middle
East MRO market is expected to growth
at a CAGR of around 15-20% over the
next five years. With such robust growth, been certified to provide engine overhaul will commence this year and is expected
cooperation with foreign partners may and component-repair services to global to conclude by the third quarter of 2023.
prove necessary. operators. Sanad recently inked a pact Tahnoon Saif says: “This partnership
In the engine MRO sector, OEMs with Triumph Product Support to carry confirms the recovery of the aviation
control approximately half of the market, out the MRO services on V2500 engines. sector and the high demand for general
with the other half roughly split between Going ahead Sanad and Triumph Group aviation services.” Once complete, Satys
independent and airline overhaul plans to develop a long-term relationship will provide private jets and narrowbody
shops. For new powerplant generations to establish Middle East’s first engine aircraft painting.
specifically, operators frequently accessory repair and overhaul centre Saudia Aerospace Engineering
outsource engine maintenance and use by 2024. Industries is coming up with a new MRO
full MRO-support programs. Hence, Moreover, Sanad Aerotech was the village expected to be fully operational by
most expansion projects in the Middle first MRO partner within GE Aviation’s 2025. The facility is 50 percent complete
East are partnerships of airlines or third- global services network to obtain MRO and will be ready by the first quarter
party providers with engine OEMs. certification for the GEnx engine and of 2024.
Foreign MRO groups, such as Air remains the only certified GEnx MRO According to Boeing, the air traffic in
France Industries KLM Engineering partner in the Middle East and North the Middle East is projected to increase
& Maintenance (AFI KLM E&M) Africa (MENA) region. The provider by an average of 4% per year, compared
and Lufthansa Technik (LHT), have plans to expand its existing maintenance to the global growth of 3.8% per year, and
also scaled up their MRO activities in and repair services to include the full the demand for aftermarket commercial
the region through partnerships and overhaul of 315 GEnx engines until services, including MRO is valued
collaborations. For instance, in 2019, 2035. Such developments are envisioned at $275bn.
Rolls Royce expanded its global service to increase the competition in the The Middle East MRO sector is about
network with a new independent Trent region, and thereby, drive the engine to witness a sea of change in the next
700 authorized maintenance centre MRO segment. couple of years with a tremendous growth
(AMC) at Abu Dhabi International The MBRAH signed an agreement scope for the regional MROs and the
Airport. Under the US$6.5bn agreement with Satys in February 2022 to develop entry of new foreign variants leading to
spanning nine years, Sanad Aerotech has a paint hangar at MBRAH. Construction increased competition and employment.

60 Airline Economics August - September 2022 www.airlineeconomics.com

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