Well one thing for the market to consider is A380 maintenance check costs. It seems only yesterday that the A380 took to the skies, but SIAEC had an SIA A380 (MSN004) in one of its hangars two weeks ago with all engines off-wing as it undergoes its first full maintenance check. Finding out the turnaround time, the problems encountered and the cost will be essential to plotting the cost of ownership for many and thus the full economic worth of the aircraft. You will not get all of that from an in-house maintenance check that is for sure, but no ADs were issued put it that way. But one point to note is this: Is it not time for engine investors/lessors to ramp-up inventory of EA7200 and Trent 900 engines?
No matter where you are this week there will be no getting away from the plight of Monarch Airlines in the UK. This large scheduled and charter carrier, which has a large and successful MRO (MAEL) and Cosmos the UK tour operator under its wing, is in real trouble this week. When I say trouble, this is not because its plight for cash has deteriorated, but because the mainstream press has got hold of the story and splashed it all across the UK newspapers. Thus the airline may suffer reduced bookings and worsened cashflow from this point, and that is a very serious matter indeed.
Greybull, the no-messing investment fund and the equally aggressive hedge fund Elliot, are circling the airline. The Mantegazzas family is offering a £70m sweetener to assist with a takeover but the problem for all investors is the massive £150m pension deficit at the airline. PwC are understood to be on standby to put the airline into administration. Our sources paint a picture of possibilities for the airline though.
Potential investors are happy with the appointment of Andrew Swaffield and his team’s plan to cut 1,000 staff, stop charter flights and reduce the fleet to 30 aircraft from 42. In fact investors looking at the airline want to grab it at favorable terms, pump money into the airline and sell-off the MRO and the tour operator, with winding-up the latter an option on the table also.
Meanwhile another talking point will be insurance costs for airlines: oil has fallen back; younger fleets (on the main) mean that maintenance costs have/are reducing; but due to spate of aircraft losses over the past 12 months, it is likely that insurance premiums will increase by as much as 20-25%. That is equivalent to $2.80 on the price of oil and for many airlines deletes the oil price gains of the past 6-9 months. Does this mean that some airlines will take the risk of reducing insurance cover? This needs to be watched for. Even so reinsurers continue to offer cover for terrorism and geopolitical risks as an addenda to existing policies and it is likely that many more airlines will take the cover this year following the MAS disasters and the Tripoli attacks.
Continuing on airlines of interest one should not overlook Henan. China's newest airline started services on Friday with the aim of operating more than 100 routes to 32 cities throughout China and the globe.
"With the establishment of Henan Airlines, we're going to increase carrying capacity, add more flights, and open up some long distance routes to Europe and the US, via Zhengzhou," said Xu Jiebo, chairman of Henan Airlines.
Some 60% of the company is owned by China Southern Airlines. The other 40% is held by a state-owned investment company. But the airline to consider this week is Cambodia’s Apsara International Air, which gained approval from Cambodia’s State Secretariat of Civil Aviation (an AOC) to fly domestic routes earlier this month. The airline is owned by Chinese and Cambodian investors and will start domestic flights using an A320 between Phnom Penh and Siem Reap but by 2019 the airline plans to be flying to Japan and South Korea with a fleet of 50 aircraft.
But Cambodian authorities are also giving AOCs to two other start-ups – Bassaka Air and Bayon Airlines. Both are due to gain approval by December. Bassaka Air is a partnership with the mighty China International Travel Services and local investors. It aims to fly from Phnom Penh to China using Airbus A320s from this December and because of its travel firm owners it is likely that this airline will do very well indeed. Bayon Airlines on the other hand is owned by Bayon Holdings and Aviation Industry Corporation of China. Bayon plans domestic flights first with two Xian Aircraft Industry Company’s MA60 aircraft, but it will also link Cambodia to Chinese cities in the near future.
So is there room for three Cambodian start-up airlines to operate China/Cambodia routes, along with the current flag carrier? The answer is yes because the airlines are owned by the right companies, which can fill the aircraft at speed and, because they are large well known Chinese travel firms, should enjoy good access in the future to the Chinese market. This is after all the template that AirAsia is using in Japan and which Lion Air used in Indonesia. Cambodia is looking strong.
Meanwhile it would not have escaped you that aircraft manufacturers firmed-up orders totaling some $11.3 billion at list prices for 118 aircraft last week, that is more than the firm orders posted at most air shows. The market remains very strong in 2014.