Download - Airbus A380 Peter Wenham Lessor EVP - Technical Ahead of its time? Novus Aviation Capital - Dubai
Airbus A380
Peter WenhamLessor EVP - Technical
Ahead of its time?
Novus Aviation Capital - Dubai
Introduction
• Short introduction
• Growth of travelling public
• What do operators need & how do they fund - Leasing – growth in popularity & types of lease
• A380 – how it fits today
• What happens tomorrow?
World Traffic Growth
Traffic doubles approximately every 15 years
Rise of the middle classes
2013• 7.1billion• 33%
2023• 7.9billion• 49%
2033• 8.5billion• 64%
Forecast from 2013 t0 2033 – forecast middle class % of population
Demand for Aircraft
Forecast deliveries
Changing constraints
• Increasing numbers of aircraft
• Increasing number of airports at, or close to, capacity
• Convenience demanded by passengers (arrival/departure times
• Longer routes (anything over around 10hours +) = constraint on number of rotations possible in 24 hours
Aviation Megacities 2013
Lease or buy?
If the costs of leasing increase the cost of ownership, why would anyone Lease?
- aircraft are expensive and eat significantly into cash reserve
- aircraft are not brought into or out of a fleet quickly – with such a quick moving industry can hamper a quick response
- affects the balance sheet and therefore operator value
- operators have the ability to purchase at favourable rates from manufacturer then sell to Lessor at ‘market rate’
- no residual value risk at the end of life
- A mix of owned/leased fleet gives maximum lift flexibility
Growth of Leasing businesses
Lease or buy?
Commercial Bank
debt
• Operator equity and/or junior debt
ECA• Either funding or guarantee
Operating Lease
• 100% ownership rests with lessor
Finance Lease
• Ownership with lessee once paid
Others• KG, EETC, JOLCO & Islamic financing
Which one works best
Growth of Leasing
Lessors by Fleet - 2014
GECASILF
CBBAM
SMBC Avia
tion Capita
l
BOC Aviation
AerCap
AWAS
CIT Aerosp
ace
Air Lease
Corporati
on
Aviation Cap
ital G
roup
010000200003000040000
$US mlllion
0.0%5.0%
10.0%15.0%20.0%25.0%
% leased fleet
Operator Aircraft selection
Selection Criteria
•Routes – range performance & available seats•Technical – fuel and maintenance costs
Comparison – similar typesAircraft type A380-800 B747-8I B747-400 B777-300ER
MTOW-lbs 1,235,000 987,000 870,000 775,000
Tri-class seats OEM 525 515 400 370
Tr-class seats (airline av) 407-547 287-464 246-364
Airline average 484 440 363 316
Range with av airline seats (nm) 8,250 7,900 7,200 8,000
ULD type LD3 LD1 LD1 LD3
Belly freight 38 36 32 44
Fuel Performance USG/seat mile 0.0197 0.0211 0.0181
Aircraft Commerce – issue 79
A380 Operators As of December 14
Current Routes
Aviation Megacities - 2033
So………..
Travelling population growthSlot constrained airports
Crowding in the skiesFinance available
If there are so many positives………….why have A380
sales slowed so much?
And what happens to it next?
Operator/Lessor ownership
• Lessor owned fleet is circa 45% of the world fleet
• There are no conventionally leased A380s presently
• One or two ‘KG’ financed and those recently ordered/deferred by Amadeo
• None of the big Lessors involved
Headwinds
For the operator• Point to point travel vs Megacity hubs• Current fuel prices don’t help the A380• Ability to operate at minimum load factor year
round or have alternative routes to deploy to
For the Lessor• Transition costs• 2nd market options
Disincentives to increase the A380 fleet
Classic layout of Aircraft
Configurations
• Number of seats certified (538 main deck + 315 upper deck = 853 total)
• Average configuration at < 500 total (484)• Maximum layout to date Air France 538• This year Emirates partial fleet planning to
go to 615• So far – no ‘all economy’ operators because
yield on mixed class operation is more attractive on long haul operations
Transition challenges
• the upper deck is similar to reconfiguring an A330 and costs do not take into account any refurbishment of the lower deck
• one further difficulty – only Lufthansa, Thai, Emirates & Etihad have an all-economy lower deck and mixed configuration upper deck
• all remaining operators have mixed configuration upper and main decks, which adds complexity and cost
Transition Costs
• Around $1.2m per aircraft
Light Modification:Carpet and seat covers replacement, Airline logo, interior placards and other airline branding
• Around $5.8m plus $2.5 - 3m / AC on the basis of 3 AC
Medium modification: Removal of F/C and bar area, relocation of B/C seats to the front and installation of Economy Seats and rebranding (as per light modification).
• around $8,3 + $3.5 $5m per AC on the basis of 3 AC
Heavy modification: Removal of all F/C, B/C and bar area and installation of full Economy Seats on the full upper deck. Including re-branding (as per light modification)
Comparison with the competition
Airbus view of 2nd market
Future operators – 2nd market options?
Legacy operators for replacement and expansion? If this is a market – why no more recent orders?
Dependent upon? the rate of increase of the number of Megacities the rate of increase of slot constrained airports maintenance costs do not escalate too much
LCC or ULCC for long range cheap tourist or religious travel? rate of rise of middle classes for increased tourism already pressure on access to religious locations
The ‘neo’ optionWill a new engine change things?
• Emirates pushing for re-engined model to further reduce per seat operating costs
• Offering Airbus the possibility of a further very large order of 50 or more aircraft
• But will other operators follow and ‘up’ their orders?
• Will the improved economics be enough of an incentive to overcome the current slack sales situation other than for Emirates?
Conclusions•New aircraft – rate of increase in aviation
Megacities
• 2nd market – rate of increase of tourist activity & possibly also religious tourism
• Secondary considerations• fuel prices • possibility of re-engine option• ability to keep a control of maintenance costs• absence of a large scale crisis
For More Information and discussionPeter Wenham
Novus Aviation Capital – Dubai