I N T E R N A T I O N A L S O C I E T Y O F T R A N S P O R T A I R C R A F T T R A D I N G

Summer 2005

ISTATJetrader

Paris Air Show

29th AnnualAir Race Classic

Low-Cost Airlinesin Eastern Europe

AssetManagement

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Dear Members:

With the beautiful setting of our newvenue at Le Pré Catelan and with over800 members and member guests inattendance, ISTAT proudly hosted oneof the premiere events of the 2005 ParisAirshow. The activities and announce-ments from the Paris Airshow combinedwith the opportunity to network with somany associates and friends created amagnificent setting for the ISTATReception. I hope the ISTAT members inattendance enjoyed the evening asmuch as I and please join me in thank-

ing my fellow Board member, Israel Padron, along with DawnFoster and her team for all of the hard work in arranging andorganizing our most successful Paris Airshow Reception yet.Our appreciation and gratitude goes to our sponsors of theReception, debis, GA Telesis, Pratt & Whitney and Sage-Popovich for making this event possible.

If you haven't done so already, please register for the12th European Conference in Hamburg, Germany onSeptember 11-13. You will see from the insert in this issue ofthe Jetrader, the outstanding agenda and speakers we haveplanned for this program. Additionally, don't miss the opportu-nity to fly in a Messerschmitt Me-108 B-1 Typhoon and see theAirbus A380 up close during the visit to the A380 line.

I would venture to say that regardless of whether yourparticular segment of the aviation market is sliding, strugglingor steaming along, the volatility and dynamics of this marketpredicates your success on longer transaction cycles, workingharder and barriers to closure unforeseen. We hope your mem-bership in ISTAT provides you with a network of associates andsupport creating a higher probability and measure for your suc-cess.

If you have any questions, comments or ideas youwish to share, please don't hesitate to contact me at my emailaddress istatpres@aol.com or Dawn Foster, our ExecutiveDirector, at istat@istat.org

:: In This Issue

President’s Letter by Tom Heimsoth

ISTAT Foundation by Bob Brown, Foundation Chairman

opEDS - Bert van Leeuwen writes

FEATURES ::2005 Air Race Classic

Asset Management in the 21st Centuryby Ed Reese

Eastern Europe - a growth market for lowcost airlines by Boris Bjelicic

A Day at the Paris Air Show by Bert vanLeeuwen

Efficiency, flexibility of UPS fleet designedfor global reachby Bob Lekites

Aviation History by Bill Bath Did you knowabout George Schairer? Part 2

peopleTRACKER

PEOPLE going PLACES ::Alex Hsu explores BEIJING

Tom HeimsothISTAT President

ISTAT President’s LetterSeptember 11 - 13 . ISTAT EuropeanConference . Kempinski Atlantic Hotel, Hamburg

CALENDARSeptember 11 - 13 . The ISTAT European Conference will be heldat the Kempinski Atlantic Hotel, Hamburg.

March 26 - 28 . 2006 . Annual Conference to be held at the Omni Orlando at ChampionsGate, Orlando Florida

COVER :: Lockheed 12A at the Paris Air ShowThe Lockheed Model 12A made between 1936 and

'41-"Electra Junior"may not have had the recognition that itdeserves. Timing had a lot to do with it, and it did not build up animpressive airline or military record, nor did it make any notablerecord flights. The numbers produced are respectable, though;130 built.

This did not quite match the production of its famouspredecessor, Lockheed's Model 10 Electra (149 built), but it farexceeded the 75 pioneer Boeing 247s. It could not match thelarger Douglas DC-2 (192) or the DC-3, which had reached 400civil versions by the time Model 12A production was ended. Morethan 10,000 DC-3s, however, were made by the end of WW II.

photo by Bert van Leeuwen, DVB Bank

See you in Hamburg!

Jetrader is a bi-monthly publication of ISTAT, the InternationalSociety of Transport Aircraft Trading. ISTAT was founded in1983 to act as a forum and to promote improved communica-tions among those involved in aviation and supporting indus-tries, who operate, manufacture, maintain, sell, purchase,finance, lease, appraise, insure or otherwise engage in activi-ties related to transport category aircraft.

Thomas W HeimsothPresident

Michael A MetcalfImmediate Past President

John F KeitzChairman

Fred E Bearden Chairman-elect

William BathAdministrative Director

John W VitaleVice President | Secretary

Gregory A MayVice President | Treasurer

Michael PlattVice President

Alan CoePeter Huijbers

Dr Dinesh A KeskarFred Klein

Connie LaudenschlagerIsrael Padron

Daniel PietrzakNick PopovichGary J Spulak

Jack E ArehartSkip Clemens

Bill CumberlidgeAlison MasonClive MedlandPhil Seymour

Bert ven Leeuwen

Robert M BrownChairman

Thomas HinikerImmediate Past ChairmanThomas W Heimsoth

ISTAT PresidentMichael A Metcalf

ISTAT Immediate Past PresidentGregory A May

Secretary | TreasurerTrustees

Wayne LippmanHannah M McCarthy

Roland H MooreChris PartridgeDavid P Sutton

Susan ThompsonDavid Treitel

ISTAT International Society of Transport Aircraft Trading

Dawn O’Day Foster Executive Director5517 Talon Court . Fairfax Virginia 22032-1737 USA

T +703 978-8156 F +703 503-5964 E istat@istat.orgW www.istat.org

A ADVERTISING SALES / PUBLISHERS BARBARA & STEPHEN IVERSON

AJAX NEWSERVICE INC 219 939 9581 1060 N UNION STREET . GARY IN 46403 USAstephen@ajaxnewservice.com | barbara@ajaxnewservice.com

Jetrader

Board of Directors

Jetrader Editorial Board

Officers

ISTAT International Appraisers Board of Governors

Governors

ISTAT Foundation

© ::ajaxnewservice 2005

opEDsJetrader Editorial Board

Bill Bathbillbath@optonline.net

James MeylerJames.Meyler@orix.ie

Mike Plattmplatt@ilfc.com

Mike Suckowmwsuckow@tech.purdue.edu

Bert van Leeuwenbert.van.leeuwen

@dvbbank.com

Roland Moore ISTAT HISTORIAN

The up-beat atmosphere that was already signaled atthe ISTAT conference in Scottsdale certainly continuedin Europe during the 46th International Paris Air show.

Not only was the mood up-beat, but it seemed many of theindustry players were prepared to “put their money wheretheir mood is” as a significant number of new aircraft orderscould be booked. The Paris Air show resulted in over 450additional orders or commitments, valued at US$ 45 billionat list prices.

Despite global airlines losses of about $5 billionlast year, operators are scrambling to secure significantnew capacity. The low cost wave seems a major source ofdemand but the fact that oil prices are at record heightsmay very well be a major incentive to replace old gas-guz-zlers. As a confirmation of the renewed confidence in theindustry, several operational leasing companies returned toordering new aircraft.

Another development that this year’s Paris Airshow clearly demonstrated was how truly international theindustry is becoming. The four airframe manufacturers fromthe United States, Europe, Brazil and Canada may soon bejoined by RJ manufacturers from Russia and China; in addi-tion, most airframers are increasingly relying on major sub-contractors from all over the world.

The most striking trend however is the fact that air-craft mega-orders are now coming from non-traditional avi-ation countries. Who could have imagined only a few yearsago that at the most important air show of the year, themajor order volume would come from India ? While theindustry has gotten used to major orders from the MiddleEast, Qatar Airways still made the headlines as theyexpressed their intention to order 60 A350s and 20 B777s.As spectacular and maybe even more surprising was anorder for 100 A320 family aircraft from start-up airlineIndiGo, a name that only a few months ago hardly was rec-ognized as an airline from India in the aviation business.IndiGo’s compatriot Kingfisher put in an order includingseveral A380s. Even in the traditionally US dominated mar-ket segment of the leasing companies, a remarkable eventtook place as Kuwaiti lessor Alafco became the first operat-ing lessor to order the A350.

Now what are the implications for the INTERNA-TIONAL Society of Transport Aircraft Trading of all of this ?Going trough the Geographical Listings of the new and nownicely illustrated “2005 Membership Directory” one can nothelp but notice that the majority of ISTAT members are stillcoming from the traditional aviation countries like the USand the UK. India only has one ISTAT-member and theUnited Arab Emirates less than a handful, with many MiddleEast countries not even represented.

While ISTAT as an organization is clearly prosper-ing, it would be good to see the emerging aviation coun-tries represented in the membership list in a way that doesjustice to their role in the global aviation business. With therenewed and improved Jetrader magazine as good indica-tion of what topics are relevant for the ISTAT member, weinvite all current ISTAT members think of the “I” in ISTATand to bring the benefits of an ISTAT membership to theattention of your growing group of international businesspartners.

Bert van Leeuwen DVB Bank AG

Summer 05 5

Air Race Classic l continued page 6

29th Annual Air Race Classic 2005hosted by the College of Technology, Purdue University, West Lafayette, Indiana

Amelia Earhart is pictured sitting on top of the nose of her plane witha group of co-eds who greeted her upon arrival at Purdue University.September 20, 1936

Keri Wiznerowicz (on the nose), 2005 Start & Terminus Chairman with Committee Members Crystal Mathews, Erin Scott, Libby Woelfert,Elisabeth Halsmer, Halley Oleck, Amanda Browne, Marie Janus, Kim Conrad and Stefanie Gates

When Heidi Moore and Keri Wiznerowicz first beganthe work to solidify Purdue University's role ashost of the 2005 Air Race Classic, firm goals were

established in what would become a three-year journey.Because education has been such a high priority in tierlives, they wanted to make sure that in the process ofplanning the 2005 Air Race Classic, education would con-tinue to be a priority. The focus was to plan this nationallyrecognized event with an all- student team. They wereconfident of success.

Three years later, the core group of committeeheads has become an incredible team. Planning thisevent allowed students from all over Purdue to gain valu-able skills in their area of study while working on an event

that is recognized at anational level.

Through the planningprocess skills such asteam work, problem solv-ing, leadership, budgetplanning, communications,process improvement,organization, project plan-ning, airport and aircraftlogistics, Purdue takes alead in creating the futureleaders of the aviationindustry. Camaraderie +Competition of Air Racing:: Increasing the number ofwomen in the aviation fieldis also been important goal.

>> How the Winner is Declared

The Air Race Classic is a race in which

stock aircraft of various makes and

models can compete against each other

for the top prize. Each aircraft is handi-

capped based upon what the manufac-

turer publishes its performance capabili-

ties to be. The aircraft which exceeds its

handicap by the largest amount possi-

ble for the longest period of time is

declared the winner.

Women, ranging in age from 16 to 93 share sto-ries of their experiences, and provide support to theyounger generation of female pilots, including pioneeringwomen as Women Air Force Service Pilots from World WarII, the first helicopter instrument instructor, past PowderPuff Derby racers, military pilots, corporate and airlinepilots, as well as young collegiate aviators.

1936

6 JETRADER

AIR RACE CLASSIC l continued

Purdue's long standing history in aviationincludes the first airmail flight in the world, Amelia Earhart'sstaff position as a career counselor for women, and thenumerous test pilots that have become astronauts.

For over 13 years, Purdue University's AviationTechnology Department has provided opportunities bysending a team of two young women to compete in the AirRace Classic; the first university to do so. Today, theopportunities have expanded and now both men andwomen have participated in this historic event as supportstaff for the flight crew and as part of the planning commit-tees of the 2005 Air Race Classic.

Some 2005 Planning Committee members, John Schumacher, MikeKenney, Dustin Wilcox, and Josh Stroka with Ruby Sheldon, the firsthelicopter instrument instructor.

>> The Air Race Classicreturned to PurdueUniversity, Lafayette thisyear, site of the first air racein 1929. The race is the suc-cessor to the GreatTranscontinental Air Race,better known as the"Powder Puff Derby," anamed coined by WillRogers. >> Amelia Earhartand a band of hardy womenwanted to promotewomen's careers in aviation.At that time, Amelia Earhartwas a counselor at PurdueUniversity, Lafayette.Purdue has a long history ofAviation Industry firstsincluding being the site ofthe first official airmail flightby the United States PostalService and the home of 23former and current astro-nauts. >> This year’s racewas organized, managedand marketed entirely bythe students at PurdueUniversity under the leader-ship of Keri Wiznerowicz, aperson you should know.+

+1st Place Classic 11 - SophiaPayton, Marilyn Patierno & EricaCochoff HCP 111.23 Race Total 17.4322nd Place Classic 7 - Judy BolkemaTokar, Sarah Bean & Ann Williams HCP 126.00 Race Total 17.3653rd Place Classic 16 - BonnieJohnson & Carol Foy HCP 108.62 Race Total 17.1834th Place Classic 24 - Royce Clifford& Melissa Sliffe HCP 124.26 Race Total 15.5875th Place Classic 17 - Marge Thayer& Helen "Wheels" Beulen HCP 142.22 Race Total 15.5446th Place Classic 31 - Jan Bell &Lara Gaerte HCP 112.97 Race Total 14.5867th Place Classic 8 - Denise Waters& Ruth Maestre HCP 126.00 Race Total 14.4938th Place Classic 22 - Sarah Tower &Erica Ebenhoeh HCP 108.62 Race Total 14.3819th Place Classic 23 - MaragaretRinginberg & Karen Allina HCP 112.97 Race Total 14.26810th Place Classic 10 - GretchenJahn, Ruby Sheldon, & Julie Filucci HCP 174.63 Race Total 14.262

winners

Summer 05 7

ASSET MGMT l continued page 8

Asset Management inthe 21st CenturyHistorically, aircraft and

engine investors andtraders have turned to

aviation consulting firms forequipment records audits and

inspections. These services areused (1) when the equipment isreturned to an investor for anyone of several reasons (someof them bad), (2) when owner-ship changes or (3) if collateralvalues must be revisited andupdated. Most of us know thatthe mechanical condition of thisequipment is important, but thecontent of the records is thepedigree of aircraft andengines. The information con-tained in these records isarguably more important tomarket value than the equip-ment itself.

With a few changes,the current process of auditingrecords has remained the samefor decades. In today's hightechnology business environ-ment, it lags way behind andthat is not acceptable. It'sarchaic, clumsy, time consum-ing, inefficient and expensive.Effectively, the current practiceplaces the investor and traderone step removed from directaccess to the vital informationthat resides in their records anddata. Most of us have been inthis position all too frequently,and can testify to the cost intime, money, and inconven-

ience to secure this informationfor timely decision making.

Today, auditors travelto the record's location wherethey invest long hours gather-ing, sorting, organizing andauditing paper records, orstruggle to sort through recordson poor quality microfilm orCDs. This is a very expensiveand time-consuming processeasily costing $20,000 to$30,000 or more. It also takesdays and weeks when time canbe even more costly than fees.Per Diem, airfares, hotel rooms,car rentals, food and other outof pocket expenses make thisan expensive experience for theinvestor and trader. Some reliefis realized if the records areshipped to the auditor reducingor eliminating travel and mostout of pocket expenses. But,the largest portion of theexpense remains - gathering,sorting, organizing and auditingthe records.

Records audits arealso a burden for the operator.Just ask any one of the domes-tic airlines that are being soclosely scrutinized by leasingcompanies, banks and otherequipment investors. Recentand more sensitive records areeasily accessible at the time ofan audit, but the remainder areusually packed in boxes at aninconvenient storage location.It's also common that recordsmust be reassembled from dif-ferent locations within the air-line. So, the operator mustassign personnel to participatein the auditing process to locateinformation and answer theauditor's questions. In the caseof bankruptcies, the cost of theoperator's staff time will likelyend up for the account of theinvestor. As we say in this busi-ness, the investor ends up "buy-ing back" their records.

Unfortunately, the ben-

efit of an investment in an auditis event specific, and its valueis too short lived. For instance ifan operator returns an aircraft,an audit and inspection arenecessary to satisfy the investorthat the equipment is contractu-ally acceptable for return. If theaircraft is subsequently resoldor released, another recordsaudit is typically required to sat-isfy the next owner or lessee asto condition of the records andthe equipment. The cost of thataudit and an inspection are forthe account of the buyer or les-see, but it is prudent for theseller or lessor to have its tech-nical representative present aswell. Thus, the seller/lessormust again invest money in therecords auditing process.

Over the years, auditsand inspections are reoccurringand the expenses mount. In theevent of a default or bankrupt-cy, the cost of the processescalates even further if theinvestor does not enjoy thecooperation of the operator.

It's ironic, but evenafter all of these expenditures ofmoney, time and effort,investors and traders remainfundamentally disadvantaged intheir relationship with their cus-tomers by the records accessissue. That's because most ofthe technical information theyneed, often at critical times,remains in control of their cus-tomers. Investors are deprivedof ready access to and controlof the information and knowl-edge required to effectivelymanage their equipment or col-lateral. Every time they needmore than a minimal amount oftechnical or operational infor-mation, they are forced to incurcosts and delays for thataccess. Bottom line, by beingonce removed from theirrecords, investors are too often

by Ed Reese

Pictured Ed Reese VP, The AircraftGroup & TAG Fleet Online with WalterAndrushenko, President, The AircraftGroup

How do investors get to the next level ofaircraft asset management and risk con-trol? How do they get out of the old rut ofrepeatedly paying and waiting for recordsaudits whose value is temporary? Whatdoes it take to have this information avail-able at their fingertips and those of theirconsultants? Is there a system that canalert them when they need to pay atten-tion or take action? Can technology revo-lutionize the old ways?

8 JETRADER

ASSET MGMT l continued

disadvantaged and forced to playcatch up when knowledge is powerand time is their enemy.

Even routine asset manage-ment activities suffer from the lack oftimely access to and control ofrecords information. Examples ofthese activities are the periodic updat-ing of collateral values, taking transac-tions or equipment to market, and cal-culating and processing renewals,extensions and restructures. All ofthese asset management functionsrequire data and technical informationthat reside in the records.

So all of this begs the ques-tions, how do investors get to the nextlevel of aircraft asset managementand risk control? How do they get outof the old rut of repeatedly paying andwaiting for records audits whose valueis temporary? What does it take tohave this information available at theirfingertips and those of their consult-ants? Is there a system that can alertthem when they need to pay attentionor take action? Can technology revo-lutionize the old ways?

The 21st Century technologybased solution is to digitize the paperrecords, make them 100% searchableusing any word or group of words,make the search extremely fast,employ the Internet as the vehicle toaccess the information, easily shareinformation as needed but keep itsecure, and make it proactive andsimple to use. And last but not least,make it economical so there is a clearcost benefit over current recordsauditing procedures. That's a tallorder, but now there is a tool investorsand traders can employ to do all ofthese things and more. An addedoverall benefit is that this solution lev-els the playing field and enhances theinvestor's power and leverage relativeto their counter parties.

Such a product is availablefrom The Aircraft Group in Phoenix,AZ. It's called TAG Fleet Online. It's aproprietary, Internet based system todigitize, organize and manage aircraftand engine data and records. It'sdesigned specifically for aircraft andengine investors and traders,although others can effectively use it.

TAG Fleet is a system thatbrings speed and efficiency to duediligence records inspections andoperational tracking so it savesmoney. And for the first time, it placesthe investor in a position of control. It

does so by providing immediate accessto aircraft and engine records and dataanywhere the Internet is available, anytime of the day or night.

Here's how it works. Recordsare imaged, organized and placed onthe TAG fleet Online web site. Scanning,Optical Character Recognition and otherproprietary processing results in a set ofoperational data, specifications andimages of original documents thatreside on TAG Fleet's web site. All theinformation is fully searchable with nokey word or index limitations, essentiallya "Google-style" search capability. Tensof thousands of records can besearched in seconds. The system isvery user friendly, intuitive and secure.TAG Fleet is also adept at trackingscheduled maintenance and proactivelynotifying investors of non-compliance.And last but not least, it calculates andtracks reserve payments.

The user simply enters the website with a password. The user is thenguided to the likes of InteriorConfiguration, Operating Status, LifeLimited Parts, Engine Specifications,Engine Disk Sheets and ReserveSchedules. There is also a DocumentArchive button to access images of allhistorical documents that have beenimaged and put up on the web site.Again, the information in these archiveddocuments is fully searchable with nolimitations like key words or indexes.

Another convenient featureallows the subscriber to grant otherscontrolled access to the web site. Forexample under the investor's control,operators can be given discretionaryaccess via passwords to periodicallyupdate operational data. Likewise, otherparties can be given limited or discre-tionary access to records as part of anenhanced level of proactive asset andportfolio management. These could berecords auditors, equipment inspectors,appraisers, brokers, prospective equip-ment or transaction buyers, andemployees at the same or other loca-tions.

Information and data, the life-blood of successful commercial aircraftand engine investing and trading, canbe shared with potential trading partnersany where in the world almost instantlyvia the Internet. This can happen withouttranscribing or copying data, emailattachments, faxes or overnight express.This access to information brings clarityand transparency to an aspect of air-craft and engine investing that is oftencloudy, and difficult to understand andmanage.

Most of us in the aircraft and

engine investment and trading commu-nity can easily appreciate the efficiencyand cost savings of this Internet basedsystem compared to existing practices.Immediate access to data and recordssaves money, time and resources. Forexample, once records are up on theweb site the need for traditional, expen-sive and time consuming recordsaudits, as we know them, becomesunnecessary. In addition, equipmentinspections are accomplished more effi-ciently because the inspector arrives atthe equipment's location with a com-plete set of up-to-date information. Addup the cost of repetitive traditionalaudits and inspections over the life ofan investment and it's a big number.

By now it should be clear howthis program permanently changes thelandscape, and benefits investors andtraders in so many ways. Via theInternet, they gain immediate access toand control of their data and records. Indoing so, they realize the power andprerogatives needed to more effectivelyand efficiently manage their equipmentcollateral and portfolios. Keep in mindthat these vital aircraft and enginerecords, and the information they con-tain, are as much the property or collat-eral of investors and traders as theequipment itself.

Commercial aircraft andengine investors and traders such asleasing companies, banks, hedge fundsand others, have the right to direct andimmediate access to the data and infor-mation contained in equipment records.They also have a right to informationthat is current and fresh. The growingmagnitude of investments, commit-ments, responsibilities and risks associ-ated with commercial aircraft andengine financing make this accessmandatory. For the first time in the histo-ry of commercial aircraft and engineinvesting and trading, an Internet basedasset management system like TAGFleet Online makes this a practical andaffordable reality.

sideration that there is a variety of dif-ferences between the service offers,

there are currently (based on May2005 figures) 43 European low

cost airlines operating a com-bined total of 607 aircraft. It is interesting to note that 61per cent of the total fleet con-sists of Boeing 737 aircraft (fromvarious series), i.e., it is a seg-ment of world aviation in which

Airbus does not have a strongfoothold (FIGURE 2, left). Despite

numerous new market entrants, thetwo European pioneers, Ryanair and

easyJet, still dominate the low cost market in terms of boththe number of aircraft deployed and seating capacity.Ryanair (94 aircraft) and easyJet (91 aircraft) operate thelargest fleets (as of May 2005).

The next largest airline is Air Berlin, which hasentered a close co-operation with Niki, the airline, whichwas founded by Niki Lauda, the former Formula 1 racingdriver. Other large airlines in the low cost segment includeTransavia, DBA and Germanwings. DBA was sold by BritishAirways in 2003 to the German entrepreneur Rudolf Wöhrland in 2004 DBA took over the network of GermaniaExpress, which operates a total fleet of 14 Fokker-100 air-craft. These airlines altogether command 313 aircraft, i.e.52 per cent of the total European low cost airline fleet (SeeFIGURE 3).

Altogether, the European low cost airlines have227 new jet aircraft on order. Ryanair, easyJet and Air Berlinhave placed most of the new jet aircraft orders. Ryanair hasstill 73 Boeing 737-800 aircraft on order, while easyJet hasstill 77 Airbus 319 on order. In addition, both have optionswith the manufacturers for more new aircraft. Air Berlin has60 Airbus 320 on order. Three other smaller airlines have 17jet aircraft on order.

In view of the large orders from Ryanair, easyJetand Air Berlin, these airlines are committed to future expan-sion. Eastern Europe will represent an important area for

THERE IS NO TOPIC CURRENTLY GEN-ERATING MORE INTEREST IN THEEUROPEAN AVIATION INDUSTRYTHAN LOW COST AIRLINES. THEYEARS 2002 AND 2003 PROVED

THAT THE REAL BOOM YEARS FOR THEFORMATION OF LOW COST AIRLINESTHROUGH-OUT EUROPE (Figure 1above). IN 2004 TO DATE ONLY A FEWMORE AIRLINES TOOK OFF, AND SOMEOF THE START UPS HAVE ALREADYLEFT THE MARKET. NOT ONLY HAVENEW AIRLINES BEEN CREATED BUTCHARTER AIRLINES HAVE ALSO CHO-SEN TO ENTER THIS MARKET SEG-MENT.

Whereas European charter airlines usedto exclusively market their seat capacityto tour operators, they subsequentlyentered the low cost segment by intro-ducing the so-called 'seat-only-product'involving the sale of airline tickets to indi-viduals. Some of the tour operators' in-house charter airlines have followed thisdevelopment, while the tour operator TUIhas formed a special low cost airline(Hapag Lloyd Express). Some other newcompanies such as Germanwings andbmibaby are linked, however indirectly,to the traditional scheduled airlines.

Germanwings for example is a subsidiary ofEurowings, in which German Lufthansa has an interest.There are also virtual offers in the market, i.e., aircraftcapacity is bought from other airlines (e.g. Evolavia). Or thelow cost product may relate to a non-independent part ofan airline (e.g. Fare4U and Thomsonfly). Taking into consid-eration, that some of the airlines who call themselves "lowcost" might not be true low cost airlines and taking into con-

TotalFleet:607Aircraft

61% B737All Types14%A319/320/3217% F1002% B757/7674% MD 80s12%Other types*

Dash 8, ATRs,BAE146s, Avro,Saab, EMB

LOW COST CARRIERS l continued page 10

Summer 05 9

Eastern Europea growth market for

low cost airlinesby Prof. Dr. Borislav BjelicicSenior Vice President, DVB Bank AG,Frankfurt am Main+

Honorary Professor for Business AdministrationUniversity of Mannheim

10 JETRADER

such expansion. At the beginning of2004, Ryanair was still not flying to anEastern European destination. Butsince then they have started expand-ing to Eastern Europe. In the currentsummer schedule the destinationsBrno (Czech Republic), Riga (Latvia)and Wroclaw (Poland) are served.

With the new winter scheduleeight new Eastern European destina-tions will be offered: six of them are inPoland (Gdansk, Szczecin, Poznan,Lodz, Rzeszow, Bydgoszcz). AlsoKaunas (Lithuania) and Bratislava(Slovakia) will be served. EasyJet hadintroduced flights from London-Stansted to Prague already in 1999.But only In 2004 the network waslargely extended into Eastern Europe.Altogether seven new destinations(Tallin, Riga, Warsaw, Krakow,Budapest, Bratislava and Ljubljana)have been introduced. Only Air Berlinhas not yet started a major expansionto Eastern Europe. The only destina-tion, which is currently served isBudapest. Interestingly, many of thesmall low cost airlines have discov-ered the Eastern European marketmuch earlier.

LOW COST CARRIERS l continued

LOW COST CARRIERS l continued pg 18

Withtheenlarge-ment of theEuropean Unionby Poland, the Czech Republic,Hungary, Slovakia, Slovenia,Estonia, Latvia, Lithuania, Malta andCyprus in May 2004, the legalframework of EU aviation has beenextended to these states. Thispaves the way for more connec-tions between East and West. Byestablishing operating bases inEastern Europe, Western low costairlines can tap labour cost advan-tages within the region. Theenlargement also heralds new com-petition from Eastern Europeancountries. The first market entrantwas SkyEurope, founded in Bratislava(Slovakia) in 2000. In 2003,

SkyEurope Hungary wasfounded. In 2004 Wizz Air startedoperating in Poland and Hungary,while in the Czech Republic,Smart Wings, a subsidiary ofTravel Servis, the national charterairline, commenced operations.

As a reaction to morecompetition, Polish flagcarrier LOT foundedCentralwings as a lowcost airline in 2004.

There are severalother indicators thatsuggest that EasternEurope will remain agrowth market for lowcost airlines. First of all,the low cost businessmodel meets the cur-rent level of purchasingpower in EasternEurope. Greater wealthand higher disposableincomes in EasternEurope should serve toeffectively underwrite anincreasing demand for

East-West air travel in the foreseeable

Total Fleet: 607Aircraft

48%All Others15% Easy Jet15% Ryanair9% AirBerlin/Niki5% DBA/GEXX5% Transavia3%Germanwings

FIG 3

L/R, far right photo,David Treitel, SH&E &

ISTAT FoundationTrustee with MikePlatt, ILFC & ISTAT

Vice President, TomHeimsoth, Willow

Aviation & ISTATPresident with Karen

Heimsoth and NilsHallerstrom, PK Air

Finance

Near right l/r PaulRedman & Karl

Brunjes of RepublicFinancial Corp with

Steve Townend,SALE.

Near left ElisabethHarpoth and

Rhonwyn House,wives of Steffan

Harpoth and GeneHouse enjoy seeing

each other at ISTAT events.

More photos pg 15

Paris AirShow

by theNUMBERS1,926 exhibitorsfrom 41 countries

238 aircraft

480,000 visitorsover 7-days ofwhich 247,000were general public visitors and223,000 trade participants

206 official delega-tions from 88countries

4,000 accreditedjournalists

127,519 sq.m. ofcovered exhibitionspace

192,000 sq.m. of

static display

The ‘05 Paris Air Show

benefited on two fronts,

both from a rise in the

number of exhibitors to

record levels and the

presence of nearly 20

new aircraft, including

the Airbus A380,

Dasault Aviation’s

Falcon 7X and UCAV

Neuron, Boeing’s 777-

200LR, Gulfstream’s

G550, Embraer’s EMB

195 and Aermacchi’s

M356, all of which

made their first public

appearance at the Show.

Summer 05 11

ISTAT ReceptionLe Pré Catelan Par is

A day at the Paris Air Showby Bert van Leeuwen, DVB Bank

F OR THE VERY FEW ISTAT MEMBERS who were not at Le Bourget this year,I will attempt to give you an impression of the risks and rewards ofattending such an event.

The Paris Air Show 2005 is the 46th edition of this event. Asarguably the biggest business-oriented aviation events, the Paris Air Showat Le Bourget and the Farnborough Air show near London take place everyother year. It was Le Bourget’s turn in 2005.

Unless you are a VIP (and this fact is recognized by the rest of theworld) the key to surviving and even enjoying an air show is preparation. Ifone intends to stay for more than one day, it is essential to book a hotel ina strategic location. A hotel in downtown Paris is excellent for attendingevents like the ISTAT reception or a business dinner. A downtown hotel has,of course, “other” attractions like nice restaurants nearby etc.

Getting around in Paris, however, is a challenge. Don’t even thinkof parking your car; finding a parking spot will take forever. Taking publictransport is maybe a better idea. The Metro system is fast and cheapalthough not too comfortable. Taxis get stuck in traffic and, especially in theevening, finding one can be tough.

The alternative to a downtown hotel is finding a nice countrysidehotel, preferably just north of Paris, and closer to Le Bourget. These small-er hotels tend to fill up early with visitors that have learned to appreciate thelogistical advantage of such a place. Cheaper motels and the Charles deGaulle airport hotels are less romantic alternatives. However, even a hotel10 kilometers from Le Bourget doesn’t mean getting there is easy. The last5 kilometers will be very slow as officials, police, catererers, exhibitors,press and other visitors make their way to the venue. If it can be arranged,it is attractive to have a permit to use one of the parking lots reserved forofficials, press or exhibitors. These are nearest to the actual display areaand provide easy access. Parking in the residential area around Le Bourgetis possible but should not be recommended for various reasons.

Getting access to the showground itselfis another challenge. Most ISTAT members visitthe show during the trade days when the gener-al public is not admitted. It is important toarrange tickets in advance or –better- get a validinvitation from one of the exhibitors that includesgeneral admission. Despite efforts to make entrymore easy by using automated ticketingmachines, reality is that it takes a lot of patiencebefore being able to get in. Again, here “special”passes, like a press or exhibitor pass make lifemuch easier.

Fortunately, this year’s event at LeBourget was blessed by gorgeous weather, sogetting around the exhibition area was no prob-lem. Many readers may recall previous air shows

...this year’s star was

the Airbus A380 and

this was clearly the

most important attrac-

tion for many visitors.

Other big jetliners

included a Boeing

747-400 Freighter, the

A340-600 and the new

Boeing 777-200LR. A

B767 Tanker Transport

and a bright orange

DC-10 “water-

bomber” also draw

much attention. Other

interesting commer-

cial aircraft included

the Bombardier

CRJ705, the Embraer

175 and 195 and the

PW6000 powered

A318.

that were plagued by storm and rain-showers, whichdidn’t help to improve the looks of the average busi-ness suit. As an aside, despite tropical temperatures,business attire is essential if you are not a pilot or a“gendarme”. Only professional photographers and“souvenir hunters” tend to be dressed “casual”.

Once “in” there are a number of things to do.First of all there is the static display of aircraft. Withoutany doubt, this year’s star was the Airbus A380 andthis was clearly the most important attraction for manyvisitors. Other big jetliners included a Boeing 747-400Freighter, the A340-600 and the new Boeing 777-200LR. A B767 Tanker Transport and a bright orangeDC-10 “water-bomber” also draw much attention.Other interesting commercial aircraft included theBombardier CRJ705, the Embraer 175 and 195 andthe PW6000 powered A318. Although for the averagebusinessman, less relevant might have been the num-ber of the military aircraft. However, many UAVs weredefinitely drawing attention.

The many press conferences organized dur-ing the show are, unfortunately, only open to the pro-fessional press. During these events that take placeeither in the Conference Centre or in the “Chalets” ofthe exhibitors, in most cases, top-ranking executives ofthe major manufacturers provide the press withupdates on their programs. This year the battlebetween Airbus and Boeing was a highlight as bothmanufacturers tried to upstage the other by announc-ing new mega-orders. The various “Show-daily” publi-cations that are distributed to visitors are an indispen-sable tool to remain on top of the order battle if one isnot in possession of a press pass.

The other “outdoor”activity (that not too manyprofessionals will admit to) is simply watching thedemo flights. Mainly during the afternoon, a number ofaircraft are taken from the static display to the flight-line to prepare a demo-flight. Again the Airbus A380was the undisputed “star”. The quietness of the A380stood in stark contrast to the many jet-fighters thatshowed their abilities. Although very impressive, thesefighters are also extremely noisy and make normalconversation impossible.

For the lucky few, some of the manufacturersorganize different demo-flights after the official flightdisplay. This year, Embraer invited a number of its busi-ness partners as well as members of the press to ademo-flight on board of the new – and very comfort-able - Embraer 175. Some of the readers that were atthis year’s ISTAT conference in Scottsdale may recallBombardier taking a number of ISTAT visitors on a sim-ilar demo-flight on the Bombardier CRJ-700. Clearly ifyou are lucky (or important enough) this is a nice expe-rience.

Back again to the show-grounds. If the weath-er is not as favorable as it was this year, there is alwaysthe huge indoor trade-fair with hundreds of booths and

photo source :: Bert van Leeuwen A DAY AT THE PARIS AIR SHOW l page 14

14 JETRADER

A DAY AT THE PARIS AIR SHOW l continuedexhibitors ranging form the major airframers to small“metal management” companies (engine part recy-cling). Even with nice sunny weather it can absolutelybe recommended to visit a number the indoor exhibitsas this really makes one aware of the importance of the“nuts and bolt” in this industry.

And now, “la Piece de Resistance” of any airshow: The Chalets and Pavilions. These are situatedalong the flight line and can be recognized by a sign“By Invitation Only”, a serious looking guard at thefront door and a catering truck parked in the back.In these chalets, major corporations receive theirguests. Meetings in the chalets range from seriousbusiness negotiations to casual conversations over anice refreshing drink. Getting invited to a number of“relevant” chalets is an important achievement formany visitors and this positioning game must be con-sidered an important part of the preparation.

Side benefits of having access to the chaletsinclude having a place to rest one’s tired feet, hav-ing a place to have a nice cold drink without having tostand in line for an hour and paying 5 Euros for a softdrink, the opportunity to get some nice souvenirs –of course “for the kids” - such as little aeroplane mod-els, T-shirts and caps and the opportunity of beinginvited for – in almost all cases – a fabulous lunch.

After having enjoyed a day at the show, thevisitor is again faced with the challenges of traffic,although getting out of the parking lot at the same timeeverybody else is can be even more cumbersome thanmorning traffic.

In case of the Paris Air show this year, the chal-lenge was getting from the show-ground to the other“Major Event” of the week, the ISTAT reception in theBois the Boulogne. And for those interested in thatevent, a nicely illustrated article can be found else-where in this issue of your Jetrader.

Meetings inthe chaletsrange from

seriousbusiness

negotiations tocasual

conversationsover a nicerefreshing

drink. Gettinginvited

to a number of “relevant”

chalets is animportant

achievementfor many

visitors andthis

positioninggame must

be consideredan important

part of thepreparation.

Truett and Roland Moore, AviationAttorney and ISTAT FoundationScholarship Chairman and PastFoundation Chairman visit withSteve Boecker of Pratt & Whitney

ISTAT RECEPTIONSPONSORS

Summer 05 15

Nick Popovich of Sage-Popovich, left, aconference sponsor with friends

L/R Karen Heimsoth, Alan Coe, GATX Air& ISTAT Board Member with Dawn O’DayFoster, ISTAT Executive Director and MikePlatt, ILFC & ISTAT Vice President

Abdol Moabery, far right, GA TelesisTurbine Technologies (& conference spon-sor), hosts colleagues in the garden.

Pictured Dick Forsberg, RBS AviationCapital with Michael Garland, GarlandAviation, Ltd. and Michael’s daughter,Alicia.

More photos pg 16

Pictured l/r Chris Partridge, DeutscheBank & ISTAT Foundation Trustee withfriends.

future. Also reasons for travelling needto be taken into consideration.Sightseeing is of prime importance,witness the fact that highly attractivetourist destinations such as Pragueand Budapest lie at the heart of thedevelopment of air traffic in EasternEurope. Eastern Europe also repre-sents an interesting market for busi-ness travel as the enlargement of theEuropean Union creates new busi-ness opportunities for companies inboth the East and West. Closer politi-cal ties will also impact positively ontravel. Meanwhile, the improving quali-ty of the tourist infrastructure will her-ald more conferences, congressesetc. in Eastern Europe, particularly inthose areas that are also sightseeingdestinations. Migration is a key factorin Eastern Europe and this, in turn,touches on work and studies.

Numerous EasternEuropeans are currently on workingleave in Western Europe. Au pairscome to mind as do seasonal workersand the staffing of Eastern Europeancompanies' offices in Western Europe.An ever-increasing number of EasternEuropean students are heading toWestern Europe. Aspects of migrationsuch as the reuniting of families andmarriages abroad inevitably lead toincreased air travel in terms of visitingfriends and relatives.

The question of airportchoice is of vital importance to thoselow cost airlines that are intent onexpanding from/into EasternEurope.This, in turn, is closely linkedto another question, namely thecatchment area of an airport. Prague,Budapest and Warsaw all possesslarge catchment areas with highlyconcentrated populations in the vicini-ty of each capital. Bratislava, the capi-tal of Slovakia, represents a some-what special case. Here, access tothe European Union created new per-spectives due to the fact that theAustrian capital of Vienna is close tothe airport of Bratislava (the distancebetween the two capitals is just 60km) - the principal reason why theSkyEurope airline was established atBratislava airport. A good example forgrowing competition and overlappingcatchment areas is also the Alpe-Adria Region. Here Ryanair is alreadyflying to Triest (Northern Italy) andKlagenfurt (Austria), while easyJet hasstarted flights from/to Ljubljana, capi-tal of the new EU member stateSlovenia. The short distances

between Ljubljana and Triest (95 km)and between Ljubljana and Klagenfurt(82 km) already give travelers fromSlovenia a greater choice and viceversa. But now also travelers fromCroatia have access to a low costoffer by flying from Ljubljana. (dis-tance between Croatian capitalZagreb and Ljubljana is just 137 km).In this region like in other parts ofEastern Europe much attention isgiven to an upgrade of road and railinfrastructure. In the Alpe AdriaRegion a number of highways havealready been built. While some linkswill still have to be upgraded by newhighways, these measures will all helpto give travelers much quicker accessto airports and low cost offers.

As already mentioned, theenlargement of the European Unionhas created new opportunities for lowcost airlines. But there are moreopportunities to come. Bulgaria andRomania are EU member candidatesexpected to join the European Unionin 2007. And also countries likeCroatia and Serbia offer possibilitiesto expand. These Eastern Europeancountries, of course, will need to intro-duce more liberal elements into theirbilateral air transport service agree-ments with EU states if they intend toopen up similar travel opportunities fortheir communities.

A good example for such aliberal air transport policy is the CzechRepublic. Here, the CzechGovernment had introduced a liberalair transport policy vis-à-vis foreigncountries in the late nineties, when thecountry had just become a candidatefor a membership in the EuropeanUnion. And Prague airport has signifi-cantly profited from this policy and iscurrently highly frequented by lowcost airlines, especially from theUnited Kingdom. May be that low costairlines from the new EU membercountries will take advantage first ofthese developments. For example,Wizz Air has announced in June 2005to expand services to Sofia (Bulgaria)and offer passengers connections toother European destinations atBudapest. Wizz Air would be the firstlow cost airline to enter the Bulgarianmarket.

Also Romania offers a grow-ing potential for low cost offers. After2001, the lack of job opportunities onthe home labour market and the high-er wages offered abroad have led to asteep rise in the number of

LOW COST CARRIERS l continued

LOW COST CARRIERS l continued pg 18

16 JETRADER

CONSULTING

• S t ra t e g i c P l a n n i n g• I n d u s t r y Fo re c a s t

• Ai rl i n e P l a n n i n g

TECHNICAL

• I n s p e c t i o n s & Au d i t s• R e d e l i v e r i e s & R e p o s s e s s i o n s

• M a i n t e n a n c e C o s t S t u d i e s

VALUATIONS

• Ai rc ra f t & E n g i n e Va l u e s• A s s e t M a n a g e m e n t

• B l u e B o o k s & O n l i n e Va l u e s

www.AVITAS.com

tel: 703.476.2300

fax: 703.860.5855The Leading Advisor to the Aviation Industry

ISTAT Reception

Above left, Andy Troutt, GATelesis Turbine Technologies(conference sponsor) withMark Dreschler, Banc ofAmerica Leasing & Capital andMark Maymar of CompassCapital

Above right, Pratt & WhitneySponsors Mark Young, CherylAndersen and Steve Boecker

L/R Mickie, January and Al Jones with Marc Anderson ofAerocentury

FoundationISTAT

Summer 05 17

by Bob Brown

Chipping Contestraises $5,900 for theISTAT FoundationOn June 2nd, The ISTAT Foundationfound itself the beneficiary of an extraordi-nary impromptu fundraiser. Over $5,900

was raised because of the generosity and goodwill of ISTATmembers, not to mention the subtle invitations of Jennifer andShaelene of sage–popovich.

Sage-popovich hosted its 11th annual Sage-PopovichGolf Outing held at the Course at Aberdeen in Valparaiso,Indiana. 150 golfers braved the showers and lighting to provethe old saying that golf “…was a good walk spoiled.” 200 atten-dees to the post golf picnic held at Wisdom Ranch were invitedto participate in a chipping contest fundraiser for the ISTATFoundation.

The object was to hit a bucket on an island located inthe middle of a pond. Even before the superb meal, the golfingskills of the attendees were remarkably challenged. Successwas hitting the side of the barn behind the buckets. Now it mustbe said that there were substantial obstacles to over comewhilst the hitters were attempting to prove their golf worth. NickPopovich helped the golfers concentration with a volley of cher-ry bombs (some were heard to say they were really M80s, oneeven alluded to Cracker Bombs) deliberately timed to aid shotplacement.

Because no one hit the buckets, Zach Popovich“…volunteered…” to row a boat in the lake and play target.Was it the challenge of a floating target or just luck that we hada tie? Max Ulrich of Stratus Partners LLC and C David Brown ofBank of America tied in the “Hit the Kid Challenge”. But Davidprevailed in the sudden death shoot out (no one died). VXCapital Partners sponsored a custom golf club set for the win-ner. Nick Popovich of sage-popovich matched dollar for dollarthe money raised in this shoot-out. The ISTAT foundation bene-fited from the generosity of all who participated. Thank you all.

Bob Brown VX Capital PartnersISTAT Foundation Chairman

Bob Brown

What are the Foundation's goals?Historically, the Foundation has provided funds for scholar-ships, educational programs and grants to qualified individ-uals and charities that promote the advancement of com-mercial aviation. More recently, the Foundation hasbranched into causes where aviation assets are utilized todeliver humanitarian aid.

How are the scholarships & grants awarded?We work with schools that are sanctioned by the Council ofAviation Accreditation. Our scholarship committee reviewsthe applications from each school and often interviews thefinalists before making its recommendations. The primarycriteria are achievement and need. Our grant committeerecommends other educational programs to receive oursupport.

How much will be given away this year?Eight $10,000 scholarships plus $70,000 in grants for a totalof $150,000.

Why pursue humanitarian causes?Because many members of ISTAT are in an excellent posi-tion to save lives through the application of their knowledgeand resources in the delivery (via air) of humanitarian aid tonations in crisis around the world.

What is an example of a humanitarian cause theFoundation is involved in?Airport Emergency Team to be located in Miami, servicingCentral America. Members of this team would be calledupon to coordinate relief supplies arriving to an airport in aCentral American country that is suffering from a humanitari-an crisis such as a flood or earthquake.

How does the Foundation raise money?Through individual and corporate cash donations as wellevents such as raffles and auctions. We are now organizingto reach out to individuals and corporations with a majordonor program. Expect a call from us soon!

FAQ

Robert M BrownChairman

Thomas HinikerImmediate Past Chairman

Thomas W HeimsothISTAT President

Michael A MetcalfISTAT Immediate Past President

Gregory A MaySecretary | Treasurer

TrusteesWayne LippmanHannah M McCarthyRoland H MooreChris PartridgeDavid P SuttonSusan ThompsonDavid Treitel

18 JETRADER

Romanians working abroad. The Romanian "Department forLabour Abroad" estimates that around 2 million Romaniansare currently working abroad. Most of them work in Italy(800,000), Spain (400,000) and Portugal (over 40,000). Asignificant number of Romanians also work in Greece,Israel, Ireland, Hungary, Germany and France. Because ofmigration, growing air travel demand in terms of visitingfriends and relatives will be generated. This is the reasonwhy the recently founded Romanian low cost airline Blue Airis also targeting destinations in Spain and Italy.

Selling tickets may prove to be the most challeng-ing aspect of the expansion of low cost airlines in EasternEurope. Typically, low cost airlines endeavour to sell most oftheir tickets via the Internet and only to a limited extent, ifnecessary, via travel agents. Telephone sales via call centresalso play a part although the fixed costs involved are quitehigh. The Internet proved crucial to the successful develop-ment of low cost airlines in Western Europe. In line withgrowing personal computer penetration in private house-holds more and more consumers are using the Internet foronline booking. The figures relating to personal computerpenetration in Eastern Europe are currently much lower thanthose for Western Europe and the number of Internet usersin Eastern Europe is, in comparison with the population fig-ures, still relatively low.

That said, the growth rates are nothing less thanremarkable. All in all it would appear that call centres andtravel agencies are likely to remain relatively important interms of the low cost airlines' ticket sales in Eastern Europefor some years ahead. Even in Western Europe there is sig-nificant growth potential for Internet sales, bearing in mindthe fact that many Internet users still refrain from onlinebooking and/or shopping because they are suspicious ofsecurity and do not wish to divulge credit card details.

What are the risks inherent in the European lowcost sector? One risk is that the market exit of one of themajor players could impact adversely on the reputation of alllow cost airlines, bearing in mind the fact that consumerswho paid for tickets in advance would be unlikely to get theirmoney back. Traditional airlines have long argued that con-

sumer protection is not high on the agenda of low cost air-lines. An air disaster could, conceivably, pose a risk for theentire sector but the fact remains that low cost airlines, par-ticularly the largest enterprises, operate very young aircraftfleets. Somewhat greater risk might be associated withsmall airlines that operate with older aircraft. It would be fairto conclude that the risk of an air disaster is no higher in thelow cost sector than in any other sector of aviation. In termsof publicity, however, the majority of media reports regardingthe aviation industry have, of late, focused on the low costphenomenon.

Eastern Europe in general and the new memberstates of the European Union from this region in particular,will remain a strong growth market for aviation within Europeduring the years to come. Almost all countries within thisregion show strong growth rates in air passenger traffic. Acomparison of passenger numbers in relation to air trafficbetween new and old member states of the European Unionwith similar populations suggests significant potential for airtraffic growth in Eastern Europe as economic disparities nar-row. The Czech Republic's population of 10.3 million peopleis, for example, almost exactly the same as Belgium's popu-lation. In contrast, the number of air passengers in Belgiumis currently three times that of the Czech Republic. It is alsoclear that low cost airlines are not, as traditional airlines mayhave imagined, a temporary phenomenon. On the contrarythey are set to become a stable aspect of European aviationcommanding between 20 - 30% of total European air trafficwithin the next decade. The low cost airlines will particularlyin Eastern Europe continue to progress.

LOW COST CARRIERS l continued

efficiency to its on-time reliability.The employees who serve on

our acquisition team bring awealth of skills and knowledge tothe process. The team includespeople with experience workingon and around aircraft, strategicthinkers familiar with UPS's trans-portation network and services,and accounting experts who com-pile comprehensive cost analyses.

The knowledge combinedfrom these areas allows precise looks into the cost ofnew freighters versus passenger conversions, futureoperating cost, future revenue and flexibility of the air-craft.

This flexibility is key because UPS wants an air-craft that performs well under changing business condi-tions, such as fluctuations in our product mix or routestructure.

For instance, when we chose the Airbus A300-600, we were looking for a regional freighter to meet ourneeds for increased airlift on domestic routes. But we'renow finding that the aircraft fits into our international net-work.

In the 17 years since we started our own airline,we've acquired a diverse fleet of 268 jet aircraft. Our fleetreflects our efforts over the years to balance the riskequation between new and converted aircraft. It includesthe A300 and other new production freighters as well aspassenger-converted aircraft, such as the Boeing MD-11.

The A380 will bring the ability to fly a single flightto worldwide destinations that used to take two or moreflights. With its 5,600-nautical-mile range, the aircraft hasa 330,000-pound payload -- equivalent to two MD-11s ora 767 and a 747-100 combined. The 747 is currentlyUPS's largest aircraft.

Summer 05 19

UPS l continued page 20

UPS's order for 10 Airbus A380

super-jumbos illustrates our grow-

ing need for long-range, high-pay-

load aircraft. The A380 will help us

serve the fast-growing demands of

customers around the world.

With global commerce at the heart

of our business, UPS's fleet acqui-

sitions focus on larger aircraft that

support our international growth.

Acquisitions at UPS are a painstaking process. We con-tinually look at our fleet, and evaluate and adjust the airnetwork.

When it comes to acquisitions, we look to our expertsto help decide which aircraft will be the best buy. Weassemble a team of UPS employees, who study thecompany's ongoing fleet needs and recommend specificaircraft types for purchase. This team includes engineers,financial analysts, long-range planners and even pilotsand mechanics.

Although UPS's senior executive committee hasthe last say in such capital expenditures, the companyrelies on the expertise of its day-to-day workforce toensure every aspect is considered, from an aircraft's fuel

Efficiency, flexibility of

UPS fleet designed for global reach

By Bob LekitesVice President, UPS Airlines and InternationalOperations

20 JETRADER

Like the decision to purchase the A380, UPSacquisitions are made only after a long and exhaustiveprocess.

Acquisition team members typically spend ayear to a year-and-a-half reviewing data and specifica-tions. They study purchase and operating costs, fuelburn, reliability, flexibility and future revenue.

If necessary, they also meet with prospectivevendors for modification work and support services.

Once a decision on purchasing an aircraft ismade, UPS gets involved in the design, manufacturingand conversion processes.

As the first customer for both the 757 and the767 freighters, we worked closely with Boeing to makemodifications that improved the aircraft and ultimatelyreduced operating and maintenance costs.

We run our business based on a term coined byour founder, Jim Casey - "constructive dissatisfaction."We run all the numbers, examine all the parts, look at allthe ways to operate aircraft better and smarter. That'swhy we've grown into one of the finest airlines on theplanet.

The UPS FleetAircraft Type Avg. Max. Payload No. in Fleet

Boeing 727-100 46,000 lbs. 44

Boeing 727-200 58,500 lbs. 2

Boeing 747-100 215,000 lbs. 9

Boeing 747-200 240,000 lbs. 4

Boeing 757-200 88,000 lbs 75

Boeing 767-300ER 129,900 lbs. 32

Boeing MD-11 Long Range

188,495 lbs. 15

McDonnell-Douglas DC-8-71

94,000 lbs. 21

McDonnell-Douglas DC-8-73

110,000 lbs. 26

Airbus A300F4-600R

114,500 lbs. 40

Numbers reflect totals as of Dec. 31, 2004

UPS l continued

About the Fleet Since purchasing its first aircraft in 1981, UPS hassteadily built one of the largest all-cargo jet aircraftfleets in the world. The company currently owns 268jet aircraft and has 36 more on firm order. UPS alsocharters 301 aircraft. Additional aircraft are leasedduring the November-December peak season.

UPS was the first major carrier in NorthAmerica to meet Stage 3 federal noise regulationswith 100 percent of its jet fleet in December 1996,three years ahead of schedule. In addition, 92 percentof UPS's aircraft are already in compliance with Stage4 noise regulations, which are not mandatory until2006.

About UPS Air OperationsUPS began its air express service Feb. 15, 1929,using cargo space on passenger flights between WestCoast cities. Eight months later, with the worst stockmarket crash in U.S. history, the company was forcedto terminate the fledgling air delivery service.

UPS reinstituted air express in 1953 and by1980 had expanded its two-day delivery service,called Blue Label air, to cover the entire United States.The company grew more dependent on express serv-ice as it began to grow globally. In 1988, UPS startedits own airline, operating its first revenue flight fromLouisville to Milwaukee on Feb. 1. A year later, UPS'strademark service was available in more than 180countries.

Today UPS operates the world's 11th largestairline using some 600 aircraft to serve more than 200countries and territories worldwide. UPS is the largestexpress and air cargo carrier in Latin America. Thecompany's extensive air network includes internationalair hubs in Cologne, Taipei, Miami, an intra-Asia hubin the Philippines and Worldport in Louisville, Ky.

Summer 05 21

Historyaviation did you know about George Schairer?by Bill Bath

IN April 1944 the Army Air Corpissued a specification for a four jetengine powered bomber. Convair,

North American and Boeing submit-ted similar proposals of straight thinwings and a twin jet engine podunder each wing. Boeing's own high-speed wind tunnel, (Mach 0.87 andMach 0.975 without a model),allowed it to test the designs andfound that the engine pods limitedthe top speed due to their drag, sothe Boeing XB-47 design wasdelayed; each of the other con-tenders, plus Martin with a six enginedesign, got contracts for two or threetest articles. As a result, the finalBoeing XB-47 design flew eightmonths after North American's XB-45and Convair's XB-46. Boeing's delaywas the result of employing theirunique wind tunnel to test the sweptwing, using the information gainedfrom Germany, and the work byRobert Jones at the NACA.

Initially, four engines wereto be located on top of the fuselage,plus two in the tail; but fearing therisk of fire, the Air Force, (now nolonger a branch of the army), insistedthey be housed in separate podsunder the wings. It was GeorgeSchairer's letter in May 1945 on theswept wing that got the interest ofthe Air Force Bomber Project Officeat Wright Field, who helped fund theBoeing design.

Sawing the straight wingmodel in half down the center lineand testing the wings at variousangles of sweep, Victor Ganzer, oneof the small group under Bob Cookon the design team, selected 35degrees. It proved to be right, (theB727 has 32 degrees and the B747,37.5 degrees). With only theMesserschmitt 262 fighter as aprecedent, it took Boeing's vice pres-ident of engineering, Ed Wells, twotrips to Wright Field to convince theAir Force that a swept wing bomberwas feasible.

There were many heart-stopping problems during the windtunnel and parallel constructionphases of developing the prototypeXB-47. The fast track was Boeing'sonly hope of keeping within strikingdistance of the competitions' models,which were well along to flying sta-tus. With little past experience anddata to go on, it was not possible tosolve every major problem by start-ing again with a clean sheet of paperand studying it to death. Even so, ittook eight months of wind tunneltesting; with major components

being changed two to five times.Here are three of those near disasterepisodes.

The low-speed stall of aswept wing was one such problem.Unlike a high-speed tuck-under, atthe start of a low-speed deep stallthe test model would encounter asudden severe pitch-up, with or with-out the horizontal stabilizer installed.After a number of tests, which didnot reveal the source of the stall, thetunnel was run at slow speed; a 12inch length of string attached to along pole, was used to track the airstream from the wing back to the tail;the airflow was found to separate atthe wing's inboard leading edge, withthe resulting thick wake completelyblanketing the horizontal stabilizer sothat it was not contributing any nose-down pitching moment. Making aslight droop to the inboard leadingedge of the wing cured most of theproblem; with the stall now starting atthe trailing edge and progressing for-ward as the angle of attack wasincreased. The resulting narrowwakes of air left the horizontal stabi-lizer in clear air and free to maintainlongitudinal stability. The modifiedmodel wing was built and testedwhile Schairer was away. When hereturned, and saw that this messingaround with his high-speed airfoilhad not affected its top speed, hethought it was a great idea.

The residual pitch-up wascured when engine pod struts wereinstalled on the test model. Insteadof the thin boundary layer of slowmoving air on top of the wing slidingoutboard, to pile up at the wing tipand cause a loss of lift behind thecenter of gravity; the nacelle strutscaused the air to peel off at the strutsclear of the horizontal stabilizer; leav-ing the outer wing free to still providelift.

Another possible problemwas the flexibility of the very thinhigh-speed wing. The bending loadsat the wing root were thought to bequite high, which meant the centerwing box and wing panels had to bethick enough to support the loadsinduced by the wing flexing in turbu-lence. When the stress engineer,

Zeke Grey, studied the actual wingspan and sweep, he found that asthe wing bent upwards, the geometryof the sweep angle reduced theangle of attack at the wing tip, andtherefore, the lift. This meant lessbending load at the root, so theycould increase the span of each wingtip by eight feet without addingweight; the increased aspect ratio ofthe wing reduced drag andincreased the range.

The flexibility of the XB-47'shigh speed swept wing causedanother major heart-stopper. In April1946, the Air Force signed a fixedprice contract of $10 million for twoprototypes. By December 1946, thestructural design was almost com-plete, and fabrication of the wing'sheavy sections was underway. ZekeGray told Bob Cooke's expert, VicGanzer, that his final analysis of thewing strength at high speed showedthat the flexing caused the center oflift to move inboard, and thereforeforward relative to the center of gravi-ty. This translated into an equivalentcenter of gravity shift of 15 percentbetween high and low speeds, anintolerable amount.

With only six engineers inthe aerodynamics group and thedeparture of Vic Ganzer to teach atthe University of Washington, BobCook was in a corner. He goes on torelate in his book, The Road to the707, how he asked Zeke Gray, howmuch would the tail droop if its sup-porting jig was removed, while thewing and fuselage center sectionremained firmly clamped in the man-ufacturing jig. Gray told him to comeback after lunch when he would havean answer. When Cook got theanswer that afternoon, he multiplied itby the number that represented thehorizontal tail's effectiveness; the aftbody's downward deflectionincreased the stabilizer's angle ofattack to counteract exactly the 15percent shift in the center of gravity.The XB-47 was saved from possiblecancellation.

At a later high-speed conference,a paper describ-ing the aboveproblem was dis-cussed. GeorgeSchairer inferredthat the solutiondid not just hap-pen, "it had beendesigned thatway".

Rolled out of the

factory at Seattle on

September 2, 1947,

the XB-47 first flew

on December 17,

1947; exactly 44

years to the day

after the Wright

brothers made their

historic flight at

Kittyhawk.

part 2 continued from Spring issue

George Swift Schairer - Scientist whose discoveryof Nazi wind tunnel research played a crucial role indevelopment of swept-wing jets;

+

+

22 JETRADER

peopleTRACKERFlemming Jacobs and Robert van derBurg have joined the Supervisory Board ofDVB Bank AG.

Mr Jacobs' career in the shippingindustry commenced in 1960 when he joinedAP Moller where he helped to build MaerskLine into one of the world´s premier containerlines, becoming a partner in AP Moller in1996. Between 1999 and 2003 Mr Jacobs wasPresident and CEO of Singapore basedNeptune Orient Lines, owners of AmericanPresident Lines and APL Logistics.

Mr van der Burg started his careerin the aviation industry in 1970 when he joinedthe Dutch airline KLM. He held various posi-tions at KLM, principally in the area of finance.In 1994 he was appointed Senior VicePresident Finance at KLM and in 1997 he setup KLM Financial Services, a Dublin based in-house leasing company, where he held thepost of Managing Director until his retirementin April 2005. Mr van der Burg's numerousother activities included Board membership ofTransavia, the charter airline, between 1993and 2003.

Other members of DVB'sSupervisory Board are Dr Thomas Duhnkrackand Mr Wolfgang Kirsch, both members of theBoard of Managing Directors of DZ BANK AG,Mr Hemjö Klein, a former member of the Boardof Managing Directors of Lufthansa, Prof DrManfred Schölch, Deputy Chairman of theBoard of Managing Directors of Fraport AG,and three DVB employees.

by the numbers +ISTAT Membership

Primary Specializations Airline 121; Airline Products 61: Appraisal 41;

Broker 35; Cargo Airline 32; Computer Information Services 4; Consultant

113; Finance 136; Insurance 6; Leasing 344; Legal 28; Maintenance 32;

Manufacturer 101; Media 1; Overhaul Service 13; Trader 53; Other 15; Not

Listed 322

JETRADER Editorial Schedule:LATE SSUMMER 005 IssueMail August 22Topic: Preview of EuropeanConferenceFALL 005 IIssueMail Nov 4 Topic: Review of EuropeanConferenceWINTER 006 IssueMail Jan 6 Topic: tbdLATE WWINTER 006 IssueMail March 3Topic: ISTAT Annual Conference

Jetrader c/o Ajax Newservicestephen@ajaxnewservice.combarbara@ajaxnewservice.com

Written for and by the members, the Jetrader isalways looking for new writers and advertisers. If

you have any interest in either, please contact theJetrader Editorial Board or Ajaxnewservice.

The Jetrader is a bi-monthly publication.

Agenda12th EuropeanConference+ Hamburg +11-13 September 2005

go online www.istat.org

check your mail and/or

see insert this issue of

Jetrader

Summer 05 23

BEIJINGby Alex Hsu

Kempinski Hotel Atlantic . Hamburg

The Atlantic Hotel, which the People Of Hamburg affectionately call "The White Castle On The Alster,"is

more than just a hotel. First opened as a grand hotel more than 95 years ago, the Kempinski uniquely

combines the tradition of European hospitality, first-class service and an atmosphere in which guests from

all over the world can find a home-away-from-home. With the most modern technical facilities, the hotel

meets the needs of the most exacting business traveller. Latest news: The Atlantic unveiled its

"PrivateMax" and now features the first private cinema in a German hotel.

Dating back to 1644, Beijing has long played animportant role as China's capital. Through thecenturies, up to 1911 in fact, Chinese emperors

ruled the Middle Kingdom from the Imperial Palace. Theyestablished a far-flung bureaucracy to oversee dynasticrise and decline so, while the rulers would come and go,the mandarin scholar-officials-selected through the meri-tocratic imperial examination system-continued theConfucian traditions of ancient times. To this day,Chinese organizations, including those related to avia-tion, travel to the capital and kowtow before the authori-ties, seeking official approval for their activities. Readersof Jetrader, whether trying to lease, sell or buy aircraft inChina, will all have an opportunity to visit; this brief articlehopes to make that journey more pleasant.

In recent years, the city has changed dramati-cally: while the historical sites are still to be found, youwill have to deal with the worst of modernity, including airpollution (among the top ten worst in the world) as wellas traffic (instead of the thirty minutes required to crosstown through Tiananmen Square, it now takes ninety).Add to this mix the increasing temperatures -104 F inJune - and you will understand the critical need in Chinafor great patience (an important Confucian virtue).

Where to Stay As the visitor will immediatelynotice while walking around the Imperial Palace, Beijingis a city of walls. Indeed, traditional Beijing architecture isthe Four Corner House, basically four single-story build-ings facing a courtyard planted with fruit trees and wiste-ria, each compound consisting of several such court-yards connected by small walkways. The Hao YuanGuest House, built by a Qing dynasty emperor for hisfavorite concubine, is a centrally located secret with twocourtyards; you can rent an inner-courtyard suite in themain building facing south, resplendent with Chineseantiques and a sauna, for around $100. Within a fifteenminute walk is the Peninsula Palace Hotel, arguably thebest hotel in the city. And while its sister hotel in HongKong will run almost $500 per night, this Peninsula isonly $145.

Where to Eat No visit is complete withoutPeking Duck, of course; Quan Ju De is popular with sev-eral locations throughout the city. Another favorite islamb hot pot, similar to shabu-shabu; Ding Ding Xiang,with four branches, is considered the best. And forsomething special, I recommend the The Courtyard.Overlooking the moat surrounding the Imperial Palace,this restaurant was recently featured in Condé NastTraveler as one of the top fifty tables in the world and theWine Spectator gives rave reviews. Ask your Chineseguests what they would like to eat but be sure to tellthem that you want to drink Beijing Er Guo Tou. Cheers!

PEOPLE | going PLACES

+

For more than 200 years, the Beijing opera, more commonlyknown as Peking opera to westerners, is deemed thenational opera of China. The accompanying music, singingand costumes are all fascinating and artistic. Full of Chinesecultural facts, the opera presents to the audience an ency-clopedia of Chinese culture as well as unfolding stories,beautiful paintings, exquisite costumes, graceful gesturesand acrobatic fighting. Since it enjoys a higher reputationthan other local operas, almost every province of China hasmore than one Beijing Opera troupe, "piaoyou" in Chinese.

ISTAT12th European ConferenceSeptember 11 - 13 2005

Kempinski Atlantic Hotel

Hamburg

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