When an accident occurs, Ascend promptly issues an alert highlighting the key facts about the incident...via email, tweets and reports. We also publish a Special Bulletin Report when a major accident occurs, summarising all the available information known about the event.

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Finally Farnborough is here, and the Ascend team will be there in force to bring you all the news.

There has long been a tradition of utility aircraft working hard in communities worldwide. Proven hardy types such as the DHC2 Beaver and DHC-3 Otter have been in service since the 1950’s. The aircraft have been updated and many have been re-engined to turboprop power. 
 

Nine months after British Airways launched all-business class services from London-City to New York-JFK, CEO Willie Walsh has announced that the feedback from customers so far has been fantastic. The long haul operation from London’s downtown airport has always been viewed as an experiment. Now that the airline has reported load factors of up to 75%, there may be good reason to take the experiment to the next level.

Now that Wimbledon has started and the sun is shining, people’s thoughts inevitably turn towards the Farnborough International Airshow. While it offers a good chance to gauge the mood of bankers and lessors, the Airshow is really a manufacturer’s event where Boeing, Airbus et alia get to show off their latest creations and trumpet their latest orders. But what are the big issues for aircraft investors and industry watchers?

A quick round-up of some more new airlines planning to start operations…

While many space experts and pundits (including the Ascend space team) noted the high risk of failure that maiden flights usually have to face (in excess of 50%), and while even Space X’s CEO Elon Musk, equated the first launch of the Falcon 9 to ‘Russian Roulette’, in the end, the launch vehicle’s first flight successfully achieved orbit on 4th June.

Peter Morris, Chief Economist at Ascend shares his observations about changes in customer trends and challenges for the airlines.

What will be the composition of the global airline fleet in 2020? That's the question that Chris Seymour, Head of Market Analysis, answers in his Global Fleet Forecaster.  The 2010 ten year forecast has just been made available, and whilst this covers all regions and aircraft classes, I thought I'd share some of Chris's insight into fleet developments for possibly the most talked about region for aerospace - China.

The rapid expansion of the Chinese economy and their increasing share of global manufacturing, allied to increasing wealth amongst the 1.3 billion population and a growing tourism business, has resulted in the Chinese fleet expanding at ever higher growth rates. The fleet has more than tripled in the past 10 years and 120 jets (10%) were added in the past year alone.

The Chinese economy, which was suffering from a fall-off in orders for manufactured goods from the West, is seeing signs of revival. Airlines were losing money and the Government has acted to force some mergers and restrict startups. These are short term difficulties but will not impair long term aviation growth.

China is one of the key growth markets for the medium/long term and the forecast fleet growth rate is over 7.5% over ten years. In order to cope with the traffic growth led by an enlarged middle class, the increasing international routes and up to 90 new domestic airports being built or planned, the jet fleet is forecast to grow from some 1,300 today to some 2,720 in 10 years. China will account for 15% of global deliveries. From an 8% share of the jet fleet, China will rise to 11% over 10 years.

Passenger narrowbodies today make up 82% of the Chinese fleet, reflecting the large domestic networks which are centred around the Golden Triangle of Beijing, Shanghai and Guangzhou. This fleet of almost 1,100 will expand by over 90% over ten years to 2,100, some of them assembled and built in China (A320s and C919s) The average size will stay around 146 seats. Of the expected 1,400 deliveries, 65% will be for expansion purposes, the remainder mainly replacing earlier MD-80, 757 and 737 Classic fleets and older A320s and 737-NGs.

The locally built C919 will enter service in 2016 on current plans and will join the A320 and 737 in meeting the large domestic demand.

The widebody fleet, which has expanded more slowly, will see more rapid growth in the next 10 years and almost triple to over 400, increasing their fleet share to 15%. As the international networks expand, more European and American cities will be linked to China by the longer range types like 777s, A350s and 787s. The latter, together with A330s will also be the core of intra Asian expansion and domestic trunk routes. Chinese outbound tourism is also increasing, as travel restrictions are lifted, which will spur long haul traffic.

China has been relatively slow to develop a network of regional feeders, with only around 100 aircraft, mostly 30-50 seaters and some 100 seaters currently used. However, the orders by Hainan for the Embraer 190s, are seeing the start of major expansion. The new Chinese built ARJ programme will begin deliveries in 2010 and at least 160 are forecast for the next 10 year period, growing the RJ fleet to 240, as there are many new small/medium airports being built for which RJs are ideal.

As China is such a major manufacturing centre, it has strong outbound cargo and the jet freighter fleet of a modest 69 today is forecast to rise to 230 over 10 years (slower than expected growth in the first five years), as local airlines take a much bigger share of the market. Some 50 new deliveries will be focussed on the 777 and A330, whilst 130 conversions will include some 767s, starting to serve intra Asian markets, increasing numbers of converted 757s and 737 Classics will be used domestically and 747-400s for long haul markets. 
 

Consolidation in the aviation industry has long been more a topic of conversation than a reality but slowly (often very slowly) it is starting to happen, at least in Europe and the US.

As the UK General Election approaches, David Todd has tried to analyse what each party would do for space if they won the election (or even just hold the balance of power).

 

Despite the recent economic downturn there have still been new airlines starting operations across the world during this time. The number of these carriers may have slowed a bit during the last 18 months, but there are certain signs that things are beginning to pick up. Reviewing the start-up data has shown that there are a number of airlines who are in the process of acquiring their very first aircraft. Of course, just because the first aircraft has left the paint shop does not necessarily mean they are about to start flying passengers around, but these are a few to watch out for.

Wednesday was a day for celebration in Ascend with the launch of the Aircraft Ratings product. Aircraft Ratings is a product that we hope will change the way you look at Ascend. It is an in depth and sophisticated way of looking at aircraft risk and is designed around the types of conversations and negotiations needed to ensure that capital keeps flowing into the aviation finance business. As a client-led product and one that has drawn from all parts of our business it has been a great experience for us to deliver the Ratings and to feel that we are getting closer to our customers through it.

Following advice from representatives of the British Space Industry, the Government of the United Kingdom has now formed a state space agency. Despite published advice to not use an unintentionally funny acronym, the Government has unfortunately decided to name its new space agency as the ‘UK Space Agency’ or UKSA for short.

At a customer meeting a few weeks ago I was asked what airlines were on my watch list this year. Apart from saying “everybody but nobody” I couldn’t think of a single name. As the industry enters another year of losses, how is it that we haven’t had more bankruptcies?

Over the past 3 days I've had the chance to present to two very different groups on the impact on the aviation industry of environmental regulation, particularly emissions regulation.  The first group, hosted by Berwin Leighton Paisner, was primarily attended by industry players; the second, hosted by Westminster Projects Forum, had an audience comprised largely of government and non-government organisations and academic advisors.

My presentations were roughly similar in scope and content: basically, looking at the potential financial cost burden (and resulting risk) imposed by the EU's Emissions Trading Scheme (EU ETS) once aviation starts trading carbon allowances in 2012. Central to my presentations was some analysis that showed carbon trading prices adding about 1-5% of the average cost of a typical round-trip ticket: a relatively small percentage, it's true, until you look at it in the context of an industry that enjoyes profit margins in the best years (if at all) in that sort of range.

What was really eye-opening for me was this: when presenting to industry players, you could see the potential size of the cost burden hit them right between the eyes. On the other hand, the "so what?" scepticism of the government/NGO crowd's response was palpable in the room. There was a lot of talk of so-called "demand management" - whether in terms of artificially rationing flying by setting per-person flight "quotas" or by raising ticket prices so high that people stop flying. Chilling stuff.

And it underscored the size of the gulf in terms of understanding of the industry that exists between those inside the aviation industry, and those outside it - and how high the stakes are to bridge that divide, as aviation's fate is to a great extent shaped by those outside the industry.  As one attendee at the Westminster Forum presentation asked me pointedly: "what's so special about the aviation industry? If we have to cut our emissions dramatically to limit global warming to 2 degrees, then everyone has to do their part!" And it's a question that we inside the industry are going to have to do a lot better job at answering than we have done up to this point.

So how do we do this? Well, for a start, by engaging on the issue.  The industry has been largely put on the defensive, having been caught blindsided in Europe.  This has allowed the debate to have been cast as an "us versus them" - with aviation clearly marked out as the guy in the black hat and long twirling mustache in the mind of the public and the governments beholden to them.

It's true that this debate is largely Europe-centred: certainly in many developing regions, the issue isn't even in the kitchen, let alone on the back burner. But European perceptions changed breathtakingly swiftly in the past decade, and the global movement only appears to be going one way: towards greater environmental consciousness, not less. To me it seems simple prudence for non-European carriers to learn from the PR mistakes that their European counterparts have made, and be proactive where they still have the chance.

Engaging the issue means stepping up and telling the story of the benefits that aviation brings in terms of international development, social mobility, and trade. It also means telling the story of the incredible improvements in efficiency over the past 50 years. And it means doing everything possible to highlight areas where the industry is being held hostage to lack of political will: air traffic management is a key area where dramatic improvements in routing efficiencies could be made practically overnight.

And finally, engaging the issue means not shirking aviation's collective responsibility to the environment - recognising the impact, and taking steps to reduce it. Otherwise, others outside the industry, who don't see us as "special", will do it for us.

Business travellers are expecting to fly more often over the coming year, and predict increases in their travel budgets, according to Ascend's third annual Corporate Travel Survey.

After the recent announcement by the Government of the United Kingdom that an official British Space Agency is to be formed, a competition is to be held to name this new space agency.

The United States of America has its National Aeronautics and Space Administration, more famously known as NASA, while Europe has its European Space Agency (ESA) and Japan has the Japan Aerospace Exploration Agency (JAXA). So just what should the British version of NASA or JAXA be called? There is, of course, large scope for confusion, embarrassment, and even cynicism in using any such acronym, but Ascend’s space team is here to help!

After waiting several months the first ATR72 for BQB Lineas Aereas has just been delivered from France down to Uruguay. Legal issues had delayed the carrier from starting operations last year. In 2009 we got to see Fuji Dream, AviaNova, FlyDubai, V Australia, Eastarjet and AeroLogic all start up operations. Who can we look forward to seeing take to the air for the first time in 2010?

By Paul Sheridan - Head of Risk Advisory EMEA, Ascend

The Dublin Air Finance Conference always serves as a good barometer of where we are in the cycle and this year was no exception. The more upbeat were trumpeting the record attendances, the banks with money to lend and the number of start up lessors there to explain their business plans. The less optimistic in the crowd were quick to point out that there was no sign of a bottoming out of airline losses, that banks still didn’t have enough money to go around and that most the new lessors still hadn’t done a deal. An even divergence of opinion like that probably means that things probably aren’t getting any worse but we shouldn’t be ordering the cases of champagne just yet.

It’s hard to avoid and even harder to ignore the news came this week that Tiger Woods the global phenomenon, sports star and overall great guy wasn’t that great. Everyone’s inner gossip went wild with Tiger’s loose morals and looser belt which have meant that his reputation and marriage hang in the balance. The question reverberating around the world is will he still be marketable and will he lose his endorsements? Well in the airline industry he’s apparently more marketable.

This week came the news that the saviour of Irish Aviation Michael O’Leary would be staying at the helm of Ryanair for a further two to three years. I’m sure those who have taken his flights, some even to the same country than that of their hotel will all breathe a huge sigh of relief…

As the ISTAT 737 Express left London for the Dubrovnik European Conference one paused for thought as to what would happen if the aircraft became a Paul Hayes Total Loss statistic with nearly 50% of the conference onboard. Thought nearly became reality when Captain McDonald was forced to circle the Croatian Airfield for what seemed an eternity to let the bad weather shift on to neighbouring Bulgaria.

The conference got off to a cracking start (literally) with some of the most spectacular thunderstorms the Dalmatian coast has seen recently. Over a month of drought was brought to a close yesterday evening as we enjoyed catching up with acquaintances and colleagues, old and new, at the opening reception. The turnout was so healthy that there were at least 4 incidents involving trays with glasses on that I counted. This was testimony to the limited room available for manoeuvre; such was the amount of delegates in attendance. Crashes (both natural and man-made) heralded the start of proceedings.

Air Finance Journal’s Middle East and Africa Airfinance Conference was a useful opportunity to gauge the mood within the region – although frankly the representation from Africa was limited to a handful of airlines and 1 bank. Some might say this kind of ratio mirrors the general debt chasing situation pretty well.

With the Cargo Facts Symposium in Seattle just around the corner I thought it would be appropriate to share a bit of ad-hoc analysis I’ve been looking at around the freighter market. In reaction to the current downturn (and off the back of the widely discussed theory that freight recovers ahead of passenger markets) and the reported softening in demand contraction in both the passenger and freighter market, one of the items we’ve been looking at has been the freighter market and how it compares to the passenger market.

NASA has become famous in recent years for spending a lot of money on a space project and then scrapping it before it comes to fruition. In some cases this was the wrong choice. However in some cases it made the right call. It is the amount of money wasted that is the problem. For example some US$2 billion was wasted on the X-33 suborbital aerospace plane – the final death knell being a failure of its new composite fuel tank in a test. Before that US$1 billion was wasted on the NASP – National Aerospace Plane – a technology that was never going to work. Sadder loses were the Orbital Space Plane – a mini-shuttle that could have been the answer to NASA’s current space vehicle shortfall (some US$2 billion was spent on that). A further US$3 billion has been spent on Ares 1 with little to show except technical problems. There were other less expensive but still wasteful projects including rocket engines that were never built and projects investigating reusable vehicles. But as the White House considers whether to scrap the Ares I & V launch vehicle elements of its manned Project Constellation plans, those that remember those cost-cut-driven decisions of the past will be fretting about the future. But are they right this time?

Not many people think that starting an airline is a good idea, particularly in 2009. But what if you are trying to start an airline, which does not even intend to take off? Some might think you’re mad, while others might realise that actually it is all a scam.

While the Government of the United Kingdom would like to have a British astronaut land on the Moon as part of NASA’s Project Constellation, they now find themselves too cash strapped to invest. But do not fret. In a world exclusive, Ascend can reveal that there is already a Union Jack (more correctly known as the Union Flag) on the Moon. This is not because, like the plot of the 1964 film treatment of H.G. Wells’ The First Men in the Moon, some Victorian British astronauts got there first. Actually, it is due to a British engineer cheekily sneaking a bit of ‘Union Jack’ graffiti onto Apollo 11’s experimental equipment.

Gary was one of the opening presenters at the recent Air Finance conference in Beijing and reports on some of the event’s highlights

The session was opened by Garry Burke, CEO of Pembroke; he noted that the “balance of power is shifting from West to East” when it came to the aircraft finance market. This was a recurring theme throughout the conference, particularly when it comes to the lending activity of Chinese banks to Chinese operators – interest in seeing that activity expand internationally is extremely high, not surprising given the financial squeeze that has characterized the international banking industry in the past year. However, the Chinese market and Chinese tax / regulatory structure are quite different to the West, and so it remains to be seen how quickly Chinese banks will become major international players in the aircraft finance arena. Furthermore, given the collapse of international trade flows, China’s export-oriented economy is giving increasing focus to its huge domestic market – from an air transport perspective, the contrast between domestic and international travel in China is stark, with domestic travel showing recovery while international travel remains weak.

Business Jet Transactions Down Since 2007

Whilst talking to anyone in the business jet sector you’ll learn quickly that the number of deals has declined year over year. The graph below details the number of transactions done, one of the most important indicators on the business jet market dashboard.

The quietest Paris Air Show for in memory finally drew to a close on Thursday with a last minute LoI from Wizz Air of Hungry for 50x A320's. That the largest order came at the close is as telling as the storm that accompanied the opening ceremony itself. Whilst people spoke of money being available for deals again, and the mood was generally upbeat, the order totals versus previous years was still well down. Take Airbus, effectively on home ground, and traditionally very strong at the show managed to register 56 firm orders vs. the 2007 firm total of 375. The widebody / narrowbody split was telling as well, with the only firm widebody order announced being the long awaited order from AirAsia X for 10x A350 XWB's, and if we were to do the split geographically then we'd be looking at the lion's share of the orders coming from the Middle / Far East, with just a single A319 ordered by Aigle Azur to keep Europe in the picture. Regional Jets and TurboProps fared slightly better in Europe, with orders from Air Nostrum for a mixture of CRJ-1000 NG's and ATR 72-600's, Olympic ordering Dash 8-Q400 NG's and KLM Cityhopper placing an order with with Embraer for Embraer 190's. Boeing on the other hand fared slightly worse, only announcing an order for 2 aircraft, 2 737-800's for MC Aviation Partners/Mitsubishi Corporationvs, vs. 66 firm orders in 2007. Although the temperatures had risen for the close of the show, the skies over Paris were still overcast until later in the evening, when analysts and journalists were long gone and trying to put meaning to the firm order total standing at 134 aircraft, vs. the 1135 aircraft last time around.

The last Paris Air Show saw 660 firm orders, with the total reaching 1135 if you add in LoI's and Options. Airbus received the lion's share with 375 firm orders, 735 if you add in LoI's and options, Boeing however received 66 firm orders and no LoI's or options. 

There have been a lot of questions raised over the need for a new ultra large widebody aircraft right from the inception of the A380 concept. It took Boeing a long time to agree that there was a need beyond the 747-400 and proceeded to develop the 747-8. However, the 747-8 has failed to gain any support beyond the launch customer Lufthansa, which again puts in questions the world’s demand for the largest passenger aircraft.

The European Space Agency (ESA) has named a 37-year-old ex-British Army Apache helicopter gunship pilot as one of its six new recruits to its astronaut training programme.   Major Timothy Peake now works for Augusta Wesltand after serving in the Army Air Corps as a test pilot.  His appointment was announced after a selection competition. Major Peake was one of six astronauts selected.  The others were Italian Samantha Cristoforetti, German Alexander Gerst, Dane Andreas Mogensen, Italian Luca Parmitano and Frenchman Thomas Pesquet.

I wanted to take the chance to put up a few graphs that do a great job of displaying the difference between older and newer technology, specifically, I wanted to show the relationships between values and lease rates, and how aircraft near the beginning of their useful lives behave differently to those near the end.

From the 215 entries on the Ascend start-up airlines spreadsheet, two of the companies are to be located in Morocco. One of them will be created by an airline from inside, and one from outside the country. But both are hoping to make the best of the opportunities available to them from the North African nation.

The aviation industry has seen and been a part of some of the most powerful and exciting developments that have helped create what is today a global economy. As part of the aviation industry Ascend has seen the development of the 747 and the A380, the creation of route networks that circumnavigate the globe, and who knows how many business cycles. What we haven’t seen, but now find ourselves in the midst of, is a business community that is becoming increasingly aware of, and active in dealing with the issues that affect our world, the parts outside of P&L statements. I say this not to belittle the accomplishments of companies that take every step possible, down to insisting upon duplex printing or recycling, but to underline the increasing visibility of green projects in our industry.

Recent management changes at Air Canada, including the return of Calin Rovinescu as the new President and CEO, have set off a swirl of speculation regarding the company's strategic vision and business plan. Mr. Rovinescu made his mark at the Air Canada during in the early 2000's, notably in the role of Chief Restructuring Officer. He was the architect of the airlines current corporate holding company structure and the key company negotiator in bankruptcy restructuring. Now that he has returned, industry analysts are pondering the implications for Air Canada.

There were close to 1000 attendees at the ISTAT 26th Annual Conference in Scottsdale, and it seemed as if each had their own unique set of challenges. While airlines, publicly traded lessors and banks could all cite weakened balance-sheets, broken business models, devastating spikes in the cost of inputs during 2008, and uncertain near term business prospects, there was little consensus on what the commercial aviation industry should expect to see in 2009. And so the conference began with the confessional mood of a 12-Step Recovery meeting where all attendees stand up in turn to declare, " I am a [CHOOSE ONE: O AIRLINE O LABOR UNION O LESSOR O OEM O OEM SUPPLIER O BANK] and I have a problem."

It is not a good time for the airline industry currently, nothing new, and there are still a number of new airlines with plans to start-up operations. 2008 saw more start-ups than failures and there is no real reason to doubt that will happen in 2009.

Now that governments are starting to employ so called ‘quantitative easing’ (printing money to buy assets) that threatens to begin an era of ‘stagflation’ (economic stagnation AND inflation),  I have to ask how we came to this?  While executives’ bonus targets, financial deregulation, credit rating errors and the ‘gambling instinct’ of bankers have all been blamed for the credit crunch and world economic downturn, there could be other causes. 

For western jets, announced cancellations and deferrals combined equated to 12% of the number of orders placed in 2006, 6% in 2007, rising to 20% in 2008 and this year to date is running at 242%.

Recently I'd decided that it was high time I went to visit a friend of mine in Barcelona, a beautiful city I'm sure you'll agree. Working at Heathrow as I do, a flight from here on a Thursday night, returning on the Sunday night seemed like the perfect option. However, on checking my bank account it seemed like taking an LCC was a better option and a check again later before I booked the ticket confirmed that walking was my only option.

Manufacturers Backlog

Investors are paying close attention to the Airbus and Boeing backlogs, with particular attention being paid to their vulnerability.  A few months ago we had stated that there was potential for as many as 200 white tails to be produced throughout the duration of the downturn, largely depending on how bad it gets and how long it lasts.  In fact, we weren’t the only ones saying this. That said I thought it would be useful to highlight some of other the key dynamics of the two biggest manufacturers backlogs that could also factor into the “white tails” equation.

Air freight has long acted as a bellwether for passenger traffic, with trends generally appearing in the freight sector around a year before they’re seen in the passenger sector. Although not an exact science, the freight sector acted as an early warning that the current downturn was around the corner. As we go through the current cycle its likely that air freight, which is so closely tied to the business cycle, will signal further declines, and eventually an upturn in global trade.

“True care, truth brings - I'll take, one lift - Your ride, best trip.” It was this first verse of the above titled Blink 182 song which came to mind as I was arriving in to JFK last week, some 5 hours late.

I must admit I was quite laid back about the whole situation; however, what had dawned on me was what a difference the small things really do make to passenger decisions. Going further than just providing the mandatory £5 refreshment voucher for a delay, as a for instance.
 

Heathrow has received a go ahead for its third runway from the Government: an issue that has been debated for decades. Arguments are so varied that it’s very hard to judge whether it’s right or wrong to have an extra runway. But I would like to share some of my views based on my limited knowledge and experience.

China has seen tremendous growth in all sectors over the past decade, the airline industry and the sectors around it being no exception. The graph below shows the percentage growth in the in-service airline fleet in China as compared to the percentage growth in the global airline industry. The notable trend here is that between 1999 and around 2003 the two seemed to be moving similarly, around this time the Chinese fleet bottomed out at around -2.0% growth.

With the departure of Qantas flight 31 from Sydney to London via Singapore on 16th January, Heathrow becomes the only airport which handles scheduled Airbus A380 flights from all three of the aircraft types operators.

Last year was clearly one of the worst the industry has ever experienced. For many airlines it was a tough operating environment to be in. For some it was too tough. Airlines cease trading on a regular basis. However because of the higher number of casualties and because of the bigger name airlines amongst them, 2008 was a real shock to the system.

2008 Overview

While dismal holiday shopping numbers, growing unemployment and bank profit warnings are taking all the wind out of the highly touted New Year rally, most of the US economy is left to look only to the “Obama Bounce” for their next bit of hope. But somewhere between the fuel spike in the middle of 2008 and the financial paralysis that began later in the year, the U.S. airline industry, seemingly as a whole, made the right moves.
 

As a child I grew up next to Blackbushe airport. It’s not the biggest airport in the world; more of an aerodrome, but it has an illustrious history going back as far as the Second World War and was once London’s second airport.

It is my first day back at work. This is always a good time to look back and to look forward. Around this time last month I gave my friends a copy of my top choice as business book of the year, Snowball, the authorized biography of Warren Buffet. It is a cracking read but a bit of a tome. I suspect many of my friends drank the bottle of port that accompanied my gift and are now using Snowball as a door stop. This would be a shame. Although Buffet would claim he is not in the advisory business, there are few others who have been so mostly right over so many years.

Although the industry is suffering at the moment, some airlines are successfully battling the downward economic trend. There are still new opportunities out there that airlines are hoping to exploit and earn revenue from.

Overview

Much like with our previous analysis of narrowbodies, this feature looks at the 767-300ER and A330-200 widebody aircraft, and compares their percentage decreases in value. For the 2008-built aircraft values, the graphs show a decrease in value since January 2008, while the 2000-built aircraft decreases run through to the latest values (as of November) and are based on the October 2007 values, so as to keep them in line with the narrowbody data from two weeks ago.

Early last year I had the chance to visit Taiwan, and more specifically Taipei. It’s a fascinating city populated by wonderful people but unfortunately my trip was all too short and soon I had to leave. My flight out to Seoul left during the morning so I headed out to Taoyuan airport nice and early. Check in and security was a breeze and I was soon sat, coffee in hand, watching the world go by.

There has been no shortage of serious talk this week in Hong Kong at a series of aviation events which have included the annual Asia-Pacific Airfinance Conference, not least of which has been ongoing discussions about the industry’s ability to fund the commercial aircraft scheduled for delivery in 2009.

Overview

Ascend is constantly monitoring Market Values (the ‘spot’ price an aircraft will sell for) and as the aviation downturn starts to bite, many aircraft types have seen their values falling.

This week I’ll take a look at narrowbody values, with widebody values to follow next time.

The recent AFJ conference in Dubai provided a good gauge of the state of mind of the region’s aviation players – both those based there …and those along for the ride.

The latter group includes many of the seasoned finance players Ascend knows and loves, or at least quite likes. The finance panel was notable for its dominance by the international rather than locally based players, with Barclays, BNP, Citi, Natixis and Standard Chartered dominating proceedings, and Bahrain’s United International Bank the only ME based representation.

Well I’d like to challenge that. This article aims to help you understand the aircraft enthusiast. To try and provide a better understanding of what we do. Not just the members of Ascend’s Aircraft Data Team but aircraft enthusiasts the world over. Welcome to Spotters 101…if you like.

Like father like son is an old saying and sometimes sons follow their fathers into their professions. Millionaire computer games designer, Richard Garriott, has now followed his father into becoming an astronaut as he was launched to the International Space Station on SOYUZ TMA-13 on 12th October. But while his crewmates U.S. astronaut Mike Fincke, Russian cosmonaut Yury Lonchakov of the flight from the Baikonur launch site in Kazakhstan did not have to pay for the pleasure, Garriot is reported to have paid around US$30 million for his ten days in orbit.

Richard Garriot’s father, Owen Garriott, was a NASA astronaut from 1965 to 1986. During this period he carried out two space missions: one to America’s first space station SKYLAB in 1973 and one on a Shuttle SpaceLab mission in 1983. But while there has been a lot in the press about Garriott being the first second generation "astronaut" to fly in space, this is not actually true. In fact, the first second generation spaceman was already in orbit when Richard Garriott was launched. The current commander of the International Space Station, Cosmonaut Sergey Aleksandrovich Volkov, is the son of Cosmonaut Alexander Volkov, who joined Russia’s cosmonaut corps in 1978 and retired in 1998. During that time the older Volkov carried out three space missions,SOYUZ T-14 in 1985, SOYUZ TM-7 in 1988 and SOYUZ TM-13 in 1991.

Sergey Volkov and Richard Garriott along with cosmonaut Oleg Kononenko are expected to return to Earth on SOYUZ TMA-12 on 23rd October. And their proud fathers are expected to be close by to greet their boys home.
 

And another one bites the dust. Hansung Airlines, the South Korean carrier operating 4 ATR72s from Jeju to Seoul and Cheongju has effectively run out of funds and decided to suspend services, cancelling all flights on Saturday. Hansung reportedly owes the airports and its employees about a billion won, and debts were approaching 30 billion won (US$23 million) earlier this year.
 

Based on US airline reporting for the second quarter of 2008, six key Network carriers in the US carried 6% less passengers when compared to the second quarter of 2007. At the same time, available seat miles (ASMs) were only 4.5% less, meaning that passenger numbers were falling faster than seat miles were being taken out of the market. ASMs did not go down enough. Net result is Load Factor fell 0.8%. That's not really a good thing.

Could Low Cost save the day? The four key 'low cost' carriers recorded an increase in passenger numbers of 2.9% (now that's promising). However they also recorded an available seat mile (ASM) increase of 5.4%, meaning seat miles were being introduced faster than they could fill them. ASMs went up too much. That's probably a bad thing. Load Factor went down 0.95%

We all know how 'interesting' the third quarter 2008 has been. I don't think we are going to see any improvement, or any light at the end of this particular tunnel. In fact, as one observer put it recently, it is likely to get worse before it gets bad. US airlines are losing the race to remove capacity. Their saving grace would be a continued easing of fuel prices. Capacity will be less of an issue if the yield per passenger has a chance of improving. Assuming the passengers are still there in sufficient numbers of course.
 

YOUR QUESTIONS ANSWERED.

What is the outlook for the 767-300ER in light of tanker uncertainty?

The US Air Force tanker decision is a military matter and has no bearing on the market for airliner 767s, what it will determine is how long the 767 family stays in production.  Boeing is to build more 767-300ERs for JAL and ANA in 2010 to cover for 787 delays, but these are likely to be amongst the last off the line for the passenger version.

That said, the real story behind the 767-300ER at the moment is secondary demand.  Six months to a year ago it was difficult to find an available airframe, today there are 24 parked and to be placed.  Despite the delays to 787 deliveries, there is now overcapacity in the 300ER market.

Over 400 industry players gathered in Prague on the 5th October for the 15th ISTAT European conference. After a Sunday night of festivities hosted with aplomb by Erste Bank, the conference on Monday began against a backdrop of Black Monday 2, the sequel, as global stock markets nosedived led by the finance and commodity sectors.

The Market Defined

Business (or corporate) aviation is one of the most important segments of general aviation.  The universe spanned by purpose-built business jet types is quite wide, ranging from small, four-seat, short-range aircraft to large business airliners that can carry up to 19 passengers 7,000 miles nonstop – and of course, even larger commercial jets, all the way to the A380 can be, have been, and will be converted to corporate usage.  For the purposes of this article, we will restrict our view to purpose-built business jet types.  These fall into several fairly distinct categories (although the classification is not always neat), outlined below:

Once again, the US airline industry is facing significant challenges. Whatever the criticisms of the U.S. Chapter 11 options, it provided an umbrella for several of the Majors to reinvent their businesses over the 2002-2005 period. As a result of restructuring measures taken whilst under this protection, costs were slashed, productivity increased and overall profitability was restored (albeit briefly). This success inevitably came at a price, both for staff who found their terms and conditions significantly eroded; the travelling public, who found falling service levels, fuller planes and rising fares; and shareholders who found much of their investment destroyed.

Given the events of the last 48 hours Ascend believes this synopsis of the ILFC fleet will be of interest. We have provided a brief breakdown of the ILFC fleet by aircraft type, by region, and by top 20 operators. Additionally, we have used data from our Ascend Online Fleets and V1 databases to approximate a generic half-life market value for the entire fleet.

While most major airlines in the world’s largest aviation market continue to struggle through a period of economic uncertainty, it’s important to examine the overall growth and contraction of different sectors of the global aviation industry.

For those aviation-anoraks out there, there are always a few trick questions that can be asked of you. For example, during an interview for a job, I was once asked what was the fastest passenger aircraft in World War II? I started by reciting all the WWII passenger aircraft I knew, - ruling them out as I went…….the Handley Page HP-42, the Armstrong Whitworth Ensign, the Junkers Ju 52-3M, the Douglas DC-3, the Curtiss C-46, Focke-Wulf FW-200 Condor etc.