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Aircraft deliveries to accelerate in 2011. Led by Ryanair, Air China and Turkish Airlines

27-Jan-2011

Aircraft deliveries are set to accelerate in 2011, with more than 1,400 aircraft scheduled for delivery this year, up from 1213 in 2010. Fleet expansion will be led by Ryanair, Air China and Turkish Airlines, all of which will take delivery of more than 30 aircraft by the end of 2011, based on Ascend data. Asian carriers will take delivery of the most aircraft of any region, as was the case in 2010, followed closely by Europe. LCCs and carriers in emerging markets are driving the expansion trend.

Aircraft deliveries for 2011 by airline: Top 40^

1,400+ deliveries scheduled for 2011

According to IATA in its Nov/Dec-2010 Financial Monitor, released in Jan-2011, 1400+ deliveries are scheduled to the world's airlines for 2011, equating to just under 120 per month. This highlights an acceleration of the global fleet, following just under 100 aircraft deliveries per month in 2010. IATA added that aircraft utilisation rates are now returning to more normal levels which will likely further push up overall rates of capacity growth in the year to come.

Airbus delivered a record 510 aircraft in 2010 and booked 644 gross and 574 net aircraft orders while Boeing delivered 462 aircraft, slightly ahead of its target and reported 625 gross and 530 net orders.

See related report: Aircraft orders and deliveries review 2010 and 2011 outlook: Airbus, Boeing, Embraer and regionals

Asian carriers to receive 32% of 2011 deliveries. Europe 31%

Asian carriers will take delivery of the most aircraft in 2011 with a 32% share of total, or 452 aircraft to be added. Europe follows closely behind with a 31% share of the 1416 aircraft scheduled for delivery worldwide in the year. North America has a much smaller 11% share of total orders.

2011 aircraft deliveries due by region

North America to see reduction in deliveries in 2011 from 2010 levels. But fleet renewal ahead

All regions are scheduled to take delivery of more aircraft in 2011 than 2010, with the exception of North America which is scheduled to receive 157 aircraft in 2011 compared to 164 in 2010.

However, this will likely change in the years ahead, as US carriers renew their ageing fleets and streamline their mixed fleets – often as a result of consolidation activity. North American fleets are among the oldest in the world (at an average fleet age of 17 years), trailing only Africa and Latin America/Caribbean, but equal to Europe (which also includes developing nations in Eastern Europe).

Average fleet age by region

Region

Average Age

Africa

22

Latin America & Caribbean

20

North America

17

Europe

17

Middle East

16

Australasia

16

Asia

14

In mid Jan-2011, Delta Air Lines CEO Richard Anderson stated the carrier plans to order 100 to 200 narrowbody aircraft with options for a further 200 aircraft in an agreement that may become the largest in commercial aviation history (currently Jan-2011's MoU by IndiGo Airlines for 180 aircraft). A request for proposals went to “several” manufacturers in Dec-2010 and deliveries to Delta may commence as soon as 2013.

Meanwhile, Virgin America in mid Jan-2011 announced a firm order for 60 new A320 aircraft to be delivered 2013 to 2016, including 30 of the A320neo – the first commercial order for the new eco-efficient engine option. This formalises and expands an initial commitment made at the Farnborough International Airshow in Jul-2010. With this order and growth from other sources, Virgin America's fleet will more than triple, from 34 to 111 aircraft by 2019.

Meanwhile, Africa and Australasia will see the largest growth in fleet from 2010 to 2011: Africa deliveries will increase from 56 in 2010 to 93 in 2011 (for growth of 166%) while Australasian deliveries will total 51 in 2011, up from 34 in 2010 (growth of 150%).

Aircraft 2010 deliveries and 2011 deliveries due by region

Meanwhile, Middle Eastern carriers have significant fleet orders in the next few years. Emirates has the largest order book for widebody aircraft in the world and will require more than USD28 billion in financing through to 2017 -nearly twice the amount it raised since 1996. Airbus and Boeing together have outstanding orders for 137 aircraft from Qatar Airways, 103 from Etihad Airways and 200 from Emirates, according to Ascend.

Large number of aircraft orders creating large financing requirements

As always, aircraft financing remains a key concern for airlines, with many airlines having significant financing requirements.

Emirates, which has 12 confirmed deliveries for aircraft in 2011 and a total of 203 aircraft on order, this month stated it had raised USD4.6 billion in aircraft financing over the past two years amid tight lending conditions following the global downturn. The Dubai-based airline has successfully lined up credit to finance 30 widebody aircraft delivered during the period. Emirates, which will take delivery of two aircraft per month on average over the next six years, is reportedly seeking to borrow USD1 billion through a revolving- credit facility at present.

The issue of export credit financing

Emirates has been forced to hit back at its European rivals who are claiming the region's airlines have expanded through global subsidy. The overall share of aircraft deliveries covered by government guarantees more than doubled to 34% in 2009, according to Airbus and Boeing. Air France has stated the US Export-Import Bank arranged USD2.3 billion worth of financing agreement to Middle East airlines, a 200% increase from 2006 as export credit agencies stepped up assistance to foreign airlines during the global financial crisis. More than 100 airlines receive this sort of funding.

According to Emirates, in its "Subsidiary – Myths and Facts" document, of the USD22 billion in aircraft financing over the past 14 years, 13% (or USD2.9 billion) has come from US ExIm financing, with EU ECAs contributing 10% of the total financing amount (or USD2.3 billion), and that this ratio was “likely to remain in this range in the future”, according to the carrier. US Export-Import Bank Chairman and President Fred Hochberg similarly commented that “about 20% of the Emirates and Etihad fleets has been provided by export credit agencies both in Europe and the US”. He continued: “Some airlines have used us to a lesser extent and many have used us to a far greater extent”.

Emirates aircraft funding: Sources of financials over the past 14 years

Also in the Middle East, Etihad has issued requests for proposal (RFPs) to finance seven aircraft for delivery this year. The carrier plans to nearly triple its fleet within 10 years, will require USD13.3 billion from financial institutions.

IPOs on the rise

Other carriers and/or lessors, such as Air Nostrum, Lion Air, AerCap and Air New Zealand, have recently secured ECA financing for their aircraft. Air Nostrum secured financing for five Bombardier regional jets with ECA funded Spanish operating leases (SOLs), the first ECA SOLs arranged for regional aircraft. AerCap has mandated Citi for the export credit guaranteed financing of three A330-300s while Lion Air closed ECA financing for first of six ATR72-500s, for operation by its subsidiary, Wings. Air New Zealand, also in Jan-2011, secured a USD170 million term loan backed by US Export-Import Bank.

Meanwhile, a number of carriers that have large aircraft orders, such as Flybe and Garuda, have conducted or are conducting IPOs, to help diversify funding sources as the economic environment and equity market conditions strengthen.

Global airline share prices rose strongly during 2010, on aggregate ending the year up 28% over the 12 months, according to IATA. Share prices for US airlines were up more than 31% over this period, those in the Asia Pacific by 27% and European airlines by 21%. These are much greater rises than the 12% seen in the broader market Global All-Cap index, indicating that financial markets are taking a positive view on airline financial prospects.

Bloomberg Airlines Index: Jun-2005 to Dec-2010

A number of other carriers are also considering listing. IndiGo, for example, is considering an IPO to finance its recent USD15.6 billion aircraft order with Airbus for 180 A320s, while GoAir, also in the Indian market, is similarly planning an IPO to fund its fleet expansion. Meanwhile, AirAsia X is planning a European and Asian listing to fund its fleet expansion, with the carrier planning to triple its fleet to 35 aircraft over the next six years. Mesxico's InterJet and China's Spring Airlines are also considering IPOs in the next couple of years.

Many full-service carriers have shored up their balance sheets by a mixture of institutional capital raisings and stock issuances, as well as securing large amounts of reasonably inexpensive debt amid the global financial downturn. In 2011, a number of carriers, such as US Airways and United Continental, have announced aircraft financing plans through the offering of bonds, notes and/or trust certificates.

Ryanair – the world’s largest international carrier keeps on getting bigger

Ryanair, already by far Europe’s biggest LCC and the largest international carrier in the world, has 39 aircraft scheduled for firm delivery in 2011. The carrier plans to increase its fleet from 256 B737-800s to 299 of the aircraft type by Mar-2013.

The carrier handled a record 72 million passengers in 2010, representing growth of 10% from 2009 levels. Despite growth expected to slow to the single-digits in the years ahead, Ryanair is continuing its growth trajectory, at least over the next couple of years. The carrier expects to add 6.5 million passengers in FY2012 and 5.0 million passengers in FY2013, representing fleet and traffic growth of 28% by 2013.  

Ryanair fleet and passenger growth

FY to Mar

Total fleet

Disposals

Pax traffic

Pax growth

2010

232

-3

66.5m

+14%

2011

272

-10*

73.5m

+11%

2012

294

-3*

80.0m

+9%

2013

299

-10*

85.0m

+6%

Chinese airlines in ‘golden’ era for aviation. China to have highest number of deliveries in 2011

Air China, one of the "big three" Chinese carriers, has 35 aircraft scheduled for delivery in 2011, while its Shenzhen Airlines subsidiary has 19 aircraft scheduled for delivery this year. Air China is benefiting from the booming local economy and the population's rising propensity to travel. This has resulted in what many industry participants see as the beginning of a “golden” era for Chinese aviation.  

See related report: Chinese aviation industry generates record profits in 2010. Golden era ahead?

Air China fleet and fleet plan: as at 30-Sep-2010

Shenzhen Airlines fleet and fleet plan: as at 30-Sep-2010

Chinese airlines occupy nine of the Top 50 spots globally for total aircraft scheduled for delivery during 2011 - more than any other country. Hong Kong-based Cathay Pacific also ranks in the Top 20. USA has seven airlines in the top 50 spots, followed by Germany (3), Russia (3), Japan (2), India (2) and Brazil (2).

In Jan-2011, CAAC Vice Director Wang Changshun stated Chinese carriers would introduce 290 new aircraft and retire 67 aircraft, for a net increase of 223 aircraft this year, 13.9% more than 2010. Mr Wang added that the CAAC would support fleet renewal plans, but urged airlines to adjust fleet capacity to market demand. China’s aviation industry introduced 187 new aircraft in 2010, 40 less than initially forecast, for a total fleet of 1604 at the end of 2010.

Turkish Airlines to increase capacity by 29% in 2011. To add 32 aircraft to support growth

In Europe, fast-expanding Turkish Airlines has 32 aircraft on order for delivery in 2011. The carrier expects a 20% increase in passenger demand and a 29% capacity increase in 2011 and plans to add at least 11 new destinations to its network. Long and medium-haul operations remain the carrier’s priority, as well as increasing destinations to Europe.

The carrier expects to handle 35 million passengers in 2011, a third of them transit passengers, up from a total of 29.1 million in 2010.

During 2010, Turkish Airlines’ fleet reached 153 aircraft, with an average age of 6.5 years. 11% of the aircraft are owned, 49% are operating under financial lease and 41% under operating leases. The carrier, in its Dec-2010 investor updated, released the following fleet and capacity plans for the next five years:

  • 2010: 153 aircraft with seat capacity of 27,891 seats;
  • 2011: 175 aircraft with seat capacity of 31,911 (+14.7% year-on-year);
  • 2012: 186 aircraft with seat capacity of 34,127 (+6.7%);
  • 2013: 197 aircraft with seat capacity of 36,042 (+5.6%);
  • 2014: 201 aircraft with seat capacity of 36,790 seats (+2.1%);
  • 2015: 196 aircraft with seat capacity 36,100 (-1.9%). 

Turkish Airlines’ fleet: Dec-2010

ANA and Alitalia also rank in Top 5

Rounding out the global Top 5 is ANA, which has 28 aircraft scheduled for delivery in 2011 (including 15 B787s, although this number is expected to be reduced by further production delays).

ANA is aiming to fill the gaps created by JAL’s network restructure and downsizing as part of its bankruptcy rehabilitation, while seizing growth opportunities created by airport expansion in Tokyo. ANA, which has become the largest carrier in the Japanese market, operated a fleet of 228 aircraft at the end of 2010.

ANA fleet as at 31-Dec-2010

The number of aircraft actually delivered to ANA in 2011 could be under 20. ANA has confirmed it would receive at least nine new aircraft in 2011 (four B767-300ERs, two B737-800s and three DHC8-A400s) in addition to the B787 deliveries and retire nine aircraft (one B767-300, four A320s-200s, two B757-500s and two DHC8-Q300s) as it proceeds with plans to replace older aircraft, beginning with the retirement of the B767-300 on domestic routes. Retirement of the DHC8-Q300 will also commence and a gradual consolidation of aircraft to the DHC8-Q400 model will be implemented for propeller aircraft.

In Jan-2011, ANA commented that preparations are under way for the commencement of flights using the B787. Until then, more B767-300ERs will be added on international routes and B787-800s on domestic routes. The carrier stated "work is being done to secure production volume to meet the recent increase in demand".

Meanwhile, Alitalia has 26 aircraft expected for delivery in 2011, including 20 A320s and six A330s. With the addition of three new A320s in Dec-2010, the carrier has taken delivery of 21 new aircraft since Jan-2009, including two A330s for long-haul operations. The renewal plan of the Airbus fleet for medium and long haul operations will continue in 2011. The carrier had a total operating fleet of 150 aircraft at the end of 2010. 

Rounding out the Top 10 are easyJet (24), China Southern (22), Air France (20), Lufthansa (20), LAN (19) and Moska Air Company (19). 

Outlook: BRIC and LCCs continue to expand

LCCs and carriers in the emerging BRIC – Brazil, Russia, India and China – will continue to drive fleet (and capacity and network) growth in 2011, based on the number of aircraft on confirmed delivery for the year. Other key regions and economies seeing rapid growth prospects – such as Turkey and Latin America – are also boosting their fleets.

There were 14 LCCs among the Top 50 carriers by fleet orders for 2011, led by Ryanair (39), easyJet (24), Azul (17), airberlin (16) and IndiGo (14).  Meanwhile, there were 16 carriers from BRIC nations in the Top 50 list, led by Air China (35), China Southern (22), Moskva Air Company (19), Aeroflot (18), Azul (17) and China Eastern (17). 

Carriers from other emerging markets such as Turkey, Indonesia and Latin America, such as Turkish Airlines (32), LAN (19) and Garuda Indonesia (14), Lion Air (13) and Copa (14) are also expanding rapidly in 2011 while a number of the major network carriers continue to acquire aircraft as they add capacity back into their network in 2011 and replace their ageing fleets. 

APPENDIX:

Top 2011 aircraft deliveries by carrier^

 

Operator

2011 deliveries

1

Ryanair

39

2

Air China

35

3

Turkish Airlines

32

4

ANA

28

5

Alitalia

26

6

easyJet

24

7

China Southern

22

8

Air France

20

9

Lufthansa

20

10

LAN Airlines

19

11

Moskva Air Company

19

12

Aeroflot Russian Airlines

18

13

Azul

17

14

China Eastern

17

15

Korean Air

17

16

airberlin

16

17

Cathay Pacific

16

18

American Airlines

15

19

JAL

15

20

Qatar Airways

15

21

Xiamen Airlines

15

22

Garuda Indonesia

14

23

IndiGo Airlines

14

24

UPS Airlines

14

25

Air Nostrum

13

26

KLM Royal Dutch Airlines

13

27

Lion Air

13

28

Norwegian

13

29

Southwest

13

30

Tianjin Airlines

13

31

Emirates Airline

12

32

Hainan Airlines

12

33

Malaysia Airlines

12

34

US Airways

12

35

Continental

11

36

Lufthansa CityLine

11

37

Niki

11

38

Saudi Arabian Airlines

11

39

Sichuan Airlines

11

40

Virgin Blue Airlines

11

41

Copa Airlines

10

42

FlyDubai

10

43

Polet

10

44

SpiceJet

10

45

TAM Linhas Aereas

10

46

WestJet

10

47

Frontier Airlines

9

48

JetBlue Airways

9

49

Okay Airways

9

50

Shenzhen Airlines

9


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