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At the Paris Airshow, Wizz Air signed a MoU with Airbus for the purchase of 110 Airbus A321neo aircraft, with deliveries to start in 2019, and uncommitted purchase rights over an additional 90 A321neo aircraft. The order is subject to a final purchase agreement and approval by the shareholders of Wizz Air, which listed on the London Stock Exchange earlier this year.
Such approval is typically forthcoming and the new aircraft should provide significant unit cost improvements. Nevertheless, Wizz Air's order is very large compared with its size today and follows large orders for narrow body aircraft in recent years for other leading European LCCs, including Ryanair, easyJet, Norwegian and Vueling (the latter as part of an IAG group order).
Norwegian has admitted that it may not be able to use all of its planned aircraft and Wizz Air's order now provides an opportunity to review the data on the number, and types, of narrow bodies on order in Europe. Narrowbody deliveries to Europe look set to rise, at a time of rising global deliveries. Success is not guaranteed for all. Meanwhile the expanding role of LCCs in both leisure and business markets continues to undermine the positions of legacy airlines on short haul routes.
On 26-Jun-2015, the US Congress went into a recess without having approved a renewal of the charter for the Export Import Bank of the United States (Ex-Im Bank), the country’s export credit agency. Congress doesn’t return to session until 08-Jul-2015, forcing a hiatus of at least a week on further Ex-Im Bank financing activities.
When the bank's Congressional funding authority expired on 30-Jun-2015, it became unable to undertake new transactions. Existing financing – some of it stretching out as far as 18 years – will continue unaffected, but new activity will effectively cease.
This is the first time in the bank’s 81-year history that it has been forced to suspend its lending activities, even on a temporary basis. Once a source of bipartisan unity, the Ex-Im Bank has fallen victim to Tea Party activism, ideology and the increasingly acrimonious nature of US politics. It is hard to see who wins from this silliness.
Royal Brunei Airlines focuses on regional growth as restructuring phase ends, new 5-year plan begins
Royal Brunei Airlines is preparing a new five year business plan which will see it pursue expansion of its regional network within Asia-Pacific. The government-owned flag carrier, which recently celebrated its 40th anniversary, enters a new chapter after completing a restructuring and renewing its widebody fleet.
Royal Brunei (RB) is now evaluating several potential new destinations for 2016 and beyond. Expansion will be made possible mainly by a larger narrowbody fleet, which will grow from six to nine aircraft in the new five-year plan, as well as the delivery of a fifth 787.
The focus will be on expanding regional operations within Asia as RB is unlikely to expand its long-haul network despite performance improvements following the transition to 787s. But the new A320neo fleet will open up opportunities for new medium-haul routes to Australia, South Asia and North Asia.
SAS narrowed its underlying loss in 2QFY2015, after stripping out the gain on the sale of two slot pairs at London Heathrow. The Scandinavian airline is enjoying a more benign capacity environment this year, particularly in short and medium-haul markets, and is cutting its own capacity. This allowed it to grow its unit revenue at a faster pace than its unit cost, prompting a modestly more positive outlook for FY2015.
Although SAS has invested in product improvements and is growing its revenues from members of its Eurobonus scheme, low cost competition in Europe is making short-haul markets increasingly price-based. FY2015's positive unit revenue conditions may not last, especially within Europe.
Looking into 2016, SAS is planning to return to capacity growth, through long-haul expansion. It is looking at adding further long-haul aircraft to its fleet, beyond the four A330s and eight A350s currently on order. However, competition on long-haul markets is also fierce.
Indonesian flag airline Garuda Indonesia is resuming international expansion as it takes its last batch of four 777-300ERs and acquires 30 787-9s along with 30 A350s. The expansion comes as Garuda's outlook improves after a challenging 2014, which led to a restructuring of its international network and a hiatus from international growth.
The additional 777-300ERs will support international capacity growth in the near-term, including more capacity to Saudi Arabia in 2H2015 and new services to Frankfurt and Paris in 2016. The 787-9s and A350s will partially be used to replace Garuda’s fleet of A330s from 2020 but will also enable further growth of the carrier’s medium and long-haul networks.
Meanwhile Garuda is adjusting its widebody fleet plan by opting not to include a first class cabin in its additional 777s, although at least for now it will maintain a first class product in its original fleet of six 777-300ERs. Garuda also plans to remove the business class cabin on six A330s, giving it an all-economy product similar to the A330s operated by low-cost rivals Indonesia AirAsia X and Lion Air.
Philippine Airlines (PAL) is leasing two additional 777-300ERs and is looking to acquire four to six new-generation widebody aircraft, most likely A350-900s. The group’s new widebody fleet plan envisions phasing out six recently acquired A340-300s over the next three years while also potentially pursuing relatively modest long-haul growth.
PAL is keen to offer a standard product across its long-haul operation, which currently consists of one destination in Europe and five in North America. Los Angeles and San Francisco could transition to an all-777-300ER operation by the end of 2016, while A350s could be used to introduce non-stops to New York, which was launched in Mar-2015 with service via Vancouver.
PAL is also planning to standardise its A330-300 fleet by retrofitting the eight aircraft which currently are in all-economy configuration. PAL may sublease two of its 15 A330-300s but growth of the medium-haul network could still be pursued using A321neos.