Aircastle Bets on Narrowbodies
Aircastle says the fundamentals of air transport remain strong and the industry will return to growth, although the company didn’t hazard a guess when that may be. Until growth returns, though, the lessor believes airlines will be looking to add new, fuel-efficient narrowbodies for short-haul and regional missions.
“Things are moving in the right direction,” CEO Mike Inglese told analysts last week during the lessor’s fourth-quarter and full fiscal-year earnings call. A sign of this is the lessor has seen deferrals “stabilize,” he said.
Airlines that have larger domestic and regional networks are looking for new narrowbodies and will lead the recovery, Inglese said. With the near collapse of international travel, widebody demand remains depressed and is likely to stay low for the near- to medium-term as the market sops up existing widebody aircraft, he said.
But the near-term picture is far from rosy. The pace of vaccinations is uneven and not as far enough along as was first predicted. Travel bubbles have not worked as well as they were expected to. No global consensus exists to lift travel restrictions, and airlines are hampered by a confusing array of travel restrictions, making it difficult to plan. It remains “ambiguous” whether airlines will be able to capitalize on the upcoming peak summer travel season.
Regionally, Inglese said Southeast Asia is perhaps the most challenged. Singapore hasn’t recovered as much as was expected, and other countries in the region are closing down or are suffering new outbreaks of the coronavirus. “Southeast Asia is progressing a lot slower than everyone would like,” Inglese said.
The lessor, which was taken private last year and is now owned by Mizuho Leasing and Marubeni, has placed 18 of the 25 Embraer E195-E2s it has ordered, 15 of those with KLM. The company ended its fiscal year with 252 aircraft, primarily narrowbodies.
Aircastle reported a fiscal fourth-quarter loss of $96 million on revenues of $198 million.
- Delta Air Lines exercised 25 Airbus A321neo options last week, upping its firm commitment for the re-engined jet to 125 aircraft plus another 100 options. Its first A321neo will arrive in the first half of next year. In addition, Delta moved up three widebody deliveries — two A350-900s and one A330-900 — to the second half of 2022.
- Aeromexico is adding 28 aircraft to its fleet, in a newly announced deal with Boeing and lessors. The order is comprised of 24 737s, including 737 Max 8s and 9s, although the airline did not specify the precise fleet mix. Aeromexico is also adding four 787-9s. The first nine aircraft are due by summer, and the carrier expects the balance to arrive in the second half of this year and through next year. Aeromexico, which is operating under U.S. bankruptcy protection, said the deal is part of a restructuring of its agreements with Boeing and its lessors. CEO Andres Conesa said restructured aircraft agreements give the carrier a “strong path” to exiting Chapter 11 later this year.
- Etihad Airways is busy reinventing itself as a “midsized airline,” CEO Tony Douglas said last week. Much of this plan centers around the carrier’s fleet, which Douglas said had become too complex to be efficient. Etihad’s 10 Airbus A380s have been parked “indefinitely,” and are unlikely to return. Similarly, it has retired its Airbus A330s and Boeing 777-300ERs. Its fleet now will focus on Boeing 787s and Airbus A350-1000s. About the 777X, “it’s still too early to say,” Douglas said.