Issue No. 823

Canada's Airlines Awaken

Airlines Plan New Schedules as Canada Takes Its First Steps Toward Reopening

Pushing Back: Inside the Issue

At long last, Canada has begun to relax some Covid-19 restrictions on domestic and international travel. For much of this year, the country had had among the strictest rules, requiring travelers to provide test results and quarantine in government-approved hotels (at great cost), among other measures. These rules all but squashed international travel, and domestic restrictions put a damper on flights within the country. But now, the industry's airlines are taking their first steps back from the void, with Air Canada resuming several international routes from its Toronto, Montreal, and Vancouver gateways. Still, the airline plans to fly only 35 percent of its 2019 capacity this August. Meanwhile, Ottawa provided Porter Airlines with a loan, as it did for Air Canada and Transat. The carrier, which hasn't flown a single flight since last March, now says it will resume operations in September.

Elsewhere in this issue, Washington Dulles International Airport is considering a new concourse to replace a dated United facility. Lufthansa is adding narrowbody freighters to its fleet. Latam spars with its creditors over aircraft deals. Investors didn't love Wow Air copycat Play's debut on the stock market. And speaking of low-cost long-haul, will Ravn Alaska really build a hub in Anchorage for Asia-U.S. flights?

U.S. airline leaders have been downright giddy about demand this summer. They say leisure travel is back almost to 2019 levels, and they're increasingly confident business demand will return in September. So will this exuberance be reflected in the balance sheets? We'll find out, starting next week, when Delta kicks off earnings season.

Verbulence

"This is the moment our team members, passengers, and the communities we serve have been waiting for."

Porter Airlines CEO Michael Deluce

Weekly Skies

Air Canada is returning to nine long-haul destinations this summer as Canadian airlines begin to spool up their schedules amid the country’s gradual reopening.

The Star Alliance carrier will resume flights on 17 routes from its Montreal, Toronto Pearson, and Vancouver gateways in July and August, Air Canada said last week. Athens, Casablanca, Dublin, Dubai, Geneva, Lisbon, Rome, Vienna and Zurich have or are returning to its map this summer. All in, Air Canada will fly as much as 35 percent of its 2019 capacity by August — its highest since the crisis began — according to Cirium schedules.

The additions are the latest in Canadian airlines’ service resumptions amid loosening travel restrictions both within the country and for international arrivals. Mandatory hotel quarantines for international arrivals were dropped for fully vaccinated travelers on July 5, and provincial restrictions have eased as well. The lessening comes as Canada’s vaccination rate steadily climbs: 31 percent of people 12 years or older were fully inoculated and nearly 77 percent had received at least one vaccine dose as of July 5.

Citing the vaccine roll out and the easing of both some federal and provincial travel restrictions, Air Canada Senior Vice President of Network Planning and Revenue Management Mark Galardo said last week that the “summer is looking brighter.” The airline has seen an uptick in travel demand in just the past few weeks, he added.

At the same time, Ottawa is coughing up more relief for the country’s beleaguered carriers. Porter Airlines is the latest recipient with an agreement for up to CAD$270 million ($217 million) in government loans and grants. Air Canada and Transat previously received federal aid. As a condition to the relief, all three carriers have agreed to provide refunds to travelers whose travel was affected by the pandemic.

The relief will allow Porter to resume flights in September after an 18-month suspension that began in March 2020 and had many speculating whether the quirky carrier would ever return. Initially, the airline will offer flights between its Toronto Billy Bishop base and Montreal, Ottawa and Thunder Bay on September 8, and expand to Boston, Chicago Midway, Halifax, Moncton, Newark, Quebec City, St. John’s and Washington Dulles by the end of the month.

“This is the moment our team members, passengers and the communities we serve have been waiting for,” Porter CEO Michael Deluce said in a statement. “The pandemic has progressed to the point that we can now begin restoring service across our network.”

Canada’s second largest carrier, WestJet, is notably absent from the list of airlines receiving government relief. But that has not stopped WestJet from resuming flights and adding new markets to take advantage of what travel recovery occurs this summer. The airline has returned to destinations it suspended in Atlantic Canada and will add 11 new domestic routes by the end of July. WestJet has even plans its first-ever service to Amsterdam in August.

Altogether, WestJet could fly as much as 78 percent of its pre-crisis system capacity — and 98 percent of domestic capacity — by August, Cirium schedule data show. No small step for an airline that, as recently as March, was flying just 7 percent of what it flew two years earlier.

A WestJet spokesperson said the airline “continues discussions” with the Canadian government on a possible relief package.

The developments at Canadian carriers may signal the sustained travel recovery that they have waited for since Covid-19 decimated air travel more than a year ago. However, the recovery comes with a number of major caveats. For one, the international connecting traffic between the U.S. and both Asia and Europe that Air Canada relies on remains moribund. And, with the Covid-19 variants spreading, the threat of new restrictions remains a possibility.

That uncertain outlook has at least two Canadian carriers hedging their passenger recovery bets. Air Canada and WestJet plan a fleet of dedicated freighters as they emerge from the crisis. The former will introduce its first two Boeing 767 freighters later this year, and the latter its first Boeing 737-800 freighters early in 2022. Both airlines hope to take advantage of what many expect to be a sustained increase in air freight amid a jump in e-commerce and ground shipping bottlenecks.

Edward Russell

Latam Spars With Creditors Over Cancellation of Delta and Qatar Deals

Desperate for cash as global air travel ground to a halt in the early days of the coronavirus pandemic, Latam Airlines Group reached out to two of its largest shareholders, Delta Air Lines and Qatar Airways, in an effort to raise liquidity. The result was the termination of two deals for Airbus A350 jets in exchange for cash in the days leading up to Latam’s U.S. Chapter 11 bankruptcy filing.

At least that’s the narrative presented by Chile-based Latam in a growing disagreement with the unsecured creditors committee in its Chapter 11 proceedings. The committee alleges that, rather than helping Latam, Delta and Qatar deliberately took advantage of the ailing carrier to cut their own costs and exit deals for aircraft they no longer needed amid the grounding of most of the global fleet.

The back-and-forth is the latest high-stakes drama in the restructuring of South America’s largest carrier. Earlier in July, The Air Current reported that Delta has reached a deal with Latam creditor AerCap for several “gently used” A350-900s — potentially the very aircraft that it was due to buy last year. And in May, it emerged that Azul may be preparing to make a bid for Latam’s Brazilian subsidiary — Latam Airlines Brasil — by leveraging its relationships with creditors. All of these moves come as Latam prepares to submit its reorganization plan to the court by September.

Latin America’s second- and third-largest carriers, Avianca and Aeromexico, also are restructuring under Chapter 11 protection in the U.S. However, neither carrier’s proceedings have yet proved as eventful as those at Latam.

At the center of Latam’s dispute with its unsecured creditors are its separate deals with Delta and Qatar. Atlanta-based Delta had agreed to buy four A350-900s from Latam, as well as to assume 10 delivery positions, as part of the strategic alliance the carrier’s unveiled in September 2019. That deal was terminated in exchange for a one-time $62 million payment on May 25, the day before Latam filed for bankruptcy in the U.S.

The creditors allege that Delta did the deal solely to avoid paying pre-crisis prices for the A350s. They estimate that the value of the jets had halved by May 2020 since the deal was finalized in November 2019.

“Delta’s gain was the debtors’ loss, all at the expense of the debtors’ estates,” the creditors said in a June 14 court filing.

The creditors may be overstating the pandemic’s impact on values. The value of a new A350-900 fell by just $10 million to $135 million from the beginning of 2020 to that September, according to Cirium current market value data. A new A350-900 was worth roughly $123 million this March.

Doha-based Qatar was subleasing five A350-900s from Latam when the pandemic hit in March 2020. Latam agreed to end the subleases early in May in exchange for an undisclosed payment, something the creditors allege was “essentially a favor” for one of its largest shareholders.

“Latam flatly rejects any suggestion that it undertook either transaction with the intent of defrauding its creditors,” the airline said in a response to the allegations in a court filing last week.

Both Delta and Qatar filed separate motions with the court objecting to the unsecured creditors’ claims. “This was an arm’s-length business transaction that was consistent with, and in fact markedly better than, the then-other available options for increasing liquidity,” Qatar said in its filing.

The unsecured creditors are seeking authority from the bankruptcy court to pursue a legal suit against Delta and Qatar.

Regardless of the outcome of the dispute, Latam is in the process of exiting its A350 fleet. The airline outlined plans to remove its 10 A350-900s in favor of an all-Boeing widebody fleet in April. Latam flies Boeing 767s, 777s and 787s.

Edward Russell

U.S. Tops 10 Million Flyers over July 4th

U.S. airports screened 10.1 million people over the July 4th weekend from July 1-5, according to Transportation Security Administration data. It was the strongest holiday travel period since the pandemic began and down just 17 percent compared to the same five days in 2019.

The largest U.S. carriers American Airlines, Delta Air Lines and United Airlines carried more than 64 percent of those travelers, or 6.51 million people, individual airline data show. American carried the most travelers with nearly 2.7 million travelers boarding its flights over the five-day holiday period — a three-fold jump from the Covid-hit July 4th holiday in 2020.

Delta carried 2.3 million travelers with the busiest day July 2 when 505,000 people boarded its flights. And United carried 1.51 million travelers on 15,876 departures over the holiday weekend.

“After a challenging year, this weekend proved that people are ready to travel again,” American Chief Operating Officer David Seymour told staff in a memo on July 6 that was shared with Airline Weekly.

Edward Russell

IATA: Slot Flexibility Crucial Until Airlines Stabilize

At the beginning of the pandemic, airlines — particularly in Europe — operated “ghost” or “zombie” flights, empty of passengers and cargo, simply to retain their use-it-or-lose-it slot rights at constrained airports. By last summer, most European governments and airport operators waived those rules, but the decisions were not met with, shall we say, universal acclaim.

Instead, several low-cost-carriers and aspiring new entrants cried foul, arguing that the waivers were tantamount to states picking winners and losers in the battle for a precious commodity. Those valuable slots, they claimed, should be redistributed to airlines that were in a position to use them.

But that characterization is unfair, Rikke Christensen, Virgin Atlantic vice president for networks, alliances, and commercial planning said. Mechanisms were put in place to allow new entrants to start up at constrained airports, she said, pointing to Heathrow as an example. Furthermore, enough organic slot trading has occurred to allay competitive concerns. Christensen chairs IATA slot policy working group.

Had there not been slot waivers, airlines would have continued operating ghost flights, which would have served neither the carriers nor the environment well, she said.

Booking curves remain short, particularly in Europe, and schedules are in flux. Christensen pointed to the example of UK-Portugal bookings, which spiked when pandemic restrictions eased but collapsed when restrictions were quickly put back into place. For this reason, airlines need flexibility with slots. “Slots are what you plan toward,” she said. “But we need more flexibility until restrictions end.”

And restrictions show no sign of ending. Forward bookings in Europe for longhaul international flights are down from last year. For the October-December period this year, bookings are down to 18-25 percent of 2019 levels, down from 30 percent of 2019 levels last year, IATA said. Domestic demand, led by the U.S. and China, is back to 80 percent of 2019, the group’s data find.

Madhu Unnikrishnan

In Other News

  • Korean Air’s acquisition of Asiana passed one of its final milestones, after the Korea Development Bank signed off on the carriers’ integration plan after a three-month-long review. The plan governs the carriers’ plans to merge both the mainline and their low-cost-carrier subsidiaries. Now, Korean is waiting for other regulatory agencies to approve the integration plan. Korean says it is beginning the process of harmonizing the two airlines’ cargo and passenger routes and schedules.
  • A sign that the domestic air travel recovery is real: Regional carrier Mesa reported its June block hours were up 225 percent. Block hours for its American operations were up 320 percent, while its United operation rose 175 percent. Its new freighter business for DHL, which it launched last year, reported 144 departures and 221 block hours in June.
  • The U.S. Transportation Department approved Ravn Alaska‘s name change (from RavnAir Alaska) and approved the carrier’s application to register the trade names Northern Pacific, Northern Pacific Airlines, and Northern Pacific Airways. The carrier has ambitious plans to launch low-cost, longhaul service between Asia and the continental U.S. over a hub in Alaska, news first reported by Paxex.aero. Ravn announced its network plans, which include possible flights to Tokyo and Osaka, and its efforts to secure ETOPS-certified Boeing 757s for its expansion in a video that has since been removed.
  • IATA maintains expectations that global air travel will recover by 2023, the organization said last week. Domestic markets continue to recover faster than international with China and Russia passenger traffic already above 2019 levels and the U.S. set to recover by year-end. IATA Director General Willie Walsh described the organization’s outlook as “optimistic but cautious” and added that there is still “quite some uncertainty” in the travel recovery, especially with the emergence of new Covid-19 variants and differing vaccination rates around the world.

Edward Russell and Madhu Unnikrishnan

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Sky Money

There’s a strong sense of déjà vu in the skies over the North Atlantic. Icelandic startup Play Airlines debuted on the Nasdaq First North stock exchange on July 9 with an eye on picking up where Wow Air and Norwegian Air left off.

Play is a near carbon copy of defunct Wow: It will connect points in North America and Europe over a Reykjavík hub cheaply with new Airbus A321neo aircraft, with the key difference of doing it profitably this time. The near identical business plan is no fluke, Play was founded in part as a “restoration” of collapsed Wow in June 2019, just three months after its predecessor closed its doors. Play is led by a who’s who of former Wow leaders, including CEO Birgir Jónsson, who was deputy CEO of Wow, and Chief Operations Officer Arnar Már Magnússon, who was vice president of operations at Wow.

Play’s public offering was eight-times oversubscribed when shares went on sale on June 25, the airline said. However, in what is likely a more realistic market view of the startup, its share price fell 5 percent to 24.7 Icelandic krona ($0.20) during its first day of trading on July 9.

Successful long-haul low-cost service across the Atlantic has long been a dream of airline entrepreneurs. Before Norwegian, which shed its long-haul operations as part of a court-led restructuring in January, and Wow, there is a long list of failed attempts from Laker Airways in the 1970s to People Express in the 1980s. At issue is the need for consistently high load factors to turn a profit on cut-rate fares; something that is difficult outside of the peak summer travel season across the Atlantic. That does not mean entrepreneurs are not eager to keep trying, with Norwegian-clone startup Norse Atlantic Airways also hoping to crack the market.

Play , and Norse Atlantic, if it gets off the ground, face formidable competitors. Nearly every major transatlantic carrier, from Air France-KLM to United Airlines, have cut millions — in some cases billions — of dollars in expenses with an eye on emerging from the crisis leaner than before. Play’s prospectus argues that, despite these savings, competitors will face higher unit costs post-Covid due to lower capacity — setting up something of a cost battle in the coming years. Play targets a low 3.6 cent costs per available seat kilometer (CASK) excluding fuel by 2023.

The assumptions are not entirely off base. Historically, major carriers have retrenched after crises, leaving the door open to new entrants or smaller competitors to expand and scoop up marketshare. However, the influx of billions of dollars in state aid in both Europe and the U.S. means incumbents are defending their turf and not retrenching as they have in the past.

Play’s financial outlook is equally rosy. The startup anticipates only one annual loss of $15 million this year before turning a profit of at least $4 million from 2022. Revenues are forecast to grow from $25 million this year to $509 million by mid-decade.

And in addition to the European and North American heavyweights, Icelandair is ramping up service after its own Covid-19 hiatus. The airline has cut costs and resumed its fleet renewal program with Boeing 737 Max aircraft. It recently returned to Minneapolis-St. Paul and plans to resume service to Baltimore in April 2022.

Play began flights to London Stansted on June 24 and expanded to Tenerife by the end of the month. Alicante, Barcelona, Berlin, Copenhagen and Paris Charles de Gaulle are due to join its map in July. The airline has leased three A321neos from AerCap.

But Europe is only half the puzzle. North American flights are due to begin by April 2022 — though Play has yet to seek foreign air carrier permits from either the Canadian or U.S. governments. The airline has not disclosed what cities it could serve in the Americas; however, when Wow shut down in 2019 it flew to Baltimore/Washington, Boston, Detroit, Montreal, Newark and Toronto. Play’s Chief Network Officer Daníel Snæbjörnsson was vice president of network planning at Wow.

Play plans to expand its fleet to at least six A321neos by the time it begins North American operations.

Edward Russell

Financial Briefs

  • Indonesia’s long struggling flag carrier Garuda Indonesia continues to face a number of financial ills. In June, the airline defaulted on a $500 million sukuk, or a bond governed by Islamic finance principles, as total debt topped $4.5 billion. While the airline is exploring a court-led restructuring of its debt, Fitch Ratings said it is watching the resolution of the sukuk default closely due to a lack of precedent in the still relatively new asset class. The bonds’ Sharia requirements could make the resolution process “more complex,” said Fitch. The Indonesian government owns more than a 60 percent stake in Garuda, making it a key stakeholder in the sukuk and any additional debt restructuring.
  • When airlines were struggling during the worst crisis in the industry’s history they struck out to bankers and the capital markets for every possible source of liquidity they could find. For JetBlue Airways, that included tangible assets such as its gates and slots at busy airports as well as intangible assets like its brand. Those items were used as collateral for a $750 million term loan that closed in June 2020. Fast forward a year and rosy recovery forecasts for the U.S. market, JetBlue is confident enough to repay some of its pandemic debts. The airline repaid the $722 million outstanding under the term loan at the end of June — a small step towards deleveraging its balance sheet and giving it full control again over its brand.
  • But while U.S. airlines are repaying their pandemic debts, European carriers continue to bolster their balance sheets. The Lufthansa Group closed a €1 billion ($1.2 billion) unsecured bond issue last week. The debt is split into two €500 million tranches: one due in 2024 at an interest rate of 2 percent and the other due in 2029 at a rate of 3.5 percent. Proceeds will “further strengthen” the group’s liquidity position. Lufthansa had €10.6 billion in cash and cash equivalents at the end of March.
  • Turkish Airlines has closed a secured loan backed by four Boeing aircraft from Castlelake. Collateral for the debt includes three 737-8 and one 737-9 jets. Castlelake called it a “tailored solution” for the airline, which continues to renew its fleet amid the Covid-19 slowdown.
  • After a record two airline IPOs in U.S. markets this spring, Mexico’s Viva Aerobus is considering a third possible listing before the end of 2021, Bloomberg reports. The ultra low-cost carrier has engaged three banks to discuss a possible listing. Viva Aerobus is the third largest Mexican carrier behind Volaris and Aeromexico according to the three carriers traffic numbers for the first five months of 2021.

Edward Russell

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Landing Strip

United May Finally Get a New Concourse in Washington

Travelers have long derided the facilities at United Airlines’ Washington Dulles hub. The center of its hub, Concourse C/D, opened as “temporary” facilities in the mid-1980s and have improved little in the decades since.

That may be about to change if a proposal for a new regional facility at Dulles airport moves forward. Airport operator the Metropolitan Washington Airports Authority (MWAA) is seeking environmental approval for a potential new three-storey, roughly 535,000-sq.-ft. concourse connected to the existing AeroTrain station for Concourse C. While the proposed facility would not replace Concourse C/D, it would replace the Concourse A regional gates that opened in 1999.

“The proposed [concourse] is needed to accommodate the changing fleet mix at the airport and to address the operational and passenger level of service concerns in the Concourse A regional aircraft gates,” MWAA said in a letter to the Virginia Department of Environmental Quality on June 8. “The existing Concourse A regional aircraft gates … are functionally obsolete.”

The plan remains is conceptual at this point, according to MWAA spokesperson Robert Yingling. He added that the operator is “studying potential concepts for future facilities” at Dulles.

However, the project is far enough along for Virginia to review its possible environmental impacts. The agency lists the project as under review on its website and plans to release a final environmental assessment by August 6.

Airline Weekly understands that the environmental review is, in part, an effort by MWAA to get the project close to “shovel ready” in the event President Biden’s infrastructure plan passes Congress later this year. Airports were allocated $25 billion in a bipartisan deal valued at $1.2 trillion over eight years that was unveiled in June.

A new concourse at Dulles is the latest in a slew of airport improvement projects in Washington and around the U.S. A 14-gate regional concourse for American Airlines at Washington Reagan National Airport opened in April and replaced ground-level bus gate Gate 35X — among the most hated gate in the country. And new facilities have opened in Denver, Los Angeles, New York, Portland, Ore., Salt Lake City, San Francisco and Seattle since the pandemic began in March 2020.

In some cases, airlines and airport operators were able to use the drop in air travel to accelerate projects. For example, Delta Air Lines has shaved as much as a year off the timeline for its new “Delta Sky Way” redevelopment of Terminals 2 and 3 at Los Angeles International Airport. The carrier hopes to fully open the facility in late 2022 or early 2023, instead of 2024 as previously planned.

One concern with any project at Washington Dulles is cost. Following the construction of the AeroTrain and a new international arrivals facility that both opened in 2010, the airport saw the cost per passenger skyrocket along with debt service obligations as carriers — particularly United — cut flights in the wake of the great recession. Cost per enplanement, or CPE, peaked at $26.47 per passenger in 2013, according to MWAA data. That is more than double the rates at nearby Baltimore/Washington International Airport and nearly double those at Washington National.

“This hub also disproportionately bears a lot of debt service compared to other airports inside of MWAA, which is a terrible competitive burden and inappropriate burden on this hub,” United’s then-CEO Jeff Smisek told Flightglobal in 2013. He added that that made it “more difficult to do business here compared to other hubs”.

MWAA and Virginia authorities heeded Smisek’s thinly veiled threat to the future of United’s hub and cut costs. Virginia provided $50 million in funds to defray debt service expenses, and a new airline agreement allowed some of the revenues from booming National airport to be shared with Dulles. United recommitted to its Dulles hub in 2016. CPE at the airport is forecast at $18.63 in 2021; an increase from the year before due to the pandemic drop in passengers.

Prior to the Covid-19 crisis, United was growing its Dulles hub by increasing connectivity north-south along the U.S. East Coast. From 2016 — when United’s then-president and now CEO Scott Kirby joined the airline — through 2019, the airline grew seats at Dulles by nearly 14 percent compared to 13 percent systemwide, according to Cirium schedule data. In 2018, Kirby said the growth strategy was proving successful and added that United could grow the hub by half as part of its larger domestic push.

United spokesperson Kimberly Gibbs said the airline looks forward to working with MWAA throughout the concourse development process but declined to give any specific plans.

A new regional concourse suited for large regional jets, like the Embraer E175s that dominate the United Express fleet, would fit plans to grow the hub. While the environmental letter does not say how many gates are planned, the existing Concourse A regional facility can only handle 50-seat regional jets or smaller aircraft at six ground-level gates. Increasing the number of gates and building a new, modern concourse could go a long way to improving both operations and customer satisfaction.

Work on the new concourse could begin by October 2023 and take 18 months, or open by March 2025, according to the environmental review letter.

Edward Russell

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Fleet

Lufthansa is the latest carrier to convert passenger aircraft to dedicated freighters, hoping to capitalize on the boom in air cargo when belly-hold space is at a premium.

The carrier is converting to Airbus A321s to freighters, and they are expected to enter service early next year. The freighters, with a payload capacity of 28 tons and a range of 2,175 miles, will be operated by CityLine, based in Frankfurt and will fly on European routes. Lufthansa said it the conversion process includes cutting in new cargo doors in order to carry containers on the main deck.

The carrier forecasts e-commerce to fuel  20 percent annual growth in cargo demand for at least the next five years. “With the converted A321s, we are meeting our customers’ growing demand for same-day solutions and further strengthening our dense network of global connections as well as our product offering,” Dorothea von Boxberg, CEO of Lufthansa Cargo, said in a statement.

Lufthansa is in good company. Both Air Canada and WestJet recently announced plans to add freighters to their fleets, but unlike Lufthansa, the two Canadian carriers did not previously operate dedicated freighters. In the U.S., regional carrier Mesa Air Group added its first Boeing 737s — freighters for DHL — and Sun Country is operating a fleet of 737Fs for Amazon.

Air France CEO Anne Rigail recently told Airline Weekly that cargo routes played a crucial role for the carrier during the pandemic, not only providing much-needed revenue but also keeping crews current and employed. The importance of cargo, she said, will likely last for several years. Similarly, Qatar Airways’ Mark Drusch, senior vice president for revenue management, alliances, and strategy, said cargo will have an increasingly important part in network planning as the carrier climbs out of the pandemic.

The latest data from IATA bolster these anecdotes. In May, cargo demand was up almost 10 percent from May of 2019. In April, demand was more than 11 percent higher than April 2019. But cargo capacity fell 10 percent from pre-pandemic levels, mainly because international passenger frequencies remain depressed, and belly-hold capacity therefore is down significantly.

There is reason for even more optimism, IATA said. Business confidence is higher now than it was even at the beginning of the year, as manufacturing output and exports are rising worldwide. Global trade rose by half a percentage point in April.

Meanwhile, air cargo’s main competitor, maritime cargo, is constrained by bottlenecks at ports in Asia, Europe, and North America. The Suez Canal blockage earlier this year has been resolved, but its effects are still rippling through the sector. And the premium for air cargo is falling. Before the pandemic, air cargo was on average 12 times more costly than maritime. Now, it’s only six times as costly, giving airlines hope to further eat into surface cargo’s market share.

Madhu Unnikrishnan

Fleet Briefs

  • AerCap bought 15 aircraft in the second quarter: 10 A320neos, four 737 Maxes, and one Embraer E2. The lessor sold 12 aircraft, including one Airbus A330 and several older Boeing narrowbodies. In the quarter, AerCap leased 13 widebody and 38 narrowbody aircraft, although the lessor did not define the types. AerCap expects its planned $30 billion acquisition of GECAS will close in the fourth quarter of this year or the first quarter of 2022.
  • Meanwhile, Avolon says it leased 48 aircraft in the second quarter, sold three, and entered into agreements to sell an additional 12. The lessor delivered eight aircraft to lessees and five aircraft to second leases. Avolon ended the quarter with 581 aircraft in its portfolio.
  • And in California, Air Lease Corp. said it invested $1 billion in aircraft in the quarter, with most of that investment occurring in the second half of the quarter. The lessor placed 12 aircraft in the quarter: two A320neos, three A321neos, one A330-900, one A350-1000, two 737-8s, one 737-9, and two 787-9s. ALC did not sell any aircraft in the quarter. The lessor issued $1.2 billion in unsecured notes, along with another trance of $600 million.
  • Airbus notched 73 orders in June, including the 70 A321neos United announced at the end of the month (part of its 270 aircraft order). The other three orders were by two undisclosed customers for one A220-300, one A321neo, and one A330-300. The airframer delivered 77 aircraft in June and 297 in the year so far.
  • Blueberry Aviation is remarketing 11 Avianca ATR 72 turboprops for lessors Turbo Aviation and Wells Fargo. The aircraft are due to leave the carrier’s fleet beginning in the fourth quarter with the exit approved by a U.S bankruptcy court in October 2020. The move will see Avianca exit its ATR fleet, which stood at 11 aircraft at the end of March, as part of its Chapter 11 restructuring.

Edward Russell and Madhu Unnikrishnan

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Routes and Networks

  • Eurowings is expanding, primarily at its Düsseldorf and Stuttgart bases, in the second half. The Lufthansa Group budget arm will add six new routes from Düsseldorf to Kiev and Zagreb from August 31; Bergamo from October 31; Tromsø, Norway, and Rovaniemi, Finland, from early December; and Lombardy from January 31, 2022. Stuttgart will gain three new routes: Kiruna and Luleå, Sweden, and Marrakech all from early December.

    Eurowings also will connect Cologne/Bonn with Yerevan from August and Marrakech from December. And Salzburg to Larnaca from September 4. The airline cites leisure and visiting friends and relatives demand for the new routes.
  • Canadian ultra-low-cost carrier Flair Airlines plans a big foray south of the border this fall. The carrier will add Burbank, Fort Lauderdale, Las Vegas, Orlando Sanford, Palm Springs and Phoenix Mesa to its map on October 31. Flair plans to connect the six U.S. cities with 21 routes to eight Canadian gateways through the winter. Flair’s expansion comes weeks after WestJet-owned discounter Swoop added three new U.S. destinations, including Orlando Sanford.

Edward Russell

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