UAS – A Regulatory Profile

In this edition of mba Aviation’s Insight Series, Zahara Oubre compiles a Regulatory Profile for Unmanned Aircraft Systems.

Narrowbody Engine Q1 2021 Update: CFM and IAE Shop Visit Forecast and Values

In this edition of mba Aviation’s Insight Series, Garrick Rice, Director – Asset Valuations, provides an update regarding the Commercial Narrowbody Engine Market.  Discussing key engine value drivers and how they have been impacted by the COVID-19 pandemic.

Corporate Jet Market Conditions – 1H20

In this edition of mba Aviation’s Insight Series, mba Valuations Group explores the Corporate Jet Market.

How Many Aircraft did Major Airlines Operate Last Week?

In this edition of mba Aviation’s Insight Series, Ryan Cross investigates the fleet activity of major operators throughout the past week.

Key Concepts:

  • United Airlines leads the three US legacy carriers in terms of fleet activity, with 78% of its aircraft flying in the past week days—albeit with each aircraft typically operating fewer frequencies.
  • China’s large carriers are ahead of the rest of the world in fleet activation rates, with China Eastern Airlines and China Southern Airlines both operating a significant majority of their fleets.
  • The two main Australian carriers lag behind major operators elsewhere in the world.

U.S. Air Operator Safety Trend

In this edition of mba Aviation’s Insight Series, Danielle Hershey compares Part 121 Air Carrier Operations and Part 135 Air Taxi and Commuter Operations significant safety event trends.

Key Concepts:

  • Part 121 Air Carrier Operations continue to hold steady despite one significant event in 2019.
  • Although Part 135 Air Taxi and Commuter accidents with substantial damage have a decreasing trend over the past ten years, significant accidents continue to rise for Part 135 Operations.
  • Overall, Part 121 Air Carrier Operations continues to show a steady and stable trend within safety.

 

Evaluating the Airbus A220 and its Competition

In this edition of mba Aviation’s Insight Series, Ryan Cross analyzes how the A220 stacks up against its competitors.  He weighs the A220-100 against the Embraer E195-E2 and the A220-300 against the A319ceo and A319neo.

Key Concepts:

  • The A220-100 fills the niche for aircraft carrying about 110 to 125 passengers, but this type has sold in relatively small numbers.
  • Airbus’ orderbook reveals how the A319neo has sold poorly: the airframer counts 84 net orders for the type, amounting to just 1.1% of the entire A320neo family backlog.
  • The A319neo offers unappealing operational economics compared to the popular A320neo and A321neo.  This explains why the similar A220-300 has sold better.

 

Impact of Covid-19 on Capacity Planning and Revenues

In this edition of mba Aviation’s Insight Series, Steven Harokopus takes a look at the impact of Covid-19 on capacity planning and revenues.

The eight largest US air carriers by revenue have reduced capacity to varying degrees in response to lower demand and in an effort to save costs through smaller operations.

In the first half of 2020, the Subject Airline reduced their offering of available seat miles (ASM) approximately 43%, compared to the same period last year  Despite this drastic reduction in capacity, revenues per ASM decreased by an average of US¢2.6.

LCCs took advantage of their flexibility and maintained more capacity compared to their mainline competitors.  Southwest reduced capacity the least, cutting only 32% with a RASM reduction of US¢4.4.  Among the three mainline carriers American maintained the most capacity allowing them to overtake Delta in revenues for the first half of the year, even with a US¢3.2 reduction in RASM.

mba Insight: Evaluating the Boeing 787’s Backlog and Competition

In this edition of mba Aviation’s Insight Series, Ryan Cross analyzes the expected production schedule for each 787 series, reviews the pace of deliveries of the 767 and A330ceo programs, and studies 787 deliveries alongside those of its competitors from Airbus.

Key Concepts:

  • Due to the disruption caused to commercial aviation by the COVID-19 pandemic, Boeing cut production of the 787 Dreamliner aircraft to six aircraft per month.
  • Boeing has already delivered 975 aircraft (64.6%) of the existing 787 orderbook, leaving a backlog of 535 aircraft.
  • The pace of 787 deliveries demonstrates the aircraft’s first-to-market advantage over its competitors from Airbus, the A330neo and A350.

 

Trends in OEM Delivery Rates

In this edition of mba Aviation’s Insight Series, Ryan Cross explores how the pace of new aircraft deliveries slowed during the global financial crisis of 2007-08, in comparison to the sharp decline in deliveries caused by the COVID-19 pandemic.

US Airlines’ Effort to Manage Liquidity

In this edition of mba Aviation’s Insight Series, Steven Harokopus, Senior Analyst, Airline & Airport Services, takes stock of the US Airlines’ liquidity positions and their efforts to raise capital and preserve cash during the Coronavirus Pandemic.

Key Concepts:

  • Coronavirus related liquidity concerns have prompted carriers to encumber assets including SGR and frequent flyer program intangibles
  • Airlines are utilizing creative solutions to raise liquidity and reduce cash burn
  • CARES PSP funds are an important contribution to reaching management liquidity targets

The Covid-19 Pandemic has pushed air travel demand to historic lows for the first half of 2020 and led to widespread groundings that have shocked the industry’s passenger revenues. Many US airlines have seen ticket refunds outpace net revenue and prompted management to raise capital and implement changes to reduce cash burn. US carriers drew down credit lines and secured billions in new financing during the first quarter of 2020 as the initial downturn of the pandemic hit. Airlines moved quickly to bolster their balance sheets with cash. The table below shows the cash ratio for the eight largest US passenger airlines. The cash ratio is a measure of liquidity that compares the firm’s available cash to its near term liabilities. Although it is not always a widely used credit metric this ratio presents an interesting look at how management teams are handling this crisis as cash flow from operations has widely stopped. First quarter results indicate that for many of the subject airlines the cash ratio has slipped.  Alternatively, Southwest Airlines went into the crisis with a strong balance sheet and was able to quickly secure additional long-term financing that bolstered the firm’s cash ratio.

As second quarter results are reported, we expect to see the cash ratios improve as management teams have made significant progress securing long-term financing, managing costs through schedule changes and voluntary employee leave, and generating cash receipts as we begin to see a slight uptick in demand from the VFR and leisure segments. During the second quarter, all of the airlines above have been successful in raising capital by encumbering assets. In addition to collateralizing their fleets, US carriers have been able to utilize intangible assets to shore up balance sheets and refinance short-term debt. Delta, American, and JetBlue have collected raised over $6.7 billion in long-term financing through SGR assets and United recently issued long-term debt of $6.8 billion secured by its Frequent Flyer Program, Mileage Plus Holdings, LLC (“MPH”). Another significant factor improving airline liquidity is US government aide through the CARES PSP program. US airlines agreed to delay involuntary furloughs, continue service on underserved domestic routes, and limit financial engineering and executive compensation in return for grants and low interest loans from the US Treasury. The Treasury Department anticipates over $22B in total payroll support for the Subject airlines. Payroll support will keep routes open and airline staff employed as the carriers work to make travelers feel safe again.

All of the subject airlines have reported improvements in cash burn rates as the pandemic continues.  Delta and American have even set the ambitious target of approximately zero cash burn by the end of 2020. The Covid-19 crisis has seen many employees across the industry taking voluntary leave or accepting early retirement packages. Management teams have made significant progress in deferring or eliminating capital expenditures and non-essential projects. Raising long-term funds and taking creative approaches to preserving cash is going to be essential for the US carriers to continue operation and capture demand as it recovers.