Pegasus Airlines seals $4.3 billion engine deal with CFM

By BA Staff

Pegasus Airlines has finalized its order for CFM International’s advanced LEAP-1A engine to power its 100 Airbus A320neo and A321neo aircraft on order.

The agreement is valued at approximately $4.3 billion U.S. at list price, including a long-term service agreement.

Under the terms of the 20-year Rate per Flight Hour (RPFH) maintenance agreement, CFM will guarantee maintenance costs on a dollar per engine flight hour basis.

The engine selection was announced in July 2013 and the airline is schedule to begin taking delivery of its new aircraft in 2016.

The Istanbul-based low cost airline has been a CFM customer since it began operations in 1990. The airline operates a fleet of 45 CFM-powered Boeing 737 aircraft on scheduled routes to 76 domestic and international destinations throughout Europe, Russia, Central Asia, Caucasus, the Middle East, and Africa.

Sertaç Haybat CEO of Pegasus Airlines said:

“We are pleased to have selected CFM to provide LEAP engines for our new Airbus A320neo and A321neo aircraft until 2022, in addition to the 20-year maintenance agreement. This will enable us to keep what is arguably the most significant cost for airlines — engine maintenance costs— in check by making these costs more predictable. With this order, we have now increased our total Airbus fleet investment to $16.3 billion U.S. — $12 billion for 100 new aircraft and $4.3 billion for the engines and long-term service agreement. Based on the delivery schedule for the fleet, our partnership with CFM will continue at least until the year 2042. Together, we are witnessing the signing ceremony for a collaboration that is set to last for another 30 years.”

Pierre Fabre, president & CEO of CFM parent company Snecma (Safran) said:

“This agreement marks an important milestone in our already 20-year relationship with Pegasus. Beyond the quality of the LEAP product comes our unwavering commitment to keep our promises and deliver the kind of performance, reliability, and operating economics Pegasus has come to rely on from CFM.”

The first LEAP-1A engine to test started for the first time on September 4, 2013, two days ahead of the schedule set in early 2010. The engine logged more than 300 hours and 400 cycles before coming off the test stand. The next major event is the icing tests that will take place in 2014. CFM is performing the test early, more than one year ahead of the engine certification timeline, to ensure that any potential issues are identified well in advance.

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Analysis: Emboldened by Etihad deal, Turkish Airlines seeks additional flying rights to India

by Vinay Bhaskara

Late last week, The Times of India reported Turkish Airlines, one of the world’s fastest growing airlines in the world, wanted to more than quintuple its Indian footprint, requesting an increase in weekly seat allocation from 4,000 to 20,000 seats per week, and gain access to Bangalore, Kolkata, Chennai, Hyderabad, Amritsar, and Ahmedabad.

Turkish is also requesting an increase in its weekly frequency allocation from 14 weekly flights (one daily each to Mumbai and Delhi), to 70 flights per week.

Reportedly, Turkish Airlines’ Indian general manager Adnan Aykac made the following statements with regards to his carrier’s requests:

We currently fly 14 flights a week — a daily from Delhi and Mumbai each to Istanbul. This is very limited capacity. We have asked the government for more destinations as we want to fly to all the six metros [Bangalore, Chennai, Delhi, Hyderabad, Kolkata and Mumbai], Amritsar and Ahmedabad. We want to have 70 weekly flights from eight cities in India. We are ready to mount the flights that we seek to and from the new cities as early as possible. Delhi and Mumbai are among the most expensive airports in the world, with Delhi being costlier than Mumbai. But these are the two gateways to India and generate almost 70% of all international traffic to and from India. Indian carriers can start flights to Turkey whenever they want. This will be a commercial decision. There are many places whose airlines fly to India without an Indian carrier going there like Amsterdam, from where KLM flies without any Indian carrier going to Holland. 

Turkish Airlines may have some weight behind its request thanks to the timing. As a condition of the recent purchase of a 24% stake in full service carrier Jet Airways by Etihad Airways (with the Abu Dhabi government behind it), Etihad asked for and received a massive increase in seat allocation through the bilateral air service agreement (ASA). Etihad now controls more than 92,000 seats per week between India and Abu Dhabi, while other Middle Eastern rivals like Emirates (54,000) and Qatar Airways (24,292) control more than the 20,000 seats requested by Turkish Airlines. However, Turkish Airlines lacks the political clout of Jet Airways head Naresh Goyal, which might affect its chances of getting an expanded bilateral. And the so-called Jetihad deal is under further review by concerned parties in the Indian government.

Regardless of the outcome of its request, Turkish Airlines already has a strong presence in the Indian market. As with much of its route network, the success is predicated on connectivity across its global hub at Istanbul. Currently, Turkish operate daily services to both Delhi and Mumbai, and each destination is primarily utilized for connecting Indian passengers westbound to Europe, Africa, North America, and (now) Latin America. In 2012, only 24% of Turkish Airlines passengers at Mumbai (where it had a seat factor of 82%) were origin and destination (O&D) passengers from Istanbul, while the figure was 23% at Delhi (on seat factors of 75%).

The five largest origin points for Turkish Airlines service to Mumbai in 2012 were Tel Aviv (despite nonstop service from Israeli national carrier), Stockholm Arlanda, London Heathrow, Washington Dulles, and Chicago O’hare. Arlanda, Dulles and O’hare all lack nonstop service from Mumbai. The market between Washington DC and Mumbai was sized at 38,232 passengers in 2011, while Chicago – Mumbai had nearly 62,367 annual passengers. The five largest origin points for the Delhi flights were Tel Aviv, Barcelona, Washington Dulles (an annual market size of nearly 61,235 passengers), Berlin Tegel, and Copenhagen. Mumbai and Delhi were of course the two largest inbound feeder markets for Turkish Airlines’ services to Washington Dulles, and both airports were amongst the top 5 feeders for Turkish Airlines service to Tel Aviv and Berlin. Delhi was a top 5 feeder market for Turkish Airlines flights to Sao Paulo, Barcelona, Bremen, Dusseldorf, Hamburg, Madrid, Nuremberg, Milan and Venice, while Mumbai was a top 5 feeder market for Chicago, Los Angeles, London Heathrow, and Rome. It is interesting to note that Turkish Airlines has won a large share of traffic between Germany and Delhi, despite the presence of German national carrier Lufthansa in Delhi with the largest aircraft available; the Boeing 747-8 Intercontinental. Perhaps this lost traffic is behind Lufthansa’s long standing request to operate the Airbus A380 to Delhi?

The services to Bangalore, Chennai, Kolkata, Chennai, Hyderabad, Amritsar, and Ahmedabad will likely follow much of the same pattern. While Bangalore and Chennai are reasonably well served to Europe, the remaining destinations all lack connectivity. Africa and Latin America are un-served, as is the United States, to which these destinations had more than 1.7 million passengers worth of annual demand in 2011 (436,881 – Bangalore, 481,748 – Hyderabad, 398,941 – Chennai, 244,185 – Ahmedabad, 108,581 – Kolkata, and 100,000 – Amritsar).

Turkish Airlines currently serves 235 destinations worldwide on a fleet of 218 passenger aircraft (carrying 39 million passengers in 2012), including 38 in Africa, seven in North America, two in Latin America, and 87 in Europe (with several more in each region announced). Its hub at Istanbul’s Ataturk International is one of the fastest growing airports in the world, with traffic having more than quadrupled to nearly 45 million passengers in 2012 from 11.3 million in 2002.

However, space is constrained at Ataturk, and the airport is now heavily congested, with airline on-time performance in June of 2013 at Istanbul Ataturk registering at an abysmal 38.02%. Turkish has already begun to develop Istanbul’s second airport, Sahiba Gokcen, as a secondary hub. Traffic there hit 14.5 million annual passengers in 2012, but these growth pressures should be resolved by the end of the decade, as Turkey has broken ground on the world’s largest airport in Istanbul.

Analyst's views are individual and may not necessarily reflect the views of Bangalore Aviation.

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Jumbo orders from Turkish Airlines and Lion Air further consolidate A320neo lead

On the eve of the 25th anniversary of its first delivery, the European Airbus A320 narrow body, is ratcheting up the pressure on competitor the American Boeing 737 booking two high profile orders during this month.

The first order cames from national Turkish Airlines (THY), which signed a contract, the biggest ever by a Turkish carrier, for up to 117 A320 Family aircraft (25 A321ceo, four A320neo, 53 A321neo and options for 35 additional A321neo aircraft). Turkish Airlines already operates 75 A320 Family aircraft. (ceo=classic engine option, neo=new engine option).

The coup, though, was a 234 A320 Family aircraft order, comprising 109 A320neo, 65 A321neo and 60 A320ceo, from Indonesian carrier Lion Air, until now a Boeing only operator, which had placed Boeing's largest commercial airplane order, at the time. The carrier currently operates a fleet of Boeing 737s dominated by 737-900ERs in an all economy 213 seat configuration. Lion Air will configure its A320 family in an all economy layout, with its A320's seating 180 passengers and its A321's seating 236.

Incorporating new engines and large Sharklet wing tip devices, the A320neo will enter into service from late 2015, followed by the A319neo and A321neo in 2016.

Below is a video of the thank you extended by Airbus employees to Lion Air.

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