Jet Airways to lease three A330-200s to Turkish Airlines

by Devesh Agarwal and Vinay Bhaskara

In a December 12th filing with the Borsa Istanbul stock exchange (BIST), national carrier Turkish Airlines has said it will lease three Airbus A330-200 aircraft from India's Jet Airways for a period of six years. The financial details of the proposed lease were not made available. The middle-eastern giant will lease another five A330s from Dutch lessor AerCap for a period of eight years.

Bulk of Jet's A330s sitting on the ground. Photo copyright 2012 Devesh Agarwal.

Turkish Airlines (THY) has been leasing aircraft from Jet Airways since 2008 and once again in 2013, as the Indian carrier found it difficult to fill most of its international wide-body fleet. At one point 70% of Jet's Boeing 777-300ER fleet was leased out, with four aircraft leased to Turkish Airlines and three to Thai Airways. Jet even sold one of its Boeing 777s, strangely a money spinner for most of the world's airlines, but not for Jet.

Till recently, much of Jet's A330-200 fleet was grounded at Indian airports thanks to aggressive route rationalisation by the airline. In the second quarter of this fiscal year, Jet lost a whopping Rs.123 crores, just on the costs of keeping its aircraft on the ground.

Five of the ten grounded A330-200 aircraft have been leased by Jet, though on a short term basis, to 24% stake-holder, Abu Dhabi based Etihad Airways PJSC. The deal with Turkish was expected, after a deal to sell the remaining five A330s to Kuwait Airways fell through last month.

Repeated requests to Jet Airways for comments on this story were not answered.

It is an economically sensible deal for Jet Airways. In one stroke it is addressing a major cash drain, and ensuring long term dollar denominated revenue for itself. While a sale which would have brought in one-time income which would have reduced long-term lower cost debt, a lease will give Jet a long term hedge against potential rupee devaluations and the ability to pay off its $400 million high interest rate debt. Jet is reeling under a total debt load of about $1.9 billion.

As Jet Airways continues to turn over its long haul operations to Etihad and Abu Dhabi via the Jetihad partnership, look for the carrier to continue to seek out incremental opportunities to earn rent on its under-utilised assets.

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Sberbank and UAC build up operating leasing of Sukhoi Superjet 100 aircraft at MAKS air show

Skerbank and UAC have signed a Memorandum of Intent (MoI) to collaborate on the leasing of the Sukhoi Superjet 100. Find more details below.

27th August 2013

UAC, represented by JSC Sukhoi Civil Aircraft and JSC Sberbank Leasing, are planning to perform joint promotion of Russian aircraft Sukhoi Superjet 100 in Russian and international markets. The respective Memorandum of Intent on join collaboration was signed by the companies at MAKS-2013 Airshow on August 27 in the city of Zhukovskiy.

The joint venture will consolidate SCAC expertise in creation of state-of-the-art aircraft and their subsequent technical support with the current expertise and opportunities of Sberbank Leasing Group in the market of operative leasing using the best world practices.

Consolidation of SCAC and Sberbank Leasing efforts in creation of financial infrastructure for promotion of Sukhoi Superjet 100 aircraft will make it possible to fulfill comprehensive tasks aimed at development of operative leasing in the Russian Federation, including building up of legal framework for operative leasing, creation of sources and tools of financing and government support, forming liquid market of Russian aircraft.

According to the operating plan of the joint leasing company, in the territory of Russia and other countries at the initial phase customers will be provided with operating lease for up to 50 aircraft to the total amount of about two billion US dollars at catalogue price. Establishment of joint venture is aimed at smoothing the way for active promotion of Sukhoi Superjet 100 in the domestic and overseas markets.

"As of today Sukhoi Superjet 100 is the most state-of-the-art aircraft built in Russia. We believe that this aircraft has a very good perspectives in the sphere of leasing, – comments Dmitry Eroshok, General Director of Sberbank Leasing. – Work with Russia-made aircraft is one of the priority areas of JSC Sberbank Leasing operations. At the moment we are ready to offer one of the most favorable terms and conditions for financial and operating leasing of these aircraft".

"Collaboration with JSC Sberbank Leasing offers great long-term opportunities for the project, because extensive branch network of our partners will open a new window of opportunity for joint promotion Sukhoi Superjet 100 aircraft not only in the Russian market but also in the international market", – notes Andrey Kalinovskiy, President of JSC Sukhoi Civil Aircraft.

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Jet Airways Q1 FY2013~14 performance analysis - part 1 - Financials

by Vinay Bhaskara and Devesh Agarwal

Earlier this week, Mumbai based Jet Airways announced a net post-tax loss of Rs. 355.4 Crore (US $ 59.8 million) for the first quarter of Fiscal Year 2014, reversing from a Rs. 24.7 Crore net profit during the same period a year prior.

Total revenues declined a whopping 12.3% to Rs. 4, 064.4 Crore on a 15.0% decline in revenue passengers to 4.13 million, and an 11.3% capacity decline measured by available seat kilometres (ASKs) to 9.13 million ASKs. Seat factors cratered to 78.4% from 82.7% year-over-year (YOY).

Jet Airways recorded a large operating loss of Rs. 111.2 Crore in Q1 versus an operating profit of Rs. 223.5 Crore the year, translating to an operating margin of -2.8% versus +4.9% in Q1 of Fiscal Year 2013.

The nominal average fare paid by Jet Airways customers rose 2.3% to Rs. 8,278, but fell 4.2% on an inflation adjusted basis. Revenue per available seat kilometer (RASK) fell 0.8% year over year to 3.60 Rupees from 3.63 Rupees a year prior while cost per available seat kilometer (CASK) increased 8.7% to 3.92 Rupees. CASK and RASK are used to adjust revenue and cost figures for segment length.

Looking segment by segment, Jet Airways’ full service domestic operations once again performed abysmally, with a net pre-tax loss of Rs. 263.0 Crore versus a profit of Rs. 16.8 Crore the year prior. Operating margin domestically was an astoundingly poor -7.9% versus +6.8% a year prior – a swing of 14.7 percentage points! Domestic revenues fell 13.1% year over year to Rs. 1763.5 Crore, and while domestic RASK actually increased by 0.9% (down 3.3% on an inflation-adjusted basis), it was more than offset by a 17.6% increase in CASK.

Domestic operations continued to suffer from the poor Indian macroeconomic environment, as growth for Fiscal Year 2014 is projected to fall to 5.5% by the Reserve Bank of India. India’s growth prospects seem doveish for the next few years and airline will see growth plateauing over the next few months.

Importantly, fuel is not a major contributor to Jet Airways’ woes, as moderating fuel prices around the globe in Q1 meant that fuel cost per ASK fell 7.5% year over year. Despite the slowing economy, domestic capacity amongst Indian carriers was up 0.1% in Q1 and passenger demand rose 1%.

Low Cost Carriers (LCCs) SpiceJet, GoAir, and IndiGo have continued their rapid expansion despite slowing Indian growth, which has put increased fare pressure on Jet Airways at the lower end. At the same time, the expected fare bump amongst high yield business travellers and first class passengers after the demise of full service rival Kingfisher Airlines largely has not materialized thanks to aggressive pricing on the part of beleaguered national carrier Air India. Despite spotty operational reliability, LCC SpiceJet has continued to profit (Rs. 55 Crore in Q1 of FY14) and its maturing Q400 operation is taking away business from Jet Airways’ regional ATR operations, especially in the South.

International financial performance also weakened year over year, falling to a Rs. 92.4 Crore pre-tax loss from a Rs. 16.5 Crore pre-tax profit the year prior. Revenues fell 11.7% to Rs. 2300.9 Crore as Jet Airways continues to restructure its international operations in advance of the implementation of the newly designed Jetihad partnership with Etihad Airways. Revenue per available seat mile fell 2.1% (7.8% on an inflation adjusted basis), while cost per available seat kilometer grew 2.3%. The operating margin on international operations fell to 0.8%, from 5.6% in Q1 of Fiscal Year 2013.

Despite all the hubbub and media drama surrounding Jet Airways’ international operations, they are actually the better performer within the company on an operating and net basis. International operations came under some pressure thanks to the continued de-valuation of the Indian Rupee since many costs on international operations are accrued in US dollars. That pressure, which contributed nearly a third of Jet Airways’ losses in Q1 at Rs. 134.3 Crores, looks like it should subside to some degree as the Indian government is taking steps to increase in-flow of US dollars.

Bulk of Jet Airways' A330-200 fleet idle at New Delhi

The airline withdrew from many international routes like Mumbai Johannesburg, Chennai Brussels, Brussels New York JFK, and New Delhi Milan. The contraction in operations led to a severe under-utilisation of Jet Airways’ wide body fleet, especially the Airbus A330-200s, (as captured by Devesh Agarwal at New Delhi IGI airport), which led to a Rs. 128.2 Crore adverse impact on finances.

During the analysts earnings call, Jet Airways management indicated that the airline had already leased two A330s to investor Etihad Airways PJSC of Abu Dhabi, and is "close to signing" a deal with another west Asian carrier for five A330s. So the cost impact will reduce in the quarters moving forward.
 

During the call, the airline announced “load factors for the North American routes were at 79.1%, the UK routes were at 84.1%, Asian routes were at 82.1%, Gulf routes were at 83.4%, SAARC routes were at 75.1%.” However, thanks to its contraction on long haul routes, Jet has been unable to capitalize on recovering Western economies in the United States and in the European Union. Still, the outlook moving forward for the international operations. from a purely financial perspective (ignoring strategic considerations), the feeder operation with Eithad, which appears likely to be Jet Airways’ plan as the carrier undertakes a 10 year network planning study, is likely to return Jet to profitability on its international operations at least.
But the domestic operations remain challenging. In our opinion, from a financial perspective, Jet must solve its lagging domestic revenue and market share before the company as a whole can return to profitability. Structurally, the debt load facing Jet Airways, including US $300-400 million in high-cost shorter term debt, is the major challenge. Finance charges stood at Rs. 234.1 Crore in Q1, and with Jet Airways recently committing to order 50 737 MAX, as per a report in the Live Mint, the capital expenditures plan over the next 10 years only looks set to exacerbate that.

Stay tuned for Parts 2 and 3 of our analysis coming later this week, covering JetLite results, analysis of fleet and network plans, and a plan to tackle the debt load.

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Jet Airways to lease three Boeing 777-300ERs to Turkish Airlines

by Devesh Agarwal

Sources within Mumbai based Jet Airways indicate the airline has entered into an agreement with Turkish Airlines to dry-lease three of its Boeing 777-300ER (77W) aircraft for one year. The Indian carrier has a total of ten 77Ws in its fleet.

Since 2008, the carrier has found it difficult to effectively utilise these highly popular aircraft. It has been leasing up to 70% of its 777 fleet to various carriers like Gulf Air, Turkish THY Airlines, and Thai Airways. Boeing India chief Dr. Dinesh Keskar attributes this to Jet's small network in comparison to its competition. (Read Dr. Keskar's exclusive interview with Bangalore Aviation.)

At present the airline has five 77W's on lease with Thai Airways. Three of these aircraft will return by June and July 2013 and will be leased to Turkish Airlnes for a one year period. The other two are expected back from Thai in the fourth calendar quarter of this year. At present indications are that Jet plans to use these aircraft on its own network.

It appears the carrier is bullish on its deepening partnership with Abu Dhabi based Etihad and may want to deploy the high capacity 77Ws on select routes. Jet has been negotiating a 24% stake-sale to Etihad. It recently sold its landing slots at London Heathrow airport to the UAE carrier, a sale many consider as selling the family jewels.

There are reports that Jet plans to extend its code-share agreement with Etihad to include the Mumbai-Brussels-Newark route, and the winter season is the peak demand for the year.

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Air Canada in talks to lease 5 Air India Boeing 777-200LRs... Huh?

Late last week, reports emerged that beleaguered Indian national carrier Air India, which is in the midst of a crippling strike by its international pilots union, was in discussions with Canadian airline Air Canada to lease out 5 of Air India's Boeing 777-200LRs to the Toronto based airline. The news broke as Air India continues to operate less than half of its international network due to the strike by the IPG, but it is actually just the logical extension of continuous Air India efforts since 2009 to lease out 5 777s as well as 2 Boeing 747-400s.

 In the previous instances, it was reported that Air India was looking to lease out these aircraft for 8-10 years. However, given their inability to place these aircraft with any carrier for 3 years, perhaps Air India has realized that it must be more flexible. As Air India continues to take delivery of the all-new Boeing 787s, the necessity for the 777-200LR in Air India's fleet, which has almost been miscast by Air India as a regional widebody to and from Asia, all but evaporates. Air India currently operates 8 777-200LRs, most of which are grounded due to the strike.

Air Canada on the other hand, operates a fleet of 6 777-200LRs, primarily on long range routes between Canada and Asia. The carrier recently moved to convert 5 options for the larger Boeing 777-300ER into firm orders for delivery in 2013 and 2014, ahead of the first delivery of its own Boeing 787s. As Air Canada continues to hemorrhage money on its short haul network in the face of heavy competition from more nimble domestic rivals like low cost carrier WestJet, it appears to be doubling down on its more profitable long haul network; especially important given that Air Canada is having labor struggles of its own.

Even with this rationale, it's hard to see the merits of the deal for Air Canada. The Boeing 777-200LR is a hard aircraft to make money with, though Delta and Emirates appear to have made a go of it. Moreover, while they do need additional international capacity, Air India's 777-200LR might not be the best choice. There are a number of differences between Air India's 777-200LR and Air Canada's that will increase the costs of such a long term acquisition. Firstly, Air India's 777-200LRs are equipped with the General Electric GE-115B engines, which deliver 115,540 pounds of thrust whereas Air Canada's 777-200LRs are equipped with the GE-110B engines that deliver 110,100 pounds of thrust. While this difference might seem irrelevant, having two different engines on the same aircraft increases operational complexity (due to slight differences in operating performance) and makes scheduling more complex. It also increases maintenance costs as an airline's MRO workers must now be trained to handle both types of engines, or separate workers brought in to handle each. These costs are not insignificant; American Airlines famously sold off many of TWA's 757s due to engine incompatibility earlier this decade. Air Canada would also be forced to retrofit Air India's 777-200LRS, which are configured in a 238 seat (8F/35J/195Y), 3-class configuration, into their own 2-class 270 seat (42J/228Y)configuration. The cost of retrofitting 5 aircraft would likely run into the millions of dollars, increasing the true cost of acquisition.

So it makes little sense to me that Air Canada would be actively seeking to lease Air India's 777-200LRs, unless Air India was practically giving these birds away with super-low lease rates. And if that is in fact the case, then even leasing out these 777s would do little good for Air India's abysmal finances.

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Air India's flawed sales and lease-back strategy for its 787 Dreamliners

A few days back Air India released a request for proposal (RFP) for their planned sale and leaseback of seven Boeing 787 aircraft. These are the first seven Dreamliners out of a planned order of 27 aircraft. The deal would also include “one or two spare” GE GEnx engines. Air India is currently requesting a 12 year lease deal from lessors in return for these 787s.

Sale and lease-back agreements allow cash-strapped airlines to raise funds by selling owned aircraft to lessors, and then leasing back those aircraft back on favorable terms. The money realised from selling the aircraft is used for more productive purposes by the airline.

With Air India suffering from a debt-load of more than Rs. 40,000 Crore, the additional cash would help them either pay down their debt, or at the very least fund their operations; an action for which Air India has already secured a Rs. 30,000 Crore loan for the next ten years.

Furthermore, this agreement will allow Air India to avoid incurring further aircraft related debt. IndiGo has made great use of sale-leaseback agreements on their fleet of Airbus A320 aircraft; the carrier made over Rs. 100 Crore from sale-leaseback transactions in 2012, and concurrently has managed to keep its debt level below that of its competitors.

Why a sale and lease-back instead of financing through the US Export-Import bank?

Air India already has a confirmed contract with the United States Export-Import bank to finance these 27 aircraft at a sweetheart rate of 2.6%, but the airline has been hauled up by the Comptroller and Auditor General for excess debt, so it prefers the sale and lease-back deal, which will end up with at least 4%~4.5% debt servcing cost since it will be a private financing deal rather than government.

A sale and lease-back also brings immediate cash relief to an ailing airline, but at a higher future cost. The closest individual parallel is, taking a mortgage on your house to pay off old debt on previous houses. It is a dual edged sword. In the hands of a disciplined and stake-holding management sale and lease-backs are a powerful financial weapon allowing airlines to reduce high cost operations expense debt burdens, grow the operations and earn more to cover the higher long term costs of a private lease. However, at the mercy of an uninterested management, demoralised work-force and a government "run" airline with a history of constant interference, this will most likely be time-bomb that will explode and add to the financial misery of the Indian taxpayers whose money is being squandered to run the airline.

A 12 year tenor is too long

At first glance, it would seem that this sale and lease-back RFP represents a very lucrative opportunity for leasing companies: the Boeing 787 is a new and highly valuable asset that will be worth a lot of money for many years to come.

However, the very tenor of the lease gives one reason to pause. Most lease agreements are typically about six years in length. Why? one may ask. In a business, like aviation, which is so afflicted by external forces, 12 years is an eternity. It is next to impossible to predict with any significant confidence, what the market for the Boeing 787 will look like so many years later.

To give an example, in 1995, the Boeing 777-200 (non-ER) was considered as revolutionary an aircraft as the 787 is today. Six years later in 2001, competitor Airbus increased the weight carrying performance of its A330-300. Just six years after its entry into service (EIS), virtually overnight, Boeing lost the business justification for their 777-200.

Today, the Airbus has an order backlog of over 200 A330-300 aircraft, while Boeing has not received a single order for the 777-200 in the last four years. Can such a fate befall Air India and its 787-8 variant? Sure it can. Today the 777 is a segment leader in its class but in variants other than the -200. Similarly the 787-9 is expected to be more popular, as could be a potential -10 variant. The 787-8 could be rendered obsolete by a competing product from Airbus or a market that finds the operating economics of a 787-8 not as good as originally envisaged.

Over the course of these 12 years, Air India's 787s are expected to lose more than 70% of their re-sale value. Even if the airline is able to lease out the airplanes at the end of the 12 years, the rates they would be able to get will be severely diminished. Air India should look at a lease tenor of five to six years. It will drastically increase the premium the airline can command.

In all probability Air India will not be able to command any sort of premium on these aircraft over its purchase price, and will receive less than 100% of what they paid. The most current list price of a Boeing 787-8 is US $195.3 million. In 2006, when Air India purchased these planes, the list price was $157.5 million. Airlines typically negotiate a discount of 25%~40% on list prices, but in the case of Air India, there is a offset agreement in place, so we have taken a value of 32.5% discount, which yields a purchase price of ~$106.3 million.

If we assume that the lessors will offer roughly 80-90% of this (taking into account the long tenor of the deal and Air India’s shaky credit), the resultant lessor purchase range is US $85.1~95.7 million. For seven aircraft, the total value of the deal becomes US $595.7-669.9 million, which is equivalent to roughly Rs. 3,100~3,500 crore at current exchange rates. While this value is significant to be sure, Rs. 3,500 crore would represent just 41.9% of Air India’s projected FY 2011 loss of Rs. 8,348.8 Crore (US $1.6 billion converted to current rupee valuation).

How much will the 787s cost to operate with the new deal?

Lease rates for aircraft tend to fluctuate around 0.7-1% of purchase value depending on the credit of the airline. While the Indian government has shown nothing but support (in terms of financing its operations) for Air India, Indian politics are noticeably mercurial; the mindset of the Indian aviation ministry can change in a hurry. Thus for lessors looking to ensure the reliability of the Air India 787 lease deal as an asset (future lease obligations are typically accounted for as assets), the lease rates will likely be in the higher end of the range we quoted above. For the sake of an analysis, if we assume that Air India is able to secure lease rates at 0.9% of purchase price, under the terms we outlined above, their monthly lease rate would range from US $851,000 to US $957,000.

In terms of operating costs, where finance/lease charges typically represent around 15% of trip costs for Indian carriers on long haul operations, the lease deals might actually decrease direct operating costs. However, this cost reduction is a mirage, as Air India will have accrued a heavy loss in selling the 787s off for less than purchase price. Still, the 787’s will likely be 10-15% more cost-efficient on a per seat basis than the 777s in Air India’s fleet, allowing the carrier to lose less money than ever before!

Air India 787 operating configurations revealed

As part of the RFP we reviewed, Air India included the following characteristics for their 787:

• Aircraft will be configured with 256 seats (18J/238Y)
• 9 abreast in economy (3-3-3), 6 abreast in business (2-2-2)
• Business class seat pitch = 74 inches (lie-flat), economy class seat pitch = 33 inches
• 3 crew seats
• Business class seats are Contour Aura, while economy class are Weber 5751. The same slimline uncomfortable seats in Delta.
• Inflight entertainment will be Thales i8000 Top Series
• 9 toilets on board (2J/7Y), 9 galleys

Air India has elected to configure these aircraft with relatively few premium seats, a smart move given the competitive realities of the Indian market. The economy class seats are liable to be uncomfortable though; 9 abreast in a 787-8 is akin to 10-abreast in a Boeing 777; not a enjoyable experience at all.

Tentative Delivery Schedule

Air India also noted the revised schedule for delivery of these 7 aircraft; delivery of the first airplane has been pushed back from December 2011.

The first seven aircrafts are expected to be delivered in January, March, April, May (2), and June (2) of 2012 as VT-ANA/ANB/ANC/AND/ANE/ANG/ANH, but there are doubts on this schedule as well due to FAA testing and certification issues at Boeing.

Ultimately, a sale-leaseback agreement will provide Air India with greatly needed cash on hand, while neatly side-stepping the issue of financing from the Export-Import bank of the United States which had driven a law suit from the Air Transport Association.

Sound economic logic shows that the long tenor of the deal will prevent Air India from maximising the economic value; but then a clause in the RFP demonstrates the lack of such logic in the thinking of the airline and its masters

AI [Air India] is not bound to accept the highest or any other offers received. The offers received may be accepted or rejected partially or in full without assigning any reason whatsoever.

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Air India fleet plan calls for sale-leaseback of 787

Earlier this week, Air India, the beleaguered Indian national carrier, announced that it would be utilizing a sale-leaseback arrangement to evade the divisive lawsuit filed by the Air Transport Association (ATA), a US airline lobby group, over Us $ 3.4 billion worth of financing for the carrier's order of 27 Boeing 787 and 3 777-300ER widebody jets.

The lawsuit from ATA claims that because Air India is in dire financial straits (having lost more than Rs. 13,000 crore in the past four years), Air India might very easily default on its loans, leaving the US taxpayers on tab. Without getting too far into the politics of this lawsuit, it will suffice for us to say that the Maharaja will not be dying any time soon; as the imminent Rs.30,000 crore (plus) bailout proves, there are many in the government who are not yet willing to give up their "personal Netjets."

When we discussed the issue in our podcast last week, Devesh brought up the point that the ATA's suit could well affect employment at Boeing. However, the ATA has countered that export-import financing has given a direct edge to foreign competitors in adding international capacity to the US. Both of these are valid points (that will be hopefully explored in a later post), however Leeham Co., a respected aviation consultancy, implied that the dispute had more to do with a conflict between Delta Air Lines and the Indian government. In that case, any argument about there being an attempt to change the Ex-Im system is a bit overstated. Still, we will keep a close eye on the situation as more news becomes available.

Air India sale-leaseback is sound strategy; lease plans, not so much

As part of Air India's new fleet plan, the carrier will take delivery of all 27 aircraft on order, contradicting earlier reports that they would be halving the order. These 27 aircraft would be immediately sold to lessors such International Lease Finance Corp (ILFC) and General Electric Capital Aviation Services (GECAS), who would then turn around and lease the plane back to Air India. IndiGo has used this strategy to great effect with its fleet of Airbus A320 aircraft; a large chunk of its fiscal year 10-11 profit was derived from similar agreements. By selling these aircraft off immediately after purchase, Air India is able to generate cash to pay off some of its debts and avoid using Export-Import Bank funds. Given that the 787 is currently a very desirable aircraft, lessors will likely be quite willing to bring those aircraft onto their books as assets.

As part of this new fleet plan, Air India plans to lease out 5 Boeing 777-200LRs and 2 Boeing 747-400s once the 787s come on property. These leases are expected to raise Rs. 300 crore for the company. Boeing 747-400s are relatively un-economical, 4-engined aircraft, that beyond short term charters (such as Hajj), will be of little value to most airlines (save Iran Air and Air Koryo). Meanwhile the 777-200LR fleet, while newer, is not in high demand amongst world carriers. The only major operators of the type are the MEB3 (Emirates, Etihad, Qatar), Delta Airlines, along with a host of other niche carriers around the globe. Thus these aircraft are unlikely to be leased out at all, and if they were, the rates would most certainly be unprofitable for Air India.

I've gone on record as stating that Air India should cosider leasing out its larger 777-300ERs; which are highly desirable assets that would command premium lease rates. On many routes, the 777-200LR can have trip costs of up to 20% less than those of the 777-300ER. Thus for an airline of Air India's profitability; the additional revenue from leasing out the 777-300ERs would be topped off by a minimization of losses on Air India's route network.

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Turkish Airlines takes delivery of its first new Boeing 777-300ERs, prepares to return leased planes to Jet

Turkish Airlines THY took delivery of its first directly purchased 777-300ER from airframe manufacturer Boeing, registration TC-JJE.

It is the first of 12 777-300ERs the airline ordered in 2009. Currently the airline operates four 777-300ERs which it leased from India's Jet Airways in late 2008.

Boeing is scheduled to deliver four additional 777-300ERs to Turkish Airlines by the end of 2010, which will enable the carrier to commence returning the leased aircraft to Jet Airways from July 2011 onwards. The last leased 777-300ER is due to be returned to Jet in November 2011.

The airplane is powered by General Electric GE90-115BLs, the world's largest and most powerful commercial jet engines.

The new aircraft also features the economy plus cabin announced by Turkish Airlines called Comfort Class, but the premium passengers of Turkish Airlines are sure to miss the ultra luxurious first class suites and herringbone lie flat business class on the four aircraft leased from Jet.

It is not sure what Jet Airways will do with the four aircraft once they are returned. Bulk of the airline's Boeing 777-300ER fleet is leased out to other carriers including Thai Airways.

Related articles

• Turkish Airlines eyes 747-8, A380 (seattletimes.nwsource.com)
• Boeing, Emirates Announce Order for 30 Boeing 777-300ERs. (planenews.com)
• UPDATE 1-Boeing takes orders for 30 planes in latest week (reuters.com)

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Royal Brunei Airlines to lease Jet Airways Boeing 777-300ERs by February

Best wishes for a happy and prosperous 2010.

India's Jet Airways is close to finalising a deal with Royal Brunei Airlines (RBA) to lease three Boeing 777-300ERs from Jet Airways. The deal with RBA could see the 777s flying in RBA service as early as February. These 777s are the same which Gulf Air had leased for a short period and have been returned.

There is a good fit between the two carriers. Jet has excess aircraft capacity and has been looking for another carrier to lease these uber-luxurious aircraft. The delivery of its newest 777, VT-JEL has been indefinitely deferred.

At present RBA operates to London Heathrow, it's only non-Australasia destination, via Dubai, using a two class Boeing 767. The airline has few destinations in South-East Asia (Singapore, Kuala Lumpur, Ho Chi Minh City, Bangkok, Jakarata, Manila etc), near east (Hong Kong). It's other longer distance services include Perth, Brisbane, Jeddah and Auckland. Its Sydney services were suspended last year, and the carrier would like to add Melbourne as a destination.

RBA’s 767s are old products, lacking the latest cabin products of it competitors in the region, Singapore Airlines, Thai Airways, and Malaysia Airlines. Jet’s world renowned three-class Boeing 777s are fitted with state-of-the-art cabin including first class suites and fully flat beds in business class (see images here), will enable Royal Brunei to re-launch itself with a quality product for its passengers who primarily transit, rather than visit Brunei. Jet's 777's will also provide a huge boost in capacity with their 8-30-274 first, business, economy seats compared to the RBA 767's 23-182.

Reports in The Brunei Times, indicate that RBA technical staff have already assessed the B777s in India and the Royal Brunei may commence using the aircraft by February.

At this point it is unclear whether the lease will be with crew (wet lease) or without (dry lease). Messages and follow up with Jet Airways have produced no answers. Jet Airways is keen to have the aircraft on a wet lease, which will further reduce pressures on their HR.

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