TIDMDPA
RNS Number : 3715O
DP Aircraft I Limited
29 May 2020
29 May 2020
DP AIRCRAFT I LIMITED (the "Company")
QUARTERLY UPDATE
The Company is issuing this report for the period from 1
November 2019 to 30 April 2020 as an investor update. It should not
be relied on by Shareholders, or any other party, as the basis for
an investment in the Company or for any other purpose.
Overview
DP Aircraft I Limited, a Guernsey based company, was launched in
October 2013. To date the Company has acquired four Boeing 787-8
aircraft, with two leased to Norwegian Air Shuttle ASA and two
leased to Thai Airways International PCL. The Company took over the
Norwegian aircraft, LN-LNA (previously EI-LNA) and LN-LNB
(previously EI-LNB), on 9 October 2013 and the Thai aircraft,
HS-TQC and HS-TQD, on 18 June 2015. Due to the global COVID-19
outbreak, Norwegian and Thai had approached the Company to request
relief and restructuring of the lease rental amounts. Extensive
discussions took place and the outcome of those discussions is
detailed in the market announcements released by the Company during
the year. An update on the current status of the aircraft is noted
in the update below.
To date the Company has, paid out 25 dividends of 2.25 cents
each. The Company pays out dividends on a quarterly basis and
targets a yearly distribution of 9 per cent, with dividends
targeted for February, May, August and November in each year. The
last interim dividend payment was paid on 14 February 2020. The
Company declared on 3 April 2020 that it had suspended the payment
of dividends with immediate effect and until further notice, to
help preserve liquidity during COVID-19.
Company Information
Ticker DPA
Company Number 56941
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ISIN Number GG00BBP6HP33
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SEDOL Number BBP6HP3
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Traded SFS
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SFS Admission Date 4 October 2013
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Share Price USD 0.14 (26 May 2020)
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Country of Incorporation Guernsey
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Current Shares in Issue 209,333,333 Ordinary Shares
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Administrator and Company Secretary Aztec Financial Services (Guernsey)
Limited
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Asset Manager DS Aviation GmbH & Co. KG
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Auditor and Reporting Accountant KPMG
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Corporate Broker Investec Bank Plc
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Aircraft Registration (Date of LN-LNA (28 June 2013)
Delivery) LN-LNB (23 August 2013)
HS-TQC (29 October 2014)
HS-TQD (9 December 2014)
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Manufacturer Serial Number MSN 35304
MSN 35305
MSN 36110
MSN 35320
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Aircraft Type and Model B787-8
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Lessees Norwegian Air Shuttle ASA
Thai Airways International PCL
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Website www.dpaircraft.com
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THE AIRLINE MARKET
Covid-19 Pandemic
The Covid-19 virus was first identified at Wuhan in China at the
end of December 2019 but then continued to spread to neighbouring
countries. As the virus arrived in Europe and all other continents,
the Covid-19 outbreak turned into a global pandemic with
significant impact on the airline industry. At the outset, Chinese
and Asian carriers were assumed to be the most affected but
currently the negative impact on European Airlines is greater,
although airlines worldwide are facing challenging and potentially
existential times.
The number of stored aircraft worldwide is increasing rapidly;
by way of example the number went up by over 1,000 aircraft within
a single day (31(st) March to 1(st) April 2020). Many airlines have
completely grounded their fleet, in particular those carriers with
no freighter business. The demand for cargo flights itself is
strong as the volume of belly freight opportunities falls away with
the decrease of passenger flights. Some airlines, amongst others
Lufthansa and Aegean, are using passenger aircraft to transport
cargo and urgently required medical equipment and protective
clothing.
The further development and duration of the pandemic as well as
any progress in research and development of a vaccination and
effective testing will largely determine the total impact on the
airline and aviation industries.
Global Airline Market
-- Current Outlook
o Airlines worldwide substantially impacted by the Covid-19
pandemic
o The total impact of the Covid-19 pandemic cannot be assessed
at the current stage
o A significant number of airlines have completely grounded
their fleets for an as yet undefined period
o Up to 64% of passenger aircraft (more than 16,000) stored
globally
o Demand for cargo flights to increase as belly freight capacity
of passenger jets falls away
o The 2020 forecast of the chart below was provided late 2019 by
IATA and will inevitably significantly change which becomes clear
by the following current assumptions published by IATA:
-- Passenger demand to decrease by 60% in 2020
-- Return to 2019-level of passenger demand not before 2023
-- Passenger revenues to decrease by 55% in 2020
2018 2019 2020
(Expectation) (Forecast Pre-Covid-19)
Passengers [billion] 4.4 4.5 4.7
----- --------------- -------------------------
Capacity (ASK) [% YoY] 6.9 6.5 4.7
----- --------------- -------------------------
Demand (RPK) [% YoY] 7.4 4.2 4.1
----- --------------- -------------------------
Passenger Load Factor [%] 81.9 82.4 82.0
----- --------------- -------------------------
Passenger Yield [% YoY] -2.1 -3.0 -1.5
----- --------------- -------------------------
Freight [million freight tonnes] 63.3 61.2 62.4
----- --------------- -------------------------
Cargo Yield [% YoY] 12.3 -5.0 -3.0
----- --------------- -------------------------
Overall Expenses [% YoY] 9.7 3.8 3.5
----- --------------- -------------------------
Overall Revenues [% YoY] 7.6 3.2 4.0
----- --------------- -------------------------
Net Profits [billion USD] 27.3 25.9 29.3
----- --------------- -------------------------
Source: IATA, December 2019
European Airline Market
-- Estimated Covid-19 impact in 2020 by IATA
o 55% decline in demand (RPK)
o USD 89 billion decrease in passenger revenues
o Strongest decline in demand amongst the regions
Asian Airline Market
-- Asian airlines were amongst the first affected by the Covid-19 outbreak
-- Estimated Covid-19 impact in 2020 by IATA
o 50% decline in demand (RPK)
o USD 113 billion decrease in passenger revenues
o Strongest decrease in passenger revenues (total numbers)
amongst the regions
Outlook & Conclusion
The airline business is a cyclical business and sensitive to
external shocks, currently graphically reinforced by the Covid-19
pandemic. Previously burdens on airlines caused through the
worldwide Boeing 737MAX fleet grounding and the Rolls Royce Trent
1000 issues will be trivial in 2020 by comparison as more than 60
per cent of the passenger fleet had already been considered as
stored. Even if the level of coronavirus cases flattens and travel
bans are gradually lifted, it is difficult to project when capacity
and numbers of passenger aircraft will be on pre-Covid-19
levels.
Airlines operate in a very competitive environment, their profit
margins are low and their operating costs significant. Fixed costs,
semi-fixed costs and crew expenses amount for nearly 50% of total
operating costs. Most of these costs cannot be avoided in the
short-term and as revenue streams are currently marginal or
non-existent, their financial puffer will be used up shortly.
According to IATA, an average airline has an amount of cash and
cash equivalents for about two months. This indicates that the
industry will heavily rely on governmental support.
Not only current travel restrictions and closures of tourist
related infrastructure but also the decrease in manufacturing and
retail industries and the resulting lay-off of employees might
contribute to an economic recession which in turn will impact the
recovery of the airline industry. At the current stage, it is
impossible to make any reliable or resilient statement on the total
impact of the Covid-19 pandemic or its further development.
However, from a historical point of view, the airline industry has
proven to be resilient and has recovered from all previous crises.
This time the recovery period will likely take longer than average
to return to pre-Covid-19 levels and as long as the pandemic will
last and most of the travel restrictions remain in place, the
number of airlines dependent on governmental support or filing for
bankruptcy will increase.
THE LESSEES
Norwegian Air Shuttle ASA
Norwegian Air Shuttle in brief - Pre-Covid-19
-- Low-cost carrier; 3(rd) largest in Europe
-- Short-, medium- and long-haul operations
-- 37 Boeing 787s
-- 36 million passengers in 2019
Current situation resulting from Covid-19 pandemic
o Existing liquidity risk further increased as costs cannot be
reduced by the same amount as revenue streams fall away
o 95% of the fleet stored and 7,300 employees temporarily
laid-off reducing monthly expenses
o Operation of repatriation flights and several routes in the
Nordics, subsidised by the government to ensure connectivity to
remote areas
o Joint venture with CCB and B737MAX deliveries on hold
resulting in reduced CapEx
o High exposure on transatlantic network and dependent on
development of the pandemic in the U.S
o Norwegian requested a forbearance period with its main
creditors (lessors and banks) until the end of June 2020
o Government offers support package in three tranches (NOK 300m,
NOK 1.2bn, NOK 1.5bn) totalling NOK 3.0bn (USD 286m); each subject
to certain conditions
- Norwegian met requirements for the first tranche quickly which
had been approved (raising additional NOK 30m (about USD 2.9m)
funding through banks)
- Norwegian could not fulfil conditions for the second tranche
(required support from banks and lessors through forbearance) but
this tranche is automatically unlocked if the conditions of tranche
3 were met...
- ...therefore Norwegian focused successfully on fulfilling the
requirements of tranche 3 (equity ratio >8%) through
debt-to-equity conversions
-- Conversion of NOK 3.6 billion from convertible bonds
-- Conversion of NOK 9.1 billion of lease obligations through
the issue of shares or perpetual bonds
-- Oversubscribed public offering of NOK 400 million
o Norwegian announced 20(th) May that it had entered into a NOK
2.99 billion state supported term facility agreement
o DP Aircraft's situation:
- Restructuring provisions discussed and agreed
- Outstanding and reduced amounts converted into equity (in the form of shares)
o Potential benefit of increase in low-cost carriers' overall
market: passengers are historically more price-sensitive during
economic downturns or recession
o Restructuring - including debt-to-equity conversion and
temporary power-by-the hour agreements for B787 aircraft - provides
the airline with further financial headroom and flexibility on
their flight schedules
o Becoming the "New Norwegian" once the restructuring becomes
operational.
The following information on the Lessee Norwegian summarise the
previous events and strategies to give a full picture; however the
situation pre-Covid-19 becomes less and less relevant with the
continuing effects of the pandemic creating an unpredictable and
market.. The "Comments & Conclusion" will then link the pre-and
post-Covid-19 situation .
Financial & Operational Figures
[million NOK] 4Q2019 4Q2018*** Change FY2019 FY2018*** Change Link**
- 7
Operating Revenues 8,944 9,658 % 43,522 40,266 + 8 % a)
------- ---------- ------- -------- ---------- ------- -------
- 23
Operating Expenses* 10,222 13,251 % 42,666 44,117 - 3 % b)
------- ---------- ------- -------- ---------- ------- -------
+ 237
EBITDAR 357 -1,925 --- 7,314 2,171 % c)
------- ---------- ------- -------- ---------- ------- -------
+ 64
Operating Result -1,278 -3,593 % 856 -3,851 --- d) g)
------- ---------- ------- -------- ---------- ------- -------
+ 38
Net Result -1,873 -3,012 % -1,609 -1,454 - 11 % e-h)
------- ---------- ------- -------- ---------- ------- -------
Unit Costs incl. + 10
fuel 0.48 0.44 % 0.44 0.43 + 0 %
------- ---------- ------- -------- ---------- ------- -------
Unit Costs excl. + 15
fuel 0.35 0.31 % 0.31 0.31 + 0 %
------- ---------- ------- -------- ---------- ------- -------
+ 16
Unit Revenue 0.34 0.30 % 0.35 0.33 + 7 %
------- ---------- ------- -------- ---------- ------- -------
+ 10
Yield 0.40 0.37 % 0.41 0.38 + 6 %
------- ---------- ------- -------- ---------- ------- -------
Ancillary Revenues + 8
per Passenger 182 169 % 184 168 + 10 %
------- ---------- ------- -------- ---------- ------- -------
Capacity - ASK - 19
(million) 21,018 26,058 % 100,031 99,220 + 1 %
------- ---------- ------- -------- ---------- ------- -------
Demand - RPK - 15
(million) 17,835 21,068 % 86,616 85,124 + 2 %
------- ---------- ------- -------- ---------- ------- -------
+ 4.0 + 0.8
Load Factor 84.9 % 80.9 % pp 86.6 % 85.8 % pp
------- ---------- ------- -------- ---------- ------- -------
- 16
Passengers (million) 7.57 9.04 % 36.20 37.34 - 3 %
------- ---------- ------- -------- ---------- ------- -------
Average Stage - 4
Length 1,805 1,872 % 1,876 1,843 + 2 %
------- ---------- ------- -------- ---------- ------- -------
Aircraft Utilisation - 6
[block hours] 11.7 12.5 % --- --- ---
------- ---------- ------- -------- ---------- ------- -------
Number of Aircraft --- --- --- 156 164 - 5 %
------- ---------- ------- -------- ---------- ------- -------
Cash & Cash
Equivalents --- --- --- 3,096 1,922 + 61%
------- ---------- ------- -------- ---------- ------- -------
+ 1.8
Equity Ratio --- --- --- 4.8 % 3.0 % pp g)
------- ---------- ------- -------- ---------- ------- -------
Total Assets --- --- --- 85,343 55,985 + 52 % j)
------- ---------- ------- -------- ---------- ------- -------
* Calculated
**Please refer to Background Information
***FY2018 did not incorporate IFRS16
Background Information
a) Decreasing revenues in 4Q19 driven by capacity reductions;
Strongest growth of revenue streams from travel originating in
the U.S. in FY2019 (+19%)
b) Costs of NOK 300 million (NOK 1,000 million) in 4Q19 (FY2019)
caused by the grounding of B737MAX aircraft
c) Improvement resulting from network optimisation and #Focus2019 cost reductions.
d) Loss of NOK 244 million from currency effects in 4Q19
e) Sale of 14.0 million Norwegian Finans Holding ASA (NOFI) shares in 4Q19
f) Gain of NOK 174 million in net profit in FY2019 from the sale
of shares in Lilienthal to NOFI including brand-licensing
g) Impact of IFRS 16 (implemented on 1(st) January 2019) on 4Q19 (FY2019), e.g.:
- Net cost reduction on depreciation and aircraft lease of NOK 255 million
- Positive impact of NOK 342 million (NOK 981million) on operating profit
- Negative impact of NOK 456 million (NOK 756 million) on net profit (net financial items)
- Lease liabilities of (NOK 34,274) million included in net interest-bearing debt
- Equity ratio of 4.8% but 9.1% without IFRS 16 as at 31(st) December 2019
h) Results of the previous year 2018 benefitted from a
reclassification of the NOFI holding by NOK 1.9 billion
i) Receivables increased by NOK 4,438 million in FY2019;
particularly due to holdbacks from credit card acquirers
j) IFRS 16 effect on Total Assets compared to 31(st) December
2018: increase by NOK 32,797 million
Tangible fixed assets decreased by NOK 5,558 in 4Q19: No
addition of aircraft and sale of five B737-800s
k) Implementation of IFRS 16 with negative impact on equity
ratio in FY2019 (e.g. equity ratio 4Q19 without IFRS16 effects:
9.1%); please also refer to Comments & Conclusions
Strategic development
-- In 2019 Norwegian's focus turned from growth to profitability
o Implementation of cost saving programme #Focus2019 with the
target of reducing costs by NOK 2 bn in 2019
o Objective outperformed: cost reduction of NOK 2.3 bn in
2019
-- Norwegian had additionally put several measurements in place
to increase liquidity and reduce capital commitments:
o Joint venture with China Construction Bank Leasing (CCB)
o Restructuring of order book and sale of 24 aircraft
o Sale of shares in Norwegian Finans Holding ASA
o Extension of two unsecured bonds by two years
o Sale of Argentinian subsidiary to low-cost carrier JetSmart
(Chile) early December 2019
o Successful completed capital raise of NOK 2,500 million
through a private placement and a convertible bond issue of USD 150
million; pre-Covid-19 intended to leave Norwegian fully funded
throughout 2020
o Introduction of a new hand luggage policy to generate
additional revenue end of January 2020
Comments & conclusions
2019 was once thought to be the year of changes and
restructuring. The new strategy together with the earlier
implemented measures went some way to demonstrate that the airline
was aware of the risks and the urgent need to address them.
Particularly, the completed extension of the two bonds and the
capital raising were key to more financial headroom. The increase
of the equity ratio in the third quarter 2019 seemed to indicate
the beginning of an upward trend. Although the equity ratio in the
fourth quarter was lower, reflecting the low season for European
carriers, it was above 2018 fourth quarter levels (IFRS 16 further
lowered the equity ratio in 2019 compared to the previous years).
At year's end, Norwegian Air Shuttle was in a significant stronger
position than at the beginning 2019. Although the carrier stated a
net loss in 2019, Norwegian succeeded at the operational level, of
demonstrating that the strategy change was beginning to make a
positive impact.
Before the first quarter ended, the airline was severely
affected by this pandemic through no fault of its own and entered
again a restructuring process. It is clear that the impact of
Covid-19 is significant and the economic survival, not only for
Norwegian but for a majority of the airlines worldwide, depends on
governmental and stakeholders' support. The commitment of the
Norwegian government to offer support packages to Norwegian, SAS
and Wideroe shows that Norway considers Norwegian Air Shuttle as an
important player which warranted assistance. However, different
from other governments, Norway linked its support packages to
certain conditions. Following the restructuring in 2019, Norwegian
was not in a position to meet all the stipulated financial
conditions but with the support of Seabury - a well-known
consulting company in the aviation industry - set-up a
straightforward restructuring plan and successfully obtained
stakeholders' support to unlock the full package of governmental
support. Although, Norwegian was amongst the first in need of
governmental support, it is becoming evident that more and more
airlines are requiring financial support, including formerly
profitable airlines like Lufthansa.
Thai Airways International Public Company Limited
Thai Airways in brief - Pre-Covid-19
-- Full-service and flag carrier; majority-owned by the Thai Government
-- Short-, medium- and long-haul operations
-- Eight Boeing 787 aircraft
-- 80 destinations in more than 30 countries
-- 24 million passengers in 2019
Current situation resulting from Covid-19 pandemic
-- T hai Airways had been one of the first airlines
significantly affected by the pandemic as the carrier ( including
Thai Smile) has an exposure of 95 weekly flights to nine Chinese
destinations
-- After Thailand declared a state of emergency starting 26(th)
March, Thai Airways suspended all international flights
- Temporary grounding of 69 aircraft to reduce expenses
- Domestic flights transferred to Thai Smile with lower operating costs
- Thai operates repatriation flights and cargo services
- Majority of employees granted leave until end of May with salary cuts of 10 to 50 per cent
-- Liquidity risk deriving from increasing debt to equity ratio and lack of profitability
-- Aircraft retirement of older types in the fleet under consideration
-- Thai's request for governmental support was not approved
resulting in a court-supervised rehabilitation process
-- Rehabilitation process
o 19 May 2020: Approval by the Thai Government to a
restructuring under supervision of the local bankruptcy court
o Thai Airways can continue to run its business and operations
as usual
o 22 May 2020: Thai Airways ceased to be a state-controlled
company after government's shareholding decreased under 50 per
cent
o Acceptance of Thai's application by the bankruptcy court
followed by an automatic stay
o After making the rehabilitation order, the positions of the
"plan preparer" and "plan administrator" (responsible for the
implementation of the rehabilitation plan) need to be filled either
by the same or by different candidates
o Detailed schedule, process and measurements are not clearly
communicated yet by the airline or the respective governmental
authorities - this being the first case an airline in Thailand has
chosen this kind of rehabilitation protection
o DP Aircraft's situation
- Lease rent deferrals agreed with Thai but due to the rehabilitation not yet signed
- Outcome of rehabilitation process unknown and pending clarification
-- Successful restructuring of Thai Airways including the
implementation of an approved business plan could turn Thai in an
efficient and profitable airline
-- Tourism stimulation measures initiated by the government
(e.g. waived visa on arrival fees) might support Thai in future
post-Covid-19 times
The following information on the Lessee Thai Airways summarise
the previous events and strategies to give a full picture; however
the situation pre-Covid-19 becomes less and less relevant with the
pandemic further continuing and the development of the market being
very dynamic. The "Comments & Conclusion" will then link the
pre-and post-Covid-19 situation.
Financial & Operational Key Figures
[billion THB] 4Q2019 4Q2018 Change FY 2019 FY 2018 Change Link**
Operating Revenues 46.7 50.8 - 8 % 184.1 199.5 - 8 % a)
------- ------- ------- -------- -------- ------- -------
Operating Expenses 48.4 57.0 - 15 % 196.5 208.6 - 6 % b)
------- ------- ------- -------- -------- ------- -------
EBITDA 3.7 2.0 +78% 8.8 14.5 - 39 %
------- ------- ------- -------- -------- ------- -------
Operating Result - 1.6 - 6.2 + 74 % - 12.4 - 9.1 - 37 %
------- ------- ------- -------- -------- ------- -------
Net Result - 0.9 - 7.5 + 88 % - 12.0 - 11.6 - 4 % c)
------- ------- ------- -------- -------- ------- -------
Unit Costs incl.
fuel* 2.03 2.02 + 0 % 2.17 2.24 - 3 %
------- ------- ------- -------- -------- ------- -------
Unit Costs excl.
fuel* --- --- --- 1.52 1.55 - 2 %
------- ------- ------- -------- -------- ------- -------
Unit Revenue* 2.00 2.17 - 8% 2.03 2.14 - 5 %
------- ------- ------- -------- -------- ------- -------
Passenger Yield
[THB/RPK] 1.97 2.25 - 12 % 2.04 2.19 - 7 % d)
------- ------- ------- -------- -------- ------- -------
Freight Yield
[THB/RFTK ([1])
] --- --- --- 7.84 8.51 - 8 % e)
------- ------- ------- -------- -------- ------- -------
Capacity - ASK
(million) 23,325 23,402 - 0 % 90,622 93,131 - 3 % f)
------- ------- ------- -------- -------- ------- -------
Demand - RPK
(million) 18,962 17,943 + 6 % 71,695 72,315 - 1 %
------- ------- ------- -------- -------- ------- -------
+ 4.6 + 1.5
Load Factor 81.3 % 76.7 % pp 79.1 % 77.6 % pp
------- ------- ------- -------- -------- ------- -------
Passengers (million) 6.44 6.16 + 5 % 24.51 24.32 + 1 %
------- ------- ------- -------- -------- ------- -------
Aircraft Utilisation
[block hours] 12.1 12.6 - 4% 11.9 12.0 - 1 %
------- ------- ------- -------- -------- ------- -------
Number of Aircraft --- --- --- 103 103 ---
------- ------- ------- -------- -------- ------- -------
Cash & Cash
Equivalents --- --- --- 21.66 13.69 + 58 % g)
------- ------- ------- -------- -------- ------- -------
Total Assets --- --- --- 256.67 268.72 - 5 %
------- ------- ------- -------- -------- ------- -------
Equity Ratio* --- --- --- 5 % 8% - 3 pp
------- ------- ------- -------- -------- ------- -------
* Calculated
**Please refer to Background Information
Background Information
a) THB 149.04bn in passenger & access baggage revenues (-7%)
THB 17.78bn in freight & mail revenues (-20%)
THB 13.45bn in revenues from other activities (+1%)
THB 3.77bn in other income (+7%)
b) Increase of 11% (THB 612 million) in crew expenses in FY2019
due to introduction of a new pilot compensation system to align
with industry standards
Decrease of 8.2% in average fuel prices in FY2019
Decrease of 12% (THB 2,258 million) in depreciation and
amortisation expenses due to change in residual value recognition
in FY2019
- Adoption of Thai Financial Reporting Standard No. 15 as at
1(st) January 2019 (Revenue recognition in passenger patents and
mileage rights)
c) Net result FY19 influenced by one-time expenses:
- THB 2,689 million estimated service compensation due to a
change in the severance payment conditions
- THB 4,439 million gain on foreign currency exchange
- THB 634 million impairment loss of assets and aircraft
- THB 273 million gain in ownership interest (dilution of shareholding in NOK Airlines)
d) Decrease in passenger yield mainly driven by the appreciation
of the Thai Baht and the fierce competition; decrease excluding
currency effects would be 2.7%
e) Significant drop in freight volume (-13.7%) and yield
- U.S.-China trade war
- Protests in Hong Kong
- Weaker economy
- Pakistan airspace closure resulted in trading off belly
freight against fuel due to longer flight routes to Europe
f) Decrease in capacity particularly due to Trent 1000 engine
issues and temporary closure of Pakistan Airspace
g) Increase in cash due to debenture issue in November 2019
h) The debt to equity ratio (leverage) significantly increases over the last quarters
Strategic development
-- "Brother & Sister Model": Integration of Thai Smile into Thai Airways to generate synergies
-- New Transformation 2020 Plan launched at the end of 2019
after having not met the targets of the first half of 2019 -
included three guidelines:
o Increasing revenue (supported by the Mantra project and
acceleration of digital marketing operations)
o Cost control and reduction through a cost management
programme
o Increase in operational efficiency by taking actions in
parallel (e.g. effective fleet management, decrease of debt to
equity ratio)
-- Further measurements:
o November 2019: Unsecured debenture issue on 13(th) November
2019
-- Successful issue of THB 8.8 billion with institutional and
high net worth investors
-- Rated category "A" by TRIS Rating
-- Divided in five tranches with maturities between one and 15
years
-- Coupon rates between 2.32 per cent to 3.98 per cent
o Memorandum of Understanding (4Q19) with the Toyota Tsusho
[Thailand] company on travel activities: Thai Airways will become
the exclusive and preferred airline for company members' business
travel
o Sale of six decommissioned aircraft in 2019
-- Changes in management
o January: 2020: vice-chairman Chaiyapruk Didyasarin takes over
the role as chairman permanently after Ekniti Nitithanprapas
resigned in November
o March 2020: second-vice president Chakkrit Parapuntakul became
acting president after Sumeth Damrongchaitham resigned
-- Changes in shareholding:
o 22(nd) May 2020: The shareholding by Thailand's finance
ministry had been reduced by about 3 % from 51.03% to 47.86%
o Thai Airways is no longer classified a state enterprise under
the relevant laws.
Comments & conclusions
Thai Airways has struggled to return to profitability after
low-cost competition increased. For the financial year 2019, the
carrier reported an operating and net loss with no improvement
compared to the previous year. However, the fourth quarter showed
some significant improvement compared to the comparable quarter in
2018 before being hit by the negative impact of the Covid-19
pandemic beginning of 2020.
The airline is dependent on the tourism sector, particularly on
the in-bound tourism and vulnerable to external shocks such as
epidemics, riots, natural disasters or the downturn of originating
passengers' economies. Chinese tourists count for the biggest share
of foreign tourists travelling to Thailand, and both the US-China
trade war and the unrest in Hong Kong had a negative impact on
Thai's performance in 2019. As another consequence of this
correlation, Thai Airways had been affected from the beginning by
the outbreak of Covid-19 in China. After it turned into a global
pandemic, Thai Airways grounded most of its fleet at the end of
March 2020. As the first quarter is high season for Asian carriers,
these flight cancellations will strongly affect Thai's revenue
streams and operating results for the financial year 2020. The
ongoing Rolls Royce Trent 1000 issues limiting Thai Airways'
capacity growth in 2019 might currently be trivial until
operational levels return to pre-Covid-19 levels.
Thai Airways needs to prepare itself for the post-Covid-19
period. It is essential for the carrier re-adopting and
implementing measurements to at least stabilise the leverage as
well as to increase revenue streams which had already been weak
before the pandemic. Restructuring is a necessary move with a
strict focus on a rehabilitation plan. However, as long as the
rehabilitation plan and process under the bankruptcy court are not
outlined in detail, it remains to be seen if this more drastic
process will be more successful than any restructuring from own
sources would have been.
THE ASSETS
Key Facts B787
-- 61 operators (Airlines) on all continents
-- 73 customers (Airlines and Lessors)
-- Aeroflot cancelled its order of 22 B787s in 4Q19
-- Emirates and Malaysian lessor CALC became new customers in November 2019
-- Reduction of production rate to 10 aircraft monthly by 2021
-- B787 production temporarily suspended due to Covid-19 pandemic
Assets & Operations
Trent 1000 issues
The availability of Rolls-Royce Trent 1000 spare engines and the
bottleneck of shop visit slots have impacted airlines' Boeing 787
fleets as some of their aircraft had been temporarily stored,
including aircraft of Thai Airways and Norwegian Air Shuttle :
-- Aircraft TQC stored since 29(th) September 2019 at Bangkok Suvarnabhumi Airport (Thailand)
-- Aircraft TQD stored since 6(th) December 2019 at Bangkok Suvarnabhumi Airport (Thailand)
-- Aircraft LNA stored since 27(th) May 2019 at Glasgow-Prestwick Airport (United Kingdom)
-- Aircraft LNB stored since 17(th) September 2019 at
Glasgow-Prestwick Airport (United Kingdom)
Although for some of the above aircraft in-service dates were
scheduled in accordance with Trent 1000 spare engine availability,
it is very likely that all four aircraft will remain stored at
least throughout the Covid-19 pandemic related travel
restrictions.
Asset Overview
AIRCRAFT OPERATIONS Norwegian Air Shuttle Thai Airways
LN-LNA LN-LNB HS-TQC HS-TQD
---------------------- -------------------- --------------------- -----------------
Cabin Layout 32 Premium Economy Class 24 Business Class Seats
Seats 240 Economy Class Seats
259 Economy Class Seats
-------------------------------------------- ----------------------------------------
PHYSICAL INSPECTION
(by DS Aviation)
---------------------- -------------------- --------------------- -----------------
Date 27.02.2020 27.02.2020 03.12.2019 03.12.2019
---------------------- -------------------- --------------------- -----------------
Place Prestwick Airport Bangkok Airport
-------------------------------------------- ----------------------------------------
Aircraft & Technical Aircraft/Technical records Aircraft/Technical records
Records condition in good condition with no in good condition with
significant defects or airworthiness no significant defects
related issues (Storage or airworthiness related
inspection) issues
-------------------------------------------- ----------------------------------------
AIRFRAME STATUS
(30(th) April 2020)
---------------------- -------------------- --------------------- -----------------
Total Flight Hours 29,177 30,925 16,873 15,536
---------------------- -------------------- --------------------- -----------------
Total Flight Cycles 3,386 3,652 3,814 3,598
---------------------- -------------------- --------------------- -----------------
Average Monthly Utilisation 355 hours 385 hours 255 hours 240 hours
since Delivery 41 cycles 45 cycles 58 cycles 56 cycles
---------------------- -------------------- --------------------- -----------------
Hours/cycles ratio
since delivery 8.62 8.47 4.42 4.32
---------------------- -------------------- --------------------- -----------------
ENGINE DATA Engine Serial Number Engine Serial Number
(30(th) April 2020)
-------------------------------------------- ----------------------------------------
10118 10119 10130 10135 10239 10240 10244 10248
---------- ---------- --------- --------- ------------ ------- -------- -------
Total Time [Flight
Hours] 23,984 26,357 21,802 24,868 15,292 10,518 11,081 16,805
---------- ---------- --------- --------- ------------ ------- -------- -------
Total Flight Cycles 2,818 3,101 2,422 2,864 3,433 2,583 2,681 3,690
---------- ---------- --------- --------- ------------ ------- -------- -------
Location Spare LNF LNC Shop TQB Shop TQA TQA
---------- ---------- --------- --------- ------------ ------- -------- -------
Comments and Conclusions
The order and delivery numbers emphasise that the Dreamliner
Boeing 787 aircraft is favoured by many airlines from different
regions and different business strategies. As new customers placed
orders in 2019 and Lufthansa even decided for Trent 1000 engines,
it seems there is confidence in Rolls-Royce to fix the known
problems and the capacity bottleneck. However, it cannot be
assessed yet, how the Covid-19 pandemic will have any impact on the
number of aircraft orders or conversions within the B787 family. In
a difficult economic environment, it is possible that there might
be a temporary preference towards the smaller types within an
aircraft family. This may lead, once the recovery period starts, to
greater interest in the B787-8 series compared to the larger 9 and
10 series variants. Moreover, the temporarily suspension of B787
production will set back the B787 delivery timetable for 2020 and
thereafter.
Material Events since November 2019
November 2019
Interim Update (7 November 2019)
The interim investor update report for the period 1 May to 31
October was published.
January 2020
Dividend Declaration (15 January 2020)
T he Company declared a quarterly dividend in respect of the
quarter ended 31 December 2019, of 2.25 cents per Share, to holders
of shares on the register at 24 January 2020, and payment was made
on 14 February 2020.
March 2020
Company Update (23 March 2020)
The Company announced that lease payments had not been received
for the aircraft leased to Norwegian Air Shuttle, due to the
COVID-19 global outbreak.
April 2020
Company Update - Suspension of Dividends (3 April 2020)
The Company declared that dividends would be suspended with
immediate effect and until further notice to put the Company in the
best possible position in its discussions with the lending banks
providing debt financing in respect of the two aircraft leased to
Norwegian Air Shuttle.
Company Update (9 April 2020)
The Company announced that, in response to a written request
received, it was considering affording Thai Airways a temporary
relaxation of its lease payment obligations, in light of the
ongoing COVID-19 crisis.
Annual Report and Audited Consolidated Financial Statements (29
April 2020)
The Annual Report and Audited Consolidated Financial Statements
for the year ended 31 December 2019 were published.
May 2020
Company Update (13 May 2020)
The Company released an update regarding its discussions with
its two lessees, Norwegian Air Shuttle and Thai Airways, and its
lending banks.
Shareholding in Norwegian Air Shuttle (21 May 2020)
The Company announced that the equity allotment in Norwegian Air
Shuttle had been received. DP Aircraft Ireland Limited (a wholly
owned subsidiary of the Company) had been allotted 154,189,712
shares, representing 5.02% of Norwegian Air Shuttle's issued share
capital and voting rights at the date of the announcement.
Enquiries:
Kellie Blondel / Laura Dunning
Aztec Financial Services (Guernsey) Limited
As Company Secretary to DP Aircraft I Limited
Tel: + 44 (0) 1481 748833
[1] Revenue per Freight Ton Kilometre
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
UPDSEMSUUESSEFI
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May 29, 2020 05:27 ET (09:27 GMT)
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