17 November 2015
DP AIRCRAFT I LIMITED (the
"Company")
QUARTERLY UPDATE
The Company is issuing this report
for the period from 1 July 2015 to 5 November 2015 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. Its US$ 113 million
placing was oversubscribed. The company has acquired two Boeing
787-8 aircraft, leased to Norwegian Air Shuttle ASA, with the two
aircraft delivered in June 2013 and August 2013 respectively. DP
Aircraft I Limited took over title to the aircraft, EI-LNA and
EI-LNB, on 9 October 2013. Since that date all lease obligations
have been met in full by Norwegian and no incidents of note
concerning operations of the aircraft have occurred. Since
Norwegian Air Shuttle has not yet received traffic rights under the
open sky agreement to the U.S. through its Irish operations, EI-LNB
had been re-registered in Norway with new registration
LN-LNB.
On 5 June 2015, the Company offered
96,333,333 Ordinary Preference Shares (the 'New Shares') of no par
value in the capital of the Company at an issue price of US105.89
cents per Share by means of a Placing. The Company's New Shares
were admitted to trading on the Specialist Fund Market of the
London Stock Exchange on 12 June 2015. On 18 June 2015 the Company
purchased two further Boeing 787-8 aircraft which were leased to
Thai Airways. DP Aircraft I Limited took over the title to the
aircraft HS-TQC and HS-TQD. Since that date all lease obligations
have been met in full by Thai Airways and no incidents of note
concerning operations of the aircraft have occurred.
Inclusive of the November 2015
dividend, the Company has so far paid out as scheduled eight
dividends of 2.25 cents each. The Company pays out dividends on a
quarterly basis and targets a yearly distribution of 9 per cent on
the initial placing price of US$ 1.00. The next interim dividend
payment is due in February 2016. The quarterly distributions are
targeted for February, May, August and November in each
year.
Company Information
Ticker
|
DPA
|
Company Number
|
56941
|
ISIN Number
|
GG00BBP6HP33
|
SEDOL Number
|
BBP6HP3
|
Traded
|
Specialist Fund Market
|
SFM Admission Date
|
4 October 2013
|
Share Price
|
USD1.0475 as at 16 November
2015
|
Country of Incorporation
|
Guernsey
|
Current Shares in Issue
|
209,333,333 Ordinary
Shares
|
Administrator and Company
Secretary
|
Dexion Capital (Guernsey)
Limited
|
Asset Manager
|
DS Aviation GmbH & Co.
KG
|
Auditor and Reporting
Accountant
|
KPMG
|
Corporate Broker
|
Canaccord Genuity Limited
|
Aircraft Registration (Date of
Delivery)
|
EI-LNA (28 June 2013)
LN-LNB (23 August 2013)
HS-TQC (29 October 2014)
HS-TQD (9 December 2014)
|
Manufacturer Serial
Number
|
MSN 35304
MSN 35305
MSN 36110
MSN 35320
|
Aircraft Type and Model
|
B787-8
|
Lessee
|
Norwegian Air Shuttle ASA
Thai Airways International
PCL
|
Website
|
http://www.dpaircraft.com
|
The company´s investment objective
is to obtain income returns and a capital return for its
Shareholders by acquiring, leasing and then, when the Board
considers it is appropriate, selling the aircraft.
Aviation Market
The general outlook for aviation is
positive. The International Air Transport Association (IATA) is
maintaining its increased positive outlook from June of this year,
and expects airline global net profits to be USD 29.3 billion on
revenues of USD 727 billion in 2015. The latest airlines financial
monitor, published by IATA last month, highlights the fact that
that the financial performance of airlines has significantly
improved in the second quarter of 2015 compared to the same period
in the previous year. Furthermore, the organisation expects that
over the course of this year more than 3.5 billion passengers will
travel by air and more than 50 million tonnes of cargo will be
transported. According to the 59th edition of the IATA
World Air Transport Statistics (WATS) 2014, released in September
2015, 35 per cent of all goods (by value) traded internationally
last year were transported by air.
According to IATA's Air Passenger
Market Analysis for September 2015, global air traffic - measured
in Revenue Passenger Kilometres (RPK) - increased by 7.3 per cent
compared to the same month last year. This is above the expected
annual air travel growth rate of 6.7 per cent. Air traffic growth
in June had been moderate but the aviation industry returned to
solid growth in July, August and September, consistent with the
earlier part of this year. Capacity - Available Seat
Kilometres (ASK) - rose by 6.6 per cent and global load
factor therefore improved by 0.5 percentage points to 80.7 per cent
compared to September last year. International travel in particular
saw strong growth in all major regions.
In the European region, the impact
of the Eurozone's economic recovery positively supported air
traffic, resulting in an increase of 7.1 per cent in September 2015
compared to the same month in the previous year. As capacity rose
by 6.6 per cent, the load factor further increased and was the
highest amongst all regions. According to WATS, Europe had the
second largest market share behind the Asia-Pacific region and
transported over 870 million passengers in 2014, an increase by 5.6
per cent compared to the same period the year before. Net profits
in 2015 for European airlines are expected to amount to USD 5.8
billion.
Air traffic for the Asia-Pacific
region increased by 6.8 per cent in September 2015 compared to the
corresponding month in 2014. Capacity accelerated 5.9 per cent and
the airlines' load factor rose slightly by 0.7 percentage points.
Despite decreased trade activity in emerging Asia and slower
Chinese economic growth the region's carriers have continued to
experience solid growth in international travel. According to WATS,
42 per cent of total international RPKs in 2014 related to
international traffic to, from and within the Asia-Pacific region.
Furthermore the region's carriers transported 33 per cent of total
passengers. These results support the outlook of the manufacturer
Airbus (Global Market Forecast 2015-2034), which emphasises that
the Asia-Pacific region will continue to take the lead in world
traffic over the next 20 years.
Moreover, airlines in almost all
regions continued to benefit from low crude oil prices in the
second quarter, leading to increased profitability notwithstanding
the fact that the US dollar remained strong. In contrast, airlines
in the Latin America region struggled with lower yields due to the
recession in Brazil. However, uncertainty remains as to future oil
prices and the competitive environment, which supports demand for
aircraft benefitting from the latest technology, such as the
Dreamliner Boeing 787.
The long-term outlooks of both
Airbus and Boeing (Current Market Outlook 2015-2034) remain
positive in regard to demand for new aircraft. They forecast that
passenger fleets will double within the next 20 years. The demand
for air travel is expected to remain strong and resilient and,
according to Airbus, 32,600 new aircraft worth nearly USD 5
trillion will be needed by 2034. Boeing estimates annual
growth rates of airline traffic (RPK) at 4.9 per cent on average
over the next 20 years, based upon the assumption of an average
annual increase of 3.1 per cent in global GDP over the same period.
According to the manufacturer the wide-body fleet will continue to
grow as airlines expand their international presence. Boeing
therefore assumes that within the next 20 years the annual growth
rate of international long-haul traffic will be slightly above the
global average rate.
The Assets: Boeing 787s
As at 30 September 2015, 329 Boeing
787 aircraft had been delivered to 34 different customers. 275 of
these aircraft are of the B787-8 variant. The current backlog
counts for 768 aircraft of all three different aircraft types. In
2015, five of the 34 customers received their first B787 aircraft,
amongst them American Airlines, Korean Air and Privatair. It is
clear that this aircraft model remains in high demand. As of
September 2015, 14 per cent of the B787 global fleet was operated
by European airlines and 46 per cent by operators based in the Asia
Pacific region. The B787-8 is a suitable aircraft to serve as a
market opener on new non-stop routes and is an appropriate
replacement for aging A330-200 and B767 aircraft. As of June 2015,
the global B787 fleet has been deployed on around 300 different
routes to more than 140 markets. Furthermore the Dreamliner has a
large and diverse customer base with 60 different customers from
all continents.
Norwegian´s cabins provide 32
premium economy plus 259 economy seats, while Thai Airways´ cabins
offer seating for 24 business ("Royal Silk Class") and 240 economy
passengers. Norwegian deploys its Dreamliner fleet both to Bangkok
and to destinations in the US and the Caribbean. Thai Airways
operates its B787 fleet on routes within the Asia-Pacific region as
well as to and from destinations in Australia like Perth, Tokyo and
Kuala Lumpur.
Both aircraft TQC and TQD were
inspected by DS Skytech Limited on the 8 and 9 July 2015 at Bangkok
International Airport. This also included a review of their
technical records. The inspection found the Aircraft to be in good
condition with no significant or airworthiness related defects,
with the records being maintained to an acceptable
standard.
The two charts below give a short
overview of the utilisation of airframe and engines of each of the
four Aircraft:
AIRFRAME STATUS
(30 September 2015)
|
Norwegian Air Shuttle
EI-LNA
|
Norwegian Air Shuttle
LN-LNB
|
|
TOTAL
|
September 2015
|
TOTAL
|
September 2015
|
Flight hours
|
9,346:10
|
495:25
|
10,618:80
|
309:32
|
Cycles
|
1,150
|
55
|
1,311
|
35
|
Block hours
|
11:33
|
16:51
|
13:81
|
10:31
|
Flight hours/Cycles Ratio
|
8.13 : 1
|
9.00 : 1
|
8.10 : 1
|
8.84 : 1
|
ENGINE DATA
(30 September 2015)
|
|
|
Engine Serial Number
|
10118
|
10119
|
10130
|
10135
|
Engine Manufacturer
|
Rolls-Royce
|
Rolls-Royce
|
Rolls-Royce
|
Rolls-Royce
|
Engine Type and Model
|
Trent 1000
|
Trent 1000
|
Trent 1000
|
Trent 1000
|
Total Time [flight hours]
|
7,583:40
|
5,542:50
|
5,622:30
|
5,581:040
|
Total Cycles
|
962
|
757
|
589
|
663
|
Location
|
LNA
|
LNA
|
Workshop
|
LNB
|
AIRFRAME STATUS
(30 September 2015)
|
Thai Airways
International
HS-TQC
|
Thai Airways
International
HS-TQD
|
|
TOTAL
|
September 2015
|
TOTAL
|
September 2015
|
Flight hours
|
3,747:99
|
301:77
|
3,068:63
|
223:41
|
Cycles
|
1,041
|
95
|
829
|
67
|
Block hours
|
11:12
|
10:06
|
10:34
|
7:45
|
Flight hours/Cycles Ratio
|
3.60 : 1
|
3.18 : 1
|
3.70 : 1
|
3.33 : 1
|
ENGINE DATA
(30 September 2015)
|
|
|
Engine Serial Number
|
10239
|
10240
|
10244
|
10248
|
Engine Manufacturer
|
Rolls-Royce
|
Rolls-Royce
|
Rolls-Royce
|
Rolls-Royce
|
Engine Type and Model
|
Trent 1000
|
Trent 1000
|
Trent 1000
|
Trent 1000
|
Total Time [flight hours]
|
3,747:99
|
3,747:99
|
3,068:63
|
3,068:63
|
Total Cycles
|
1,041
|
1,041
|
829
|
829
|
Location
|
TQC
|
TQC
|
TQD
|
TQD
|
The Lessees
Norwegian Air Shuttle ASA
The low cost carrier Norwegian Air
Shuttle continues to grow and further expand its long-haul network.
In addition to the announced new route between London-Gatwick and
Boston, Norwegian also disclosed its plans to offer transatlantic
flights to Boston from Oslo and Copenhagen. Services on all routes
will start in May 2016. The extension of the route network complies
with the carrier's plans to gain a further share of the long-haul
market. As at 30th September 2015, Norwegian operates 434 scheduled
routes to 130 destinations in 31 countries and has a fleet of 105
aircraft. After being awarded two Skytrax Awards during the second
quarter, the airline's performance has remained convincing in the
third quarter. Norwegian received two awards at the annual APEX
Awards Ceremony in the categories 'Best in Region: Europe' and
'Best In-flight Publication'. Furthermore Norwegian was named
'Europe's Leading Low-cost Airline 2015' at the World Travel
Awards.
Norwegian´s third quarter results
state operating revenues of NOK 7,277 million (USD 860 million).
This is an increase of 15 per cent compared to the same quarter in
the previous year. ASKs and RPKs increased by 2 per cent and 9 per
cent respectively. The passenger load factor therefore rose to 91
per cent. Operating profit increased by 122 per cent to NOK 1,182
million (USD 140 million). EBT amounted to NOK 1,098 million (USD
130 million), which is an increase of 117 per cent compared to the
third quarter 2014. The carrier's net profit improved by 123 per
cent to NOK 833 million (USD 98 million) and the net profit margin
increased to 11.4 per cent. Unit costs decreased by 5 per cent and
unit revenue increased by 13 per cent. Moreover, ancillary revenues
grew by 3 per cent. Cash and cash equivalents as at 30 September
2015 counted for NOK 2,297 million (USD 271 million). Norwegian
transported 7.7 million passengers during the third quarter, a gain
of 9 per cent. The strongest growth in passenger numbers was
recorded at London-Gatwick.
The airline's current B787 fleet
includes eight aircraft of the B787-8 variant. In August the
airline announced its intention to increase its Dreamliner fleet by
two more B787s. They are scheduled for delivery in 2017 so now in
total four Dreamliners will be received in 2016, five in 2017 and
two in 2018. These eleven aircraft, which have been ordered through
lease deals, will be the larger B787-9 model. The fleet was thus
expected to comprise 19 B787 aircraft at the end of 2018. However,
Norwegian then announced in October an order for another 19 B787-9s
together with options for a further ten Dreamliners. This is the
largest single order placed by a European airline. The first
aircraft of this order is scheduled to be delivered in 2017 and the
airline´s fleet will therefore include 38 B787s aircraft by 2020.
The mix of B787-8 and B787-9 aircraft will provide the airline with
flexibility in regard to route planning and further long-haul
commitment. Overall, Norwegian's fleet plan shows that the Boeing
787 Dreamliner is an essential and intrinsic factor in the
airline's long-haul strategy.
The load factor of the long-haul
fleet in September was 96 per cent. Moreover, Norwegian's long-haul
traffic saw solid growth of 15 per cent during the third quarter of
2015 compared to the same quarter last year. The carrier's CEO,
Bjørn Kjos, said accordingly "The third quarter results show that
Norwegian's long-haul operations and international routes are
becoming significantly more important. This is where we see most of
the future growth potential, enabling the company to compete in a
global market with strong competition." In 2016, Norwegian will
receive four leased B787-9 aircraft and intends to increase
capacity in the long-haul market by 40 per cent.
Thai Airways
International
The lessee Thai Airways
International Public Company Limited, founding member of the
airline alliance Star Alliance and full-service network carrier,
celebrated its 55th Birthday this year. The flag carrier
of the Kingdom of Thailand is market-listed and majority-owned by
the Thai Government (51.03 per cent). In 2014 the airline
transported more than 19 million passengers (including Thai Smile,
a fully owned subsidiary of Thai Airways). It operates a fleet of
94 aircraft within a network of 72 destinations and 33 countries
(as at 30 June 2015). The carrier received two further Dreamliner
aircraft and currently has a fleet of six B787-8s. The carrier will
receive two more B787-9s as part of its fleet renewal plan. Amongst
others, this aircraft type is deployed on the routes to Tokyo,
Perth and Kuala Lumpur. With a mix of 20 narrow-body aircraft and
74 wide-body aircraft, Thai Airways International has a strong
focus on wide-body aircraft to serve its regional and
intercontinental flights whereas Thai Smile mainly operates on
domestic and short regional routes. As a result of its dense
network within Thailand and South-East Asia, as well as a result of
its highly awarded service, Thai Airways attracts not only a high
percentage of holiday travellers but also the higher yield
traveller segment of international, less price-sensitive, business
customers.
This year´s second quarter results
showed a decrease in total revenues by 3.6 per cent, but also a
reduction in total expenses by 8.8 per cent compared to the same
period in the previous year. Furthermore, while ASKs grew by 2 per
cent, RPKs increased by 11.2 per cent and therefore the load factor
improved by 5.7 percentage points. Net losses increased from THB
7,662 million in in the second quarter 2014 to THB 12,759 million
in the same quarter this year. However, operating loss was THB
4,712 million (USD 140 million) compared to an operating loss of
THB 6,390 million (USD 197 million) in the same quarter last year.
Cash and cash equivalents were THB 22,525 million (USD 668 million)
as at 30 June 2015.
The results were influenced not only
by gains on foreign exchange and a lower fuel price, but also by
impairment charges because of the additional phase-out of older and
inefficient aircraft and the implementation of early-retirement
programmes. In the first nine months of the year, Thai Airways sold
17 aircraft and reduced its fleet from eleven aircraft types to
eight; and it intends to sell another 17 aircraft in due
course.
The financial results for the first
half of 2015, compared to the same period in 2014, show that the
operating result significantly improved from an operating loss of
THB 10,986 million (USD 326 million) to an operating loss of THB
297 million (USD 9 million). Financial costs decreased by THB 207
million (USD 6 million), expenses by THB 10,383 million (USD 308)
and revenue increased by THB 100 million (USD 3 million). On 30
September 2015, Thai successfully issued a THB 8 billion (USD 220
million) unsubordinated and unsecured debenture. The four tranches
of the debenture vary in size and maturities and the fixed coupon
rates range between 3.46 and 4.74 per cent. The debentures were
placed with both institutional investors as well as high net worth
individuals.
Passenger numbers increased in the
first nine months of 2015 by 6.6 per cent compared to the same
period in the previous year. Capacity was slightly reduced by 0.2
per cent, whereas RPKs increased by 7.3 per cent and overall cabin
load factor by 7.5 percentage points. The load factor in September
2015 improved by nearly 2 per cent compared to the same month in
the previous year. The highest load factors of September 2015 have
been recorded on domestic and regional routes.
The airline's 2-year restructuring
plan is intended to improve both profitability and cost-efficiency
as well as customer-orientation. The plan embraces six strategies
with 21 project charters to be implemented in three stages. First
of all, the airline has concentrated on stopping losses before
rebuilding Thai Airways´ strengths and growing in a sustainable
manner. Given the results for the first half of 2015, the carrier
now sees itself in stage two, which will include, amongst other
things, the reduction of per-unit costs and the improvement of
efficiency in regard to fleet utilisation and company structures,
as well as the further enhancement of revenue generating
capabilities. Part of the transition plan involves the reduction of
2,000 staff members and the sale of non-core property to reduce the
debt-to-equity ratio. Costs are intended to be reduced by 20 per
cent by the beginning of 2017. Thai Airways has ceased loss-making
routes and will concentrate on dynamically managing yields and the
optimisation of ticket sales which will include putting stronger
emphasis on network selling instead of only point-to-point. This
will be supported by the introduction of a new revenue management
system and an upgrade of Thai Airways´ IT infrastructure, as well
as staff re-training.
Both the Boeing 787 and the Airbus
A350 play a significant role in the fleet policy of Thai Airways.
Compared to the B747, these state-of-the art aircraft types operate
more fuel efficiently and offer the airline better network
flexibility as they are easier to fill and easier to deploy on both
long-haul and regional routes. This enables the carrier to react
faster and more efficiently to changes in environment. The
objective of Thai Airways´ transition plan is to return to
profitability in 2016 and to become one of the top five global
network carriers.
Material Events since 30 June
2015
July 2015
Interim Dividend (17 July
2015)
The Company declared an interim
dividend, in respect of the quarter ended 30 June 2015, of 2.25
cents per Share, to holders of Shares on the register at 31 July
2015. The ex-dividend date was 30 July 2015, and payment was made
on 14 August 2015.
August 2015
Unaudited Condensed Consolidated
Interim Report (26 August 2015)
The Company issued its Unaudited
Condensed Consolidated Interim Report for the period from 1 January
2015 to 30 June 2015.
October 2015
Interim Dividend (21 October
2015)
The Company declared an interim
dividend, in respect of the quarter ended 30 September 2015, of
2.25 cents per Share, to holders of Shares on the register at 30
October 2015. The ex-dividend date was 29 October 2015, and payment
was made on 13 November 2015.
Investor Information
The latest available portfolio
information can be accessed by eligible Shareholders via
www.dpaircraft.com
Enquiries:
Kellie Blondel / Carol
Kilby
Dexion Capital (Guernsey)
Limited
As Company Secretary to DP Aircraft
I Limited
Tel: + 44 (0) 1481
743940