TIDMDPA
RNS Number : 7087S
DP Aircraft I Limited
07 November 2019
7 November 2019
DP AIRCRAFT I LIMITED (the "Company")
INTERIM UPDATE
The Company is issuing this report for the period from 1 May
2019 to 31 October 2019 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. Since these dates all lease
obligations have been met in full by Norwegian and Thai, an update
on the current status of the aircraft is noted in the update
below.
To date the Company has, paid out 23 dividends of 2.25 cents
each. The Company pays out dividends on a quarterly basis and
targets a yearly distribution of 9 per cent. The last interim
dividend payment was paid on 15 August 2019. The quarterly
distributions are targeted for February, May, August and November
in each year.
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 0.785 (30 October 2019)
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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 Aviation Market - Overview and Development
In June 2019, the International Air Transport Association (IATA)
downgraded its expectations of global net profits from USD 35.5
billion to USD 28.0 billion for the current year. Nonetheless, the
organisation expects 2019 to be the tenth year in a row of airline
profits. The change mainly results from slower growth in world
trade as well as increasing costs, particularly of fuel but also of
labour and infrastructure. Overall costs are anticipated to
increase by 7.4 per cent whereas overall revenues are expected to
grow by 6.5 per cent. Passenger numbers are expected to increase
from 4.4 billion to 4.6 billion. According to IBA (International
Bureau of Aviation; specialised in aircraft valuations, market
research and advisory services) global GDP will increase by 3.2 per
cent in 2019 and by 3.5 per cent in 2020 respectively. Economic
growth has been impacted, amongst others, by trade tensions such as
the trade war between the US and China, tightened financing
conditions and moderate industrial production. The global average
load factors in July 2019 was 85.7 per cent, a slight increase by
0.3 percentage points compared to the same month 2018. Europe was
leading with an average load factor of 89.0 per cent. According to
IBA, demand, measured in RPKs (Revenue Passenger Kilometres),
increased by 5.3 per cent compared to the same month in the
previous year and it appears that yields are stabilising. Overall
leasing activities are expected to be slightly above 2018
levels.
According to IATA, European carriers are expected to generate a
total net profit of USD 8.1 billion in 2019 compared to USD 9.4
billion in 2018. Break-even load factors are the highest amongst
all regions and are anticipated to be 70.2 per cent on average.
Capacity, measured in ASK (Available Seat Kilometres), is assumed
to increase by 5.6 per cent and therefore outperform demand which
is anticipated to increase by only 4.9 per cent. The operating
profit margin of European carriers in the second quarter 2019 was
7.4 per cent compared to 8.9 per cent in the same quarter in the
previous year. Carriers of the Asia-Pacific region are anticipated
to deliver a total net profit of USD 6.0 billion compared to USD
7.7 billion in 2018. Demand is assumed to increase by 6.3 per cent,
being the strongest growth amongst all regions, and to outperform
capacity growth of 5.7 per cent. The operating profit margin
slightly decreased from 3.6 per cent in the second quarter 2018 to
3.3 per cent in the same quarter 2019. For most airlines in the
Asia Pacific region, the second quarter is not high season for
leisure tourists.
The latest published Boeing Outlook (Current Market Outlook
2019-2038) expects deliveries of 44,040 aircraft with a market
value of USD 6,810 billion within the next 20 years. Widebody
aircraft and freighter deliveries will account for more than 40 per
cent of the total market value. 17,390 aircraft deliveries are
expected to be for airlines in the Asia Pacific region and 8,990
deliveries for European airlines. Annual global fleet growth is
anticipated to be 3.4 per cent on average. Both Boeing and Airbus
(Global Market Forecast 2019-2038) forecast that the global
passenger and freighter fleet will double within the next 20 years.
According to Airbus, demand will increase by 4.3 per cent on
average within the next 20 years. In the last twenty years (1998 -
2018) airlines significantly increased their profitability; daily
aircraft utilisation increased by two block hours per day and load
factors improved by 13 percentage points. Besides, 10 per cent of
global GDP is generated by tourism with airlines transporting more
than half of these tourists today. In 2019, 1,770 new aircraft will
be delivered with a value of USD 80 billion according to IATA.
About half of these deliveries will replace older, less
fuel-efficient aircraft. The global fleet would consequently
increase by 3.6 per cent to more than 30,500 commercial aircraft
until year's end. According to IBA, the Boeing 787 and Airbus A350
families show the strongest performance in the wide-body
market.
Discussions regarding climate change intensified recently in
some European countries. Aviation accounts for about two per cent
of global CO2 emission. The airline industry, represented by IATA,
agreed on three main objectives to minimise CO2 emissions: To
improve fuel efficiency from 2019 to 2020 by 1.5 per cent,
stabilise CO2 emission on 2020 level (carbon neutral growth) and to
reduce CO2 emission to 2005 levels by 2050. In 2016, the Carbon
Offsetting and Reduction Scheme for International Aviation (CORSIA)
had been adopted by the UN specialised agency ICAO (International
Civil Aviation Organization), which is based in Montreal (Canada).
Consequently, aviation is the first single industry agreeing to a
global market-based measure in the climate change field. The
objective of CORSIA is not to slow down any technological,
operational or infrastructural progress but to additional support
to mitigate CO2 emissions and to freeze them at 2020 levels. Since
1st January 2019, all airline operators are obliged to report
emissions for international flights. From 2021 on, all flights
between countries which are volunteering to take part, and from
2027 on, all international flights (there exist some few
exceptions, such as for example small island developing states)
will become subject to the offsetting requirements
The Assets - Four Dreamliner Boeing 787-8s
Boeing has delivered 894 Boeing 787 Dreamliner aircraft, of
which 364 aircraft are B787-8s, 492 aircraft are B787-9s and 38 are
B787-10s (as of 30th September 2019). These deliveries had been
made to 54 customers consisting of airlines and lessors. In 2019,
two new customers of this aircraft type placed orders: Bamboo
Airways (Vietnam) and Lufthansa (Germany). The customer Korean Air
placed an order for further 20 B787s (ten B787-9s and ten
B787-10s). The number of total orders for the B787 family amounts
to 1,450 aircraft from a total of 73 customers, of which 425 are
for the B787-8 model.
A bottleneck by Rolls-Royce regarding spare engines and shop
visit slots and the engine manufacturers' engine shops being busy
with upgrades on the Trent engines, had certain effects on
airlines' Boeing 787 fleets. Some of the aircraft, including the
aircraft TQC and TQD operated by Thai Airways, had been temporarily
parked. Aircraft TQC returned into service at the end of March 2019
and TQD returned into service end of May 2019. Aircraft TQC had
been parked again end of September 2019 due to the same reason. Our
technical inspector completed an interim storage inspection on 24th
October 2018 at Bangkok International Airport and concluded that
both aircraft had been stored in accordance with the applicable
storage requirements. The next annual inspection is scheduled for
autumn 2019. The temporary storage does not release the airline to
pay lease rentals. Thai Airways' B787-8 offers a total of 264
seats, of which 24 are business and 240 economy class seats. The
carrier operates this aircraft type to destinations such as Vienna,
Seoul and Hanoi.
Norwegian has equipped its B787-8 fleet with a total of 291
seats, of which 32 are premium economy and 259 economy class seats.
This type of aircraft is used to fly from Europe to destinations in
Asia and America, amongst others Los Angeles, New York and Fort
Lauderdale. On 26th February 2019 and 27th February 2019
respectively, aircraft LNB and LNA were physically inspected at
Copenhagen Airport. Our inspector considers the aircraft and the
technical records to be in good condition with no significant
defects or airworthiness related issues. Since end of May 2019 and
mid-September 2019 respectively, aircraft LNA and aircraft LNB are
parked at Prestwick Airport (United Kingdom) due to the
above-mentioned bottleneck by Rolls-Royce in providing spare
engines. The temporary storage does not release Norwegian to pay
lease rentals.
The charts below give a short overview of the utilisation of
airframe and engines of each of the four aircraft:
AIRFRAME STATUS Norwegian Air Shuttle
(30 September 2019)
LN-LNA LN-LNB
----------------------- -----------------------
TOTAL September TOTAL September
2019 2019
----------- ---------- ----------- ----------
Total Flight Hours 29,177 0 30,925 57
----------- ---------- ----------- ----------
Total Flight Cycles 3,386 0 3,652 7
----------- ---------- ----------- ----------
Average Monthly Utilisation 388 hours --- 422 hours ---
since Delivery 45 cycles 50 cycles
----------- ---------- ----------- ----------
Flight Hours/Flight
Cycle Ratio 8.62 : 1 --- 8.47 : 1 8.14 : 1
----------- ---------- ----------- ----------
ENGINE DATA Norwegian Air Shuttle
(30 September 2019)
LN-LNA LN-LNB
-------------------------- --------------------------
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 Flight Hours 22,232 24,272 19,811 24,868
------------ ------------ ------------ ------------
Total Flight Cycles 2,633 2,883 2,212 2,864
------------ ------------ ------------ ------------
Location In shop LN-LNF LN-LNC In shop
------------ ------------ ------------ ------------
AIRFRAME STATUS Thai Airways International
(30 September 2019)
HS-TQC HS-TQD
----------------------- -----------------------
TOTAL September TOTAL September
2019 2019
----------- ---------- ----------- ----------
Total Flight Hours 16,873 257 14,884 274
----------- ---------- ----------- ----------
Total Flight Cycles 3,814 60 3,477 58
----------- ---------- ----------- ----------
Average Monthly Utilisation 286 hours --- 258 hours ---
since Delivery 65 cycles 60 cycles
----------- ---------- ----------- ----------
Flight Hours/Flight
Cycle Ratio 4.42 : 1 4.28 : 1 4.28 : 1 4.72 : 1
----------- ---------- ----------- ----------
ENGINE DATA Thai Airways International
(30 September 2019)
HS-TQC HS-TQD
-------------------------- --------------------------
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 Flight Hours 13,436 10,518 11,035 14,907
------------ ------------ ------------ ------------
Total Flight Cycles 3,114 2,583 2,675 3,365
------------ ------------ ------------ ------------
Location HS-TQD In shop In shop HS-TQA
------------ ------------ ------------ ------------
The Lessees
Norwegian Air Shuttle ASA
Norwegian Air Shuttle ASA operates on short-, medium- and
long-haul routes. It is the 3rd largest low-cost carrier in Europe
and the 5th largest worldwide. As of 30th September 2019, the fleet
comprised 161 aircraft, including 37 B787 aircraft. In the third
quarter 2019, the carrier received one B787-9 Dreamliner aircraft.
In 2018, the airline transported more than 37 million passengers,
an increase of 13 per cent over the previous year and took delivery
of 11 Dreamliners. The low-cost carrier operates a network of more
than 500 routes to over 150 destinations including more than 60
intercontinental city pairs. Passengers can now fly on Norwegian
from the world's northernmost airport in Svalbard (Norway) to the
world's southernmost airport in Ushuaia (Argentine); although three
flight changes and one airport change in Buenos Aires would be
necessary. This year, Norwegian Air Shuttle had been awarded
"Europe's Leading Low-Cost Airline 2019" for the fifth consecutive
year at the annual World Travel Awards. The airline had also been
awarded "World's Best Low Cost Long-Haul Airline" by SkyTrax World
Airline Awards.
1(st) Half - KEY FIGURES
[million NOK] 1H2019 1H2018 Change
Operating Revenues 20,173 17,221 + 17 %
-------- -------- ---------
EBITDAR 2,297 738 + 211 %
-------- -------- ---------
Operating Result - 836 - 2,073 - 60 %
-------- -------- ---------
Net Result - 1,407 254 ---
-------- -------- ---------
Capacity - ASK (million) 50,531 45,628 + 11 %
-------- -------- ---------
Demand - RPK (million) 42,813 39,129 + 9 %
-------- -------- ---------
Load Factor 84.7 % 85.8 % - 1.1 pp
-------- -------- ---------
Passengers (million) 18.09 17.45 + 4 %
-------- -------- ---------
Norwegian closed the first half of 2019 with an operating loss
of NOK 836 million (USD 98 million) compared to an operating loss
of NOK 2,073 in the same period last year. Net loss amounted to NOK
1,407 million (USD 165 million) compared to a net profit of NOK 254
million. Operating revenues increased by 17 per cent to NOK 20.17
billion (USD 2.36 billion). Capacity growth outperformed the
increase in demand and the load factor dropped from 85.8 per cent
to 84.7 per cent. Passenger numbers increased by 4 per cent to
18.09 million and the average stage length increased to 1,867
kilometres, up 4 per cent. Ancillary revenues per passengers
increased by 10 per cent to NOK 177 (USD 21). Unit costs excluding
fuel decreased by 2 per cent whereas unit revenue and yield grew by
6 per cent and 7 per cent respectively. Cash and cash equivalents
as at 30th June 2019 stood at NOK 1.69 billion (USD 198 million).
Receivables are NOK 4 billion above normalised levels due to
holdbacks from credit card acquirers. Results benefitted from a
gain of NOK 174 million from the sale of shares in Lilienthal to
Norwegian Finans Holding ASA (NOFI) including the license to use
the name and logo of Norwegian for the period of five years in
Europe. Beyond this date, additional license fees will apply.
Norwegian announced early 2019, that they had reached an agreement
with Rolls-Royce regarding the Trent 1000 issues, having a positive
effect in 2019. If comparing first half results of 2019 and 2018,
it should be taken into account, that the first half results of the
previous year benefitted from a reclassification of the NOFI
holding by NOK 1.9 billion
3Q - KEY FIGURES
[million NOK] 3Q2019 3Q2018 Change
Operating Revenues 14,404 13,387 + 8 %
------- ------- ---------
EBITDAR 4,660 3,358 + 39 %
------- ------- ---------
Operating Result 2,970 1,815 + 64 %
------- ------- ---------
Net Result 1,670 1,304 + 28 %
------- ------- ---------
Capacity - ASK (million) 28,482 27,534 + 3 %
------- ------- ---------
Demand - RPK (million) 25,968 24,927 + 4 %
------- ------- ---------
Load Factor 91.2 % 90.5 % - 0.7 pp
------- ------- ---------
Passengers (million) 10.53 10.86 - 3 %
------- ------- ---------
Third quarter results 2019 indicate that the strategy to move
from growth to profitability makes a positive impact. Operating
revenues increased by 8 per cent to NOK 14.40 billion (USD 1.59
billion) although passenger numbers decreased by 3 per cent to
10.53 million compared to the same quarter in the previous year.
The average stage length increased by 3 per cent. Revenues from
travel originating the United States are the largest share of the
company's revenues. While capacity grew by 3 per cent, demand was
up by 4 per cent. Therefore, the load factor improved by 0.7
percentage points to 91.2 per cent. Both unit costs excluding and
including fuel decreased by 6 per cent and unit revenue and yield
improved each by 3 per cent. Ancillary revenues per passenger
increased by 11 per cent. Operating profit increased by 64 per cent
to NOK 2.97 billion (USD 327 million) and net profit grew by 28 per
cent to NOK 1.67 billion (USD 184 million). While the operating
profit was positively impacted by NOK 158 million, the net profit
was negatively influenced by NOK 285 million through the
implementation of IFRS 16. Results had further been impacted,
amongst others, by additional costs of around NOK 300 million due
to disruptions of the fleet (Boeing 737MAX grounding and
Rolls-Royce Trent 1000 issues) but also by gains of NOK 23 million
from jet fuel hedge contracts and NOK 238 million from favourable
currency effects.
During the third quarter 2019, Norwegian sold two B737-800s
having an anticipated cash effect of USD 21 million. Aircraft
utilisation in the third quarter remained relatively stable at a
daily average of 13.2 block hours per aircraft. As at 30th
September 2019, cash and cash equivalents stood at 2.93 billion
(USD 323 million) and the equity ratio was 5.7 per cent. Excluding
the effects of IFRS 16, the equity ratio would have been 11.2 per
cent. Norwegian also agreed to sell its entire shareholdings in
NOFI until the end of 2019 for a sales price of NOK 68 per share.
During the third quarter 18.6 million shares for a total of NOK
1,266 million had been sold while the remaining 14.0 million shares
will be sold in December for an agreed value of approximately NOK
952 million, subject to regulatory approval. This would have a
positive effect of NOK 934 million in total on Norwegian's cash
position.
The grounding of the B737MAX aircraft is anticipated to impacted
2019 results by NOK 1.0 billion (USD 110 million). Norwegian stated
to request compensation from Boeing but no agreement had been
signed yet and it is not clear when the Boeing 737MAX will be
allowed to return into commercial service and therefore the total
effect of the grounding cannot be conclusively determined yet.
Deliveries of B737MAXs in 2019 are put on hold. This in turn
contributes to a lower CapEx which is estimated to be USD 1.0
billion in 2019 and USD 1.4 billion in 2020.
In the first nine months of 2019, the low-cost carrier stated
cost reductions of NOK 1,848 million (USD 203 million) through the
implemented cost saving programme named #Focus2019, a crucial key
factor in the strategy to return to profitability. In the third
quarter, Norwegian achieved a reduction in costs by NOK 827 million
(USD 91 million). The programme includes, amongst others, network
optimisation, crewing efficiency, refinancing of aircraft
deliveries and the divesting of several aircraft on order. The
objective of NOK 2.0 billion cost reductions in 2019 had been
increased to an amount of NOK 2.3 billion.
After the growth peak in 2018, Norwegian Air Shuttle shifted its
focus from growth to profitability and cash generation. This became
already significantly evident in the second quarter 2019. Capacity
growth was 6 per cent compared to 48 per cent in the same quarter
2018 and is anticipated to further reduce speed. The recent
estimate in capacity growth for 2019 had been downgraded from a
range between 0 to 5 per cent to 0 per cent. In 2020, the airline
anticipates reducing capacity by 10 per cent compared to 2019. The
airline had a review on the route network resulting in cutting
loss-making routes and adjusting frequencies. Transatlantic flights
out of Ireland ended in September 2019 as these routes are not
commercially viable without the operations of B737MAXs. Frequencies
from London Gatwick will be adjusted according to their
performance. Amongst others, frequencies to Rio de Janeiro, Orlando
and Buenos Aires will be reduced while weekly flights to San
Francisco, Austin and Denver will be increased next summer.
In October 2019, Norwegian announced to have signed a Letter of
Intent to partner with the low-cost carrier JetBlue which has,
amongst others, hubs in Boston, New York JFK, and Fort Lauderdale.
This would allow Norwegian's passengers to transfer to about 40
additional destinations in the U.S., the Caribbean and Latin
America whereas JetBlue passengers can transfer to Norwegian's
flights to Europe and on twenty intra-European routes. The tickets
would be available on both airlines' websites from early summer
2020 on. The same month, it was announced that Norwegian has agreed
on the sale of further five B737-800 aircraft in the fourth quarter
2019 and the first quarter 2020 to the company "Aircraft Recycling
International", a recycling and asset-management entity based in
Hong Kong. The airline expects that this sale increases liquidity
by USD 50 million. In regard to Norwegian's leasing business, the
carrier will establish a joint venture with China Construction Bank
Leasing, the leasing arm of one of the largest banks worldwide. The
latter will have 70 per cent shareholding and Norwegian 30 per cent
in the newly established joint venture. The joint venture will
start with 27 Airbus A320neo with delivery dates from the
manufacturer between 2020 and 2023. Norwegian assumes that this
will reduce its CapEx by approximately USD 1.5 billion.
End of October 2019, Norwegian announced to have implemented a
two to three year transformation plan called NEXT (Norwegian
Excelling Together). It is a cross-functional plan with the focus
on improving RASK (Revenue per Available Seat Kilometre),
minimising CASK (Costs per Available Seat Kilometre) and optimising
the route network. This would include, amongst others, the
aforementioned reduction in capacity in 2020 as well as the
development and implementation of digital tools to support revenue
generations. The objective is to generate NOK 4 billion run-rate
EBITDAR until the end of 2021 on top of the pursued benefits of
#Focus2019.
Norwegian is exposed to normal business risks such as
fluctuations in fuel prices and currencies, fierce competition,
seasonal variations, operational risks (as for example the Boeing
737MAX grounding), Brexit and regulatory issues. Besides, Norwegian
is aware that it is exposed to a liquidity risk, amongst others
regarding commitments for future aircraft deliveries, lease
commitments and constraints from credit card institutions. The
carrier identified various potential sources of financing,
including amongst others the divestment or postponement of
aircraft, the shareholding in Bank Norwegian (as previously
mentioned), improved operational performance and the extension of
two bonds with maturity in December 2019. The latter had been
approved by the bondholders mid-September and the maturity of two
unsecured bonds had been pushed back to November 2021 and February
2022 respectively; secured by a pledge over Norwegian's slots at
London Gatwick Airport. According to Norwegian the value of these
slots is above the bond's nominal value of USD 380 million.
Transaction costs amounted to NOK 70 million. Norwegian Air Shuttle
follows, as mentioned above, a strategic change from growth to
profitability, including postponements of aircraft deliveries,
divesting aircraft, network optimisation and the implementation of
#Focus2019. Norwegian's priority remains to return to sustainable
profitability.
Thai Airways International PCL
Thai Airways International Public Company Limited is
majority-owned by the Thai Government (Ministry of Finance) (51.03
per cent) and operates as full-service network carrier. It is the
flag carrier of the Kingdom of Thailand. In 2018, Thai Airways
International, including its subsidiary Thai Smile, transported
more than 24 million passengers. As at 30 June 2019, the fleet
comprised 103 active aircraft of which 83 were wide-body aircraft.
Thai and Thai Smile operate routes to around 80 destinations in
more than 30 countries, including destinations in eleven European
countries. In 2019, Thai Airways is ranking again in the top ten of
"the World's Best Airlines" by Skytrax. In the category "The
World's Best Airline Cabin Crew" and "World's Best Airport
Services", Thai Airways was voted fourth best and second-best
airline respectively. Additionally, the carrier was rated number
one in the category "Best Airline Staff in Asia".
2Q - KEY FIGURES
[billion THB] 2Q2019 2Q2018 Change
Operating Revenues 42.51 47.24 - 10 %
------- ------- --------
Operating Result - 7.11 - 2.81 - 153 %
------- ------- --------
Net Result - 6.88 - 3.10 - 122 %
------- ------- --------
ASK (million) 21.897 22,804 - 4 %
------- ------- --------
RPK (million) 16.353 17,282 - 5 %
------- ------- --------
Load Factor 74.7 % 75.8 % - 1 pp
------- ------- --------
Passengers (million) 5.72 5.90 - 3 %
------- ------- --------
In the second quarter 2019, Thai Airways stated a net loss of
THB 6.9 billion (USD 224 million), an increase of 122 per cent
compared to the same quarter 2018. Total operating revenues
decreased by 10 per cent to THB 42.5 billion (USD 1.4 billion)
whereas passenger and excess baggage revenues decreased by 6.1 per
cent totalling THB 34.6 billion and freight and mail revenues
dropped by 18.8 per cent to THB 4.4 billion. The operating loss
rose from THB 2.8 billion in the second quarter 2018 to THB 7.1
billion in the same quarter 2019. Last year's second quarter
operating results benefitted from a gain from selling shares in
Royal Orchid Hotel (Thailand) PCL and properties in Sydney. Despite
significant lower revenues, operating expenses decreased only
slightly. Expenses for fuel and oil account for nearly 28 per cent
of total expenses and the carrier stated a fuel hedging loss of THB
81 million. Expenses for cockpit crew increased after the
introduction of a new pilot compensation system to align with the
industry standard. While capacity was reduced by 4 per cent, demand
decreased by 5.4 per cent which resulted in a decline in the
passenger load factor by 1.1 percentage points to 74.7 per cent.
The average passenger yield decreased by 1.4 per cent, amongst
others due to the appreciation of Thailand's currency. Aircraft
utilisation remained stable at 11.5 block hours a day. The number
of transported passengers decreased by 3.1 per cent to 5.72
million. During the second quarter, three decommissioned Airbus
A330-300s had been sold while another 18 aircraft are held for
sale.
Second quarter results 2019 were impacted by rising fuel prices,
fierce competition and one-off expenses: impairment loss of assets
and aircraft THB 172 million (USD 6 million) and a gain on foreign
currency exchange THB 522 million (USD 17 million). The
appreciating of Thailand's currency slowed down the expansion in
the tourism sector; the increase of foreign tourists was 1.1 per
cent compared to the same quarter in the previous year whereas the
number of Chinese tourists declined by 8.2 per cent (Chinese
tourists account for 28 per cent of all foreign tourists). The
decline in Chinese tourist numbers is still the aftermath of the
boat tragedy in Phuket in 2018 and the effect of the U.S. trade
barriers. The latter had also a negative impact on freight demand
decreasing by 16 per cent. Chinese economy growth in the second
quarter 2019 was the lowest in 27 years.
1(st) Half - KEY
FIGURES
[billion THB] 1H2019 1H2018 Change
Operating Revenues 92.30 100.71 - 8 %
------- ------- ----------
Operating Result - 7.94 1.03 ---
------- ------- ----------
Net Result - 6.44 - 0.38 - 1,595 %
------- ------- ----------
ASK (million) 44,768 46,338 - 3 %
------- ------- ----------
RPK (million) 34,715 36,251 - 4 %
------- ------- ----------
Load Factor 77.5 % 78.2 % - 1 pp
------- ------- ----------
Passengers (million) 12.01 12.16 - 1 %
------- ------- ----------
Thai Airways stated in the first half 2019 a net loss of THB
6.44 billion (USD 210 million) compared to a net loss of THB 0.38
billion in the same half 2018. Total operating revenues decreased
by 8.3 per cent to THB 92.3 billion (USD 3,008 million) while total
operating expenses increased by 0.6 per cent to THB 100.24 billion
(USD 3,267 million). The carrier stated an operating loss of THB
7.94 billion (USD 259 million) compared to an operating profit of
THB 1.03 billion in the first quarter in the previous year.
Capacity decreased by 3.4 per cent and demand by 4.2 percent
respectively. The load factor consequently decreased by 0.7
percentage points to 77.5 per cent. The lower traffic production
resulted mainly from the frequency reduction on the Australian
routes as well as from parking aircraft due to the bottleneck of
spare engines caused by the Trent 1000 issues. The passenger yield
was THB 2.14, down by 2.7 per cent. Aircraft utilisation increased
by 2.6 per cent to an average of 12.0 block hours per day. Cash and
cash equivalents as at 30th June 2019 were THB 13.23 billion (USD
431 million) and total assets amounted to THB 261.99 billion (USD
8,538 million).
First half results had been impacted by the reasons as mentioned
above as well as by one-time expenses: Impairment loss of assets
and aircraft of THB 385 million (USD 13 million), a gain on foreign
currency exchange of THB 1,888 million (62 million) and a gain on
exchange in ownership interest of THB 273 million (USD 9 million)
resulting from the dilution of Thai's shareholding in NOK Airlines
PLC. Additionally, the closure of the Pakistan airspace and the
suspension of flights to Lahore and Islamabad negatively impacted
Thai's results. On 27th February 2019, the Pakistani airspace was
closed for several days forcing Thai Airways to cancel flights not
only to and from Pakistan but also to and from Europe. Since August
2019, flights operate as before after Pakistan re-opened its
airspace.
In 2018, the airline declared a new vision as part of its
transformation process: "National Premium Airline with Touches of
Thai and Effective Management for Sustainable Profitability". This
comprises the core values of customer satisfaction, world-class
service and value creation for all stakeholders. In line with the
objective of sustainable growth, Thai Airways signed code share
agreements with NOK Airlines on secondary routes (from Bangkok Don
Muang Airport), Bangkok Airways (ten domestic and six international
routes) and Shenzhen Airlines (three international routes) and
moved some routes to its subsidiary Thai Smile. The latter expanded
routes to strengthen its network to destinations in China, India
and the member states of the Association of Southeast Asian Nations
(ASEAN). Thai Smile applied in June 2019 to become a Connecting
Partner of the Star Alliance in 2020.
Thai Airways continues to focus on its revised 2018-2022
transformation plan, a reconstruction programme defining
operational strategies, to exit the business rehabilitation
process. The focus is to deliver a profitable business performance
and to improve service quality and customer satisfaction. The
airline's five strategic objectives of the implementation plan
include: Aggressive profit, business portfolio, customer
experience, digital technology and effective human capital
management. The airline also puts priority in generating additional
revenues from supplementary businesses such as frozen meals and
ready-made sauces under Thai's catering brand offered to European
consumers. This is part of the project "Mantra", which had been
launched in the second quarter 2019. During the same quarter the
integration of Thai Smile into the main carrier Thai Airways
continued. The project called "Brother-Sister" has the objective to
generate synergy effects through the merging of functions which are
currently still exercised in parallel, particularly in the sales
and flight planning sector. In 2020, the airline aims at being
ranked among the world's top 5 airlines and the reduction of
negative retained earnings by 2022. The 2019-2026 fleet acquisition
plan undergoes a review and will be amended to the current
airline's needs. Local press indicates that the acquisition of 38
aircraft might be split into two phases.
For 2019, the airline expects increasing passenger numbers as a
result of various governmental promotions to support tourism
growth; amongst others through the free visa on arrival policy for
21 countries which had been extended until the end of October 2019
and the promotion of secondary destinations. Thai Airways also
expects further recovery of the number of Chinese tourists. On 3rd
May 2019, the carrier raised THB 10 billion (USD 313 million)
through an unsecured debenture issue for institutional and high net
worth investors. The coupon rates between 2.35 per cent and 4.65
per cent have tenures between one and 15 years. The debenture
received an A-rating by the rating agency TRIS which has taken into
consideration that Thai's debt to capitalisation ratio remains
high. The raised capital will be used to refinance maturing debt
and investments. In July 2019, Thai Airways increased its daily
flights to Fukuoka in Japan to ten times a week and in in October,
the airline launches flights to Sendai (becoming the airline's
sixth destination in Japan). After the removal of the red flag by
ICAO, Thai Airways' competitors launched new routes and increased
production which further intensifies price competition. Early
November 2019, the airline's chairman Ekniti Nitithanprapas
resigned and was replaced by the current vice-chairman, Air Chief
Marshal Chaiyapruk Didyasarin.
Thai Airways identified various risk factors for 2019, amongst
others natural disasters, accidents where tourists are involved,
and trade wars, particularly between China and the United States.
The airline's operations are also subjected to seasonal variations
and dependent on the tourism sector. Furthermore, growing market
shares of low-cost carriers as well as fluctuation risks of fuel
price, foreign exchange rates and interest levels put yields under
pressure. Strategic decision making is dependent on the Government
impacting the airline's agility. Thai Airways has implemented
Enterprise Risk Management (ERM) in 2003 which has also been
integrated into the airline's business rehabilitation plan to
further support enhanced efficiency and proactiveness. In October
2019, Sumeth Damrongchaitham, CEO of Thai Airways, stressed the
importance of the business rehabilitation plan and the necessary
support by the entire airline staff to optimise the cost basis, to
improve revenues and to return to profitability.
Material Events since April 2019
April 2019
Dividend Declaration (23 April 2019)
The Company declared a quarterly dividend in respect of the
quarter ended 31 March 2019, of 2.25 cents per Share, to holders of
shares on the register at 3 May 2019, and payment was made on 16
May 2019.
Annual Report and Audited Consolidated Financial Statements (24
April 2019)
The Annual Report and Audited Consolidated Financial Statements
for the year ended 31 December 2018 were published.
May 2019
Interim Update (28 May 2019)
The interim investor update report for the period 1 November to
30 April was published.
July 2019
2019 Annual General Meeting (08 July 2019)
The results of the 2019 AGM were published.
Dividend Declaration (08 July 2019)
The Company declared a quarterly dividend in respect of the
quarter ended 30 June 2019, of 2.25 cents per Share, to holders of
shares on the register at 26 July 2019, and payment was made on 15
August 2019.
August 2019
Unaudited Condensed Consolidated Interim Report (19 August
2019)
The Unaudited Condensed Consolidated Interim Report for the
period ended 30 June 2019 were published.
Director Retirement (21 August 2019)
The Company announced that Ms Angela Behrend-Görnemann would be
retiring as a director of the Company with effect from 31 October
2019.
October 2019
Dividend Declaration (21 October 2019)
The Company declared a quarterly dividend in respect of the
quarter ended 30 September 2019, of 2.25 cents per Share, to
holders of shares on the register at 1 November 2019, and payment
was made on 14 November 2019.
Director Appointment (24 October 2019)
The Company announced that Mr Harald Brauns would be appointed
as a director of the Company with effect from 1 November 2019.
Enquiries:
Kellie Blondel / Laura Dunning
Aztec Financial Services (Guernsey) Limited
As Company Secretary to DP Aircraft I Limited
Tel: + 44 (0) 1481 748833
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
UPDUBONRKKAARAA
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