Airbus, ATR big losers in Kingfisher turmoil

This is an expanded version of a story we did for Flight Global.

Airbus will be hit hard if Kingfisher Airlines of India fails. ATR has already lopped its entire order of turbo-props from its books due to Kingfisher’s financial travails.

Airbus is a wholly owned subsidiary of EADS and EADS owns half of ATR.

DVB Aviation Finance is planning to repossess two Airbus A320 family aircraft, if it hasn’t already, and some lessors are also taking back aircraft.

According to the Ascend data base, Kingfisher operates 31 A320 family with V2500 engines and 25 ATR-72-500s. It has 68 A320s and 38 ATR-72-600s on order. Kingfisher also has A330s, A350s and A380s on order and holds options for a variety of aircraft.

If Kingfisher were to cease operations, the 31 A320s hitting the market would likely depress values. These models are powered by the V2500 engine, which is generally considered harder to place in a remarketing situation, say lessors. Lease rates tend to be softer, as well, say lessors.

A Kingfisher liquidation would sting the A350 and A380 programs, though the airline holds only five firm orders for each, according to Ascend.

Kingfisher holds an order for 15 A330-200s, a loss of this order would free up some early delivery positions for this in-demand aircraft.

Aircraft

Quantity

Status

Del Date

Airbus A319 V2500

4

In Svc
A320 V2500

19

In Svc
A320 V2500

68

Order 2013-2017
A321 V2500

8

In Svc
A330-200

2

In Svc
A330-200

15

Order 2014-2017
A350 TBD

10

Option LOI 2021-2022
A350-800

15

LOI 2018-2021
A350-800

5

Order 2019-2020
A380

5

Option 2018-2019
A380

5

Order 2017-2018
ATR ATR 72-500

25

In Svc
ATR 72-500

19

Option 2015-2016
ATR 72-600

38

Order (CXLd) 2012-2017

Source: Ascend Data Base

Lessors to Kingfisher

AerCap Indec Turbo Leasing
Air Lease Corp Johannesburg LTD
Aviation Capital KF Aero
AWAS KF Turbo Leasing
BBAM Pleateu Aviation
BOC Aviation RBS Aviation Capital
DAECapital Several Special Purpose Companies
DVB Aviation Finance TP Leasing
FLY Leasing Veiling
Hubli Leasing Volito Aviation Services
ILFC

Source: Ascend Data Base

26 Comments on “Airbus, ATR big losers in Kingfisher turmoil

  1. When I read the headline I was expecting more info about Kingfisher’s current turmoils. Obviously, Airbus and ATR would be/are hit hardest by Kingfisher’s problems (although I wouldn’t really be concerned about the LOIs and options, to be honest – those can even end up not materialising into orders if they come from airlines that are doing just fine, so I’m sure that’s not a big concern to Airbus/ATR.)

    One thing that leaves me wondering is the statement: “the 31 A320s hitting the market would likely depress values”. There’s some 10,000 airplanes (of varying ages) of this size category in service around the globe, and neither Boeing nor Airbus currently have any issues placing new-built examples with airlines, despite the “current economic climate” (as the phrase goes). So I’m sure that 31 A32S would be placed with ne operators very quickly indeed without any significant impact on the price of this aircraft type.

  2. If those A-32Xs were CFM-56 powered, I would agree with you. But they are powered by an engine almost no one wants.

  3. KC135TopBoom :
    If those A-32Xs were CFM-56 powered, I would agree with you. But they are powered by an engine almost no one wants.

    Among A320 family aircraft in operation, IAE has roughly 40 percent market share. I think that qualifies for more than “engine nobody wants”.

  4. The Indian economy is NOT doing very well and the above news by itself is not
    very surprising, but it could be the beginning of a trend in the whole Pacific, in-
    cluding China where they already have had unemployment increases due to a
    serious drop in exports to Europe.

    In general, I sincerely hope that the “stampede” in orders for A320NEOs and
    the corresponding forecast for an equally large number of 737MAX orders, will
    not become victim of a general economic downturn!

    • Indeed! Both OEM’s stand to lose a great deal if the economies of Asia-Pacific and the sub-continent slow. Both Airbus and Boeing are counting on large GDP growth in the region to drive RPK demand and demand for new aircraft over the next two decades. If the expanding middle class in these regions slows by whatever mechanism, Boeing and Airbus will both be hurt. Kingfisher failing is nothing more than a speed bump for Airbus. However, if this is just the tip of the iceberg for operators in this part of the world due to a declining regional economy, Boeing and Airbus will both feel it keenly, as will the rest of us. It would mean we are on the precipice of a further deepening GFC, one from which the world is counting on Asia to help bootstrap us out of.

    • Not all Asian economies are slowing for the same reason. In order to understand the situation in India, it helps to pull our heads out of the airline business for a minute (remember, the airline industry has its own recessions, and not necessarily at the same time and for the same reasons as the rest of the world). Anyhow, here is a quick primer on what is happening in India:

      Demand for manufactured goods (the life-blood of most Asian economies) has declined as the US and then Europe have slid into recession. In response, Indian companies have reduced industrial output. This has scared away investors and outside money from flowing into India. Also, Inflation has been very high, which disproportionately hurts the middle class. Compounding the matter is the fact Indian monetary policy has been reluctant to lower interest rates. This has damaged capital expenditures.

      So the recipe for recession in India is simple:

      1. Reduced global demand for goods from India
      2. Less investment capital flowing into India
      3. The Rupee is losing buying power
      4. Money in India has become harder to borrow

      • Comparing China ( PRC ) and India as to reaction and coping will be very interesting.
        IMHO China will proove to have the better managed economic ecology.

  5. Last Thursday the 5000th A320 family aircraft was delivered, and of those roughly 4900 are still in service. Assuming more conservative a 35% share of IAE-powered aircraft, we have 1715 active aircraft worldwide.
    That is not far from the entire production run of the B737 Classic, more than the B757 ever produced and probably more than the entire MD80/1/3/7/8 production run.

    So even if IAE-powered aircraft are less famous on the market, they are far far away from being a marginal appearance. There are other aircraft that are probably more difficult to place (imagine the famous and officially bankrupt airline American Airlines. If they downsize their B757 or MD-82/83 fleet, these aircraft would become virtually worthless overnight (they are not so away from it anyways).

  6. It seems all aircraft in question are well in demand. So probably Airbus will survive this potential disaster..

    • Sorry keesje, I don’t see this as a disaster for Airbus or ATR. If Kingfisher went out of business, both OEMs loose a handful of orders and may have to help remarket the airplanes they hold leases on…..so what? In the big scheme of things Kingfisher is just a nat in the airline industry. Airlines fail all the time, yet somehow the industry, and the OEMs manage to survive.

    • Given the choice, Uwe, I prefer the Star Trek one. Yes, please pray for me, I need all the help I can get. LOL

      • And i will even pray for you and give you all the help you want from this side of the little pond.

  7. KCTB I was just cynical.

    Having early slots for e.g. A320, A330, A350, A380, 773, 737, 787 has become a real strong selling point with orders having outnumbered deliveries for the last 5 yrs.

    E.g. UA/Co, AF/KL, BA and others will do shopping in the next few yrs. Not being able to offer slots before 2017 isn’t easy for sales.

  8. Uwe :
    Comparing China ( PRC ) and India as to reaction and coping will be very interesting.
    IMHO China will proove to have the better managed economic ecology.

    Yes. China’s slowdown is far more deliberate, as China watched things unravel in the west, they have tightened lending in order to avoid finance bubbles in their own system. Moving to a more conservative monitory policy and letting the RMB float up a little closer to its real value only cost the a couple tenths of a percent off their GDP growth, which is still above 8%. Very wise, in my view.

  9. Over recent years the two manufacturers have scoured the world in the quest to increase orders & market, any cancellation risk is a blow, the plethora meant many were high risk from conception . The fact remains the race for orders has increased the potental for a number of failures of the Kingfisher ilk.

    If were allowed to offer interesting associated links, this might interest some.

    http://www.youtube.com/watch?v=nYDba1UsgHc&feature=related

  10. I would hardly be shocked if Airbus hadn’t already re-sold those slots allocated to Kingfisher.

  11. On the upside, the potential demise of Kingfisher certainly stands to benefit the likes of IndiGo, who operates an exclusive A320 fleet with 150 NEOs on order. They appear to be doing rather well with a positive image, consecutive profits, and steadily increasing marketshare – from 14.3% in 2009 to 19.5% in 2011. In this period they surpassed both Air India and Kingfisher. In November, it was reported they would be the only airline in India to hit the black in 2011. Further, they are considering ordering A330s, which they would use for flights limited to 5-6 hrs in keeping with the LCC model (avoiding meals, etc). That said, I think Airbus would actually be quite “content” to lose Kingfisher’s iffy, outstanding narrowbody orders – all while helping to cement the future of India’s biggest and most promising carrier in an otherwise booming market, with an all-Airbus fleet to boot.

    The only real “losses” for Airbus, in my mind, are the A350 and A380 orders – although most observers never really expected their A380s to actually see the light of day anyway. As for the A350s, 5 frames seems like peanuts these days and the slots would be snatched up quickly.

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  14. This is an example of biting more that you can chew. Looking at the number and size of aircrafts this company had on order,it seems to me that the company was too optimistic.
    Bad managementand inability to forcast realistically leads to such a mess.I really doubt that this company could have operated 5 A380 profitably.
    Now all airbus fanatics are up in arms trying to minimise the impact of loss of these orders. No matter how to try to put a positive spin on this by talking about early delivery slots being freed up and hot selling point, that can never never compare that to loosing an order of potentially 123 aircrafts.
    This loss of orders will hit airbus hard,very hard especially the A380 as sales of this aircraft are hard to come by.

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