TIDMDPA
RNS Number : 4021X
DP Aircraft I Limited
23 November 2017
23 November 2017
DP AIRCRAFT I LIMITED (the "Company")
INTERIM UPDATE
The Company is issuing this report for the period from 27 May
2017 to 6 November 2017 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. 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. DP Aircraft I Limited 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 and no incidents of
note concerning operations of the aircraft have occurred.
To date the Company has, as scheduled, paid out 15 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 next
interim dividend payment is due on 17 November 2017. 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 SFS
---------------------------- ----------------------------
SFS Admission Date 4th October 2013
---------------------------- ----------------------------
Share Price 1.10 6th November 2017
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Country of Incorporation Guernsey
---------------------------- ----------------------------
Current Shares in Issue 209,333,333 Ordinary Shares
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Administrator and Company Aztec Financial Services
Secretary (Guernsey) Limited
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Asset Manager DS Aviation GmbH & Co.
KG
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Auditor and Reporting KPMG
Accountant
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Corporate Broker Canaccord Genuity Limited
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Aircraft Registration LN-LNA (28 June 2013)
(Date of Delivery) 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
---------------------------- ----------------------------
Lessees Norwegian Air Shuttle
ASA
Thai Airways International
PCL
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Website www.dpaircraft.com
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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 International Air Transport Association (IATA) sees strong
traffic growth in 2017. Traffic growth in summer had proved to be
strong and is expected to potentially slow down towards the end of
2017. Pressure remains on average profit margins in the second
quarter 2017 due to higher costs, lower yields and strong
competition. However, in the first half of 2017, the share of
revenues from premium passenger demand increased to 27 per cent and
air freight demand grew by 10.4 per cent compared to the same
period in 2016. It has been the strongest performance since the
global financial crisis in 2010. The freight business benefits from
an improvement in global trade. The average growth rate over the
last five years was at 3.9 per cent.
In September, capacity measured in ASK (Available Seat
Kilometres) rose by 5.3 per cent while demand measured in RPK
(Revenue Passenger Kilometres) increased by 5.7 per cent and the
average load factor climbed to 81.6 per cent when compared to the
same month in the previous year. Both in Europe and the
Asia-Pacific region, growth in demand was above global average and
outperformed growth in capacity resulting in higher load factors.
Europe registered the highest load factor (86.4 per cent) amongst
all regions. Traffic volumes in September had been impacted by two
hurricanes hitting the south of the U.S. and parts of the
Caribbean.
The upward trend in demand had slowed down but IATA expects 2017
to be another year of above-average passenger growth with an annual
average increase of 6.6 per cent. Load factors are expected to
increase slightly to 80.6 per cent. However, break-even load
factors are assumed to increase due to rising unit costs, mainly as
a result of increasing fuel prices, maintenance, and infrastructure
and labour costs. Moreover, it is assumed that this year, fuel
costs will account for 18.8 per cent of average operating costs.
IATA forecasts global net profit in 2017 to amount to USD 31.4
billion. Although this is still a decline compared to a net profit
of USD 34.8 billion in 2016, the level of profitability would be
the third highest on record.
The latest Boeing Outlook (Current Market Outlook 2017-2036)
expects deliveries of 41,030 aircraft with a total market value of
USD 6.1 trillion within the next 20 years. Both Boeing and Airbus
(Global Market Forecast 2017-2036) continue to forecast that the
global passenger and freighter fleet will at least double by 2036.
According to Boeing and Airbus, 57 per cent and 60 per cent
respectively of new deliveries are anticipated to be used for fleet
growth. According to Boeing, air traffic will grow on average by
4.7 per cent annually and the airlines' fleets by 3.5 per cent per
annum, within the next 20 years. Boeing forecasts that the current
share of the global airlines' fleet from the Asia-Pacific region
will increase from 29 per cent to 37 per cent. European airline
fleet growth is anticipated to be lower than the global average,
with an average annual growth rate of 2.7 per cent. For 2017, IATA
anticipates that around 1,850 new aircraft will be delivered
worldwide and that half of these deliveries will be for fleet
growth. In the first seven months, 865 aircraft had already been
delivered, 24 fewer aircraft than in the same period 2016. However,
during this year's month of July 125 aircraft were back in service
from storage, compared to 104 aircraft last July, and positively
contributed to fleet growth. The number of aircraft put into
storage in July, was the lowest within the last three years.
The Assets - Boeing 787-8s
As at 30 September 2017, 1,283 aircraft of the B787 family had
been ordered by 66 customers. Boeing has delivered 600 Boeing 787
Dreamliner aircraft, of which 346 aircraft are B787-8s and 254
aircraft are B787-9s. The first B787-10 is scheduled to be
delivered in 2018 to Singapore Airlines. In August, El Al took
delivery of its first B787. In September, Boeing announced that
Turkish Airlines intends to purchase up to 40 B787s. Japan
Airlines, who operates a fleet of more than 30 B787s, ordered
further four Dreamliner and Malaysian Airlines signed a tentative
agreement for an order of eight B787s. Boeing announced to increase
the monthly production rate from 12 to 14 starting in 2019. Already
the current monthly production rate is the fastest production rate
for wide-body aircraft.
Norwegian has equipped its B787 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, America and the Caribbean including, amongst others, New
York, Fort Lauderdale, Los Angeles and Bangkok. Since the
acquisition by DP Aircraft I Limited of the two aircraft LNA and
LNB in 2013, Norwegian has met all of its lease obligations in
full. In December 2016, aircraft LNA was inspected by DS Skytech
Limited at the Boeing maintenance facilities at Copenhagen
International Airport. Aircraft LNB was inspected on 6 April 2017
at the British Airways Maintenance facilities in Cardiff during
Base Maintenance (every 6,000 flight hours). Both aircraft and
their technical records were found to be in good condition with no
significant defects or airworthiness related issues.
Thai Airways' B787 fleet offers a total of 264 seats, of which
24 are business and 240 economy class seats. The carrier operates
this aircraft type to destinations within the Asia-Pacific region
such as Singapore, Delhi, Hanoi, Perth and Brisbane. Since DP
Aircraft I Limited acquired the two aircraft TQC and TQD in 2015,
Thai Airways has met all of its lease obligations in full.
Aircraft TQD had not been in operation for several weeks due to
a shortage of spare parts and spare engines, which are provided by
Rolls-Royce. During this period, DS Skytech Limited inspected TQD
and TQC, the latter being in scheduled commercial service. The
annual inspection was carried out on 6 September 2017 at Bangkok
International Airport. TQD is back in scheduled commercial service
since 17th October. Our inspector considers both aircraft and its
records to be in good condition with no significant defects or
airworthiness related issues. Lease Rental Payments had not been
affected by the downtime of TQD.
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 Norwegian Air Shuttle
(30 September LN-LNA LN-LNB
2017)
--------------------- ------------------------------------ --------------------------
TOTAL September TOTAL September
2017 2017
--------------------- ---------------------- ------------ ------------ ------------
Total Flight
hours 20,285 502 21,413 426
--------------------- ---------------------- ------------ ------------ ------------
Total Cycles 2,421 56 2,596 49
--------------------- ---------------------- ------------ ------------ ------------
Average Monthly 397 hours --- 435 hours ---
Utilisation 47 cycles 53 cycles
--------------------- ---------------------- ------------ ------------ ------------
Flight hours/Cycles 8.38 : 8.25 :
Ratio 1 8.96 : 1 1 8.69 : 1
--------------------- ---------------------- ------------ ------------ ------------
ENGINE DATA
(30 September
2017)
--------------------- ------------------------------------ --------------------------
Engine Serial
Number 10118 10119 10130 10135
--------------------- ---------------------- ------------ ------------ ------------
Engine Manufacturer Rolls-Royce Rolls-Royce Rolls-Royce Rolls-Royce
--------------------- ---------------------- ------------ ------------ ------------
Engine Type Trent 1000 Trent 1000 Trent 1000 Trent 1000
and Model
--------------------- ---------------------- ------------ ------------ ------------
Total Time
[flight hours] 15,636 16,224 11,469 15,661
--------------------- ---------------------- ------------ ------------ ------------
Total Cycles 1,941 1,985 1,281 1,863
--------------------- ---------------------- ------------ ------------ ------------
Location In shop LN-LNF LN-LNB LN-LNA
--------------------- ---------------------- ------------ ------------ ------------
AIRFRAME STATUS Thai Airways International Thai Airways International
(31 October HS-TQC HS-TQD
2017)
--------------------- ----------------------------- -----------------------------
TOTAL October TOTAL October
2017 2017
--------------------- -------------- ------------- -------------- -------------
Total Flight
hours 12,494 398 10,336 80
--------------------- -------------- ------------- -------------- -------------
Total Cycles 2,995 79 2,563 21
--------------------- -------------- ------------- -------------- -------------
Average Monthly 346 hours --- 300 hours ---
Utilisation 83 cycles 74 cycles
--------------------- -------------- ------------- -------------- -------------
Flight hours/Cycles 4.17 : 4.03 :
Ratio 1 5.04 : 1 1 3.81 : 1
--------------------- -------------- ------------- -------------- -------------
ENGINE DATA
(31 October
2017)
--------------------- ----------------------------- -----------------------------
Engine Serial
Number 10239 10240 10244 10248
--------------------- -------------- ------------- -------------- -------------
Engine Manufacturer Rolls-Royce Rolls-Royce Rolls-Royce Rolls-Royce
--------------------- -------------- ------------- -------------- -------------
Engine Type Trent 1000 Trent 1000 Trent 1000 Trent 1000
and Model
--------------------- -------------- ------------- -------------- -------------
Total Time
[flight hours] 10,750 10,518 10,125 9,931
--------------------- -------------- ------------- -------------- -------------
Total Cycles 2,563 2,583 2,467 2,451
--------------------- -------------- ------------- -------------- -------------
Location HS-TQC In shop HS-TQB In shop
--------------------- -------------- ------------- -------------- -------------
The Lessees
Norwegian Air Shuttle ASA
Norwegian Air Shuttle, the third largest low cost carrier in
Europe and the sixth largest in the world launched long-haul
services in 2013. As at 30 September 2017, Norwegian had a fleet of
142 passenger aircraft, including a fleet of 20 Boeing 787s. The
airline is aiming to have a fleet of 37 B787s by the end of 2019.
As at 30 September 2017, Norwegian Air Shuttle had 23 operational
bases globally and operated a total of more than 500 routes to over
150 destinations on four continents. In 2016, the airline
transported nearly 30 million passengers, with 30 per cent of
intercontinental passengers transferred to intra-European flights.
For a fifth consecutive year, Norwegian Air Shuttle has been
awarded as "Best Low Cost Airline - Europe" by
Airlineratings.com.
In the third quarter of 2017, operating revenues increased by 21
per cent to NOK 10.07 billion (USD 1.27 billion) while ancillary
revenues per passenger grew by 10 per cent, compared to the same
quarter in the previous year. The operating profit was NOK 1.59
billion (USD 0.20 billion), up by 16 per cent. Net profit increased
by 4 per cent to NOK 1.03 billion (USD 0.13 billion). The equity
ratio as at 30 September 2017 was 11 per cent, up 1 percentage
point compared to the same date in the previous year. Capacity and
demand increased by 25 per cent and 26 per cent respectively and
the load factor slightly increased to 91.7 per cent. The airline
transported 9.80 million passengers during the third quarter, an
increase of 14 per cent. In U.S. and Spain passenger numbers grew
by 79 per cent and 25 per cent respectively which was the highest
increase in Norwegian's key markets. Cash and cash equivalents as
at 30 September 2017 stood at NOK 5.57 billion (USD 0.70
billion).
During the first nine months of 2017 passenger numbers increased
by 13 per cent to 25.08 million compared to the same period the
previous year while operating revenues increased by 16 per cent to
NOK 23.10 billion (USD 2.90 billion). Ancillary revenues per
passenger increased by 5 per cent. Norwegian stated an operating
loss of NOK 975 million (USD 123 million) compared to an operating
profit of NOK 1.49 billion (USD 0.19 billion). Net profit decreased
from NOK 938 million (USD 117 million) to NOK 620 million (USD 78
million), though it benefited from the sale of a 2.5 per cent Bank
Norwegian shareholding in the second quarter (NOK 2.05 billion (USD
244 million)). However, results were significantly influenced by
jet fuel prices as well as by the introduction of new markets and
setting up new bases resulting in lower staff efficiencies due to
critical mass not having achieved yet under the strong growth
phase. In addition, performance has also been impacted by a
passenger tax introduced by the Norwegian government in June 2016,
by wet leasing costs and compensation paid to passengers affected
by delays.
In October 2017, capacity increased by 31 per cent and demand by
29 per cent compared to the same month in the previous year.
Passenger numbers grew by 14 per cent to 3.15 million passengers
and load factor decreased by one percentage point to 87.4 per cent.
Both capacity and demand over the last twelve month (November 2016
to October 2017) grew by 25 per cent, the load factor remained
stable at 87.7 per cent and passenger numbers increased by 14 per
cent. Unit revenue in October decreased by 8 per cent while the
average flying distance grew by 12 per cent compared to the same
month a year ago.
In early July, Norwegian announced that their CFO Frode Foss had
resigned after 15 years at the company. Tore Ostby, who is
vice-president of investor relations, acts as finance chief on an
interim basis. Frode Foss concentrates on his position as chairman
of the board at WR Entertainment, in which Bjorn Kjos, CEO of
Norwegian, has a stake in. In the same month, the US Department of
Transportation (DOT) granted a tentative approval to Norwegian's UK
subsidiary. Two months later, it was announced that the final
approval had been granted by the DOT. In September, Norwegian and
Ryanair ended talks on a potential feeder-flight agreement followed
by the announcement that EasyJet and Norwegian agreed that EasyJet
will feed Norwegian's long haul routes out of London Gatwick.
EasyJet offers not only feeder services for Norwegian but also for
the Canadian low cost operator WestJet and is considering expanding
these services to other airports within Europe.
Norwegian's Argentinian subsidiary applied for permits to
operate up to 156 routes and was granted concession for the
operation of 153 routes from Argentina. The fleet of the subsidiary
would start with a fleet of five aircraft and grow by six more in
the first months of operations. The decision of the Argentinian
Government to liberalise the air transportation sector, is not
embraced by public unions which went on partial strike early
September because they fear that labour conditions might be
weakened. However, Norwegian planned to invest up to ARS 4.3
billion (USD 247 million) into the new subsidiary and to create up
to 3,200 new jobs. Norwegian's experience in opening new markets
should be an advantage to prevail in this challenging market and
political environment.
For 2017, Norwegian expects a negative impact from the passenger
tax in Norway and weaker demand in the UK. Performance may be
negatively influenced by currency movements and increasing unit
costs due to fuel price movements. Bookings are solid ahead of the
fourth quarter. Flights from London Gatwick to Singapore, the
world's longest low-cost route, started 28th September. Services
from London-Gatwick to Seattle and Denver had been launched
mid-September. For 2018, Norwegian expects capital expenditures to
spend on new aircraft to amount to USD 2.1 billion. The carrier
anticipates a negative impact from the introduction of a Swedish
passenger tax. However, Norwegian Air Shuttle targets unit costs to
decrease by 7.1 per cent to 9.5 per cent and estimates a production
growth of 35 per cent in capacity (ASK) for 2018.
Thai Airways International PCL
Thai Airways International Public Company Limited, headquartered
in Bangkok, is a full service network carrier and flag carrier of
the Kingdom of Thailand and is majority-owned by the Thai
Government (Ministry of Finance) (51.03 per cent). As at 30 June
2017, the fleet of Thai Airways, including its subsidiary Thai
Smile, was 97 aircraft of which six are Boeing 787-8s. Two B787-9s
had been delivered to Thai during the third quarter. There are no
further B787s on order. In 2016, the carrier transported more than
22 million passengers and currently flies from Bangkok to over 63
destinations in 34 countries.
Second quarter and first half yearly results for 2017 were
impacted by low yields, increasing fuel prices and the strength of
the Thai Baht against Euro and Yen. In the second quarter,
operating loss improved by 16.7 per cent from THB 1.8 billion (USD
51.2 million) to THB 1.5 billion (USD 44.2 million) compared to the
same quarter in the previous year while net loss increased from THB
2.9 billion (USD 82.6 million) to THB 5.2 billion (USD 153.1
million) due to extraordinary items. Results had been impacted by
one-time expenses such as maintenance provisions to meet return
condition of leased aircraft (THB 275 million), costs related to
the Transformation Plan (THB 300 million), loss from the dilution
of Thai's shareholding in NOK Air (THB 428 million), impairment
loss of assets and aircraft (THB 390 million) as well as a loss on
foreign currency exchange (THB 2,431 million). Revenues increased
by 9.7 per cent and passenger numbers rose by 14.9 per cent. While
capacity grew by 7.1 per cent, demand increased by 21.9 per cent
and the load factor improved by 9.5 percentage points to 78.5 per
cent. Aircraft utilisation grew by 4.5 per cent to 11.5 hours a
day. Cash and cash equivalents stood at THB 21.80 billion (USD
641.9 million) and total assets were THB 291.80 billion (USD 8.62
billion) as at 30 June 2017.
In the first half 2017, revenues grew by 3.9 per cent but
operating profit decreased by 75.9 per cent to THB 1.3 billion (USD
39.0 million) compared to the same period in 2016. The net loss was
THB 2.0 billion (USD 58.9 million) compared to a net profit of THB
3.1 billion (USD 92.9 million). Above mentioned reasons have
impacted the results significantly. However, growth of demand
outperformed the increase in capacity and therefore the load factor
improved by 7.4 percentage points to 80.7 per cent. The number of
passengers carried rose by 12.4 per cent and aircraft utilisation
by 6.3 per cent. Thai Airways believes to close the year with an
annual profit and prepares for future growth. Passenger numbers in
the first nine months of 2017 increased by 10.6 per cent while
capacity and demand grew by 5.5 per cent and 15.2 per cent
respectively compared to the same period in 2016. Cabin load factor
rose by 6.8 percentage points to 80.4 per cent. The strongest
increase in demand was on long-haul routes to and from Europe.
Cargo freight (measured in tonnes) carried by Thai improved by 16.9
per cent.
This year, Thai Airways has entered the third and final stage of
its restructuring plan ("sustainable growth"). This includes six
strategies: profitable and competitive advantages, competitive
capability and revenue generating, excellent service ring,
competitive cost and efficient operations, culture building as well
as portfolio and new business development. Thai invested in a new
revenue management system, network management system and new system
for check-in services. Amongst other advantages, this supports the
airline to react faster to competitive offers as well as to
optimise route, crew and maintenance planning. The third stage also
includes the extension of code sharing as well as an in-flight
entertainment and cabin upgrade to enhance the passenger
experience.
Thai Airways received board approval and is currently seeking
governmental approval to purchase 28 new aircraft, mainly to
replace older aircraft of Thai and Thai Smile in the next five
years. The carrier intends to maintain a fleet of around 100
aircraft. In September, Thai Airways has approved the roll-over of
a USD 150 million loan with a term of six month provided by
Thailand's finance ministry. In the same month, the ICAO reviewed
Thailand's revamped regulatory system and removed the country's red
flag on its website. The Federal Aviation Administration (FAA)
started reviewing the "Category 2" status for the country, which
the agency put in place after Thailand's downgrade by the ICAO in
2015 and which currently prevents Thai carriers to serve U.S.
destinations. The FAA will perform an audit in the coming
weeks.
The number of foreign tourists visiting Thailand increased by
6.6 per cent in the second quarter compared to the same quarter in
the previous year. The growth is a result of visitors from
Indochina, India, Malaysia, Korea and China while the numbers of
Chinese tourists travelling to Taiwan and South Korea significantly
dropped due to political pressure. Thailand is supporting the
aviation industry by creating the Eastern Economic Corridor (EEC)
which targets ten industries, amongst others the aviation industry,
to facilitating foreign investments by special privileges within
three Eastern Thai provinces. The development of the U-Tapao
International Airport to become a logistic and air cargo centre is
a part of the EEC initiative.
Material Events since May 2017
June 2017
Interim update (13 June 2017)
The interim investor update report for the period 28 October
2016 to 26 May 2017 was published.
Annual General Meeting (16 June 2017)
The company's Annual General Meeting was held on Monday 17 July
2017.
July 2017
Results of Annual General Meeting (17 July 2017)
The announcements in regards to all resolutions sent to
shareholders at the AGM being passed were released.
Interim Declaration (17 July 2017)
The Company declared an interim dividend, in respect of the
quarter ended June 2017, of 2.25 cents per Share, to holders of
Shares on the register at 28 July 2017. The ex-dividend date was 27
April 2017, and payment was made on 18 August 2017.
August 2017
Interim Report (23 August 2017)
The Interim report for 30 June 2017 was released on 23 August
2017.
September 2017
Director Declaration - Additional Directorship (13 September
2017)
The Company announces that it has been notified that Jon Bridel,
Chairman of the Company, has been appointed as a Non-Executive
Director of Phaunos Timber Fund Limited, a company which is listed
on the London Stock Exchange's main market for listed securities,
with effect from 13 September 2017.
October 2017
Dividend Declaration (19 October 2017)
The Company declared a quarterly dividend, in respect of the
quarter ended 30 September 2017, of 2.25 cents per Share, to
holders of Shares on the register at 27 October 2017. The
ex-dividend date was 26 October 2017, and payment is expected on 17
November 2017.
Investor Information
The latest available portfolio information can be accessed by
eligible Shareholders via www.dpaircraft.com
Enquiries:
Kellie Blondel / Heidi Le Prevost
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 company news service from the London Stock Exchange
END
MSCUOVNRBVAAUAA
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November 23, 2017 11:56 ET (16:56 GMT)
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