Smooth flying for DP Aircraft in 2018 – The aircraft leasing company DP Aircraft (DPA) has published its annual report for the year to December 31, 2018. The company, which has a fleet of four Boeing 787-8 series aircraft that are currently leased to Norwegian Air Shuttle (NAS) and Thai Airways international, expects the state of the global aviation industry to remain buoyant through 2019, with passenger numbers continuing to grow strongly, particularly in Asia.
Chairman’s statement
DPA’s chairman, Jon Bridel, delivered his verdict on the year and discussed the outlook for 2019, saying: “The lessees have continued to meet their lease obligations. There are no incidents to bring to the attention of the shareholders concerning the operation of the aircraft, inspections have not identified any matters to report and the company continues to report a healthy performance.
The earnings per share for the year was US$0.10 per share compared to US$0.09 per share for the same period last year. The outlook for the airline industry for 2019 is positive and the international air transport association expects 2019 to be the tenth consecutive year of profit for the aviation industry. Passenger numbers are anticipated to increase going forwards with the Asian-Pacific region expected to have the highest growth rate among the regions.
During the period, the Thai Airways aircraft were grounded for upgrades on the Trent 1000 engines to repair known issues with the turbine blades. The aircraft will be in overall better condition once the upgrades are completed. This has not resulted in any loss to the company and Thai Airways have continued to settle lease rental and maintenance reserves payments on time during the year.
The company has noted the reduction in the substantial growth plans for NAS and ongoing challenges given its high financial and operating commitments. At the beginning of 2019, NAS raised $352m to strengthen its cash position. This is a positive outcome for the company and NAS has continued to meet its obligations to the company during the year. The recent grounding of all B737-MAX aircraft is being monitored and we understand NAS is looking to obtain compensation from Boeing. NAS are managing their capacity issues by delaying planned aircraft sales and leasing additional aircraft.”
Risks to outlook
We highlight some of the key risks to the business discussed by DPA in the annual report:
NAS
- NAS has undergone an ambitious growth programme and its subsequent financial results reflect ongoing challenges. It has appointed a new CFO and has curtailed further expansion, is selling aircraft, closing some bases and has completed a financing round, which was oversubscribed, raising $352 million to assist with the company’s ongoing funding requirements. The grounding of the 737-Max aircraft (NAS is an operator) by Boeing and global certification authorities has posed challenges but NAS has taken steps to keep capacity in place by deferring the sale of aircraft, leasing aircraft and seeking compensation from Boeing.
Thai Airways
- Elections have taken place in Thailand recently. It is not felt that these will impact the airline industry but these matters are continually monitored.
Boeing
- Company exposure to Boeing in terms of ongoing guarantees and commitments could be negatively impacted with the recent 737-Max groundings and as yet the financial impact upon Boeing in terms of financial compensation and potential loss of orders is not known although it is expected these matters will be resolved.
Brexit
- The current uncertainty regarding Brexit is probably resulting in travellers delaying reservations. This will have a short-term impact upon profitability of airlines operating to and from the UK, including NAS.
DPA: Smooth flying for DP Aircraft in 2018