ISTAT

JetraderI NTERNATIONAL S OCIETY OF T RANSPORT A IRCRAFT T RADING Airbus A380 C OMPARE | CONTRAST Boeing 7E7

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awas.com Seattle Miami Phone 1 425 453 5613 Phone 1 305 423 7030 London Singapore Phone 44 20 7497 5444 Phone 65 6733 3056 ISTAT 22nd Annual Conference President’s Letter Westin Kierland Resort, Scottsdale AZ . March 6-8, 2005 This “Farnborough 2004” 3 :: In Issue President’s Letter Farnborough 2004 Is the Long Hoped for 8 Recovery Really Underway? Chairman’s Column by John Keitz of ISTAT’s International Appraisers Board of Does a Cyclical Recovery Governors Really Mean Anything if the Industry Doesn’t Learn FEATURES :: to Change its Ways? 12 13 + Compare | Contrast Airbus arnborough 2004 is now A380 and Boeing 7E7 Dreamliner :: history and attendees are Boeing and Airbus present their F left to mull their visceral feelings of whether the aviation planes and plans Michael A “Mike” Metcalf and airline industries have President . ISTAT indeed entered into a period of 18 upturn and some form of pend- The A380 :: Inspired by industry - ing recovery. Quite honestly the created by Airbus signs emerging from this year’s aviation extravaganza are 19 mixed - encouraging, but still not clear-cut. Riddle in the Middle :: With the What is clear enough is the fact that the world’s largest aircraft marketplace, the United States, is still in a 7E7, Boeing looks to solve the state of turmoil as most of the big announcements concern- riddle in the middle ing aircraft, improving airline business and rising passenger 9 counts have been issued ironically from the troubled Middle- Education :: Aviation Technology East and the not surprising rapidly awakening “Tiger” at Purdue University: growing economies of the Pacific Rim. While it is now historical fact that the mighty the leaders of tomorrow (American, Delta, United) have fallen from lofty perches, the real story of interest will be their recovery, or the survival techniques they employ to remain short-term viable and REPORT :: hopefully long term changed. Likewise, the four major air- 5 craft manufacturers are all undergoing systemic change Farnborough 2004 :: words + pics required for the future, as well as offering new aircraft pro- duction models, many of which may well be destined to by Bill Cumberlidge, ALLCO Finance Group redefine aircraft categories and usage roles. 0 Perhaps the most startling techniques of change 11th European Conference The will likely emerge from the financial community as manufac- turers, banks, leasing companies, export credit agencies and Road to Recovery | review by end users struggle to define new “techno-finance” tech- niques and models. Colin Molloy, Finnair Oyj This past cyclical downturn has already heralded a 6 pattern of change relative to ticket pricing, reduced service Industry Trends Changing amenities, on-line bookings, and will likely culminate with a + redefinition of the on-going labor-management struggles, Fortunes by Les Weal, Airclaims work rule changes, and particularly elimination and/or sig- nificant redefinition of scope clauses. Accordingly, whether the predicted and desired recovery is real or still a phantom is debatable, but a sense ISTAT FOUNDATION :: of change is definable and rapidly becoming visible in daily 11 George E. Batchelor Scholarship Awarded industry custom and operating practices. This gathering momentum of industry change will affect almost all ISTAT 23 members, and that is probably the real message to be taken PEOPLE going PLACES :: away from Farnborough 2004. NEW FEATURE The ISTAT Cocktail Reception Thomas E Burke Director, AVMARK, Inc. What is a certainty emerging from this year’s Farnborough 2004 is the continuing growth and appreciation of our hall- writes about his Favorite Places mark ISTAT events with the ISTAT Farnborough Cocktail 21 Reception this year’s instant success. Calendar This “non-denominational,” so to speak, event 22 attracted almost a thousand attendees, guests, and those LETTERS just desiring to be a part of what is now recognized as the Metcalf l continued page 4 Metcalf l continued

hallmark Monday night event at the annual Airshow venues JetraderJetrader is a bi-monthly publication of ISTAT, the International of Paris and this year Farnborough. Society of Transport Aircraft Trading. ISTAT was founded in 1983 ISTAT would like to recognize the fine efforts of to act as a forum and to promote improved communications this year’s sponsor the R B S Aviation Capital and their rep- among those involved in aviation and supporting industries, resentatives Mr. Dick Forsberg and Ms. Nodlaigh Goss, con- who operate, manufacture, maintain, sell, purchase, finance, cerning their continuing support of ISTAT and in helping to lease, appraise, insure or otherwise engage in activities related make this event so successful. Ultimately, we were only lim- to transport category aircraft. ited in attendance numbers by the fire marshal’s limitations placed on the meeting gallery. Officers Further, even as ISTAT grows into a much larger Michael A Metcalf John W Vitale organization we have not forgotten our roots and in many President Vice President | Secretary ways we are still a very cohesive like-minded aviation family. Thomas W Heimsoth Proof of this fact is offered by the many ISTAT members and Bill Cumberlidge Vice President | Treasurer associates who pitched in to help Executive Director Dawn Immediate Past President Michael Platt O’Day Foster pull off another almost flawless event. Vice President These people were a tremendous asset to ISTAT in Alan C Coe Board of Directors helping accomplish these tasks. In the office, Jennifer Colin M Davis Earyes, Valerie Wheeler and Taylor Coffman helped with the Dr Dinesh A Keskar RSVPS, badges, shipping and other preparations as needed. Fred Klein A380 / 7E7 / C Series / E-Jets 170/190 Connie Laudenschlager The thematic content of this JETRADER is to recognize the Israel Padron Gregory A May fascinating array of new aircraft types on the horizon and Nick Popovich how they might possibly affect the ISTAT Membership as the Gary J Spulak manufacturer’s order books become reality and the machines themselves issue into the hands of their initial ISTAT International Appraisers Board of Governors operators. John F Keitz Clearly, the Airbus A380 will likely be among the Chairman largest metal aircraft to ever be constructed and is almost William Bath certain to be the final aircraft of that passenger carrying Administrative Director capacity (or larger higher seating capability) to resemble the traditional outline of an airplane as we recognize it today. Governors Eric G Allred This mammoth will require new engine technology, passen- Jack F Arehart ger compartment attributes and accouterments, and even Richard M Baudouin will dictate and necessitate specialized loading equipment Fred E Bearden and airport gate modifications. Stephen C Bieneman The airplane promises to be a high-density cost Skip Clemens effective commercial platform to serve the world’s tradition- Alison Mason al gateway hubs. New trans-border production and assem- Clive Medland bly facilities and systems have illustrated Airbus’ commit- ISTAT Foundation ment to this revolutionary aircraft. Yet in building one of the largest aircraft ever built the aircraft will also be one of the Thomas Hiniker Chairman “greenest” environmentally friendly to ever take to the skies. Roland H Moore The Boeing 7E7 might best be summarized by a Immediate Past Chairman quote from James Allen, “Dream Lofty Dreams and as You Thomas W Heimsoth Dream so Shall You Become,” appropriately the aircraft is Secretary | Treasurer named the “Dreamliner.” The airplane promises to be a sea Michael A Metcalf change airplane whose airframe will be largely composite ISTAT President (less than 18% metal composition). The airplane will be a Bill Cumberlidge “greater electric airplane” whose new generation power- ISTAT Immediate Past President plants will do away with traditional bleed air systems. Trustees The airplane will be built around an open core Robert M Brown architecture allowing for non-proprietary appliances and Laurie Hatcher accessories (non-boutique suppliers), as technology provides Wayne Lippman newer advances (for instance the APU might ultimately be Chris Partridge replaced by improved fuel cell technology) retrofits can be David P Sutton made as economically feasible. The airplane promises to be David Treitel very long lived in the hands of the original operators and may ISTAT International Society of Transport Aircraft Trading come with manufacturer provided maintenance and a hand- Dawn O’Day Foster Executive Director ful of approved maintenance centers. 5517 Talon Court . Fairfax Virginia 22032-1737 USA Original parts vendors will be required to stock JIT T +703 978-8156 F +703 503-5964 E [email protected] inventory freeing the airlines from massive spares inventories. W www.istat.org Perhaps of utmost importance this aircraft reaffirms Boeing’s A ADVERTISING Ajax Newservice Inc 219 939 9581 commitment to the commercial aircraft industry making a [email protected]

cover :: image sources Boeing + Airbus Metcalf l continued page 22 Fall 04 5 Farnborough 2004 ISTAT Reception

here was an air of apprehension about what the mood at the Farnborough Airshow would be T and what implications that mood would have on the industry as we enter the second half of Fiscal 2004. Airline orders and defence spending announce- ments dominated the news with 42 official military del- egations visiting the show. New attractions and big contracts dominated the week.

The transportation section of the famous Kensington Science Museum in London was the stage for what was to be the best ISTAT Farnborough Airshow Reception to date. With over 600 members and their guests turning up for a most enjoyable and memorable evening, the attendee’s list read straight from the pages of the Who’s Who of the aviation industry.

There is no doubt that the ISTAT reception has become and will continue to become one of the premier events of the Farnborough airshow calendar. It is a credit to Dawn and her staff and of course the Seymour family who volunteered to help that evening that all went smooth and according to plan.

To all concerned, thank you for making this event a great success and of course not to forget The Royal Bank of Scotland who very kindly agreed to part spon- sor the event. I look forward to seeing you all next year in Paris. by Bill Cumberlidge ALLCO Finance Group Immediate Past President, ISTAT 6 JETRADER Industry Trends Changing Fortunes by Les Weal, Chief Analyst, Airclaims

HERE is little doubt that the fortunes of many aircraft Of course, increasing the hours flown by their types, in terms of achievable market lease rates, have existing fleets is the easiest and most economical way for T undergone a significant improvement during 2004, airlines to increase capacity, and until this 'underutilised indeed it is arguable that the rate of improvement has been capacity' was absorbed the decline in the stored fleet was somewhat unexpected and is beginning to manifest itself in inevitably going to be delayed. However, with the increases improving market values, which is good news for asset expected this year, it is not surprising that the corollary is owners, at the very least. Certainly the prevailing mood at that the stored fleet for the types in question has declined the recent ISTAT European Conference was noticeably more dramatically throughout 2004 from the nadir in mid-2003. optimistic than in the previous year's event.

INDEX OF LEASE RATES

By way of example, the chart below, through an 'index' of market lease rates across all the years of produc- ANNUAL AVERAGE UTILISATION tion, illustrates this phenomenon and it is now accepted wisdom that the bottom of the cycle occurred in mid-2003. Aircraft Usage - Stored Population This chart tracks the market lease rate movement The second parameter to be considered is the of four aircraft types which are, or have been, popular number of stored aircraft (the figures include aircraft in both amongst the airlines, financiers and lessors and which have long and short term storage). been at the forefront of the decline in lease rates, but which Boeing 757-200 The 757 fleet has been a little are now recovering. more lethargic in the recovery, but the demand from the These are the Boeing 737-300, Boeing 757-200, cargo sector is now being coupled with renewed interest Boeing 767-300ER and Airbus A320-200, and here at from charter operators, airlines in the CIS and the LCCs in Airclaims we have examined some of the parameters which Asia, where its range is best suited. This has led to a reduc- may go some way to explain this improvement in which we tion in stored numbers which have halved in just over a currently see no signs of abatement. Indeed, even under the year. worst case scenario of say, a US Major liquidation, this may As with the other types under review, there has only slow the rebound rather than depress or reverse the been a “flight to quality” with customers preferring high market. Nevertheless, whilst percentage improvements of specification, 10 years old or younger aircraft, and it is this up to 20% have been impressive, we are still some way category where the lease rates have improved more signifi- from the levels achieved in the late nineties, although it is cantly. However, the supply is not inexhaustible and rates fair to say for three of the types under review that these lev- should respond in time for older examples, though it is likely els may be forever unattainable. The “in production” Airbus that freighter conversion, or maybe the occasional breaking A320 is presently offering the best scope for recovery. for parting out, will offer more potential. Airbus A320-200 The last six months have seen Aircraft Usage - Utilisation availability of the marque rapidly declining, with strong The “stored” fleet is symptomatic of over-capacity but per- demand from both the LCC sector and charter operators. haps a better measure of potential capacity is the annual The main 'silver lining' about the demise of the likes of utilisation of aircraft. As the chart below illustrates, for the Sabena, Swissair, and Ansett (which led to the rapid rise in the four types under consideration the annual utilisation has stored A320 fleet) is that the customer base has subsequently declined from the highs experienced in 1999 and 2000. undergone a large expansion and the resultant increased However, in late 2003 and in the first two quarters liquidity bodes well for the family. of 2004, we have witnessed a significant increase in the Boeing 767-300ER Such is the rebound in the average daily hours that these aircraft types are flown, and long-haul markets, that demand for this still highly flexible the portents are for a return to utilisation levels not record- and versatile aircraft has seen the stored fleet decline dra- ed since 2000. matically. Demand, until recently, has tended to favour high Fall 04 7

“...recovery and improvement are well underway”

specification CF6 versions but now the PW4000 powered Summary aircraft is proving to be in equally strong demand. This recovery is likely to postpone cargo conversion of this Using just a few of the industry's main barometric measures variant for a few more years, despite increasing interest. of 'health', 'liquidity', or 'market condition', it is fairly clear Boeing 737-300 that recovery and improvement are well underway. Lease Demand, especially for younger -3C1 powered from all sec- Rates and Utilisation are up, Stored Population and Average tors of the industry, has brought about a rapid decline in Downtime are down. the stored 737-300 fleet, whilst older examples are finding These factors even apply to the B757, which had homes in the freighter conversion market or as part-outs for almost been 'written off' by some pundits. Whilst the type still very low specification aircraft. For younger examples, we has many of the attributes that challenge its residual value believe lease rates will continue to improve as the limited potential and marketability, its improvement does reveal the availability of Series 700s should reflect positively on this scale of the upturn in market conditions. marque. This winter will challenge and severely test the Off Lease Exposure robustness of the recent recovery. US Airways, Delta, and a Another parameter and measure of a type's liquidity is how handful of other airlines currently have the potential to further quickly it can be placed back into service after coming off stress the market as a whole. Some careful manoeuvring by lease - for many reasons, the last thing a lessor wants is an airlines, lessors and financiers alike can help minimise the Aircraft on Ground (AOG) where it is not earning any lease challenge of the months ahead. A little bit of luck wouldn't revenue. go amiss either.

TIME BETWEEN LEASES - PLACED AIRCRAFT AVERAGE DOWNTIME IN DAYS

The above analysis, based on data from the CASE Database, looks at how long each individual aircraft within the type has spent parked on the ground between leases (or before being sold on), excluding lease extensions. It is in effect a measure of aircraft inactivity - although the new lease will typically have been arranged in the downtime period or prior to the previous lease ending. It does however provide a benchmark to show which types are likely to be quickly placed, relative to each other. The four types are amongst the most numerous in the operating lease market fleet. As is shown, most of the types have a relatively short period of inactivity between leases on average (between 3-4 months). It is often the unplanned or unexpected lease endings - e.g. an airline fail- ure or repossession, which result in the average time being pushed up, as the lessor may not have another lessee arranged or in place, straight away. Time between leases will be influenced by the popularity of the type and also the market conditions at the time. Hence in the recent downturn, the time between leas- es was pushed up for virtually every type. It is noticeable however, that 2004 has seen a sig- nificant improvement, with the average downtime for all types coming down, to a little over a month. This is further evidence of the improving market and results in the strengthening of lease rates. 8 JETRADER ISTAT International Appraisers Board of Governors John Keitz Chairman

Another project that has been primarily pushed by Fred Bearden, although a few others have been push- ing it as well, is slowly making progress. We have all wanted for some time to create a database of sales transactions for the use of ISTAT appraisers. the opening of a recent col- ernment sites, assures us that even he Recently, more and more of umn, I stated that I wondered if can not review the exchanges between our ISTAT members among the leasing In anyone ever reads it. I know at our members. After setting-up the sys- companies, financial institutions and least one person read it. In this issue, tem he turned the sign up security over operators have been more amenable to you will find a “letter to the editor” to Bill Bath. That means when a new helping the appraisers' credibility by from Mr. Ted Baker of the American member wants access to the forum, Bill divulging recent transaction prices. They Society of Appraisers who takes excep- certifies his or her eligibility before have been reluctant to do so, primarily tion to my impression of the process access is allowed. However, even Bill is because they often have strict contractu- involved in getting certification as an restricted as to what he has access to al restrictions that forbid them from ASA appraiser. and private messages sent between divulging such data. Our proposals have I have never had anything to appraisers are secure. suggested ways of keeping the data do with the American Society of As the appraisers who have confidential by, for example, only giving Appraisers and my impression of the signed up know, but other readers may the aircraft type, engine model, year of process was based entirely on what I not, in Bill Bath's original e-mail inviting manufacture and takeoff weight. The heard from others. I now know from Mr. appraisers to join, he stresses that our skeptics say that any good detective Baker's letter and from my subsequent ISTAT ethics code must be complied with could probably derive from these data visits to the ASA website that I was very by citing some specific references to the only who the seller, buyer and operator wrong. The ASA certification requires, in handbook. The purpose of the forum is are, thus revealing the information that addition to taking the courses, a refer- to exchange ideas and information and they are obligated to keep confidential. ence check, submission of examples of it can not be used for collaborating on In an earlier proposal, Fred suggested one's appraisal work, a prescribed level values or fees, for example. When one that confidentiality would be preserved of experience and an intense examina- signs up he or she must agree to comply by only identifying the transaction date tion. The process is not unlike our ISTAT with the rules and ethics code. by calendar quarter and that there be a appraisal certification. This should not So far, other than several tales time lag of one quarter before the infor- be surprising since the founders of the posted by Jack Feir and Fred Bearden, mation was reported. ISTAT appraisers program modeled our the forum has not been used too much The skeptics say, "Suppose program after ASA, with considerable other than for initial sign ups of mem- there is only one B737-300 transaction, help and advice from various ASA offi- bers. I envision that the forum may for example, in any one quarter?" Then cials at that time. eventually become the primary means of all the confidential information is Our code of ethics is almost communications with our members. To revealed. Fred's latest suggested varia- identical to that of the ASA and differs some extent, that should make this col- tion is to keep even the names of the only where specific references to aircraft umn obsolete as a message center for participants confidential. So, instead of were required. In fact, it may well be appraisers and I can go back to columns Fred, for example, asking XYZ Capital that the only significant difference is that reminiscing about the Concorde or the corporation to contribute data to the we don't require candidates to enroll in early days of our business. (That should program, he would just submit a list of formal courses. The main reason for this help keep me out of trouble with the possible participants, as would I and any is that we don't have any courses that ASA!) Bill Bath has already been using it other interested appraisal companies. address the nuances of transport aircraft effectively soliciting ideas for next year's Our trusted administrator, Bill Bath, appraisal. continuing education program, although would then contact the companies and I apologize to Mr. Baker and to the responses have been minimal. ask their participation. They would not any other ASA certified appraisers who I can understand one reason be identified to each other or to the were offended by my impression, which why there are few chatters. The forum appraisers. ABC Capital would not know was made, as Mr. Baker stated, without has its downside. Remember when you whether XYZ is participating in the data full knowledge of the facts. came to work at 8:30 A.M. and began pool nor would anyone else except for Thanks to the prodding of Fred to work? It seems now you must first Bill Bath. It seems like it could work. Bearden, we have established a "chat read your e-mail, delete all the porn and There is the potential problem that ABC room" for ISTAT certified appraisers. By the offers to work at home for sells an Aircraft to XYZ and both submit the time you read this, it may be old $100,000 per week or refinance your the transaction price. Then we would news, but as I write it, the "ISTAT Private mortgage at zero percent interest. Then have two data entries and we would be Appraisers Forum" as it is officially you must respond to the legitimate mes- lead to believe that there were two called, was just recently established and sages. Before you realize it, it is 10:00 transactions that were ironically at the promises to be an effective tool for us. A.M. and you're just beginning to work. same price. But too much information is You can sign up by going to Now, you must check the forum as well better than none. istat.org/appraisers/. As I write we have to see if anyone is looking for you to Another problem is that we 26 appraisers enrolled. Access is restrict- share some of your unique knowledge could be manipulated. We all know that ed to ISTAT certified appraisers and pains and, since we appraisers always know some of our clients try to persuade us have been taken to keep the exchanges something that is worth passing along, that our values are too low or, (some- confidential. The webmaster of our ISTAT you find it is now 10:30 when you begin times!) too high. The participants could web site, who also is the trusted web- to work. influence our conclusions by submitting master of several highly secure U.S. gov- Chairman l continued page 22 Fall 04 9 Aviation Technology Aviation Technology at Purdue University: growing the leaders of tomorrow

Submitted by the following faculty members at Purdue University, West Lafayette Indiana: Prof. David L. Stanley Prof. Denver Lopp Prof. Michael Suckow

he aviation program at Purdue University recently celebrated its T 50th anniversary. From modest formal beginnings in the 1950s, this program, a department within the School of Technology at Purdue, has since grown to include disciplines in professional flight, aeronautical tech- nology, and aviation management, all of which are four-year baccalaureate degree programs. Graduates of these programs bring a variety of knowl- edge, skills, and abilities to career posi- tions throughout aviation. They are technology-ready. of knowledge for practical application in the industry. This goal is achieved, The mission of an effective technol- in part, by engaging with industry to ogy program must include outreach bring the combined resources of fac- ulty, students, and industry to bear and engagement with industry. In upon the issues at hand. Initiatives of this type historically involve aviation the State of Indiana, a partnership graduate students managing the proj- has been struck between industry ects, with undergraduate students playing significant roles in observa- and Purdue University at many lev- tional activities and collection of data, for instance. Faculty members provide els, and this has been particularly general oversight of the initiatives. the case for the School of Research activities have included studies of human factors, Technology. productivity, and safety for a number of major carriers at nearly 50 domes- Faculty members in the tic and 15 international stations. A There are, however, other Aviation Technology Department have major project underway at this time is attributes of significant importance recognized this critical need and studying third-party maintenance, an beyond the technical skills required by worked diligently to broaden the industry that has experienced explo- professional pilots, maintenance sup- undergraduate experience to include sive growth over the last decade and port personnel, and those in positions important knowledge, skills and abili- the growing pains typical of that suc- of aviation maintenance. It is widely ties. Further effort has been directed cess. recognized throughout the industry towards the development of a gradu- For students, learning occurs that while aviation professionals are ate program that can respond to these at a multitude of levels in such an generally well-trained and very skilled, urgent needs. Since the beginnings of environment. They bring the "sound important abilities remain undeveloped these efforts nearly a decade ago, the bites" of education they've heard in and lacking in many cases. Aviation Technology graduate program lecture and applied in laboratory to Furthermore, as the airline and aero- has experienced impressive growth the airline or industrial setting, where space industry struggle through diffi- under the guidance of Gary Eiff, PhD, they put them to the acid test. In cult times, it has become increasingly the chair of the aviation graduate pro- these settings faculty members can apparent that the best minds and the gram. make significant contributions to the strongest possible leadership will be For the aviation program at educational experience of their stu- necessary to overcome the problems Purdue University, the discovery mis- dents while also providing invaluable ahead. sion is focused on creating a new body consultation services to the industry.

Purdue l continued page 22 10 JETRADER 11th European Conference | Gleneagles

Notes on 11th Annual ISTAT industry such as lessors at 30% and airports 26%. Finnair started to improve the value chain and returns back in 1999 by adapting European Conference by Colin Molloy its route network, fleet and a new objective " It is not enough to be an excellent airline but we need to be an excellent business he conference opened on Sunday evening 12th enterprise as well". Finnair has lowered unit costs by 25% since September just in time to have US Air declare bankruptcy but as yields have also followed the same trend, profitability has yet again! With 900 attendees at the annual conference, remained depressed. T Chris Tarry of CTAIRA asked "Is history a guide to the we still had 74 Europeans attend the European Converence that did not attend the annual conference. This certainly validates the future?" and answered "NO " because the structural changes reason for holding theEuropean Conference and may provide needed are not historical but have been driven by factors such as some useful guidance for a South American (Brazilian) event. Low Cost Carriers. Peter Morris of Airclaims suggested that the The introduction by Mike Metcalf noted that ISTAT now has world narrow-body fleets would increase by 3% per year to about 1500 members. 2013 as opposed to 4% for wide-body. If yield erosion continues Keijo Suila, CEO of Finnair suggested that the cyclical at the same rate, airlines could expect to fly their passengers for crisis was over but that a structural crisis in the industry free by 2025! Russ Hubbard of IBA took a regional view 1) remained with overcapacity, yield collapse, weak balance sheets, Europe is steady but yields continue to decline, 2) The US is very poor profitability and too rigid cost structures. EBIT returns by unsettled and changes will have to occur and 3) Asia Pacific has airlines are of the 3% range compared to the suppliers to the an optimistic outlook with low cost carriers starting and the mar- ket expanding very rapidly. Conference l continued next page

CONSULTING • Strategic Planning • Industry Forecast • Airline Planning

TECHNICAL • Inspections & Audits • Redeliveries & Repossessions • Maintenance Cost Studies

VALUATIONS • Aircraft & Engine Values • Asset Management • BlueBooks & Online Values

www.AVITAS.com The Leading Advisor to the Aviation Industry tel: 703.476.2300 fax: 703.860.5855 Fall 04 11 The ISTAT Foundation

Chairman | Thomas G. Hiniker DAVID LOWE WINS Tom Hiniker pres- FARNBOROUGH ents a $10,000 GEORGE E. BATCHELOR $10,000 RAFFLE check to Kate SCHOLARSHIP AWARDED David Lowe, Chairman Zaranek, a senior The ISTAT Foundation of Belvest Limited in at Daniel Webster Scholarship Committee, headed by Pulborough, England is College. Also pic- the winner of the raffle Chairman Roland Moore, has selected tured is Hannah Katryzina Zaranek, a senior at Daniel fundraiser conducted at the London McCarthy, Webster College in Nashua, New President of the Hampshire, to receive the George E. Farnborough Air Show. Batchelor Scholarship for 2004. David’s name was college. Kate Zaranek is a dedicated, picked from the roughly young aviation enthusiast from upstate 300 tickets sold to be New York. She committed herself to a the lucky winner of the career in aviation and enrolled at Daniel Segway Human Webster College in 1999 (and received her Transporter. David’s FAA pilot’s license on January 18, 2002). Human Transporter will Kate is a senior this year, is excelling aca- be delivered to his home in England by demically, and will receive her Bachelor of British Aerospace, the agent for distributing Science Degree in Aviation Management in the Human Transporter in England. Upon May, 2005. She has worked hard, been delivery, Segway will also provide training active in campus activities and sports but so that David can safely tour the country funding. A very special thanks to both the had incurred ten’s of thousands of dollars roads of Southern England on his two- many companies that contributed mer- of personal debt to fulfill her dream of wheel Segway. chandise and to the many enthusiastic bid- becoming an aviation professional. She is ders that overbid to generate great pro- a most deserving candidate for this scholar- EUROPEAN FUNDRAISERS GENER- ceeds. A very special thanks to Charlie ship award. ATE $14,000 Willis, of Willis Lease Finance Corp., who Following graduation next The two fundraisers conducted generously purchased the March ISTAT Conference package for well-above its stat- spring, Kate will seek employment with an by the ISTAT Foundation in Europe this ed value. airport operation and hopes to develop her summer, the raffle at the Farnborough Air Mr. Willis’ generosity exemplifies career either on the airport or airline side. Show and, subsequently, the auction at the the enthusiasm and spirit that ISTAT mem- European ISTAT Conference, raised almost bers have to support continuing commer- Congratulations Kate! $14,000 which will be used for scholarship cial aviation education.

Conference l continued Adam Brown of Airbus presented the Airbus marketing forecast showing market growth for large wide- bodies but not for smaller narrow-bod- ies. Kevin Bruce of Boeing expected long term traffic of about 5,1% over the next 20 years which would double current traffic focused on point to point flights even in long haul market. They antici- pate freighter growth with 110 wide- body conversions per year. Steve Fortune expects slower freighter fleet growth forecast by Merge Global of up to 70 freighters only. Converters will have steady business with B757, MD11 and 767 but margins will shrink because there are too many converters. Colin Stuart noted the 139 firm orders and commitments for the A380 and that it is the world's first aircraft to use less than 3 liters of fuel per 100 passenger kilometers. He reviewed the interior con- figurations and showed the first models actually in production. It is on time to have its first flight in Spring 2005 and service entry spring 2006. John Feren noted the 3 different 7E7 models. The structure is half com- posites and the interior features will showcase spaciousness, lighting and design. Service entry is 2008 for the basic -3 short- range model, the -8 long range one year later and the stretched -9 now in 2012. The no bleed engines that will reduce DOCs by Charlie Willis bids in the Silent Auction 20% compared with the benchmark 767-300. Boeing is focused as Tom Hiniker looks on at the European on production simplicity and will probably only have about 100 optional features on the 7E7, rather than the 600 on the 747 ISTAT Conference.

Conference l continued page 21 COMPARE& Airbus A380

Feeding Technological Evolution A380 : the flagship of In January 2005, the the most technologically world will get its first real look at the A380, the advanced fleet flagship of the Airbus Family, which already on the market by Jacqueline Gorman, Airbus SAS includes the A320 or over thirty years Airbus has craft: the first twin-aisle to be piloted Family (the world’s best selling sought to anticipate and respond by a two-man crew, fly-by-wire, drag- single-aisles), the A330-200 F to the changing needs of an reducing wingtips, composites in sec- increasingly competitive market, ondary and then primary structures, (commanding three quarters of and laser beam welding. through the creation and innovative the market share in this category) application of leading edge technolo- At the heart of Airbus’ com- gy. mitment to advancing aviation tech- and the A340-500 (the Before launching the A380, nology, is a belief that new technolo- longest range aircraft in the Airbus had already created the most gies or materials should not be intro- world) modern and innovative aircraft fleet on duced just because it is possible. . the market. Successive generations of Instead, by understanding the needs the Airbus Family chalked up a suc- and ambitions of its customers, cession of ‘firsts’ for commercial air- Airbus seeks to identify the best com- Airbus l continued page 14 &CONTRAST

Boeing 7E7-8 Dreamliner

Composites Introduce New Design Opportunities Examining the Advancements in three key Boeing technology 7E7’s new areas combine with new engines to make the Boeing 7E7 Dreamliner technologies an efficient, effective by Lori Gunther, Boeing Company tool for airlines. hen Boeing announced its gram. “We understand this material decision to make the 7E7 of system.” Materials, systems and W primarily composite materi- That said, there are still aerodynamics improve- als, it took a leap from the mature development challenges being faced material system of aluminums into the by the team. ments over the past 10 burgeoning category of composites. “To create the entire fuselage and Still, the composite system being most of the wing out of this material, years present engineers used on the 7E7 is not radically new. we need to really define the design with new opportunities “We're using the same basic allowables and do a lot of testing to composites that have been in-service ensure we're really getting the full to refine and optimize on the 777 from the beginning,” said advantage,” Statkus said. airplane designs. Frank Statkus, vice president of He explained that introduc- Advanced Technology for the 7E7 pro- ing a new material system for these

Boeing l continued page 15 14 JETRADER AIRBUS

binations of material and most appro- reducing atmospheric emissions, factured from thermoplastics. priate application of new technologies weight and operating costs. Likewise, the upper fuselage to ensure that safety, quality, perform- In fact, the following innova- of the A380 will also see the first civil ance and costs are optimised for cus- tions enable the A380 to weigh in at application GLARE, a laminate materi- tomers, operators, pilots, crews and around ten to 15 tonnes lighter than a al that alternates layers of aluminium passengers. similar sized aircraft using 747 tech- and glass-fibre reinforced adhesive. Feeding technological evolution nology, yet carrying 30-50% more With ten per cent less density than In launching the A380 as the flagship passengers while creating less noise. aluminium, GLARE provides weight of an already technologically Composites savings of around 800 kg and greater advanced fleet, Airbus needed to cre- With Airbus’ proven track record in the resistance to fire and damage. For ate something special. Not only be application of composites, carbon example, an artificial crack subjected the most spacious civil aircraft ever fibre reinforced plastic (CFRP) is of to thousands of flight cycles barely built, but also the most advanced. An course a prominent feature of the increases in size and with the first aircraft that would benefit from all that A380. The fin box and rudder, horizon- glass-fibre layer preventing any pene- was best in the aircraft that had gone tal tailplane and elevators, upper deck tration beyond the superficial alumini- before and would in turn feed subse- floor beams, rear pressure bulkhead um coating, it is exceptionally resist- quent technological evolutions back and centre wing-box all benefit from ant to corrosion with. In addition into the rest of the family and the CFRP technology. In fact, the CFRP GLARE uses a hot bonded manufac- wider aircraft industry, through collab- centre wing-box alone saves up to turing process but is repaired in the orative working and technology trans- one and a half tonnes compared to same way as standard aluminium. fer programmes. most advanced aluminium alloys. A380 engineers have also To that end, Airbus and its Previous innovations such as succeeded in moving the aircraft’s suppliers and industrial partners have the introduction of the world’s first car- centre of gravity aft by around six per developed an array of new technolo- bon fibre keel beam on large com- cent, which when coupled with its gies for materials, processes, systems mercial aircraft, (on the A340-600) enhanced fly-by-wire system, has and engines for the A380. Every tech- have ensured a continuous evolution reduced the surface area of the hori- nological evolution is carefully in Airbus’ skill and expertise in the zontal stabiliser by approximately assessed in terms of its maturity and field, making the advances on the 40m2, thereby saving additional added value, the lifecycle of the air- A380 a natural progression in the weight while preserving the stability of craft and environmental considera- field. the aircraft. tions. New materials Hydraulic systems Overall around 40 per cent But with the balance of technologies Innovative developments on the of the aircraft’s structure and compo- and materials available today, com- A380’s hydraulic systems also play a nents will be manufactured from the posites are not automatically the best critical role in the weight savings and latest generation of carbon compos- solution for everything and the A380 performance enhancements on the ites and advanced metallic materials has sought the optimum balance of new aircraft, while at the same time, which, offer numerous advantages in all possible materials. For example, chalking up another first for civil avia- terms of improved aerodynamic per- the wing skins are being constructed tion. formance, operational reliability and from advanced aluminium alloys and ease of repair, as well as significantly the fixed wing leading edge is manu- Flagship l continued page 16 BOEING Fall 04 15

Boeing l continued Advanced Systems Offer In today's airplanes, new technologies are often not introduced types of structures means that the Performance, Flexibility because they would require extensive designers have more to consider in There is a plethora of advances being modifications to the airplane. creating their designs. introduced in the systems arena with One technology Sinnett sees on the As one example, Statkus the 7E7 as well. Most significantly, the horizon is a fuel cell auxiliary power recounted how a test structure that high-pressure bleed air system that unit (APU). was being tested to the point of failure has been standard for the last 60 “Fuel cell technology won't actually failed well later than anticipat- years on jet airplanes is gone, quite be ready for 2008, when the 7E7 ed. While on the surface this may be replaced by new electronics. enters service,” said Sinnett. “But seen as a good thing, it's actually a “Today's bleed air systems rob the because the APU is only required to sign of the challenges being faced. engines of efficiency,” said Mike provide electrical power now and not “It means the part was over Sinnett, chief project engineer for 7E7 bleed air, the 7E7 will easily be adapt- designed,” Statkus said. “We want to Systems. “In the past, we had to able to the fuel cell technology when it design to the failure limits that are set. accept this because it was the only is ready.” They are very conservative and way.” With its common core sys- ensure the highest levels of safety Now, electronics have tem, the 7E7 is reducing the number already. To over achieve means we've advanced to be light enough and of computers on board and centraliz- introduced inefficiency and unneces- robust enough to provide a better ing data processing to allow more effi- sary weight.” solution. cient use of resources. And that is exactly the intention “We've talked about this con- “There are about 80 unique comput- behind doing the materials testing. cept in systems for years,” said ers onboard a 777,” Sinnett said. “And Tests are done at this phase of the Sinnett. “But this is the first time we've there are multiple copies of many of program to create a database that been able to really achieve it.” them for a total of about 200 total tells designers the properties of the Each 7E7 engine will have computers on board. With the 7E7, materials so that they don't over two 225 kilowatt generators. The auxil- we're down to 30 unique.” achieve and never under achieve. iary power unit will also have two simi- For systems, the 7E7 is all about pro- Another challenge that composites lar generators. They will be used to viding better functionality with fewer are bringing to designers is the need provide electric anti-icing, to power parts and greater flexibility. to rethink the entire design of the air- the environmental control systems, to “We're designing a systems architec- plane. power hydraulic pumps and to drive ture that will start providing service in “Composite parts can be the motors on the brakes - all func- 2008 and continue well past 2050,” bigger and yet be simpler. They can tions formerly powered by pneumatics Sinnett said. “There's no way we can be more tailored to achieve the per- or hydraulics. know what the future will bring but we formance that is needed,” Statkus Sinnett said the program is can sure be ready to bring it on said. “And it's not just that they can be looking for other opportunities to board.” bigger, simpler, tailored - they need to expand the use of electronics. One be bigger, simpler, and tailored so that potential under review is using electri- we can get the full advantage of the cal actuation for some of the second- Aerodynamics Tools Lead material system. If we just substitute ary control systems. to Optimized Design composites for aluminums and don't The primary system would The laws of aerodynamics haven't create new designs, we're not going still operate like the 777 - with elec- changed so how can there be to see the improvements we need,” tronic fly-by-wire signals that cause advances in this arena - advances he said. hydraulic power to move the control equal to the contribution of those Statkus said that the 7E7 surfaces. But the back up system may offered by new materials and team is pursuing these challenges use the electronic signals to move advanced systems? vigorously. In fact, test fuselage sec- electronic motors to move other con- “The laws haven't changed,” tion tooling is being created to test trol surfaces. It would be a redundant explained 7E7 Chief Project Engineer out the current design efforts and the source of power that would remain in Tom Cogan. “But our understanding new tape laying machines being the unlikely event of a total loss of of the laws has continued to evolve developed for the 7E7. hydraulics. and so have our aerodynamic tools.” “Our team is facing these In addition to eliminating Chief among those tools is challenges with a great energy and bleed air, the 7E7 will introduce an computational fluid dynamics (CFD) - enthusiasm,” he said. “They're really open systems architecture that is complex codes that run on super focused on doing this right.” managed through a common core computers to develop designs that He also said that challenges system. are optimized for minimal drag. are important early in a program. If “In an open architecture, you “As computers have become everything is easy, he said, Boeing plan for change even if you don't faster and more powerful in recent hasn't set stringent enough targets. know what it will be,” said Sinnett. years, we have been able to do a bet- “We don't lose sleep over these chal- “Part of the advantage of being com- ter job in modeling the entire airplane lenges,” Statkus concluded. “We don't puter driven is that we can achieve and predicting the three-dimensional have all the answers but we see the upgrades and introductions through effects of the airflow around it,” path forward and are confident in our new software.” ability to find the answers.” Boeing l continued page 17 16 JETRADER AIRBUS

Flagship l continued By increasing the pressure A380 capitalises on Airbus’ established cope with growing passenger num- on the A380’s hydraulic systems from centres of excellence around the world. bers without negatively impacting the the standard 3,000 pounds per This approach means that the A380 has environment: carrying up to 50 per- square inch (psi) to 5,000 psi, smaller been able to benefit from the applica- cent more passengers while operating piping and components can transfer tion of a number of innovative tech- well within ICAO Chapter 3 regulations the necessary power. Again, this not niques originally developed on other and London Heathrow’s QC2 (depar- only reduces the aircraft’s weight by Airbus aircraft programmes. Longer ture) and QC1 (arrival) regulations. around a tonne, it also makes it easier term, it also means that where appropri- The A380’s new-generation to maintain. This technology has ate, any new techniques introduced on engines also exceed the latest regula- already proven itself in military aircraft the A380 programme can be easily tions for the landing and take-off cycle over many years and trials have transferred to other Airbus programmes. and, because of its larger capacity, shown that the existing hydraulic flu- A good example of this is laser the aircraft offers airlines the maxi- ids stand up well higher pressures. beam welding, which was first intro- mum benefits from available take-off Flight control systems duced on civil aircraft in 2001 for the and landing slots, while reducing fuel Through a unique system of dual manufacture of the lower skin on the wasted in airborne delays and holding architecture for the flight control sys- rear fuselage of the A318, went on to patterns. tem, the A380 delivers an unprece- generate around 100 kilogrammes of With a fuel burn that is dented level of separation and redun- weight savings on the A340-600 and around 13 per cent lower its closest dancy in flight controls. The aircraft has since been implemented on the competitor, the A380 is the first long- provides four independent primary A380. The technique is used to attach haul aircraft to consume less than three litres of fuel per passenger over 100 kilometres (a fuel burn compara- ble with that of today’s most effi- cient cars). At a time when air-traffic is steadily increas- ing, this represents a significant reduc- tion of exhaust gases on the atmosphere. Airport compati- bility In responding to customer and industry demands, Airbus has designed the A380 to be largely com- patible with exist- ing airport infra- structures, working with airports and flight control systems with two differ- the “stringers” (longitudinal reinforce- airworthiness authorities to implement ent configurations. Two of these fea- ments) to the lower fuselage skin, innovative solutions that would make ture a conventional hydraulic actua- instead of traditional riveting, making the this possible. tion system and two feature local process quicker, while preserving the For example, while the wings electro-hydraulic actuators for the quality of the bond, reducing the risk of and engines have been designed to control surfaces. The aircraft can be corrosion and fatigue cracks and deliv- allow it to take-offs and landings in controlled using any one of these four ering weight savings. less distance than current large air- systems. Environmental Friendliness craft, the 20-wheel main landing gear Production On of the major advantages of the A380 ensures that the A380’s pavement The design and production of the will be in helping airlines and airports to loading and footprint remains within

Flagship l continued page 20 BOEING Fall 04 17

Boeing l continued coding and testing the extremes. The tunnel is a great tool but it's not very Integrating the New Cogan said. “The codes we have cost effective. So, being able to really Technologies developed allow us to look at more focus on a few designs to get the These three Boeing-led technolo- potential design options faster than data we need is helping us be more gy areas combine with new engines ever before cost effective.” to provide a 20 percent improvement “The process we use today Cogan said the program is in fuel usage on the 7E7. In fact, the for developing airplanes begins with in its second round of wind tunnel combination is the key to realizing the the computer model - that is the pri- testing, and the tests are going full improvement. mary tool we use for the actual con- extremely well. “It is the integrated effect figuration development. The coding is “We continue to find that our that allows our improvement to be so so accurate that we can evaluate CFD programs are extremely accu- dramatic,” Gillette said. “You can only miniscule changes in a design to rate in predicting the performance of take full advantage of these technolo- determine impacts on aerodynamic our design,” he said. gies with a brand new airplane.” efficiency,” Cogan said. Boeing and its partners will As an example, Gillette In fact, the accuracy of the conduct about 15,000 hours of wind noted the cycling effect of composite coding has also focused the applica- tunnel testing on the 7E7 at sites materials and new engines. tion of another aerodynamics tool - around the world including the “If you engine is more efficient, you wind tunnel testing. Boeing transonic wind tunnel in don't need to use as much fuel so “In the 80s, with the 767, we Seattle, the QinetiQ low-speed wind your wing can be smaller,” he said. “If took more than 50 wing designs into tunnel in Farnborough, England; and you wing is smaller, your airplane is the wind tunnel,” Cogan said. “We other facilities. lighter and your engine can get small- were using the wind tunnel to verify In addition to using the wind er. This allows another cycle of down- our designs. tunnel data to select the best sizing everything - the wing, the “In the 90s with the 777, we designs, Boeing uses it to create the engines and so on.” took 18 designs into the tunnel and simulation data that will help pilots In this way, with a new air- we were really not verifying the prepare to fly the airplane. plane, Boeing can optimize the designs as much as we were verify- “By the time we get the first design to ensure all of the benefits of ing that our computation tools were 7E7 in the air, there will be no surpris- each improvement is fully realized. accurate and looking at performance es,” Cogan said. “And that's how it “We've had people ask about taking at the extreme operating conditions, should be. The pilots will know how it the 7E7 engines and using them on which the coding couldn't do. handles and reacts because of the older airplanes,” he said. “But you “With the 7E7, we will take work we are doing in CFD and the wouldn't get the full advantage fewer than 12 wings into the tunnel,” wind tunnels.” because to put them on an older air- Cogan said. “We are still proving our plane you'd have to introduce bleed air again and that would make the engine less effi- cient. Plus this engine is bigger than the engines found on today's airplanes in this class so you'd have higher drag - more ineffi- ciency. “It just wouldn't be the same.” Likewise, just mak- ing today's designs out of composite materials don't allow you to really get the benefit unless you com- pletely redesign the part to take advantage of the material. “That's how we know it's time to do a new airplane and not modify our existing airplanes,” Gillette said. “When the technologies add up to something truly unique it's the right time to go for- ward with a new design and now is the right time with the 7E7. Boeing 7E7 Dreamliner passenger cabin features 18 JETRADER

ers from across the industry, Airbus THE A380: recognised the problems and offered the solution – the A380: a high Inspired by the industry - capacity long-range aircraft that would combine a wealth of innovative created by Airbus by Jacqueline Gorman, Airbus SAS new technology with all that is best about the existing Airbus Family, including commonality, and yet be y the turn of the millennium, Airbus confirmed that it was in agree- largely compatible with existing air- Airbus’ innovative application ment with most of the industry, in pre- port infrastructures. B of leading edge technologies dicting that passenger traffic will As a result, the A380 was had created an enormously flexible increase by more than 5% per year officially launched in 2000 and family of 12 aircraft types, ranging over the next 20 years, creating remains on schedule for entry into from 100 to 380 seats and covering demand for around 1,500 very large service in 2006. Thanks to input from up to 16,600km/ 9,000nm. aircraft (including 300 freighters), across the industry, the A380 will gen- At this point, Airbus could which are expected to make some erate up to 15 per cent lower seat clearly see the competitive advan- 3,400 flights per day out of 209 air- mile costs, 13 per cent less fuel con- tage of extending the benefits its ports. About 70 per cent of these sumption and half the noise of its commonality philosophy to a new, flights are expected to be clustered closest competitor, while carrying 35 very large aircraft. Such an aircraft around 25 key airports and more than per cent more passengers and meet- would further enhance airlines’ half of all very large aircraft are likely ing strict local regulations, such as options in terms of seeking the opti- to be used on flights from just ten air- QC2 for departure at London airports. mum combination of both “hub to ports, eight of which will be in Asia Two years later, the A380F will offer hub” and “point to point” routes, Pacific. 30 per cent more payload, 54 per while also offering an unprecedented However, there was also a cent more volume and 2,600km/ level of flexibility across operating clear need to balance the growing 1,400nm more range than competing fleets and flight and maintenance demand for air travel, with limited aircraft. crews. landing slots at airports, emerging With 139 orders and com- At the same time, Airbus competition and an increasingly sen- mitments from 13 customers before it had also gained some thirty years of sitive environment. This meant that has even made its first flight, Airbus experience in working closely with any such aircraft would have to be remains confident that the A380 is the airlines, leasing companies, suppli- used on a complete range of domes- solution that the aviation industry, ers, airports and regulatory authori- tic, local, regional and intercontinental passengers and the environment ties around the world. Airbus was routes, as one third are expected to have been waiting for. And when the aware that these relationships were a operate on routes of less than 2,000 A380 is revealed in January, it won’t privileged resource and would be km/ 1,100 nm (such as Hong-Kong to just be a celebration for Airbus, it will invaluable in determining how it could Beijing) while another third will be also be a well-earned celebration for best respond to the needs of the used on routes of over 9,000km/ the airlines, suppliers and stakehold- market: including deciding on 4,900nm (such as Paris to Los ers who could see the future of avia- whether – and how – to proceed with Angeles). tion and have helped to make it pos- any future aircraft programmes. In listening to the needs, sible. Drawing on this expertise, ambitions and concerns of stakehold-

With 139 orders and commitments from 13 customers before it has even made its first flight, Airbus remains confident that the A380 is the solution that the aviation indus- try, passengers and the environ- ment have been waiting for. Fall 04 19

lines will continue to mix and match various airplane size and range com- binations to meet changing competi- tive circumstances in city-pair mar- kets, Baseler said. The right mix can significantly aid profitability. For exam- ple, a carrier may fly daily nonstop increased sales in the future-up to routes from Los Angeles to With the 7E7, 3,500 units over the next 20 years-in Washington, D.C., with Monday regions around the world. mornings and Friday evenings repre- ''The large twin-aisle seg- senting peak travel times between Boeing looks to ment is currently occupied by the 777, these two cities. A carrier with a flexi- which offers superior comfort, per- ble, optimal fleet mix may choose to solve the riddle formance and economics to its pri- use its highly efficient Boeing 7E7 on mary competitor, the A340,'' said these peak routes, and switch to its in the middle Randy Baseler, vice president of smaller aircraft during non-peak days Marketing for Boeing Commercial or times. This will help carriers opti- by Debby Arkell, Boeing Company Airplanes. ''The 777 is proving to be mize loads and maximize value. very popular with our customers need- ''A new middle-of-the-mar- ing larger aircraft. Boeing is represent- ket product with greatly improved S OMETIMES THE MIDDLE HAS A BAD REP- ed well in this lucrative market seg- efficiency and capability will enable UTATION: MIDDLE OF THE ROAD, MIDDLE ment with a product that will remain airlines to grow profitably by opening AGED, MIDDLE OF NOWHERE. BUT WHEN the leader for years to come.'' And new markets,'' Baseler said. ''Airlines airplanes the size of the smaller, sin- can take advantage of a comprehen- IT COMES TO THE COMMERCIAL AIRPLANE gle-aisle 737 also are in a strong posi- sive family of Boeing products to per- MARKET, SOMETIMES THE MIDDLE IS tion in the marketplace. fectly match demand on any given EXACTLY WHERE YOU WANT TO BE. ''The Next-Generation 737s flight segment-even as markets entered service in 1997, so they, too, change.'' late 2002, Boeing will be highly effective in the years to Listening to MoM Commercial Airplanes come,'' Baseler said. ''And the Next- The 7E7 is the airplane Boeing's cus- In President and CEO Alan Generation 737 is the best-selling air- tomers have said they prefer. ''Airlines Mulally announced that the company plane ever, delivering 1,247 airplanes have expressed a desire for an air- was shifting its nearer-term product in its first five years.'' plane that optimizes efficiency rather development focus from the speedy, The ideal new airplane to than speed at this time,'' said Mike futuristic-looking Sonic Cruiser in best serve the middle market should Bair, vice president and general man- favor of a highly efficient, environ- be able to operate equally efficiently ager of the 7E7 program for Boeing mentally friendly, e-enabled airplane. whether traveling distances shorter Commercial Airplanes. ''Though the The Boeing 7E7 will meet the needs than 3,000 nautical miles or as far as new airplane will also be as fast as that commercial airline customers 8,500 nautical miles. Efficiencies at today's fastest airplanes, efficiency is worldwide have expressed; and it will shorter ranges are ideally suited to what they really need.'' serve the flying public effectively and Asia-and somewhat in the United The new Boeing 7E7 not grow the middle of the market. But States and Europe-where route density only will complement the existing with a comprehensive family of air- limits the use of single-aisle airplanes. Boeing products -which will continue planes ranging from the 100-seat 717 A new airplane also must meet to be valuable at shorter ranges-it to the 400-plus-seat 747, why would demands where twin-aisle passenger also will provide significant economic Boeing Commercial Airplanes focus appeal and lower-deck cargo require- advantages over its nearest competi- on the middle of the market for its ments are significant. tor, the A330. latest developmental project? If an airplane can be devel- By using new materials and technolo- What is the middle of oped capable of flying distances gy such as advanced composites and the market? equivalent to a 777 while carrying a new engine technology, the 7E7 is The middle of the market, generally 767-level payload, and capable of get- predicted to burn 20 percent less fuel defined, is the segment that airplanes ting passengers to their destinations than the A330 and have an increased such as the 757, 767 and Airbus quicker, it will allow airlines to offer range of approximately 1,500 nautical A300/A310 and A330 currently serve. new nonstop services-profitably. miles. These aircraft can fly ranges of Bridging the gap; ''This will result in lower seat-mile approximately 3,000 to 6,500 nautical maximizing profits costs for our customers, increasing miles and carry passenger loads of Interestingly, Boeing and Airbus fore- their profitability,'' Bair said. approximately 180 to 250 people in casts for the middle of the market are The airplane also will have a both single- and twin-aisle configura- almost identical.''However, Airbus has modest increase in speed, flying at tions. a 100-seat gap in their middle-market speeds around Mach 0.85, Bair said. While the middle-market product line,'' Baseler said. ''This pres- Faster speeds lead to greater frequen- models didn't set any records for ents a terrific opportunity for Boeing.'' cies and increased revenue, but the number of sales in 2002, this seg- As markets expand and fre- biggest difference with the 7E7 will ment presents opportunities for quencies and volumes increase, air- be in its increased efficiencies. Riddle l continued page 22 20 JETRADER

Riddle l continued ''Airlines will love it for its economics, passengers will love it next market upswing, Baseler said. ''Fleet analysis shows for its ability to get them point-to-point in greater comfort, that a significant portion of the current middle-of-the-mar- and the world will love it because it'll be environmentally ket fleet will need replacing by 2008,'' Baseler said. ''This friendly, like no other airplane in the sky,'' Bair said. represents a significant replacement opportunity of aging ''Efficiency, comfort, speed, point-to-point travel-it's all at aircraft in this segment, as over 40 percent will be 20 years the heart of the entire Boeing Commercial Airplanes strate- old or older by this time.'' gy.'' The biggest opportunity is growth. Boeing's new Timing is key airplane family is optimally positioned to be available during Boeing launched the 777 into service relatively recently, in the airline industry's next cyclic upswing. As the 777 did in 1995, and even the oldest of these large in-service aircraft the mid- to late-1990s, Boeing's new middle-of-the-market won't reach potential replacement age until after 2015. The offering, the 7E7, will provide the world's airlines with a sta- 737 family also is strongly positioned with new models fea- teof- the-art tool with which to grow their networks prof- turing the latest technological advances for smaller markets. itably. However, the percentage of the worldwide fleet in the mid- ''Ultimately,'' Baseler said, ''it's the responsibility of dle of the market that's getting older is increasing dramati- the airplane manufacturer to provide the strategic keys to cally for both single- and twin-aisles. airlines to serve the middle of the market.'' The greatest need for replacement will occur in the

Flagship l continued auxiliary power unit will eliminate any noise concerns during turnarounds. the parameters of existing aircraft, avoiding the need for At the gate, the A380’s two decks and wide forward new runways. stairs will allow turnaround times comparable to those of Equally important, the A380 cockpit is midway today’s largest airliner, even if access is only via the main between the two decks, placing pilots near the aircraft’s deck. centre-line for an enhanced view, which when combined And the benefit of introducing such features through with cameras located in the tail fin and on the belly, will facil- a process of collaboration is already becoming apparent, with itate easier taxiing. Likewise, the A380’s ability to taxi with 60 international airports expecting to be ready to accept the only two engines, using two thrust reverses and a low-noise A380 when it enters service.

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www.rms-law.com Fall 04 21 Conference l continued and with very little or no BFE as it will all be Boeing supplied. Robert Nuttall of Rolls Royce reviewed the Trent CALENDAR Program and gave details what Boeing required for the 7E7. He nd described the Trent modifications thus producing the Trent 1000 March 6-8, 2005 ISTAT 22 Annual as a low risk family member to meet 7E7 requirements. Conference; Westin Kierland Resort, On Tuesday, Jason Bitter, Commercial Director of V Bird Airlines of Holland, a low cost carrier with four A320s soon to Scottsdale AZ :: MONDAY Tim Clark, Emirates; Gerard expand to 7 by next spring, carried its 600,000th passenger. Arpey, American Airlines; Ed Greenslet, The Airline Monitor; Steve They force the flag carriers in most - not all - cases to become Ridolfi, Bombardier; Alan Mulally, Boeing; Frank Berardino, GRA; more efficient. Capitalization is a major LCC problem because of Fred Curado, Embraer, + Appraisers Panel with Bill Gardner the 'start up' words but this problem can be managed. [at time TUESDAY Robert Crandall, POGO Air Taxi; John Leahy, Airbus; of printing, V Bird Airlines has filed bankruptcy and has ceased Steve Manley, Universal Asset Management; Doug Parker, America operation] West; Jerry Atkin, Sky West + Cargo Panel with Steve Fortune, Bengt-Olov Näs of SAS reviewed European environ- Intrepid; Operating Lessors Panel with Alan Coe, GATX Air. mental concerns especially noise, CO2 and NOX. He noted how- President’s Gala Dinner Award Recipient, Fred Smith, ever that with expected traffic increases an absolute decline in Federal Express presented by Steve Hazy, ILFC and Herb these pollutants is not possible. Synthetic fuels may become Kelleher, Southwest Airlines. Reserve your spot now at available but when and cost is another question. [email protected]. Andrey Bahkmurov of Sukhoi Civil Aircraft reviewed the development of traffic in Russia. Traffic has been steadily March 21-23, 2005: SpeedNews 19th Annual Aviation Industry increasing with forecast of 4,2% for international and 5,2% Suppliers Conference, The St. Regis, Century City, Los Angeles, CA domestic. Out of almost 300 airlines the top 20 carry 80% of www.speednews.com/Conference/commercialconference.html the traffic but only 3 have western equipment and most of the fleet is more than 15 years old and needs replacing soon. The May 9-11, 2005: SpeedNews Third Annual Aerospace & Russian Regional Jet with 60 - 90 places is Sukhoi's attempt to Defense Suppliers Conference, Park Hyatt, Century City, Los address this problem but finance shortfalls is impeding progress. Angeles CA www.speednews.com/Conference/defense.html Planned introduction is still 2007. Bob James of TES noted that as aircraft age, the engines become an ever-increasing share of the value of the air- that value is retained and maintenance money not wasted. craft. This creates the need for better engine management so Charles Willis 3rd of Willis Lease wants to offer OEM type support package including pooling and spares availability dur- ing shop visits and removals, engine shop visit management and cost control but at a cheaper cost than the OEMs. Marc Verspyck of Air France/KLM stated that secured financing was a most important part of any purchase for them. Operating cost is very important so older aircraft such as A320- 100s might be more cost effective than new A320s for example. The AF/KLM fleet is 39% on Operating Lease, 25% financed and 36% owned. One of the current problems is the imbalance of Euro-US dollar exchange rates, which makes aircraft owner's bal- ance sheets more susceptible to impairment testing than has been historically the case. The appraiser panel discussed values of B737-300s, - 800s, A320-200s A330-200s, A340-300s, B777-200ERB747-400F and E170s. Dick Forsberg and Les Weal thought the values were coming back to base values for single and twin aisle. Phil Seymour agreed and noted that delivery and redelivery conditions offered by Lessors are much less flexible than in the weak market of a year ago. Bryson Monteleone also agreed and sensed that demand for classic B737s was stronger than for new because the profit making possibilities are better than highly priced NG aircraft. Jack Arehart of TIMCO reviewed the MRO market, with current estimates at $35,6Bn expects it to grow to $60Bn in 10 years. Engines are expected to be 36%, airframe 15%, line main- tenance 22% and components 27%. Customers now seek a one- stop shop solution so supplying only one aspect of the industry will restrict growth in the future.

Colin Molloy Helsinki, Finland. 22 JETRADER LETTERS |

Metcalf l continued

true and viable manufacturer duopoly in this aircraft class, which in the long run is beneficial to the industry. The Embraer E-Jets 170/190 families clearly indicate that the Brazilian manufacturer has made the quantum leap into providing a full product line from thirty seat regional jets To the Editor :: John Keitz apparently was not in possession to 100+ seat single aisle narrowbodies. The double bubble of all the facts when he suggested that the American Society fuselage and enhanced passenger accommodations and of Appraisers'(ASA) educational program for aircraft valua- advanced avionics systems combined with the new power- tion specialists was "profit motivated rather than quality plants on the 190 promise to make the game in the lower motivated" (Chairman's Column, Jetrader April-May 2004). end of the marketplace now a three way buying decision. The suggestion that an ASA accreditation involves merely Likely this airplane family and the prevailing economic climate "sign[ing] up for the course [and] pay[ing] the fee…with no will single handedly change many archaic and wrong minded further screening or testing" is simply not accurate. scope clause provisions currently existing at some of the ASA has been setting the standard for professional United States airlines. appraisal education, testing and training for more than 50 Bombardier recognizes the commercial challenges years. Individuals holding ASA accreditations must success- ahead in the 100-seat sector and is currently making noises fully complete a series of four Principles of Valuation cours- that it too will enter into this arena with its proposed “C es, pass intensive four-hour written examinations, submit Series” family of 100-150 seat aircraft. two representative appraisal reports for peer review and The Road to Recovery exhibit proof of ethical behavior. Further, they must demon- So with all of this change on the horizon and virtually the strate understanding of and compliance with the Uniform potential for change creating a powerful driver, which may Standards of Professional Appraisal Practice (USPAP) and rewrite many segments of the ISTAT Membership’s business meet demanding experience requirements (two years of full- model(s), we have much to consider, digest, and then act time appraisal practice for Accredited Members and five upon. Undoubtedly the best place to share the ideas and years for Accredited Senior Appraisers). thoughts emerging post-Farnborough with our commercial Students taking one or more of the series of cours- contemporaries will be at ISTAT’s 11th Annual European es developed jointly by the American Society of Appraisers Conference, one of the fastest growing and most content laden conferences on the circuit. and Embry-Riddle Aeronautical University will further their valuation educations and make progress toward an Embry- Riddle degree, but they will still have to meet every one of ASA's stringent requirements to achieve the association's coveted designation. Appraisal organizations need to work together to raise the bar for appraisal education and to help the public Purdue l continued find and employ only tested, trained and accredited profes- sional appraisers. Negative and uninformed comments from within the appraisal community only serve to make that goal more difficult to achieve. Ted Baker As a result of the educational impact observed with these Executive Vice President, American Society of Appraisers activities, the university formally recognizes the educational value associated with these efforts. For faculty involved, these efforts are now part of their recognized teaching and research load within the department. This recognition is extremely important and truly embraces the mission and goals for a technology program within a land grant universi- ty. Finally, the industrial stakeholders in these research activities often find themselves examining their own opera- Chairman l continued tion from a new and valuable perspective. Through this fake transaction data at higher prices. engagement process between industry and academia, learn- Finally, there is one other risk. We must trust Bill Bath ing and discovery occur, and all parties benefit from the to keep everything confidential since he would be the only one experience. privy to sources of some of the information. That is a reason- Solutions to industry problems, development of able risk to take. He is retired from active appraisal work and is research and discovery skills, and, most importantly, the involved only in administering the program. I can vouch for educational opportunities these efforts afford our students him as a trustworthy gentleman. We only have to worry that are important goals for technology education. It is a symbi- someone captures him, takes him to Abu Graib prison and tor- otic relationship, and one that requires constant fostering tures him to reveal the data sources. and continued commitment. Let us know what you think about this program. Use Nothing is free, and this includes research efforts the Appraisers Forum, especially if you have further ideas that supported by the university, but industry has found that the could help insure the confidentially of the participants. return on investment is phenomenal in many ways. Fall 04 23

PEOPLE | going PLACES

if really necessary. Jimmy also has a couple of cell FAVORITE PLACES phones that he will lend to you during your stay at his commercial aviation business of ours does the hotel should you feel the need for constant require a significant amount of travel. electronic connectivity. T Worldwide, AVMARK has three full-staffed What you do get is a clean, well-decorat- offices and a few other part time operations to pro- ed and neat room with shower at a reasonable vide worldwide coverage for our clients. This year price: a perfect place to sleep after a day at work has taken me to Bremen, Brussels, Toulouse, and and an evening with clients or at the theater, and a most frequently to London in the European theater. nice place to rest up for the next days work. But bring cash, as the Winchester does not take credit Domestic travel has been even more cards. extensive with trips to San Diego, Fort Lauderdale, One of my favorite restaurants is located Seattle, Los Angeles, and most frequently visited just around the corner from the Winchester on Bedford, Massachusetts. So far this year I’ve taken Warwick Way. The Mirimar is a small family operat- 11 trips, but even at that, I don’t consider my self a ed, neighborhood place featuring Turkish cuisine. “road warrior”, just an experienced traveler. The menu provides a nice selection of Turkish spe- One might ask why an international com- cialties one of which is sure to appeal to any taste. mercial aviation consultancy would have Bedford, I really like the medley of appetizers that provides Massachusetts as the most frequently traveled-to small portions of six different starters. Of course spot for the year. Quite simply, we do work with London does not lack for larger and more formal the US Air Force Electronic Systems Center at dining establishments. Hanscom Air Force Base, which requires constant My favorite area for finding good restau- attention. Bremen is a wonderful city, especially in rants is Covent Garden. There is a pub, Crown and the spring. It is somewhat slow-paced, but is never Anchor, located at the intersection of Neal and lacking in things to do. The Saturday market along Shelton Streets that serves a great a bowl of chili, the River Weser is vibrant and uplifting: just a lot of flavorful, but not Texas hot; not normally what one fun. Brussels is also on my list of places to go when might look for, but a nice place to know. On another corner just a block off the Covent Garden the opportunity arises. Arguably, there are more by Thomas E. Burke good restaurants in Brussels than anywhere else in Square is Le Jardin featuring as excellent French the world. And of course the “City of Lights,” menu, served by wait staff in black tie on linen cov- Paris, is unsurpassed. ered tables with candlelight at each. I personally While I do travel to Bedford most fre- enjoy the steak-au-poive; and there is a good wine quently, and while other cities have many attrac- selection. tions, I must admit it is London that I prefer. So, it appears that I like to travel to the London has some special characteristics, big city and when there to frequent the places rem- first of which is the world-renowned theater. I try iniscent of small towns. Maybe confusion as to to take in at least one stage show on every trip. large city, small city, or current time zone is what a Being a major metropolitan area, there is no lack of lifetime of travel will do to you. hotel choices, everything from rooms with bath down the hall to full-scale opulence. In conversa- Tom Burke is Director of AVMARK, Inc. Founded in tions with colleagues, I find that most prefer the full 1962, AVMARK provides worldwide aviation mar- service hotels with Internet connectivity, business keting and management services. centers, long-distance phone access in room, and the like. Personally, I prefer to do my work during AVMARK, Inc. the day at the AVMARK office and leave the work 415 Church Street, NE, Suite 203 there. Hence, I don’t need the business connectivi- Vienna VA 22180 ty at my hotel. This being the case, I have found a lovely bed & breakfast just a five-minute walk from T 703 963-7028 Victoria Station. F 703 451-0660 The Winchester Hotel located at 7 E TomEBurke @aol.com www.avmarkinc.com Belgrave Rd, SW1 1RB, is owned and operated by Jimmy McGoldrick, as Irish an Irishman as can be found outside of Ireland. Jimmy takes great pride INTRODUCING new feature in the cleanliness and neatness of his premises, and in his breakfasts, which he personally cooks to each If you would like to share your travel experiences in guest’s order every morning. (Tel: 0171-828-2972) “going PLACES,” please contact us. Your format - There are no telephones in the rooms at long or short. Photographs of people and places the Winchester, no Internet connections, and no and the winner is LONDON encouraged. Questions welcomed and answered business center although you may use the hotel fax promptly. Publisher [email protected] TURBULENT TIMES 56 professionals working worldwide to help steer you clear

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www.sage-popovich.com repossessions and lease returns [email protected] E valuations inspections - tech support litigation - legal support maintenance oversight inventory management - valuations aircraft management aircraft delivery