Airbus Says There Is Significant Airline Pressure for An A350 Freighter

Last month, it was confirmed that Airbus had been in talks with many airlines about a freighter version…

Airbus Says There Is Significant Airline Pressure for An A350 Freighter

Last month, it was confirmed that Airbus had been in talks with many airlines about a freighter version of the Airbus A350. The European manufacturer is keen to disrupt Boeing’s stronghold on the cargo scene. Now, it looks like airlines are also keen to diversify their options. Airbus’ management has shared further details of the urgency for an A350F.

The Airbus A350 was increasingly used for shipping operations following the transformation across the aviation industry last year – could we see an evolution of this trend? Photo: Airbus

The demand is growing

During the MAKS-2021 airshow in Moscow, Russia, which Simple Flying attended this week, Airbus EVP, Head of Region & Sales Europe Wouter Van Wersch spoke about pressure from carriers to introduce a new freighter option. He highlighted that following the rise of the pandemic, airlines increasingly filled in the bellies of their aircraft with goods and supplies amid the growing demand for cargo and the downturn in passenger activity.

As the global health crisis emerged, commercial airlines has to suspend passenger operations and started to ramp up cargo-only A350 flights. Moreover, the carriers also began to convert some of their units of the type when it became evident that the challenging situation wasn’t going to change anytime soon.

Airbus even revealed ways to help operators use their A350s for cargo operations. Interestingly, conversions could only take as quick as two days.

Airbus A350 Conversion
With some freighter services handling the transportation of crucial supplies around the world, it is vital that airlines can adapt their operations as quickly as possible to meet the needs of global societies. Photo: Airbus

An ever-changing situation

However, passenger demand is now picking up again as many countries relax their restrictions that had absolutely rocked the commercial aviation industry for over a year. Thus, it may not be sustainable to keep filling up A350 bellies following the return of travelers. Ultimately, carriers need to ensure that there is enough capacity.

Ethiopian Airlines
Ethiopian Airlines is one of several airlines that scaled up its cargo services with the help of the Airbus A350. Photo: Ethiopian Airlines

As a result, carriers are urging Airbus to come up with fresh solutions to meet the new requirements in the industry. Notably, a freighter A350 could be on the cards.

“There is a lot of pressure from customers. They say, “the fantastic aircraft, the A350 – why don’t you launch a freighter version of it?’ So, it is currently being studied by the company.” – Wouter Van Wersch – MAKS-2021.

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Egyptian Cargo A330
Airbus does have existing options for widebody cargo solutions, but it’s considering to expand its provisions. Photo: Airbus

Positive signals across the board

This stance is echoed throughout the company. This week, another Airbus leader, COO Christian Scherer said in a report by FlightGlobal, that his airline is now reacting to the market forces. He adds that there is some wind in the sails towards “seeing the emergence of an A350 freighter.”

A notably potential customer of the A350 freighter is Qatar Airways. Bloomberg notes that this week, the flag carrier of Qatar’s CEO, Akbar Al Baker, shared that his company could place a large order for the plane. Alternatively, the firm could go for Boeing’s 777F by this fall.

Korean Air Cargo Boeing 777F Getty
The Boeing was launched in May 2005 amid a significant demand from airlines across the globe for efficient and high-capacity long-haul cargo builds. Photo: Getty Images

So, with key clients such as Qatar Airways weighing their options, Airbus is further incentivized to speed up the process of studying the freighter. Nonetheless, with such talk happening, and plenty of benefits to be had across the board it’s highly unlikely that the opportunity for Airbus to introduce such an aircraft would be given up on.

Manufacturers are often more cryptic when it comes to the prospects of upcoming aircraft before anything is officially announcement. However, with prominent customers outwardly speaking about their desire to take on new aircraft, Airbus may be sharing details of its ambitions to let the industry know that something is in the works. This process would help give the company some time to finalize plans and allow airlines to not make any rash decisions.

Airbus A350-1000
There is an abundance of space on board the Airbus A350, so it would be a great place to store the growing supplies of cargo in today’s climate. Photo: Airbus

The lineup

Airbus does have several options for airlines in its cargo portfolio. When it comes to modern selections, the company has the A321P2F, A330-200F, and A330P2F on offer in regard to cargo versions of its passenger builds. Additionally, the firm has the distinct BelugaST and BelugaXL for larger materials. However, Airbus admits that the A330-200F is the only new-generation cargo plane presently on offer that meets requirements “in the mid-size, long-haul segment.”

Airbus’ Beluga aircraft can be spotted for their unique livery that complement the design of the cargo specialist. Photo: Getty Images

Over 430 A350 planes are currently in action with more than 30 operators. The type has been praised for its long-haul economics since its introduction with Qatar Airways in 2015. The aircraft is quickly becoming a favorite industry, often being dubbed as a new flagship in global fleets.

Qatar Airways A350-1000
Qatar Airways’ Airbus A350 aircraft are playing a more prominent role across the continents now that the airline’s A380s are grounded following the impact of the pandemic. Photo: Getty Images

Therefore, it’s only natural that these airlines want a cargo version of the plane to have consistency and familiarity across their operations. The trusted powerhouse has already proven itself in the shipping field without any actual official freighter version. Moreover, the shipping industry is going from strength to strength and is likely to continue its growth throughout the decade. So, there is plenty of potential for the Airbus A350F to do wonders in the long term across the cargo scene.

Altogether, what are your thoughts about the potential of a freighter Airbus A350? Is this something that you think would suit the current climate across the aviation industry? Let us know what you think of the overall prospects of such an aircraft in the comment section.

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American Airlines Has Started Paying Down Its Debt

With the crisis subsiding and American Airlines steaming toward profitability, the carrier has started to repair its balance…

American Airlines Has Started Paying Down Its Debt

With the crisis subsiding and American Airlines steaming toward profitability, the carrier has started to repair its balance sheet. One of the big endeavors the airline is taking over the next few years is paying down its debt. Paying off a $950 million term loan just last week, the airline is making plans to pay down approximately $15 billion in debt by the end of 2025.

American Airlines is making strides in paying down its debt. Photo: Vincenzo Pace | Simple Flying

American Airlines has begun to pay down its debt

On Thursday, American Airlines reported its second-quarter 2021 financial results. Reporting a very small net profit, the carrier is also sitting on an enhanced liquidity position of over $21 billion. Expecting to continue generating cash on its own, the airline has looked at ways to use that cash efficiently and smartly.

On Thursday, the airline announced a prepayment of a $950 million spare parts term loan. This was scheduled to mature in April 2023, but American found it beneficial to pay it off ahead of time and start deleveraging its balance sheet.

The $950 million prepayment comes on top of the $985 million of debt amortization and prepayments made during the second quarter.

AA B787
American Airlines prepaid a $950 million loan. Photo: Vincenzo Pace | Simple Flying

Further plans to free up assets and paying down more debt

American Airlines has plans to free up 20 Boeing 777 aircraft in the third quarter. As Chief Financial Officer Derek Kerr stated on the airline’s second-quarter earnings call:

“During the third quarter, we will also free up 20 Boeing 777 aircraft that will be released out of the 2013-2 and 2013-1 EETC transactions, further improving our unencumbered asset base. The deleveraging of American’s balance sheet has begun, and we are committed to significant, steady and continuous debt reduction over the years ahead.”

Enhanced equipment trust certificates (EETCs) are a way for airlines to finance fleet acquisitions. The aircraft serve as collateral, and it is just one way carriers can finance new fleet acquisitions or use the cash for other pressing financial needs.

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American Airlines is looking to free up more aircraft assets. Photo: Vincenzo Pace | Simple Flying

Heading into the crisis, there was a lot of speculation about what would happen concerning American Airlines’ debt position. The carrier entered 2020 with total long-term debt of over $23 billion or under $21 billion net of current maturities.

At the end of 2020, American Airlines had total long-term debt in the amount of $32.8 billion. It did make a few more debt-related transactions, including a large series of financing backed by the AAdvantage loyalty program to the tune of $10 billion in 2021. This pushed American’s total long-term debt as of June 30th to $39.9 billion. Note that this number includes current maturities and the spare parts term loan that was not paid down until after the second quarter ended. Factoring that, American has around $36 billion worth of long-term debt.

The plan is to continue paying down the debt. Mr. Kerr further discussed the carrier’s plan to pay down the debt:

“We now forecast reducing our debt levels by more than $15 billion by the end of 2025 by using excess cash and free cash flow to pay down prepayable debt, even though most of it is efficiently priced and by not adding to our debt levels by potentially using cash instead of debt for some future aircraft deliveries.”

AA 737 MAX
AA took on some more debt in the last decade to finance new aircraft orders. Photo: Vincenzo Pace | Simple Flying

Previously, American Airlines had planned to pay down $8 to $10 billion worth of debt by the end of 2025. The plan to accelerate the reduction of debt came as a result of American’s need to take on more debt during the crisis, but it still wants to deleverage the balance sheet as much as possible.

Why paying down debt is important

American Airlines spent much of the last decade investing in its future. A large portion of the carrier’s debt was to help pay for new and fuel-efficient aircraft to accelerate the modernization of the fleet. Taking on debt to pay for the aircraft helps reduce the carrier’s cash commitments in the near term, giving more flexibility to the carrier and making it easier to take on new jets.

American Airlines 737-800
The paying down of debt will help free up more of American’s assets. Photo: Getty Images

Paying down debt has a lot of benefits. First and foremost, with more cash available on hand that it will not need to pay off interest or meet loan payment obligations, it can turn to own more aircraft outright, whether it be by paying cash for new aircraft deliveries or buying planes off lease. This increases its available pool of unencumbered assets that it can use later on, say during another crisis, to raise much-needed liquidity.

A deleveraged balance sheet will also help American Airlines improve its credit ratings and financial standing. So, when it does decide to order more jets, or if it needs to make investments in its fleet, or modernize its infrastructure, or whatever other large cash needs it may have, it can be in a better financial position to be able to raise debt to finance those kinds of investments.

Are you glad to see American Airlines start to pay down its debt again? Let us know in the comments!

Source : Simple Flying More   

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