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Fast 5: AerFin Drives Up Embraer Focus

Chris Hooley, director – airframe division at the end-of-life specialist, talks to James Pozzi about how it is upping its focus on Embraer aircraft through its work on Saudi Arabian Airlines' former fleet of E170s.

What have been some of AerFin’s key activities in 2018 so far?

We’ve been very active in the aircraft acquisition market for dismantling. Our real focus this year has been centered on the Embraer aircraft platform. In 2017 we acquired 15 E170s from Saudi Arabian Airlines and we’ve since made great strides in that project. The first part of 2018 has focused on getting as much of the equipment and assets out of Jeddah as possible. We currently have 10 aircraft out of there with five aircraft remaining which will likely be dismantled in-country. To date, two have been dismantled – one was then sold into Russia and the other was used to support our parts pooling programs.

When is the Saudi Arabian Airlines work likely to be completed?

Work is still ongoing to get all of the spares and tooling out of Saudi Arabia, but at present, around 50% of this has been taken out. All work will likely be finished around November or December time this year.

What is attractive about Embraer aircraft to AerFin?

There’s a couple of things. AerFin has access to capital through our shareholders, who are looking to deploy upwards of between $300 million to $350 million annually through their two vehicles: the leasing business and end-of-life programs. Looking for single aircraft acquisitions is often difficult – it is often the case that one entity is competing with 10 to 20 others to buy the aircraft. For fleet purchases like the 15 Embraer aircraft bought from Saudi Arabian Airlines, it’s a big number but with a narrow field of competitors. There’s only really a few parties that can actually provide that sort of capital. Also, the Embraer market isn’t fragmented to the same extent as the Airbus and Boeing ones. We saw Embraer as an opportunity to develop an aftermarket, and both work and compete with the likes of Embraer themselves.

What are some of your key strategies around Embraer aircraft?

We’re keen to develop the pool parts market around Europe and Africa. The U.S. is another big target for us, as it has the highest concentration of E-Jets. It’s a different market over there – they generally don’t adopt the pool concept as they have such scale that it can be done in house. It’s likely that AerFin will look to potentially partner with somebody to develop in the U.S. market and we’ll be looking to place inventory into the U.S. soon just to tap into the market.

Aside from Embraer programs, what are some of AerFin’s other key investment priorities?

We’re looking to keep the pipeline going on airframes such as the Airbus A320, having already taken a few of these this year, along with growing the Boeing 737NG asset base. As we develop the AerFin business from an asset trading business to more of a service delivery one, we’re looking to invest in IT and areas such as inventory optimization systems to help our decision making processes. There is also potential to develop the engine disassembly business in Caerphilly. There is a decision to be made on whether we develop capabilities for the CF34 engine, which is the power unit on Embraer aircraft. The 15 aircraft from Saudi Arabian Airlines agreement came with 10 spare CF34 engines as part of the package deal. A number of these have been sold to GE Aviation already. This decision process will ultimately be driven by the lease market. 12 months ago, this segment was pretty soft, but now, there’s a lot of leasing opportunities for the engines. It really depends whether they go out as whole assets, or whether there’s a market out there to tear them down and sell the engine materials.

TAGS: Airframe
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