Virgin Blue orders more jets...but why???

[Cabbage]

From the DJ Website:
VIRGIN BLUE CONCLUDES SALE-AND-LEASEBACK DEAL WITH BOC AVIATION

Monday 2 March, 2009: Virgin Blue has closed a sale-and-leaseback deal with BOC Aviation for one late-2008 vintage aircraft and three new Boeing 737-800 aircraft. The aircraft will be leased for an average lease term of 10 years, with delivery of the three new aircraft scheduled for the fourth quarter of this year.
Virgin Blue Chief Executive, Brett Godfrey, said: “The financing of these aircraft amidst the challenging economic environment is an affirmation of Virgin Blue’s strong reputation in the market. We look forward to a long-lasting business relationship with BOC Aviation.”
Virgin Blue, Australia’s second largest airline with a 32% market share, will use the aircraft for domestic services and international flying in the Pacific region.
Steven Townend, Chief Commercial Officer and Deputy Managing Director of BOC Aviation, said the Company is pleased to increase its presence in Australasia with this transaction.
“Virgin Blue is an established name in the Australian market for business and leisure travel,” he said. “We continue to deliver on our expansion plans and are happy that the airline can partner us as we grow our fleet.”
BOC Aviation is the leading Asia-based aircraft leasing company with a portfolio of 104 modern aircraft operated by airlines worldwide. In addition, the company has 70 aircraft on firm order for delivery through to 2013. BOC Aviation has one of the youngest fleets in the industry with an average aircraft age of less than four years.
BOC Aviation is 100% owned by Bank of China, the third largest bank in the world*.


Gotta wonder whats going on at DJ Headquaters....one minute they're laying off staff, grounding planes and battening down the hatches for a global recession, next minute they're ordering another three new birds.

 

[Mal]

I don't think it's particularly ordering new aircraft, rather rejigging how they finance/purchase/lease planes they have on order or planes they currently have.

 

[Platy]

DJ gonna have a problem soon - their fleet is starting to age - maybe they need to start turning them airframes over :shock:

That's assuming they actually kept their maintenance records up to date (which they weren't at least in the early days) :shock:

You can get away with the latter (apparently with the toothless impotent joke which is CASA) ONLY if you have a young fleet...

 

[Evan]

Thats more a case of not having the cash on hand to pay and take a loan so sell and re-lease does the trick.
Yes, DJ probably has a few older frames now but i would expect 20 year life or not a lot less, unless they can sell them at good rates. Not this year or next but in future you never know, the real issue is why replace 738's with new 738's.... little point until a new version is out and the capital cost is less than the fuel costs and maintiance.

 

[Nigelinoz]

DJ gonna have a problem soon - their fleet is starting to age - maybe they need to start turning them airframes over :shock:

That's assuming they actually kept their maintenance records up to date (which they weren't at least in the early days) :shock:

You can get away with the latter (apparently with the toothless impotent joke which is CASA) ONLY if you have a young fleet...

I thought that Virgin Blue had a relatively new fleet,I remember seeing some figures a year or so ago which ,from memory,gave them as having an average age of less than 5 years for the majority of their fleet.
I would think the average age of the Qantas fleet would be a fair bit older than that-but then Qantas has a lot more planes than DJ.

 

[oz_mark]

DJ gonna have a problem soon - their fleet is starting to age - maybe they need to start turning them airframes over :shock:

That's assuming they actually kept their maintenance records up to date (which they weren't at least in the early days) :shock:

You can get away with the latter (apparently with the toothless impotent joke which is CASA) ONLY if you have a young fleet...

Properly licensed engineers helps too. Oh oops, that's another airline

Thats more a case of not having the cash on hand to pay and take a loan so sell and re-lease does the trick.
Yes, DJ probably has a few older frames now but i would expect 20 year life or not a lot less, unless they can sell them at good rates. Not this year or next but in future you never know, the real issue is why replace 738's with new 738's.... little point until a new version is out and the capital cost is less than the fuel costs and maintiance.

Don't they have a few -700's still? Maybe they will replace those?

 

[straitman]

Properly licensed engineers helps too. Oh oops, that's another airline



Don't they have a few -700's still? Maybe they will replace those?

oz_mark,

The 737-700 is the same vintage as the 737-800 with the first flights only 5 months apart, so not really a good reason to replace them. I'm not sure about the DJ individual airframes though.

The -700 is an upgrade of the -300 whilst the -800 replaced the -400. The real difference to the public is the -300 & -700 have the shorter fuselage whilst the -400 & -800 have the extended fuselage.

 

[oz_mark]

oz_mark,

The 737-700 is the same vintage as the 737-800 with the first flights only 5 months apart, so not really a good reason to replace them. I'm not sure about the DJ individual airframes though.

The -700 is an upgrade of the -300 whilst the -800 replaced the -400. The real difference to the public is the -300 & -700 have the shorter fuselage whilst the -400 & -800 have the extended fuselage.

I went for a hunt on info from when these were initially ordered, and from 2006 we get:

Deliveries of these airplanes to the Brisbane, Queensland, Australia-based low-cost carrier begin in 2008.

The order is valued at US$634.5 million at average list prices. Virgin Blue operates an all-Boeing fleet of 52 Next-Generation 737s and will use the new aircraft to replace leased planes in its fleet.

So the plan was to replace some leased planes. Perhaps that is still the case that some of the older leased planes will be exitting the fleet.

 

[straitman]

So the plan was to replace some leased planes. Perhaps that is still the case that some of the older leased planes will be exitting the fleet.

This sounds like the likely answer.

 

[UP4014]

When you buy a plane you pay a non refundable deposit, this is spend on materials and the construction of the plane, which as we know has a long lead time.

As it's unlikely they would get there deposit back which could be big bucks like $40M, makes sense to keep going and drop off the old aircraft unless they are really broke and go begging for some of their deposit back.

But somewhere the Virgin network could probably use them.

 

[SeaWolf]

DJ gonna have a problem soon - their fleet is starting to age - maybe they need to start turning them airframes over :shock:

That's assuming they actually kept their maintenance records up to date (which they weren't at least in the early days) :shock:

QF's fleet age is 9.3 years at Sept 2008. DJ's is 5.7 years.

This is the first time I've heard suggestions that DJ has had any maintenance records issues, could you provide a reference for that information?

 

[straitman]

When you buy a plane you pay a non refundable deposit, this is spend on materials and the construction of the plane, which as we know has a long lead time.

As it's unlikely they would get there deposit back which could be big bucks like $40M, makes sense to keep going and drop off the old aircraft unless they are really broke and go beging for some of their deposit back.

But somewhere the Virgin network coudld probably use them.

Similar to buying a car there are many ways to get around the non refundable deposit. People buy options which they can then sell or they can get out of the deposit issue when the a/c is late ie A380 & B787.

 

[oz_mark]

QF's fleet age is 9.3 years at Sept 2008. DJ's is 5.7 years.

This is the first time I've heard suggestions that DJ has had any maintenance records issues, could you provide a reference for that information?

There is a reason they handed back their ETOPS certification in the early days (which they subsequently attained again).

 

[Nigelinoz]

QF's fleet age is 9.3 years at Sept 2008. DJ's is 5.7 years.

This is the first time I've heard suggestions that DJ has had any maintenance records issues, could you provide a reference for that information?

Link here:
Virgin denies airline maintenance practices unsafe. 10/03/2004. ABC News Online

 

[UP4014]

Similar to buying a car there are many ways to get around the non refundable deposit. People buy options which they can then sell or they can get out of the deposit issue when the a/c is late ie A380 & B787.

Of course, but if the manufacturer can't sell them to someone else, hard in the current market, then they may have beaten the final price down as well to their advantage.

 

[Nigelinoz]

But somewhere the Virgin network could probably use them.

Yes but remember that there is realy no "Virgin network' as such since the airlines have different shareholders and different management and also very different markets,for instance Virgin Atlantic would have no use for a 737.

 

[NM]

QF's fleet age is 9.3 years at Sept 2008. DJ's is 5.7 years.

Would be interesting to see what affect the departure of the 743s and arrival of A380s has made on the QF number.

 

[SeaWolf]

Would be interesting to see what affect the departure of the 743s and arrival of A380s has made on the QF number.

Not much I think, it's only the changeover of 3 aircraft, out of a fleet of ~140.

Thanks NIGELINOZ for that link, very interesting.

 

[markis10]

Would be interesting to see what affect the departure of the 743s and arrival of A380s has made on the QF number.

Airfleets would seem to indicate its actually blown out with the average now 10.9 years versus DJ at 4.2 for current fleet including 3 x A380!

http://www.airfleets.net/ageflotte/Qantas.htm

http://www.airfleets.net/ageflotte/Virgin%20Blue%20Airlines.htm

Note the figure includes one Dash 8 owned by them versus the subs!

 

[NM]

Not much I think, it's only the changeover of 3 aircraft, out of a fleet of ~140.

Thanks NIGELINOZ for that link, very interesting.

But it was removal of the oldest and introduction of brand new. Should reduce the average to below 9. But of course the other 137 aircraft have all aged by 6 months in that time .

It might have been quite a different number if the 787s had been delivered per the original schedule at the time they were ordered, even though destined for JQ they would have allowed a few old 767s to drop off the end of the QF register.

QF's long existing strategy to purchase new and hold for a long time means their average fleet age has always been a lot higher than airlines such as SQ that have a different fleet management strategy (buy new and turn over before major maintenance is due).

And DJ have been adding E-jets recently and after their aggressive expansion over the last 5 years which has resulted in what is really quite a young fleet for an airline.