Ishka View Extra: Transaction Economics report

This is the 100th in a series of supplements to Ishka’s ‘Transaction Economics’ platform, delivering ‘the Ishka View’ on events that
have a bearing on aircraft values and lease rates, and the market dynamics that matter in today’s aviation environment. This report
examines how aircraft types are faring through current events and the evolving network and fleet plans; which types are in favour; which are
‘on watch’; and which are most exposed or impacted by the evolving aircraft environment.

IMPACT INTELLIGENCE 8th – 19th MAY 2023

This is the 100th Edition of the Ishka View Extra: Transaction Economics (TE Extra). Little did we appreciate in those uncertain days when
the TE Extra was launched in March/April 2020, that the aviation market would require the kind of re-boot that has happened since mid-2021.
The recovery has been brisk - today we report on mega-orders, fleet renewals and new aircraft types, in contrast to the almost complete
shutdown of the commercial airways back in 2020. The market still bears those scars, but as traffic returns to its pre-pandemic levels, so do
the opportunities (and the risks).

SHOW TIME…Ryanair and Tata/Air India are already launched with their mega-orders. Turkish, Delta, and Air Canada are not far behind
with their significant orders either. You would think there’s an Air Show coming in a month or so…

AIRCRAFT VALUES & RENTALS: 15-YEAR-OLD AIRCRAFT

As part of our regular series, we provide a view on market values and lease rates in which we compare our view today, with our view at the
start of 2020 and at the start of 2022. This week we are looking at 15-year-old aircraft, comparing values and lease rates at the start of 2020,
2022, and as of today, with the percentage change in value/lease rate to date this year. The values and lease rates assume aircraft are off lease
and available at each point in time.

In this mid to late-life sector of the aircraft fleet inventory, the value and attainable lease rate of any individual aircraft is governed by its
maintenance condition, its freighter conversion potential, and the ability of the aircraft to remain or return to service economically (e.g.,
reconfiguration costs and downtime). The summer season is kicking in and any ‘low season’ flexibility in rentals will be pushed towards
full fixed rentals. Stored aircraft numbers are still high and mask the real availability of ‘usable’ inventory. Demand for the more desirable
‘ready to go’ assets has taken lease rates higher, with values following suit, although still not quite back to pre-pandemic levels. The capacity
overhang is being absorbed, aided by freighter conversions, the permanent retirement of older and less suitable aircraft, and by a return to
service of assets which provide lease rate stability (for older) or improvements (for younger) aircraft.

We hope these numbers are not the end of a discussion, but the start of one. We look forward to our readership keeping us informed – if you
are paying more (or less) on a new deal, please let us know! These numbers reflect unencumbered assets; aircraft placed on decent leases
with good credits can generate a different set of results.

NOTE: The Values behind the above data reflect lease-free aircraft and reflect what might be achievable based on prevailing market
conditions. ISTAT definitions apply. Values reflect Basic Configuration aircraft in 'half-life' condition. In reality many aircraft are likely to be
of a higher than basic specification. This data is for comparative and trend observation purposes. For more detailed appraisal and valuation
information please contact the Ishka team.

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THE ISHKA INDICATORS

Ryanair has confirmed its long-anticipated order for 150 B737 MAX 10 aircraft with another 150 options, for delivery between 2027 and
2033. The order is subject to shareholder approval at the company’s AGM on September 14th. With 228 seats, the aircraft will provide 21%
more capacity than the B737-800s that they will in part replace. Ryanair notes there will be a two year ‘gap’ between delivery of their last
B737 MAX 8 200 in FY25 and the first MAX 10 in FY27. The Ryanair Group indicates that “capex will be substantially funded from internal
cashflows, although the Group will remain opportunistic in its fleet financing strategy”.

While Go First’s lessors were looking to repossess at least 36 aircraft, the Tata Group and IndiGo were said to be positioning with lessors
to take over some of the assets, should they be released. The recovery in traffic and the delays in new production / deliveries have created a
shortage of aircraft suitable for operations within India. Re-leasing the aircraft in India could be a preferred option for some lessors, given the
challenges previously faced with repossessions in India in the past.

For expert, independent aircraft values and lease rates data to make
informed decisions about buying and managing aircraft assets, book BOOK DEMO
your Transaction Economics demo today.

TRANSACTIONS UPDATE…
Singapore Airlines (SIA) Group has amended its Boeing backlog by cancelling orders for eight B737 MAX 8 aircraft while swapping out
three B787-9s in exchange for three larger B787-10s. Spirit Airlines has agreed a sale and leaseback transaction with ORIX Aviation for
A320neos. The first was delivered in April. Air Algerie announced the acquisition of eight new Boeing 737 MAX 9 aircraft. The first delivery
is scheduled for 2027, with the rest unspecified. The carrier will also acquire five A330-900 and two A350-1000 aircraft. Additionally, ten
aircraft will be leased for operations over the next five years to meet demand until the ordered aircraft are delivered. Aergo Capital Asset
Management has re-marketed and delivered two A330-300 on lease to Air Canada on behalf of Meritz Asset Management & Mplus Asset
Management and DAOL Investment & Securities. The aircraft were delivered in March and May. Qantas has announced its plans to establish
a wet lease agreement with Finnair. The agreement entails Finnair's A330 aircraft initially operating select Qantas flights between Sydney and
Singapore starting from late October 2023, and all flights between Sydney and Bangkok commencing from late March 2024. Starting from
late 2025, two Finnair A330s will be dry leased, operated by Qantas pilots and cabin crew for up to three years.

Eviation has signed a Letter of Intent with MONTE for up to 30 all-electric Alice commuter aircraft. MONTE will provide financing and
leasing solutions for the aircraft and a charging infrastructure to regional operators in their global customer base. Eviation CEO Gregory Davis
sees this as a significant endorsement for the Alice, with MONTE helping bring sustainable aviation worldwide.

SPOOLING UP…
Philippine Airlines has signed a Memorandum of Understanding to order nine Airbus A350-1000s for delivery from Q4 2025 and into 2027
to satisfy the needs of its Ultra Long Haul Fleet project, which will provide non-stop services from Manila to North America, including East
Coast US and Canada. Having taken its first B737 MAX in April 2023, Qatar Airways’ second MAX has arrived in Doha and up to seven
more MAX have been earmarked for the airline, with a number due for delivery before the end of July 2023. At least seven are believed to be
existing aircraft originally destined for Russia’s S7 Airlines.

Embraer and lessor Azorra have confirmed an eight aircraft deal with Royal Jordanian Airlines with deliveries scheduled to begin in Q4
2023. The deal covers four E190-E2 and four E195-E2s with the four E190-E2s and two of the E195-E2 coming from Azorra’s existing
backlog and the other two E195-E2s being firm orders directly with Embraer. The airline has been operating Embraer aircraft for 15 years,
having begun with a single E175 E1. The E195-E2 will seat 12 in business and 108 in economy while the smaller E190-E2 will have 12
business seats and 80 in economy.

China Airlines is to exercise its option to purchase eight B787-9s for delivery from 2026 onwards. The airline had previously agreed to
acquire 16 B787-9s with GEnx engines back in August 2022 with deliveries to commence in 2025. The new order for eight more B787s brings
its total B787 fleet to 24 aircraft - all to be delivered by 2028. The orders may also be converted to the higher capacity B787-10 model if
required. Aegean Airlines announced that 60% of its fleet in 2023 will consist of new or ‘more efficiently contracted’ aircraft compared to
the pre-pandemic period. The airline is set to receive nine A320neo family aircraft in 2023, seven in 2024, seven in 2025, and four in 2026.
As a result, the number of neo aircraft in the fleet will rise from 19 in 2022 to 28 in 2023, and further to 46 in 2026.

easyJet's latest half year report (covering October 2022 - March 2023) shows the fleet continues to grow despite the delivery issues with

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Airbus aircraft. The airline took delivery of five new A320neo aircraft, including accelerating two FY25 scheduled orders into FY23 and
acquired three mid-life A320 leased aircraft. One former easyJet A319 was also re-leased while three aircraft held on a zero-rental agreement
in 2022 were returned to service. Two older A319 and 2 A320 leased aircraft exited the fleet at the end of their lease-term. easyJet has an
agreed order book consisting of 163 firm orders, 130 A320neo and 33 A321neo) including the aircraft order approved in 2022 securing 56
deliveries with the conversion of 18 A320neo into A321neo for delivery between FY26 and FY29. In addition to the accelerated delivery of
the two aircraft, easyJet has also agreed to take a further two FY25 aircraft deliveries in FY24. The airline also holds a contractual commitment
to lease 11 further mid-life A320s for delivery between Q2 2023 and Q1 FY24.

SPOOLING DOWN…
Philippine Airlines is seeking buyers for its four stored Dash 8-300s. Proceeds would be put towards the acquisition of younger aircraft. Thai
Airways ‘unutilized non-core assets’ are expected to reduce in Q2 2023 by the sale of 6 B777-300s that are not in their future flight operations
plan - contract negotiations were due to be completed in April 2023.

IN THE ETHER…
Expectations are high that Turkish Airlines is close to placing a large order for up to 600 aircraft, for delivery before 2033 as part of the
airlines latest 10-year strategic plan. The airlines Chairman has indicated the order could include 400 narrowbody and 200 widebody aircraft
from both major OEMs, with a Boeing order possibly to be announced at the IATA summit in June and an Airbus order to be announced at
the Paris Air Show later the same month. Delta is said to be considering a new widebody order with Airbus, with both the A330-900neo and
A350-1000 under review, while Air Canada is apparently close to acquiring another 20 B787s for long haul fleet renewal and expansion.

CARGO CORNER…
Avensis Aviation, an engineering and design company offering a range of P2F cargo conversion products, has announced a launch customer
for its Navis cargo conversion programme for the Airbus A340-300 and A340-600. Germany-based Universal Sky Carrier (USC) which has
been operating a former SAA A340-300 on passenger ACMI services and is looking to add a former SAA A340-600, plans to convert them
into cargo configuration. The Navis conversion features the installation of a ‘plug type’ main deck cargo door, 9G rigid cargo barrier, full
Class E cargo compartment and a Cargo Loading System. Pending delivery of the Navis components, the aircraft will initially be converted
with Avensis’ reversible Medius conversion package which removes seats and turns the aircraft into a Class-E freighter without the addition
of a cargo door, meaning that aircraft can be switched between passenger and cargo when required.

THE AIRCRAFT (and ENGINE) VIEW

The OEM Deutsche Aircraft has announced a tentative agreement from charter and corporate shuttle operator Private Wings to acquire five
D328eco turboprop aircraft and become the launch customer of the PWC PW127XT-S powered derivative. The operator has an existing
fleet of Dornier 328 aircraft, both turboprop and jet examples of the type. Deutsche Aircraft acquired the rights to the 328 platform and
revealed the ‘eco’ variant in December 2020 as a two-metre fuselage stretch capable of seating 40 to 43 passengers. Entry into service (EIS)
is currently slated for H2 2026. Work has already begun on construction of the D328eco FAL (final assembly line) at Leipzig/Halle Airport,
while the prototype is to be built near Munich. Other hybrid-electric and hydrogen powered variants are also being considered by the OEM
for production.

Rolls-Royce reports the successful testing of its new UltraFan technology demonstrator engine, featuring all-new engine architecture which
is intended to deliver 10% efficiency improvements over the most efficient Trent engine. UltraFan features carbon titanium fan blades
in a composite casing and an innovative geared design, while combining Rolls’ Advance3 core architecture with an ALECSys lean burn
combustion system. While the goal for UltraFan is to power ‘next generation’ aircraft, the OEM has noted that some of the UltraFan’s
technologies could have an application and be adopted by existing engine models. The tests took place at the Testbed80 dedicated test facility
in Derby.

GE Aerospace plans to invest $20 million in the EPISCenter in Dayton, Ohio, to meet the increased demand for hybrid electric aircraft
engine testing. The investment supports the development of next-generation propulsion technologies. GE Aerospace was selected by NASA
for the Electrified Powertrain Flight Demonstration programme. The EPISCenter has already seen significant growth and this investment
brings the total capital spending to nearly $100 million. GE Aerospace has achieved technical milestones in hybrid electric propulsion systems
and is involved in the CFM RISE programme for improved fuel efficiency and reduced emissions.

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