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Market expertise sees BAE Systems ride commercial aviation downturn

Direct News Source

08-Feb-2010 BAE Systems reported today that its Regional Aircraft business held up well in the face of the worst ever downturn in the world’s commercial aviation markets.

Across its core portfolio aircraft business, the asset management team of Regional Aircraft placed 44 aircraft in a challenging market. There was also strong growth in winning 41 new aircraft remarketing mandates from third parties during the year.

In the support and engineering business, there was a drop in the spares business won as airlines consolidated existing spares stocks and cut back on new orders. However, there was a strong performance in the engineering business in winning new work from manufacturers, culminating in the announcement today of the award of engineering work on the new Mitsubishi Regional Jet (MRJ) from Japan.

Alan Fraser, Managing Director of Regional Aircraft said:

"Despite the challenges presented by the worst ever market environment Regional Aircraft has continued to deliver quality support, engineering and asset management services to our existing and growing customer base. The future will continue to present challenges, but we intend to meet them head-on and we take confidence from our performance in 2009, having already restructured our business to ensure we are able to continue to deliver a compelling offering to the market."

Of the 44 aircraft placed by BAE Systems during 2009, the BAe 146/Avro RJ regional jet accounted for 30. Despite managing only 40 percent of the available BAe 146/Avro RJ aircraft, BAE Systems transacted 60 percent of the recorded deals.

Building on the strategy of tackling five separate market segments for the aircraft, 23 of these were placed in the passenger market, three were sold as Avro Business Jets, three were sold into the freighter market and one placed for military duties. Despite this performance, a significant challenge remains for the asset management team as the year ended with 24 idle aircraft across the BAe 146/Avro RJ portfolio.

The remaining 14 aircraft placed by Asset Management were 11 ATP turboprop airliners (eight freighters and three passenger aircraft) and three Jetstream 32 regional turboprops. The year ended with the placement of the four final ATPs, resulting in a fully contracted turboprop portfolio.

In addition, the asset management team secured a further 25 transactions across the year, on various spare engine deals and short-term lease extensions.

Building on the enlargement in 2009 of its Business Development team in Asset Management, there was a notable increase in the number of third party remarketing mandates won from airlines, financial institutions and leasing companies. Of particular significance is the mandate to offer 13 Boeing 757-300 aircraft for sale and lease back to investors on behalf of Condor Flugdienst GmbH - a leading German charter airline and part of the global Thomas Cook plc group. This mandate reflects the increasing recognition of the capability and depth of Asset Management's third party services by aviation's financial community.

Of the 42 aircraft mandated for sale or lease during the year, most covered mainstream Boeing and Airbus narrow body and wide body types as well as some BAE Systems-built regional aircraft. Eight of these aircraft were placed during the year and although a small number were withdrawn by owners due to their changing plans, at the start of 2010 a total of 28 aircraft were being actively remarketed.

Across the support and engineering business, despite the downturn in continuing spares sales and a fall off in modifications business, there was further success for the 'spares by the hour' packages with a total of 142 aircraft now enrolled on to the programmes, with further contracts under negotiation. More than 90 percent of customers have now taken up Regional Aircraft's continued airworthiness charge programme across the customer base.

The engineering team, whilst continuing to maintain integrity and support to the whole fleet, grew its third party revenue by some 20 percent to secure a high quality 2010 order book across a number of civil and military platforms, the latest being the Mitsubishi Regional Jet. Some 25 percent of engineering revenues are now derived from non-BAE Systems business.

Building on the success of the asset management business development model, the support and engineering business of Regional Aircraft has recently expanded and strengthened its own business development team. A range of activities are now underway to identify potential new opportunities to leverage the skills of the Regional Aircraft support and engineering teams.

BAE Systems Regional Aircraft provides its customers with managed solutions for aircraft portfolios, fleet support and engineering. In addition to a trading portfolio of over 200 aircraft, a proven track record in aircraft remarketing and lease management services and a broad base of aircraft support solutions, Regional Aircraft also provides engineering expertise for both commercial aircraft and defence platforms.