AWK
02/07/2015 08:30
GENERAL
PRICE SENSITIVE
REL: 0830 HRS Airwork Holdings Limited
GENERAL: AWK: Airwork Holdings Market Update
2 July 2015
Airwork Holdings Market Update
Highlights
Fixed Wing Division
o 737 Fleet expanded to 17 aircraft
o 5 major customers with long term contracts and cash flows
o Total capex on 737 fleet expansion of $95 - $105 million to be completed by
end of FY16 and funded through bank debt and cash flow
o Improvement in long term Return On Invested Capital (ROIC) driven by the
program
Helicopter Division
o Helicopter fleet continues to expand globally
o Maintenance Facility expansion on track and certification expansion
continues to support continuing demand
Fixed Wing Division Update
Global aviation provider Airwork Group is significantly expanding its fixed
wing fleet to generate increased operating efficiencies and boost the
company's bottom line.
Airwork last year announced plans to purchase six Boeing 737-400 passenger
planes to be converted to freighters and leased to customers in New Zealand
and overseas.
Since then, on the back of secured demand, the programme has accelerated,
with a total of eight 737-400s purchased to date.
Lease agreements for terms of between five and 10 years have been signed for
the eight aircraft already acquired; the leases will commence as the cargo
conversion process is completed. This includes installing a large cargo door
and loading system, and a complete refurbishment and avionics upgrade.
The first aircraft has already been delivered to its European operator, with
another two to be delivered to Europe this month.
Toll Group will take delivery in Australia of two 737-400s by February next
year. These two aircraft will replace two Airwork-owned 737-300s currently
operated for Toll, part of an extended contract recently agreed between the
two companies that will see Airwork continue to provide Toll's Australian
express airfreight business with Aircraft, Crew, and all Maintenance,
Certification, and Insurance requirements through to at least 2022. Airwork
has an option to provide a further 737-400 aircraft next year to potentially
replace an existing 737-300.
The remaining three 737-400s have been leased for 10 years to a joint venture
between Airwork and Freightways subsidiary Fieldair, which is to operate a
new freight network covering Auckland, Palmerston North and Christchurch. The
joint venture's initial customers will be Freightways' express package
business and NZ Post subsidiary Express Couriers, but other freight operators
will also be welcome on the network.
Announcing this agreement last month, Airwork CEO Chris Hart said the move to
737-400s would help to upgrade New Zealand's express freight network.
Hart said Airwork expected total capital investment in the programme to be
between $95 million and $105 million for the period August 2014 to June 2016.
The capital expenditure to date, some $55 million, has been funded from
Airwork's cash flow and existing debt facilities. The company will fund the
remainder of the programme through bank debt and cash flow.
Hart said Airwork expected this investment to improve the Fixed Wing
division's long term ROIC .
"While next year will be a transitionary year as the freight conversions are
completed and the aircraft introduced into our operations, we will see
immediate benefits to Airwork's bottom line. The greater standardisation and
scale of our fleet will generate increased operating efficiencies and allow
us to further develop our engineering capability, which in turn will drive
better results for our business and our customers around the world," said
Hart.
Hart said the programme has taken Airwork's fixed wing fleet of 737 aircraft
from nine in FY14 to seventeen (potentially 18 if it takes up the option to
provide a further aircraft to Toll), allowing it to broaden its operating
footprint.
"We have now secured lease contracts of five years or more with five major
customers here and in Europe, which increases our ability to withstand
fluctuations in any one market.
"And freeing up the 737-300s currently leased to Toll allows us to pursue new
opportunities in new markets with those assets."
Hart said global demand for freight aircraft at present is very strong, with
some industry experts estimating the number of freight aircraft worldwide
will increase by 50 percent between now and 2033.
Helicopter Division Update
Airwork's Helicopter business is also continuing to grow. Construction of a
new hangar at the Ardmore maintenance and engineering base has recently been
completed, with further expansion work (stage two) on track to be finished by
the end of the year.
In partnership with US conglomerate Honeywell, Airwork has carved out a niche
as a specialist in fitting the Honeywell 850 engine to Airbus BK117
helicopters, an economical way for BK117 owners to boost performance and
increase the range of work their helicopters are qualified to perform.
Airwork recently completed its 40th such upgrade.
Airwork continues to expand its regulatory approvals, with United States
Federal Aviation Authority) certification of its helicopter maintenance
facility expected to be issued within the next six months.
Airwork has also added six helicopters to its fleet this financial year,
making a total of 38. Some of the fleet is operated directly by Airwork, with
the majority leased out to operators on contracts ranging from emergency and
police operations to commercial lifting, powerline maintenance work and oil
exploration projects in bases throughout New Zealand, Australia, the Pacific,
Africa and South America. The company continues to introduce the upgraded
BK117 850 model into new regions, with deployment into Indonesia expected in
the coming months.
Brian Fouhy
Chief Financial Officer
For further information, please contact:
John Redwood
Senescall Akers Ltd
[email protected]
021 581 234
End CA:00266489 For:AWK Type:GENERAL Time:2015-07-02 08:30:02
