New ASU agreement could impact orders

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Flybe director of aircraft acquisition and financing David Attenburrow believes the 2011 Aircraft Sector Understanding has changed the carrier's view of new aircraft orders as commercial debts cost have increased.

Addressing financiers at the 2020 Ascend Finance Forum in London, Attenburrow said: "If we had to value the E-175 with the 2011 ASU agreement we would be ordering less aircraft. When Flybe placed a firm order for 35 Embraer 175s in 2010, the cost of financing was a very key part of the transaction."

However, he admits the 2007 ASU agreement "was too soft in terms of funding" .

The UK-based group has raised senior debt funding through the Brazilian export credit agencies BNDES and SBCE on 20 aircraft under the 2007 ASU agreements at less than 200 basis points.

The following 15 aircraft are under the 2007 ASU transition list.

Flybe has deferred 16 E-175 deliveries to 2017-19 from 2014-16 period but Attenburrow says the carrier has no intention to cancel any orders.

Flybe is going through its most challenging period for the last 10 years and is changing is business dramatically, says Attenburrow. The group has already achieved £30 million ($39 million) in savings through the sale of slots at London Gatwick airport and cost saving measures.

He says the pre-delivery payment financing has hit Flybe balance sheet. "The pre-delivery payments have a real impact on the cash position."

Attenburrow estimates £20 million of cash alleviation in terms of cash exposure on pre-delivery payments for the 2013/14 winter.

But the deferral of E-175 deliveries and sale of further Bombardier Q400s will help the group to go through the difficult period. "The group is now more strongly placed for the future and is fit to compete," says Attenburrow.