TIDMDPA
RNS Number : 0662B
DP Aircraft I Limited
29 September 2022
28 September 2022
DP Aircraft I Limited (the 'Company')
Interim Report and Accounts
The Company is pleased to provide a copy of the Unaudited
Condensed Consolidated Interim Report for the six-month period
ended 30 June 2022 (the "Interim Report"), which is available from
the Company's registered office and will shortly be available to
view or download from the Company's website www.dpaircraft.com
For further information, please contact:
Aztec Financial Services (Guernsey) Limited +44(0) 1481 748863
Sarah Felmingham / Chris Copperwaite
DP AIRCRAFT I LIMITED
UNAUDITED CONDENSED CONSOLIDATED INTERIM REPORT
FOR THE SIX-MONTH PERIODED 30 JUNE 2022
FACT SHEET
Ticker DPA
Company Number 56941
ISIN Number GG00BBP6HP33
SEDOL Number BBP6HP3
Traded Specialist Fund Segment ('SFS')
of the London Stock Exchange
SFS Admission Date 4-Oct-13
Share Price US$ 0.025 at 30 June 2022
Earnings per Share US$ 0.0143 for the period ended
30 June 2022
Country of Incorporation Guernsey
Current Ordinary Shares in Issue 209,333,333
Administrator and Company Secretary Aztec Financial Services (Guernsey)
Limited
Asset Manager DS Aviation GmbH & Co. KG
Auditor KPMG, Chartered Accountants
Corporate Broker Investec Bank Plc
Aircraft Registration HS-TQD
HS-TQC
Aircraft Serial Number 35320
36110
Aircraft Type and Model B787-8
Lessees Thai Airways International Public
Company Limited ('Thai
Website www.dpaircraft.com
SUMMARY
COMPANY OVERVIEW
DP Aircraft I Limited (the 'Company') was incorporated with
limited liability in Guernsey under the Companies (Guernsey) Law,
2008 on 5 July 2013 with registered number 56941.
The Company was established to invest in aircraft. The Company
is a holding company, and made its investment in aircraft held
through two wholly owned subsidiary entities, DP Aircraft Guernsey
III Limited and DP Aircraft Guernsey IV Limited (collectively and
hereinafter, the 'Borrowers'), each being a Guernsey incorporated
company limited by shares and one intermediate lessor company, DP
Aircraft UK Limited (the 'Lessor'), a UK incorporated private
limited company. The Company and its consolidated subsidiaries, DP
Aircraft Guernsey III Limited, DP Aircraft Guernsey IV Limited and
DP Aircraft UK Limited comprise the consolidated Group (the
'Group').
Pursuant to the Company's Prospectus dated 27 September 2013,
the Company offered 113,000,000 ordinary shares of no-par value in
the capital of the Company at an issue price of US$ 1.00 per share
by means of a placing. The Company's Shares were admitted to
trading on the Specialist Fund Segment of the London Stock Exchange
on 4 October 2013 and the Company was listed on the Channel Islands
Securities Exchange until 27 May 2015.
On 5 June 2015, the Company offered 96,333,333 ordinary shares
of no-par value in the capital of the Company at an issue price of
US$ 1.0589 per share by means of a placing. These shares were
admitted to trading on the Specialist Fund Segment of the London
Stock Exchange on 12 June 2015.
In total there are 209,333,333 ordinary shares in issue with
voting rights.
In addition to the equity raised per above, the Group also
utilised external debt to fund the acquisition of the aircraft.
Further details are given within this summary section.
INVESTMENT OBJECTIVE
The Company's investment objective is to obtain income and
capital returns for its Shareholders by acquiring, leasing and
then, when the Board considers it appropriate, selling aircraft
(the 'Asset' or 'Assets').
THE BOARD
The Board comprises independent non-executive directors. The
directors of the Board are responsible for managing the business
affairs of the Company and Group in accordance with the Articles of
Incorporation and have overall responsibility for the Company's and
Group's activities, including portfolio and risk management while
the asset management of the Group is undertaken by DS Aviation GmbH
& Co. KG (the 'Asset Manager').
THE ASSET MANAGER
The Asset Manager has undertaken to provide the asset management
services to the Company and Group under the terms of an asset
management agreement but does not undertake any regulated
activities for the purpose of the UK Financial Services and Markets
Act 2000.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
The Group recognises the Paris Agreement on climate change. The
Group operates NTA ('New Technology Aircraft') - specifically
Boeing 787-8's equipped with Rolls Royce Trent-1000 engines which
are 20% more fuel efficient on a revenue-per-kilometre basis than
similar comparable current technology legacy aircraft. The Board
has taken steps to reduce its own travelling and maximises the use
of virtual meetings within the board and with all its key service
providers.
CORONAVIRUS ('COVID-19')
COVID-19 has had a significant impact on the airline sector, and
by extension the aircraft leasing sector. More information is
provided below and in the Asset Manager's Report.
THAI AIRWAYS INTERNATIONAL PCL ('THAI AIRWAYS' / 'THAI')
The suspension of travel due to COVID-19 in 2020 resulted in
Thai Airways entering into business rehabilitation. The Central
Bankruptcy Court approved Thai's Business Rehabilitation plan on 15
June 2021, the rehabilitation process is currently ongoing. Please
refer to the Asset Manager Report for details regarding the
rehabilitation process.
The Group signed a Letter of Intent ('LOI') dated 1 March 2021
with Thai Airways under which the parties agreed to amend the lease
terms that existed then. The actual lease agreement reflecting the
terms set out in the LOI was signed on 1 April 2022. The effective
date for the lease modification was agreed by both parties as 15
June 2021.
The new lease terms provide for a power by the hour ('PBH')
arrangement until 31 December 2022 (i.e., rent will be payable by
reference to actual monthly utilisation of the Thai aircraft and
engine), with scaled back monthly fixed lease payments thereafter
until 2026 that reflect reduced rates now seen in the market. The
lease term was extended for a further 3 years to 9 December 2029,
with further scaled back monthly lease payments starting from
January 2027, the extension is however subject to the Group
retaining a right of early termination in December 2026 after
consulting the Lenders. Given the uncertainty around the extension
of the lease term, the lease term is considered to be the period to
9 December 2026.
A corresponding agreement was reached with the bank providing
finance for the aircraft leased to Thai Airways as detailed below.
Note, under the terms agreed with the lending banks, the Company is
(i) permitted a monthly payment of US$ 70,000 out of the monies
received by the Group from Thai Airways through the PBH arrangement
and (ii) restricted from holding more than US$ 1,200,000 in cash at
any time, with any excess in either case paid over to the lending
banks. This will continue when the PBH period ends.
DEKABANK DEUTSCHE GIROZENTRALE AND THREE OTHER CONSORTIUM
MEMBERS ('DekaBank')
In May 2021, the Group and DekaBank amended and restated the
existing loan facility agreements in respect of the Thai aircraft
to accommodate the new lease terms. Repayments of principal are
being deferred until after the end of the PBH arrangement, 31
December 2022; and the Group and DekaBank will enter discussions
towards the end of the PBH arrangement to determine how to schedule
interest payments, principal repayments and a final balloon
repayment, having regard for both the income being received by the
Group in respect of the Thai aircraft, and the running costs of the
Group and its subsidiaries. Based on the amended and restated loan
agreements in place, post the PBH period monthly payments of
interest and principal will be limited to net lease rental monies
available for application towards the loan, and the final balloon
repayment will be settled out of proceeds from sale of the aircraft
at the end of the lease term.
From the effective date (date loan agreement was amended and
restated) interest is charged on the deferred principal at the
percentage rate per annum equal to the sum of five per cent (5.0%)
per annum (which, for the avoidance of doubt, includes the Margin)
plus SONIA (previously LIBOR up to 31 December 2021) for the
applicable period (such rate to be determined by the Facility
Agent). Prior to the end of the PBH arrangement, DekaBank and the
Group will enter into negotiations to fix the interest rate for the
period post the PBH Arrangement.
Prior to the loan amendment detailed above, the Group and
DekaBank had agreed that the Group would only be required to make
interest payments on its borrowings relating to the assets leased
to Thai, with no concomitant capital repayment obligation; and that
the Group would make no dividend payments while deferrals remained
outstanding under those borrowings.
IMPAIRMENT
In line with each reporting date, but more relevant in light of
the developments of COVID-19 and market capitalisation of US$ 5.2
million at 30 June 2022, a detailed impairment assessment of the
aircraft has been undertaken. Following this review an impairment
of US$ nil (31 December 2021: US$ nil) was booked against the
aircraft. See note 3 for further details regarding the impairment
and comments under Highlights where commented regarding the
difference between net asset value and market capitalisation.
GOING CONCERN
The Directors believe that it is appropriate to prepare these
interim financial statements on the going concern basis due to
current cash flow forecasts which comprise of PBH rentals until 31
December 2022 with fixed monthly rentals thereafter which show that
the Group has sufficient cash and resources to cover costs for a
period of at least 12 months from the signing of these interim
financial statements.
In making this conclusion, the Directors have also taken into
account:-
-- the positive outlook for Thai Airways with both Thai aircraft
in a full return to service condition and earning materially more
power by the hour revenue to date than anticipated. There is an
expectation, based on commentary by the Thai Administrator
responsible for the rehabilitation of Thai Airways, that Thai
Airways will continue to be viable and will be able to meet the
terms of the revised lease agreements. This position regarding
Thai's viability is further enhanced by the announcement on 9
August that Thai state owned banks will provide new loans and cash
infusions of US$2.3bn to Thai. Furthermore, the Thai Government has
stated that it plans to preserve its 40% holding in Thai which may
grow further but will not exceed 50%;
-- the expectation that DekaBank which made loans to the Group
(with certain loan concessions) will continue supporting the Group.
Currently the Group is deferring repayments of principal and this
will continue up to 31 December 2022 per the amended loan
agreements in place. Furthermore, in accordance with the same
amended and restated loan agreements, the Group and DekaBank will
enter discussions in the last quarter of 2022 to determine how to
schedule interest payments, principal repayments and a final
balloon repayment, having regard for both the income being received
by the Group in respect of the Thai aircraft, and the running costs
of the Group and its subsidiaries. Effectively, based on these
amended and restated loan agreements in place, post the PBH period
monthly payments of interest and principal will be limited to net
lease rental monies available for application towards the loan, and
the final balloon repayment will be settled out of proceeds from
sale of the aircraft at the end of the lease term; and
-- the successful equity fund raise in July 2022. The Group
successfully concluded a US$750,000 equity raise which was
supported by many of the largest shareholders and will be used for
working capital purposes.
The Directors are not aware of any material uncertainties that
may cast significant doubt upon the Group's ability to continue as
a going concern.
DISTRIBUTION POLICY
Under normal circumstances, the Company aims to provide
Shareholders with an attractive total return comprising income,
from distributions through the period of the Company's ownership of
the Assets, and capital, upon any sale of the Assets. The Company
targets a quarterly distribution in February, May, August, and
November of each year. The target distribution is US$ 0.0225 per
Share per quarter. The target dividends are targets only and should
not be treated as an assurance or guarantee of performance or a
profit forecast. Investors should not place any reliance on such
target dividends or assume that the Company will make any
distributions at all.
Due to the impact of COVID-19 on the aviation industry and
therefore our lessee, the Board suspended the payment of dividends
from 3 April 2020 until further notice. The suspension remains in
place to date. Note, any lease rental payments received by the
Company in respect of the Thai aircraft are expected to be applied
exclusively towards the running costs of the Company and its
subsidiaries, and interest payments and principal repayments to the
Thai lenders (DekaBank), which means that there is no realistic
prospect of the Company's shareholders receiving a dividend or
other distribution. The Board and its advisers will be consulting
with shareholders in the future with a view to determining the best
course of action to take for the future of the Company.
HIGHLIGHTS
PROFIT FOR THE PERIOD
The profit for the period ended 30 June 2022 is US$ 2,998,596
and profit per share is US$ 0.0143. The loss for the period ended
30 June 2021 was US$ 24,171,431 and loss per share was US$
0.1155.
The results for the period ended 30 June 2022 are mainly driven
by rental income earned of US$ 7,575,435 (30 June 2021: US$
12,915,197), a provision on straight lining lease asset of US$
1,106,575 (30 June 2021: US$ 12,508,499) and finance costs incurred
of US$ 2,194,840 (30 June 2021: US$ 4,314,137).
Refer to the Condensed Consolidated Statement of Comprehensive
Income for full details of results for the period.
NET ASSET VALUE ('NAV')
The NAV per share was US$ 0.1880 at 30 June 2022 (31 December
2021: US$ 0.1737). The price per share for the same dates was US$
0.025 (31 December 2021: US$ 0.01). NAV per share has increased due
to the profit made during the interim period (see above). The NAV
excluding the financial effects of the straight-lining lease asset
was US$ 0.1493 per Share at 30 June 2022 (31 December 2021: US$
0.1509).
The straight-lining lease asset will reduce to nil over time.
The NAV excluding the straight-lining lease asset is therefore
presented to provide what the Directors consider to be a more
relevant assessment of the Group's net asset position.
As at 30 June 2022 As at 31 December
2021
US$ US$ per share US$ US$ per
share
NAV per the financial statements 39,350,718 0.1880 36,352,122 0.1737
Less: Straight-lining lease
asset (9,112,927) (0.0435) (4,772,296) (0.0228)
Add: Provision on straight-lining
lease asset 1,001,511 0.0048 - -
------------ -------------- ------------ ---------
NAV excluding straight-lining
lease asset 31,239,302 0.1493 31,579,826 0.1509
------------ -------------- ------------ ---------
As at 30 June 2022, the price per share was US$ 0.025 which is
significantly lower than the NAV per share above. The reason for
the difference is due to the fact that the market price per share
reflects other factors such as market sentiment that cannot be
accounted for in a set of annual financial statements. The main
asset in the Group, the aircraft, has been assessed for impairment
(see note 3) and found not to be impaired. Other significant assets
comprise cash and receivables whose values are considered to be
reflective of fair value due to their short-term nature. Therefore,
the low share price is not indicative of a need for further
impairment to the assets of the Group.
INTERIM DIVIDS
As a result of the COVID-19 pandemic impact on global aviation
and especially its lessee, the Group suspended dividends from 3
April 2020 until further notice to help preserve liquidity. Further
details on the impact of the COVID-19 pandemic can be found within
the Summary and the Asset Manager's Report.
Furthermore, in accordance with the amended loan agreement with
DekaBank, the Group will make no dividend payments while loan
deferrals remained outstanding under the amended loan
agreement.
OFFICIAL LISTING
The Company's Shares were first admitted to trading on the
Specialist Fund Segment of the London Stock Exchange on 4 October
2013.
CHAIRMAN'S STATEMENT
I am pleased to present Shareholders with the Interim Report of
the Group for the period ended 30 June 2022.
The profit per share for the period was US$ 0.0143 compared to a
loss per share of US$ 0.1155 for the same period last year. The net
asset value per share at the period end was US$ 0.1880 compared to
US$ 0.1737 at 31 December 2021.
IFRS requires rental income to be recognised on a straight line
basis over the remaining lease period and consequently the
accounting treatment has resulted in some income being recognised
earlier than would normally be the case. In addition, IFRS requires
a provision to be made against that additional income which has
been estimated based on recent credit reports on Thai. Please refer
to Highlights which explains the net impact of this on the NAV as
at 30 June 2022, NAV per share as at 30 June 2022 is more by US$
0.0387 per share (31 December 2021: US$ 0.0228).
During the period we have seen an improvement in the global
aviation market following the challenges resulting from the effects
of the Covid-19 pandemic on its operations.
The Thai aircraft are operational and we expect both Thai
aircraft to be utilised on a regular basis during 2022. Income has
been received under the new Power by the Hour (PBH) arrangement
which is in place until the end of 2022. We then operate under
scaled back monthly lease payments thereafter until 9 December
2026, reflecting the reduced lease rates now seen in the market. As
previously noted, the lease term may be extended by a further 3
years to 9 December 2029, with further scaled back monthly lease
payments starting from January 2027, and the Group retaining a
right of early termination in December 2026 after consultation with
the Lenders.
Repayments of loan principal are deferred until after the end of
the PBH arrangement and the Group and the Lenders will shortly
enter into discussions to determine how best to structure debt
service and to measure the final balloon repayment, having regard
for both the income being received by the Group under both the PBH
and fixed rentals arrangement in respect of the Thai Assets, the
running costs of the Company and its subsidiaries and the interest
rates prevailing at that time.
As previously noted, there is no realistic prospect of the
Company's shareholders receiving a dividend or other distributions
prior to the end of the lease term. The key uncertainty remains the
outlook for the airline industry particularly with higher fuel
prices and the impact of inflation resulting from the Ukraine
conflict and a slowing economy on travel demand, its impact upon
Thai and its financial position and upon aircraft values in general
and the Boeing 787-8 in particular.
The Company raised $750,000 in equity following a successful tap
issue in July. Some service providers and the directors will
continue to defer some amounts due. The focus of the Company
remains the preservation of the Group's long-term financial
stability and assets notwithstanding the challenges noted
above.
I would like to thank the Board for their continued significant
support over the period. Thanks also go to the team at the Asset
Manager and Administrator for their considerable support and
assistance. I would like to thank our Investors for their continued
support in the Company and its subsidiaries. The Board and its
advisers will continue consulting with investors.
Jon Bridel
Chairman
ASSET MANAGER'S REPORT
THE AIRLINE MARKET
COVID-19 pandemic in brief
The Covid-19 pandemic still impacts travelling, both domestic
and international, around the globe. Although travel restrictions
have been lifted during the last months and demand for flights is
increasing faster than Airlines have expected, it still has a
significant impact on the airline industry, including airline
restructurings and bankruptcies. The number of stored widebody
aircraft worldwide remains high. Even with increased vaccination
coverage worldwide, different virus variants can still lead to
increased infection rates and new travel restrictions imposed by
various governments. It is impossible to determine the total impact
on the airline and aviation industry or when all Covid-19
restrictions might be globally lifted.
The world passenger traffic collapsed with unprecedented decline
in history as shown in the picture below.
Source: ICAO: "Effects of Novel Coronavirus (COVID--19) on Civil
Aviation: Economic Impact Analysis"; 12th September 2022
The severe impact of the pandemic compared to other major events
in history is shown in the graph above. The total passenger numbers
are slightly recovering from year to year but it will take some
more time to get back to pre-Covid numbers.
Year 2022 Outlook
The impact of Covid-19 on world scheduled passenger traffic for
the year 2022 (estimated results), compared to pre-Covid 2019
levels is:
o Overall reduction of 22% to 24% of seats offered by
airlines
o Overall reduction of 1,186 to 1,271 million passengers (-26 %
to -28%)
o Approx. USD164 to 176 billion loss of gross passenger
operating revenues of airlines
International passenger traffic (2022 vs. 2019)
o Overall reduction of 31% to 34 % of seats offered by
airlines
o Overall reduction of 628 to 627 million passengers (-33% to
-36%)
o Approx. USD118 to 127 billion loss of gross operating revenues
of airlines
The below fact sheet is provided by IATA on a regular basis and
shows statistics about the airline industry as of June 2022.
June 2022
System-wide global commercial airlines 2019 2020 2021E 2022F
---------------------------------------- ------ ------- ------- -------
REVENUES, $ billion 838 382 506 782
======================================== ====== ======= ======= =======
% change y-o-y 3.2% -54.4% 32.4% 54.5%
======================================== ====== ======= ======= =======
% change vs 2019 -39.6% -6.7%
======================================== ====== ======= ======= =======
Passenger, $ billion 607 189 239 498
======================================== ====== ======= ======= =======
Cargo, $ billion 100.8 138.5 204.1 191.0
======================================== ====== ======= ======= =======
Traffic volumes
======================================== ====== ======= ======= =======
Passenger growth, RPK, %ch y-o-y 4.1% -65.8% 21.9% 97.6%
======================================== ====== ======= ======= =======
% ch vs 2019 -58.3% -17.6%
======================================== ====== ======= ======= =======
Sched passenger numbers, millions 4,543 1,807 2,185 3,781
======================================== ====== ======= ======= =======
Cargo growth, CTK+MTK, %ch y-o-y -3.2% -9.9% 18.7% 4.4%
======================================== ====== ======= ======= =======
%ch vs 2019 6.9% 11.7%
======================================== ====== ======= ======= =======
Cargo tonnes, millions 61.5 55.4 65.6 68.4
======================================== ====== ======= ======= =======
World economic growth, %ch y-o-y 2.5% -3.5% 5.8% 3.4%
======================================== ====== ======= ======= =======
Passenger yield, %ch y-o-y -3.7% -9.1% 3.8% 5.6%
======================================== ====== ======= ======= =======
Cargo yield %ch y-o-y -8.2% 52.5% 24.2% -10.4%
======================================== ====== ======= ======= =======
EXPENSES, $ billion 795 493 552 796
======================================== ====== ======= ======= =======
% change y-o-y 3.7% -37.9% 11.8% 44.4%
======================================== ====== ======= ======= =======
% change vs 2019 -30.6% 0.2%
======================================== ====== ======= ======= =======
Fuel, $ billion 190 80 103 192
======================================== ====== ======= ======= =======
% of expenses 24% 16% 19% 24%
======================================== ====== ======= ======= =======
Crude oil price, Brent, $/b 65.0 41.8 70.7 101.2
======================================== ====== ======= ======= =======
Jet kerosene price, $/b 79.7 46.6 77.8 125.5
======================================== ====== ======= ======= =======
Fuel consumption, billion gallons 95 52 60 84
======================================== ====== ======= ======= =======
CO2 emissions, million tonnes 905 495 577 809
======================================== ====== ======= ======= =======
Non-fuel, $ billion 605 413 448 604
======================================== ====== ======= ======= =======
cents per ATK (non-fuel unit cost) 39.2 48.1 44.9 42.7
======================================== ====== ======= ======= =======
% change y-o-y -0.3% 22.7% -6.7% -4.9%
======================================== ====== ======= ======= =======
Capacity growth, atk, %ch y-o-y 3.1% -44.3% 16.3% 41.7%
======================================== ====== ======= ======= =======
%ch vs 2019 -35.3% -8.2%
======================================== ====== ======= ======= =======
Flights, million 38.9 16.9 20.1 33.8
======================================== ====== ======= ======= =======
Break-even weight load factor, % ATK 66.4% 76.8% 67.2% 69.3%
======================================== ====== ======= ======= =======
Weight load factor achieved, % ATK 70.0% 59.5% 61.7% 68.1%
======================================== ====== ======= ======= =======
Passenger load factor achieved, % ASK 82.6% 65.2% 67.0% 77.4%
======================================== ====== ======= ======= =======
OPERATING PROFIT, $ billion 43.2 -110.8 -45.2 -14.4
======================================== ====== ======= ======= =======
% margin 5.2% -29.0% -8.9% -1.8%
======================================== ====== ======= ======= =======
June 2022
----------------------------------------------------------------- ------
System-wide global commercial airlines 2019 2020 2021E 2022F
======================================== ===== ======= ======= ======
NET PROFIT, $ billion 26.4 -137.7 -42.1 -9.7
======================================== ===== ======= ======= ======
% margin 3.1% -36.0% -8.3% -1.2%
======================================== ===== ======= ======= ======
per departing passenger, $ 5.80 -76.22 -19.26 -2.58
======================================== ===== ======= ======= ======
RETURN ON INVESTED CAPITAL, % 5.8% -19.3% -8.0% -2.5%
---------------------------------------- ----- ------- ------- ------
Sources: ICAO, IATA, The Airline Analyst, Datastream, Platts.
Updated : 06/2022
Financial
Results
---------------- --------------- ------- ------- ------ ---------- ------------- ------
System-wide EBIT margin, % revenues Net profit, $ billion
global
commercial
airlines
---------------- ----------------------------------------- -----------------------------------------
2019 2020 2021E 2022F 2019 2020 2021E 2022F
---------------- --------------- ------- ------- ------ ---------- ------------- ------ ------
Global 5.2% -29.0% -8.9% -1.8% 26.4 -137.7 -42.1 -9.7
================ =============== ======= ======= ====== ========== ============= ====== ======
Regions
================ =============== ======= ======= ====== ========== ============= ====== ======
North America 9.6% -27.3% -5.9% 1.9% 17.4 -35.1 -2.2 8.8
================ =============== ======= ======= ====== ========== ============= ====== ======
Europe 4.8% -27.1% -8.8% -2.6% 6.5 -34.5 -11.9 -3.9
================ =============== ======= ======= ====== ========== ============= ====== ======
Asia-Pacific 3.7% -34.3% -13.5% -5.9% 4.9 -45.0 -15.2 -8.9
================ =============== ======= ======= ====== ========== ============= ====== ======
Middle East -5.2% -24.3% -11.4% -3.0% -1.5 -9.4 -4.7 -1.9
================ =============== ======= ======= ====== ========== ============= ====== ======
Latin America 2.9% -28.5% -9.0% -2.8% -0.7 -11.9 -6.9 -3.2
================ =============== ======= ======= ====== ========== ============= ====== ======
Africa 1.0% -16.9% -6.8% -2.8% -0.3 -1.8 -1.1 -0.7
================ =============== ======= ======= ====== ========== ============= ====== ======
Sources: IATA estimates for regions. IATA forecast for 2022.
Updated : 06/2022
Traffic
Results
--------------- ----------- ------- ----------- ------- ---------- ------- --------- -------
System-wide Passenger traffic (RPK) Passenger capacity (ASK)
global
commercial
airlines
--------------- ------------------------------------------ -----------------------------------------
% change vs % change vs % change vs % change
previous year 2019 previous year vs 2019
--------------- -------------------- -------------------- ------------------- --------------------
2019 2020 2021E 2022F 2019 2020 2021E 2022F
--------------- ----------- ------- ----------- ------- ---------- ------- --------- -------
Global 4.1% -65.8% -58.3% -17.6% 3.4% -56.6% -48.6% -12.0%
=============== =========== ======= =========== ======= ========== ======= ========= =======
Regions
=============== =========== ======= =========== ======= ========== ======= ========= =======
North America 4.0% -65.1% -39.7% -5.0% 2.9% -50.3% -29.8% -0.5%
=============== =========== ======= =========== ======= ========== ======= ========= =======
Europe 4.2% -69.5% -61.2% -17.3% 3.5% -62.3% -51.2% -10.0%
=============== =========== ======= =========== ======= ========== ======= ========= =======
Asia-Pacific 4.7% -62.0% -66.8% -26.3% 4.4% -53.8% -56.6% -18.5%
=============== =========== ======= =========== ======= ========== ======= ========= =======
Middle East 2.3% -72.1% -68.8% -20.9% 0.1% -63.0% -55.5% -19.5%
=============== =========== ======= =========== ======= ========== ======= ========= =======
Latin America 4.2% -62.5% -47.4% -5.8% 3.0% -59.0% -43.9% -6.8%
=============== =========== ======= =========== ======= ========== ======= ========= =======
Africa 4.7% -68.2% -62.9% -28.0% 4.5% -62.1% -55.1% -24.8%
=============== =========== ======= =========== ======= ========== ======= ========= =======
Source and Note : IATA. Includes domestic and international traffic,
and all commercial airlines. Historical data are subject to revision.
Updated : 06/2022
Outlook & Conclusion
The Covid-19 pandemic continues to put significant burden on
airlines. Even if the travel bans are gradually lifted resulting
from a worldwide mass vaccination, it will take years until
capacity and numbers of passenger will return to pre-Covid-19
levels. The longer the pandemic continues, the more the industry
will rely on governmental and creditor support. As most of the
governmental support - if any - are in form of credits, airlines`
financial results will be negatively impacted for the next years,
even if passenger travel might already have returned to
pre-Covid-19 levels. Some governments only granted their support
subject to the power of co-decision making which impacts the
airline's flexibility and results in conflicts of interest
regarding future strategic measurements.
All outlooks shared in this report are based on historic data
and assumptions made by industry experts. It should be considered
as a potential guideline. From a historical point of view, the
airline industry has proven to be resilient and has recovered from
all previous crises and up to date 2022 shows a slight recovery
compared to the previous year. However, recovery will take
significantly longer as the decline in passenger traffic is not
only driven by an economic downturn but a global continuing
pandemic. According to McKinsey, these aspects will lead to the
necessity of adapting to long-term changes. For example, business
travel has been partially substituted by video conferences and
might never recover to pre-Covid-19 levels, as many companies
significantly progressed in digitalisation and take advantage of
travel cost reductions.
Clearly, this time the recovery period will take significantly
longer than average to return to pre-Covid-19 levels and as long as
the pandemic lasts and most of the travel restrictions remain in
place, the number of airlines filing for bankruptcy and
restructuring will continue to increase. As the pandemic is
continuing, it is impossible to assess the total impact of the
Covid-19 pandemic at the current stage.
THE LESSEE
Thai Airways International Public Company Limited
Impact from Covid-19 pandemic
-- According to data from Cirium 40 aircraft are in operation and 51 aircraft are stored.
-- Thailand ends almost all travel restrictions - from July 1,
only one Covid-related document is required (vaccination or
test)
Restructuring and Rehabilitation Process since 31(st) December
2021
-- 30(th) December 2021: Thai Airways has continued to repay all
its creditors. As of 15 November, the repayment stood at nearly THB
130 billion (3.87 billion USD) and no default of any clauses under
its rehabilitation plan has occurred
-- 28(th) February 2022: Thai Airways swings into positive
financial territory (pre-tax profit of $1.6 billion) for the
full-year 2021 compared to a 3.8 billion loss in 2020
-- 01(st) April 2022: Thai Airways has repaid about one third of its THB410 billion debt
-- 04(th) July 2022: Thai Airways is targeting to complete its
debt and capital restructuring within 2024. The airline expects
their shares likely to be traded on the stock exchange again in
2025
Quarterly financial results
Source: Cirium; Thai Airways International "Fleet"; 21(st)
September 2022
Outlook & Opportunities post-Covid-19 pandemic - The "New
Thai Airways"
-- Measures to be taken
o Reduction of fleet (other than the B787) and aircraft types to
minimise maintenance costs and increase crew efficiency; different
aircraft types put up for sale, including A300s, A330s and
A340s
o Amendment of aircraft leases with more favourable terms and
lease rates, e.g. Power-by-the Hour contracts
o Adjustment of flight routes and cancellation of low return
flights
o Downsizing the workforce and flattening the hierarchy
-- Capital raise of about USD 1.5 billion necessary to repay the debt
-- Fleet of 86 aircraft and five different aircraft types in 2025; phasing-out Boeing 747s
-- Thai expects to return to profits in 2023 and to state shareholder equity above zero in 2030
-- Thailand's economy is dependent on tourism and Thai Airways
benefits from measures initiated by the Government to stimulate
tourism arrivals
Comments & conclusions
Thai Airways is dependent on the tourism sector, particularly on
in-bound tourism which has been severely impacted by the Covid-19
pandemic. The carrier remains contingent on any decision made by
the Government to elevate or soften travel restrictions. The Thai
Government's decision to ease almost all travel restrictions is a
step forward in the rehabilitation process of tourism in
Thailand.
The mid- and long-term impacts of the Ukraine-Russian-conflict
are not yet measurable to their full extent and depend on the
developments in the near time future. In any case we are monitoring
the situation and will take necessary actions to respond
accordingly.
Thai's decision to keep the B787 in their future fleet is backed
by the fact that both DP Aircraft owned B787s have been brought
back into commercial service. Having a fleet of modern aircraft,
including B787s and A350s, supports Thai to compete with other
carriers and base operations on a competitive cost level,
particularly if jet fuel prices increase over time.
Nevertheless, there is no guarantee for the airline's survival.
However, it might be considered that the carrier's long-term
existence is in the country's interest as tourism counted for
one-fifth of the country's national income (pre-Covid-19).
THE ASSETS
Update B787
-- 787 deliveries resumed on 10(th) August after a 15-month long break imposed by the FAA due to manufacturing issues
-- Following a recent review of the market, Ascend, by Cirium's
Value Review Board, increased Current Market Values by up to 5% and
Current Market Lease Rates by up to 17% for all variants of the
787, reflecting strengthening demand for the type as global
recovery continues. In constant-age terms, market values are still
down over 25% on pre-pandemic levels, but it seems that the trend
is now upwards
-- The orderbook stands at 409 aircraft destined for 50 airline
customers. There are an additional 30 unplaced lessor commitments,
a further 41 orders for unannounced customers, and one BBJ.
Assets & Operations
Overview
Both aircraft TQC and TQD are kept in a technical condition that
allows them to be used in commercial operations. They both have a
valid Certificate of Airworthiness and are based at Bangkok
Airport. Depending on the current passenger demand, from time to
time, one of the aircraft is kept in short-term storage if the
capacity is not needed. During this storage, the aircraft are
preserved in accordance with the manufacturer's procedures.
As of now ( September 22(nd) , 2022) TQC and TQD (including all
four engines, that are currently installed on the airframes) are
used for flight operations on international routes.
Aircraft operations Thai Airways
HS-TQC HS-TQD
------------- ------------
Cabin layout 24 business class seats
240 economy class seats
---------------------------
Last physical inspection
---------------------------
Date 18.02.2022 18.02.2022
------------- ------------
Place Bangkok Airport (BKK)
---------------------------
Airframe status
(31(st) August 2022)
------------- ------------
Total flight hours 19,269 17,836
------------- ------------
Total flight cycles 4,202 3,985
------------- ------------
Hours/cycles ratio since delivery 4.6 4.5
------------- ------------
Titled Engines Report
As of 31(st) HS-TQC HS-TQD
August 2022
ESN 10239 ESN 10243 ESN 10244 ESN 10248
---------- ---------- ---------- ----------
Total time
[flight hours] 17,348 15,375 13,382 19,105
---------- ---------- ---------- ----------
Total flight
cycles 3,822 3,143 3,068 4,077
---------- ---------- ---------- ----------
Location On-wing On-wing On-wing On-wing
---------- ---------- ---------- ----------
As the titled engine 10240 was declared a total loss, the asset
manager worked with Thai Airways to appropriately replace that
engine. A replacement engine (ESN10243) had been suggested and the
process of reviewing the respective records and physical condition
had been completed. The discussion about the commercial aspects
with Rolls Royce and Thai Airways took much longer than expected
due to the rehabilitation process. Nevertheless, the title change
was successfully completed on 1st of April 2022 and the new title
engine (ESN10243) is already installed on the aircraft. The
complete technical process of the engine replacement, including
testing, was supported, and monitored closely by the asset
manager's on-site team.
On the 5th of May 2022, HS-TQC suffered an aborted take-off run
due to an engine related warning message on the flight deck. During
the technical troubleshooting, Thai airways found a defect valve at
the air control system of ESN 10243. In accordance with the
applicable task in the aircraft maintenance manual, the engine was
removed from the aircraft. The engine manufacturer reviewed all
data and declared the engine as airworthy without further work
necessary. The engine was installed back onto TQC on 31st of August
and is now in regular operation.
Asset Manager's actions ensured asset value
Keeping the assets under management in the best possible
condition and in accordance with the manufacturer's requirement is
the top priority for DS Aviation as DP Aircraft's Asset Manager.
Given the unfortunate combination of the two circumstances of Trent
1000 issues and the Covid-19 pandemic, TQC and TQD had been stored
in the past. As of now both aircraft are in operational service.
Nevertheless, the restructuring process of the company is still
ongoing. These facts, accompanied by the experiences from working
with Thai Airways in the past months, still make intensive
monitoring necessary, including the support by an on-site technical
team. Whenever not in operation, the aircraft are periodically
inspected to check the technical condition during maintenance
events or short-term storage periods. Furthermore, through the
on-site team, it is possible to get an overall view of the current
situation at Thai Airways, which is very helpful.
Comments and Conclusions
As per the analysis above, the effects of the Covid-19 Pandemic
are still present in the entire aviation industry and will also
impact the market for future years. As of July 2022, still approx.
20% of the global widebody fleet is stored, primarily affecting the
largest widebodies like the A380 or ageing aircraft like the A340
and A330. On the other hand, the latest generation widebodies A350
and Boeing 787 have recovered much better and show storage rates
less than 10%.
Besides the Covid related issues, there are some issues
affecting the manufacturer side, especially the widebody market.
Airbus is facing problems with the surface coating of its A350
models, and Boeing has discovered several production problems with
the B787. Also, the 777X, as the subsequent widebody development,
is facing issues that will delay the first deliveries at least
until late 2023, which is still subject to Certification by the FAA
and other local authorities. Additionally, the global shortage of
electronic components, the increased cost of sourcing raw materials
for the production lines, and international political disputes and
skills shortages hurt the aircraft and engine manufacturers,
suppliers, and the MRO industry. These problems with the delivery
of new aircraft and the respective uncertainties focus on the
existing aircraft. Airlines need to postpone the decommissioning of
older airframes and might need to extend their usage to bridge the
time until newly produced jets are ready to enter service. In some
cases, this will not be possible, and even if so, the later fleet
renewal will lead to increased operating costs (fuel burn,
maintenance, etc.) and could be an additional burden for some
airlines.
All the above-mentioned factors will, especially in the future,
require close monitoring of the assets' condition and the need to
put all efforts to keep the value of the aircraft. Nevertheless,
the Boeing 787 is well-positioned for the near and mid-term future
in the passenger market. The aircraft benefits from its latest
generation technology and has a strong position in the market, with
more than 1000 units delivered up to now.
DIRECTORS' INFORMATION
Jonathan (Jon) Bridel, Non-Executive Chairman (57)
Jon is a Guernsey resident and is currently a non-executive
director of SME Credit Realisation Fund Limited (in wind down)
which is listed on the Main Market of the London Stock Exchange.
Other companies include Fair Oaks Income Fund Limited. Jon was
previously Managing Director of Royal Bank of Canada's investment
businesses in the Channel Islands and served as a director on other
RBC companies including RBC Regent Fund Managers Limited. Prior to
joining RBC, Jon served in a number of senior management positions
in banking, specialising in credit and corporate finance and
private businesses as Chief Financial Officer in London, Australia
and Guernsey having previously worked at Price Waterhouse Corporate
Finance in London.
Jon graduated from the University of Durham with a degree of
Master of Business Administration, holds qualifications from the
Institute of Chartered Accountants in England and Wales (1987)
where he is a Fellow, the Chartered Institute of Marketing and the
Australian Institute of Company Directors. Jon is a Chartered
Marketer and a Member of the Chartered Institute of Marketing, a
Chartered Director and Fellow of the Institute of Directors and a
Chartered Fellow of the Chartered Institute for Securities and
Investment.
Jeremy Thompson, Non-Executive Director (67)
Jeremy Thompson is a Guernsey resident with sector experience in
Finance, Telecoms, Aerospace and Oil & Gas. He acts as a
non-executive director to a number of businesses which include
three private equity funds and to an Investment Manager serving the
listed NextEnergy Solar Fund Limited. In addition, Jeremy is also a
non-executive director of London listed Riverstone Energy Limited.
Between 2005 and 2009 he was a director of multiple businesses
within a London based private equity group. This entailed board
positions on both private, listed and SPV companies and highly
successful exits. Prior to that he was CEO of four autonomous
global businesses within Cable & Wireless PLC and earlier held
CEO roles within the Dowty Group. Jeremy has studied and worked in
the UK, USA and Germany.
Jeremy currently serves as chairman of the States of Guernsey
Renewable Energy Team and is a commissioner of the Alderney
Gambling Control Commission. He is also an independent member of
the Guernsey Tax Tribunal panel. Jeremy is an engineering graduate
of Brunel (B.Sc) and Cranfield (MBA) Universities and attended the
UK's senior defence course (Royal College of Defence Studies). He
holds the Institute of Directors (IoD) Certificate and Diploma in
Company Direction and is an associate of the Chartered Institute of
Arbitration. He completed an M.Sc in Corporate Governance in 2016
and qualified as a Chartered Company Secretary in 2017.
Harald Brauns, Non-Executive Director (68)
Harald is a German banker with extensive experience in the
specialised lending sector. He joined NORD/LB Hannover, Germany in
1977 with a first engagement in the shipping segment. In 1985 he
started the aircraft finance activities for the bank from scratch.
As the Global Head of Aircraft Finance, he built successively a
team of more than 40 dedicated aviation experts located in
Hannover, New York and Singapore. Focused on an asset-based
business model with sophisticated solutions for selected clients he
and his team advanced to global leaders in commercial aircraft
finance with an exposure of well above US$ 10 billion split over a
portfolio of 650 aircraft assets. After more than 35 years in the
aviation industry Harald retired in October 2019. He is a resident
in Germany and was appointed as a non-executive director of the
Company with effect from 1 November 2019.
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
These are the principal risks and uncertainties that the Group
is facing and expects to continue facing in the second half of
2022.
Geopolitical and economic risks
The Company leases aircraft to a customer in Thailand exposing
it to (i) Thailand's varying economic, social, legal and
geopolitical risks, (ii) instability of Thailand markets and (iii)
the impact of global health pandemics and other global market
disruptions. The Directors continue to monitor the development of C
OVID -19 and are continuing to assess the impact on the Company.
Exposure to Thailand's jurisdiction may adversely affect the
Company's future performance, position and growth potential if
Thailand's economy does not perform well or if laws and regulations
that have an adverse impact on the aviation industry are passed in
Thailand. The adequacy and timeliness of the Company's response to
emerging risks in this jurisdiction is of critical importance to
the mitigation of their potential impact on the Company.
The Geopolitical risk surrounding the Russian invasion of
Ukraine and the subsequent fall-out have the potential to impact
travel and/or travellers' willingness to travel which in turn could
impact the volume of traffic to and from Thailand.
Exposure to the commercial airline industry
As a supplier to and partner of the airline industry, the Group
is exposed to the financial condition of the airline industry as it
leases its aircraft to commercial airline customers. The financial
condition of the airline industry is affected by, among other
things, geopolitical events, outbreaks of communicable pandemic
diseases and natural disasters, fuel costs and the demand for air
travel. To the extent that any of these factors adversely affect
the airline industry they may result in (i) downward pressure on
lease rates and aircraft values, (ii) higher incidences of lessee
defaults, restructuring, and repossessions and (iii) inability to
lease aircraft on commercially acceptable terms.
Thai Airways
Thai went into debt rehabilitation on 27 May 2020 and the
business rehabilitation plan was approved on 15 June 2021 by the
Central Bankruptcy Court of Thailand. There is risk that the
business rehabilitation plan does not achieve the desired results,
and this would have an adverse impact on the entity's lease
arrangements with Thai Airways which is the core source of income
for the Group.
The continuing impact of COVID-19 and the conflict between
Russia and Ukraine is likely to impact passenger numbers for Thai
given the reduced Chinese, Russia and regional demand. This is
particularly relevant for the Group given the aircraft leased to
Thai Airways is under a PBH arrangement up to 31 December 2022.
There is no guarantee that the Group will continue to receive any
rental payments from Thai Airways during this period.
COVID-19 Impact
The COVID-19 pandemic continues to put a significant burden on
the airline industry. Even as travel bans are gradually being
lifted, it will take years until capacity and numbers of passenger
return to pre-COVID-19 levels. Expectations are that capacity will
not return to pre-COVID-19 levels before 2024. This uncertainty as
to when capacity will return to normal levels and the possibility
of further strains which could again result in lockdowns and travel
bans pose a risk to the Group.
Asset risk
The Company's Assets as at period end comprise of two Boeing
787-8 aircraft. The Group bears the risk of selling or re-leasing
the aircraft in its fleet at the end of their lease terms or if the
lease is terminated. If demand for aircraft decreases market lease
rates may fall, and should such conditions continue for an extended
period, it could affect the market value of aircraft in the fleet
and may result in an impairment charge. The Directors have engaged
an asset manager with appropriate experience of the aviation
industry to manage the fleet and remarket or sell aircraft as
required to reduce this risk. Any lasting impact of the COVID-19
situation on both aircraft demand and lease rates are at present
unknown.
There is no guarantee that, upon expiry or cessation of the
leases, the Assets could be sold or re-leased for an amount that
would enable shareholders to realise a capital profit on their
investment or to avoid a loss. Costs regarding any future
re-leasing of the assets would depend upon various economic factors
and would be determinable only upon an individual re-leasing event.
Potential reconfiguration costs could in certain circumstances be
substantial.
Key personnel risk
The ability of the Company to achieve its investment objective
is significantly dependent upon the advice of certain key personnel
at DS Aviation GmbH & Co. KG; there is no guarantee that such
personnel will be available to provide services to the Company for
the scheduled term of the Leases or following the termination of
the Lease. However, Key Man clauses within the Asset Management
agreement do provide a base line level of protection against this
risk.
Credit risk & counterparty risk
Credit risk is the risk that a significant counterparty will
default on its contractual obligations. The Group's most
significant counterparty is Thai Airways as lessee and provider of
income and DekaBank Deutsche Girozentrale ('DekaBank') as holder of
the Group's cash and restricted cash. The lessee does not maintain
a credit rating. Thai Airways is currently implementing a
rehabilitation plan and to date things are going well with Thai
having made significant improvements. The Moody's credit rating of
DekaBank is Aa2 (2021: Aa2).
There is no guarantee that the business rehabilitation process
of Thai Airways will continue to be successful even though
developments to date have been positive. Failure of any material
part of the business rehabilitation plan may have an adverse impact
on Thai's ability to comply with its obligations under the LOI
entered into during March 2021 and the subsequent amended lease
agreement entered into in 2022.
Any failure by Thai Airways to pay any amounts when due could
have an adverse effect on the Group's ability to comply with its
obligations under the DekaBank loan agreements and could result in
the lenders enforcing their security and selling the relevant
Assets on the market, potentially negatively impacting the returns
to investors. In mitigation, Thai Airways is an international
full-service carrier and is important to Thailand's economy and as
such it is unlikely that the Government will not provide it with
the necessary support to see it through its restructure. However,
there is no guarantee and hence a significant risk remains.
Liquidity risk
In order to finance the purchase of the Assets, the Group
entered into loan agreements. Pursuant to the loan agreements, the
lenders are given first ranking security over the Assets. Under the
provisions of each of the loan agreements, the Borrowers are
required to comply with loan covenants and undertakings. A failure
to comply with such covenants or undertakings may result in the
relevant lenders recalling the relevant loan. In such
circumstances, the Group may be required to remarket the relevant
Asset (either sell or enter into a subsequent lease) to repay the
outstanding relevant loan and/or re-negotiate the loan terms with
the relevant lender.
Boeing
Company exposure to Boeing in terms of ongoing guarantees and
commitments could be negatively impacted with any problems Boeing
faces with its aircraft. Problems for Boeing may result in it
failing to fulfil its obligations.
Rolls Royce
Company exposure to Rolls Royce in terms of ongoing guarantees
and commitments could be negatively impacted with the Trent 1000
engine issues and as yet the financial impact upon Rolls Royce in
terms of financial compensation, loss of capacity and loss of
orders is not known. The Company believes that its engines will
actually benefit from the current maintenance and refurbishments
underway. Announcements by Rolls Royce have implied that the low
pressure turbine and other issues are now under control.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules ("the DTR") of the UK's Financial Conduct
Authority ("the UK FCA").
In preparing the condensed set of consolidated financial
statements included within the half-yearly financial report, the
directors are required to:
-- prepare and present the condensed set of consolidated
financial statements in accordance with IAS 34 Interim Financial
Reporting issued by the International Accounting Standards Board
('IASB') and the DTR of the UK FCA;
-- ensure the condensed set of consolidated financial statements has adequate disclosures;
-- select and apply appropriate accounting policies; and
-- make accounting estimates that are reasonable in the circumstances.
-- assess the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the Group or to cease operations, or
have no realistic alternative but to do so.
The directors are responsible for designing, implementing and
maintaining such internal controls as they determine is necessary
to enable the preparation of the condensed set of consolidated
financial statements that is free from material misstatement
whether due to fraud or error.
We confirm that to the best of our knowledge:
(1) The condensed set of consolidated financial statements
included within the half-yearly financial report of DP Aircraft I
Limited for the six months ended 30 June 2022 ("the interim
financial information") which comprises condensed consolidated
statement of comprehensive income, condensed consolidated statement
of financial position, condensed consolidated statement of cash
flows, condensed consolidated statement of changes in equity and
the related explanatory notes, have been presented and prepared in
accordance with IAS 34, Interim Financial Reporting, as issued by
the IASB, and the DTR of the UK FCA .
(2) The interim financial information presented, as required by
the DTR of the UK FCA, includes:
a. an indication of important events that have occurred during
the first six months of the financial year, and their impact on the
condensed set of interim financial statements;
b. a description of the principal risks and uncertainties for
the remaining six months of the financial year;
c. related parties' transactions that have taken place in the
first six months of the current financial year and that have
materially affected the financial position or the performance of
the enterprise during that period; and
d. any changes in the related parties' transactions described in
the last annual report that could have a material effect on the
financial position or performance of the enterprise in the first
six months of the current financial year.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Group's
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions
On behalf of the Board
Director Director
INDEPENT REVIEW REPORT TO THE MEMBERS OF DP AIRCRAFT I
LIMITED
Conclusion
We have been engaged by the Group to review the Group's
condensed set of consolidated financial statements in the
half-yearly financial report for the six months ended 30 June 2022
which comprises condensed consolidated statement of comprehensive
income, condensed consolidated statement of financial position,
condensed consolidated statement of cash flows, condensed
consolidated statement of changes in equity a summary of
significant accounting policies and other explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of consolidated
financial statements in the half-yearly financial report for the
six months ended 30 June 2022 is not prepared, in all material
respects in accordance with International Accounting Standard 34
Interim Financial Reporting ("IAS 34") as issued by the
International Accounting Standards Board ("IASB") and the
Disclosure Guidance and Transparency Rules ("the DTR") of the UK's
Financial Conduct Authority ("the UK FCA").
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued by the IASB. A review of interim
financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and
applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We read the other information contained in the half-yearly
financial report to identify material inconsistencies with the
information in the condensed set of consolidated financial
statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the review. If
we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention that causes us to believe that the directors have
inappropriately adopted the going concern basis of accounting, or
that the directors have identified material uncertainties relating
to going concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However, future events or
conditions may cause the Group to cease to continue as a going
concern, and the above conclusions are not a guarantee that the
Group will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The directors are responsible for preparing the condensed set of
consolidated financial statements included in the half-yearly
financial report in accordance with IAS 34 as issued by the
IASB.
The annual financial statements of the Group for the year ended
31 December 2021 are prepared in accordance with international
accounting standards.
INDEPENT REVIEW REPORT TO THE MEMBERS OF DP AIRCRAFT I LIMITED
(CONTINUED)
Directors' responsibilities (continued)
In preparing the condensed set of consolidated financial
statements, the directors are responsible for assessing the Group's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but
to do so.
Our responsibility
Our responsibility is to express to the Group a conclusion on
the condensed set of consolidated financial statements in the
half-yearly financial report based on our review.
Our conclusion, including our conclusions relating to going
concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion section of
this report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Group in accordance with the
terms of our engagement to assist the Group in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Group those matters we are
required to state to it in this report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Group for our review work,
for this report, or for the conclusions we have reached.
KPMG
28 September 2022
Chartered Accountants
1 Harbourmaster Place
IFSC
Dublin
Ireland
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
For the six-month period ended 30 June 2022
30 June 2022 30 June 2021
(unaudited) (unaudited)
Notes US$ US$
Revenue
Lease rental income 4 7,575,435 12,915,197
Expenses
Asset management fees 21 (233,862) (525,325)
General and administrative expenses 5 (566,886) (1,750,546)
Depreciation 9 (478,271) (87,581)
Provision on straight lining lease
asset 12 (1,106,575) (12,508,499)
(2,385,594) (14,871,951)
Operating Profit/(Loss) 5,189,841 (1,956,754)
Net losses on financial assets at
fair value 10 - (8,547,935)
Gain on derivatives at fair value 19 - 459,015
Loss on loss of control of subsidiary
undertakings 2 - (9,874,940)
Dividend income - 9,549
Finance costs 6 (2,194,840) (4,314,137)
Finance income 9,158 11,693
Net finance costs (2,185,682) (22,256,755)
Profit/(Loss) before tax 3,004,159 (24,213,509)
Taxation 7 (5,563) 42,078
Profit/(Loss) for the period 2,998,596 (24,171,431)
-------------------------------------------------- ------ ------------ -------------
Total Comprehensive Income/(Loss)
for the period 2,998,596 (24,171,431)
-------------------------------------------------- ------ ------------ -------------
US$ US$
Profit/(Loss) per Share for the period
- basic and diluted 8 0.0143 (0.1155)
-------------------------------------------------- ------ ------------ -------------
All the items in the above statement derive from continuing
operations.
The notes form an integral part of these interim financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
As at 30 June 2022
30 June 2022 31 December
2021
(unaudited) (audited)
Notes US$ US$
NON-CURRENT ASSETS
PPE - Aircraft & Related Components 9 125,946,569 126,424,840
Restricted cash 11 14,843,101 14,465,329
Total non-current assets 140,789,670 140,890,169
CURRENT ASSETS
Cash and cash equivalents - available
for use 913,380 1,179,211
Restricted cash 11 2,301,761 2,788,517
Trade and other receivables 12 9,308,792 5,023,512
Total current assets 12,523,933 8,991,240
TOTAL ASSETS 153,313,603 149,881,409
---------------------------------------- ------ -------------- --------------
EQUITY
Share capital 17 210,556,652 210,556,652
Accumulated losses (171,205,934) (174,204,530)
Total equity 39,350,718 36,352,122
NON-CURRENT LIABILITIES
Bank borrowings 16 90,396,871 98,304,863
Maintenance reserves liability 13 14,829,296 14,460,682
Total non-current liabilities 105,226,167 112,765,545
CURRENT LIABILITIES
Bank borrowings 16 8,049,720 136,010
Share based payment liability 15 344,896 310,715
Trade and other payables 14 342,102 317,017
---------------------------------------- ------ -------------- --------------
Total current liabilities 8,736,718 763,742
TOTAL LIABILITIES 113,962,885 113,529,287
---------------------------------------- ------ -------------- --------------
TOTAL EQUITY AND LIABILITIES 153,313,603 149,881,409
---------------------------------------- ------ -------------- --------------
The financial statements were approved by the Board of Directors
and were authorised for issue on 28 September 2022. They were
signed on its behalf by:
Jon Bridel Jeremy Thompson
Chairman Director
The notes form an integral part of these interim financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
For the six-month period ended 30 June 2022
30 June 2022 30 June 2021
(unaudited) (unaudited)
US$ US$
Profit/(Loss) for the period 2,998,596 (24,171,431)
Adjusted for:
Depreciation 478,271 87,581
Finance costs 2,194,840 4,314,137
Income tax expense/(recovery) 5,563 (42,078)
Loss on loss of control of subsidiary
undertakings - 9,874,940
Net losses on financial assets at fair
value - 8,547,935
Gain on derivatives at fair value - (459,015)
Provision on straight lining lease asset 1,106,575 12,508,499
Straight-lining rental income (4,340,631) (12,901,531)
Changes in:
Increase in maintenance provision 368,614 -
Increase in trade and other payables 19,522 270,978
Increase in share based payment liability 34,181 -
Increase in trade and other receivables (1,051,224) (1,738)
NET CASH FLOW FROM/(USED IN) OPERATING ACTIVITIES 1,814,307 (1,971,723)
--------------------------------------------------------- ------------- -------------
INVESTING ACTIVITIES
Sale proceeds of investments held at
fair value - 4,069,880
Cash impact on loss of control of subsidiary
undertakings - (5,456,182)
Restricted cash movement 108,984 1,490,797
NET CASH FLOW FROM/(USED IN) INVESTING ACTIVITIES 108,984 104,495
--------------------------------------------------------- ------------- -------------
FINANCING ACTIVITIES
Bank loan principal repaid - (274,173)
Bank loan interest paid (2,189,122) (2,469,951)
Swap interest paid - (301,761)
NET CASH FLOW USED IN FINANCING ACTIVITIES (2,189,122) (3,045,885)
--------------------------------------------------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 1,179,211 6,949,167
Decrease in cash and cash equivalents (265,831) (4,913,113)
--------------------------------------------------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT OF
PERIOD 913,380 2,036,054
--------------------------------------------------------- ------------- -------------
The notes form an integral part of these interim financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED)
For the six-month period ended 30 June 2022
Share Accumulated Total
Capital Losses Equity
US$ US$ US$
As at 1 January 2021 210,556,652 (152,345,457) 58,211,195
Total comprehensive Loss for
the period
Loss for the period - (24,171,431) (24,171,431)
-------------------------------- ------------ -------------- -------------
Total Comprehensive Loss - (24,171,431) (24,171,431)
-------------------------------- ------------ -------------- -------------
As at 30 June 2021 (unaudited) 210,556,652 (176,516,888) 34,039,764
-------------------------------- ------------ -------------- -------------
Share Accumulated Total
Capital Losses Equity
US$ US$ US$
As at 1 January 2022 210,556,652 (174,204,530) 36,352,122
Total comprehensive Income
for the period
Profit for the period - 2,998,596 2,998,596
-------------------------------- ------------ -------------- -----------
Total Comprehensive Income - 2,998,596 2,998,596
-------------------------------- ------------ -------------- -----------
As at 30 June 2022 (unaudited) 210,556,652 (171,205,934) 39,350,718
-------------------------------- ------------ -------------- -----------
The notes form an integral part of these interim financial
statements.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
For the six-month period ended 30 June 2022
1) GENERAL INFORMATION
The unaudited condensed consolidated interim financial
statements (the 'interim financial statements') incorporate the
results of the Company and that of wholly owned subsidiary entities
DP Aircraft Guernsey III Limited, DP Aircraft Guernsey IV Limited
(collectively and hereinafter, the 'Borrowers'), each being a
Guernsey incorporated company limited by shares and one
intermediate lessor company, DP Aircraft UK Limited (the 'Lessor'),
a UK incorporated private limited company respectively. The Company
and its subsidiaries (the Borrowers and the Lessor) comprise the
Group.
DP Aircraft I Limited (the 'Company') was incorporated on 5 July
2013 with registered number 56941. The Company is admitted to
trading on the Specialist Fund Segment of the London Stock
Exchange.
The Share Capital of the Company comprises 209,333,333 Ordinary
Shares of no-par value and one Subordinated Administrative Share of
no-par value.
The Company's investment objective is to obtain income and
capital returns for its shareholders by acquiring, leasing and
then, when the Board considers it appropriate, selling
aircraft.
2) SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The interim financial statements for the period 1 January 2022
to 30 June 2022 have been prepared in accordance with International
Accounting Standard ('IAS') 34 'Interim Financial Reporting' issued
by the International Accounting Standards Board ('IASB') and the
Disclosure and Transparency Rules (the 'DTRs') of the UK's
Financial Conduct Authority (the 'FCA').
The interim financial statements do not include all the
information and disclosures required in the annual financial
statements and should be read in conjunction with the Group's
annual report and consolidated financial statements for the year
ended 31 December 2021. The Group's annual financial statements for
the year ended 31 December 2021 have been prepared in accordance
with International Financial Reporting Standards ('IFRS') issued by
the IASB and are available on the Company's website or from the
Company Secretary.
The interim financial statements have been prepared on the basis
of the accounting policies set out in the Group's annual
consolidated financial statements for the year ended 31 December
2021 but also taking into account any new policies that will be
applied in the Group's annual consolidated financial statements for
the year ended 31 December 2022.
These are non-statutory financial statements. The last statutory
financial statements were issued on 27 April 2022.
The Directors have concluded that there are no new standards,
amendments to standards and interpretations that are effective for
annual periods beginning on 1 January 2021 which have a material
impact on the interim financial statements.
In the prior year the Group lost control of DP Aircraft Ireland
Limited, DP Aircraft Guernsey I Limited and DP Aircraft Guernsey II
Limited which resulted in derecognition of the assets and
liabilities of these entities from 26 February 2021, and
recognition of a loss on loss of control of US$ 9,874,940 in the
Statement of Comprehensive Income. DP Aircraft Guernsey I Limited
and DP Aircraft Guernsey II Limited are now in voluntary
liquidation.
Going concern
The Directors believe that it is appropriate to prepare these
interim financial statements on the going concern basis due to
current cash flow forecasts which comprise of PBH rentals until 31
December 2022 with fixed monthly rentals thereafter which show that
the Group has sufficient cash and resources to cover operating
costs for a period of at least 12 months from the signing of these
interim financial statement.
In making this conclusion, the Directors have also taken into
account:-
-- the positive outlook for Thai Airways with both Thai aircraft
in a full return to service condition and earning materially more
power by the hour revenue to date than anticipated. There is an
expectation, based on commentary by the Thai Administrator
responsible for the rehabilitation of Thai Airways, that Thai
Airways will continue to be viable and will be able to meet the
terms of the revised lease agreements. This position regarding
Thai's viability is further enhanced by the announcement on 9
August that Thai state owned banks will provide new loans and cash
infusions to Thai. Furthermore, the Thai Government has stated that
it plans to preserve its 40% holding in Thai which may grow further
but will not exceed 50%;
-- the expectation that DekaBank which made loans to the Group
(with certain loan concessions) will continue supporting the Group.
Currently the Group is deferring repayments of principal and this
will continue up to 31 December 2022 per the amended loan
agreements in place. Furthermore, in accordance with the same
amended and restated loan agreements, the Group and DekaBank will
enter discussions in the last quarter of 2022 to determine how to
schedule interest payments, principal repayments and a final
balloon repayment, having regard for both the income being received
by the Group in respect of the Thai aircraft, and the running costs
of the Group and its subsidiaries. Effectively, based on these
amended and restated loan agreements in place, post the PBH period
monthly payments of interest and principal will be limited to net
lease rental monies available for application towards the loan, and
the final balloon repayment will be settled out of proceeds from
sale of the aircraft at the end of the lease term; and
-- the successful equity fund raise in July 2022. The Group
successfully concluded a US$750,000 equity raise which was
supported by many of the largest shareholders and will be used for
working capital purposes.
The Directors are not aware of any material uncertainties that
may cast significant doubt upon the Group's ability to continue as
a going concern.
Prior year reclassification adjustment
Prior year restricted cash comprising maintenance reserves of
US$ 14,465,329 as at 31 December 2021 has been reclassified from
current assets to non-current assets, the prior year balance sheet
presentation has been updated to reflect this adjustment. The
reclassification adjustment has no effect on prior year retained
earnings.
3) SIGNIFICANT JUDGEMENTS AND ESTIMATES
The preparation of unaudited condensed consolidated interim
financial statements in compliance with IAS 34 requires management
to make judgements, estimates and assumptions about the carrying
amount of assets and liabilities that are not readily apparent from
their sources.
Information about assumptions and estimation uncertainty at 30
June 2022 that have a significant risk of resulting in a material
adjustment to the carrying amounts of assets and liabilities in the
interim financial statements for the period are:
Significant estimates
Impairment of property, plant and equipment
As with each reporting date, but more relevant in light of the
developments of COVID-19, a detailed impairment assessment of the
aircraft has been undertaken.
IFRS requires an assessment of the aircraft carrying value
versus the recoverable amount i.e., the higher of the value in use
and fair value less cost to sell. In considering the impairment of
the Thai aircraft, the board concluded that the fair value less
costs to sell was the recoverable amount. The fair value less costs
to sell used in the assessment is based on the full-life market
value of each aircraft as determined by 2 independent appraisers
given the aircraft have a lease with a full-life return condition
attached to them. The board considered it appropriate not to apply
any discounts and adjustments for these aircraft given the specific
circumstances of these aircraft.
Thai Aircraft
The board considered all possible valuation ranges and concluded
that the aircraft were not impaired as at 30 June 2022 given the
recoverable amount was greater than the book value of the aircraft.
Therefore, no impairment loss has been recognised during the period
ended 30 June 2022 (30 June 2021: US$ nil).
The board also considered if there was an indication that the
prior periods' Thai aircraft accumulated impairment of US$
58,839,697 had reversed in full or partially during the period and
concluded that based on the possible ranges of the aircraft
valuations, there was no reversal during the period ended 30 June
2022.
Depreciation of aircraft
The Group depreciates the Assets on a straight-line basis over
the remaining lease life, taking into consideration the estimated
residual value at the end of the lease term. In making a judgement
regarding these estimates the Directors will consider previous
sales of similar aircraft and other available aviation information.
The Group engages three Independent Expert Valuers each year to
provide a valuation of the Assets and take into account the average
of the three valuations provided. In performing their valuations,
the Independent Expert Valuers will have regard to factors such as
the prevailing market conditions (which may impact on the resale
value of the Assets), the leases (including the scheduled rental
payments and remaining scheduled term of the leases) and the
creditworthiness of the lessees. Accordingly, any early termination
of the leases may impact on the valuation of the Assets.
The two aircraft leased to Thai Airways International were
acquired in 2015 and had a useful economic life of 12 years at
acquisition. The useful economic life since acquisition of 12 years
is unchanged as at period end. As at 30 June 2022, the remaining
useful life of the aircraft is 4.5 years (31 December 2021: 5
years).
Residual value estimates of the Aircraft were determined by the
full life inflated values at the end of the leases from three
external valuations and discounted by the inflation rate
incorporated into those valuations.
The full life inflated value is the appraiser's opinion of the
underlying economic value of the aircraft in an open, unrestricted,
stable market environment with a reasonable balance of supply and
demand and assumes full consideration of its "highest and best
use". An aircraft's full life value is founded in the historical
trend of values and in the projection of value trend and presumes
an arm's-length, cash transaction between willing, able and
knowledgeable parties, acting prudently, with an absence of duress
and with a reasonable period of time available for marketing. The
full life inflated values used within the interim financial
statements match up the two lease termination dates and have been
discounted by the inflation rate incorporated into the valuations.
The residual value of the aircraft does not represent the current
fair value of the aircraft.
The residual value estimates at the end of each year are used to
determine the aircraft depreciation of future periods. The residual
value estimates of the leases for the aircraft as at 31 December
2021 was US$ 121,750,421 (31 December 2020: US$125,572,493),
carrying value as at 31 December 2021 was US$ 126,424,840 (31
December 2020: US$ 126,000,000). As a result, the year ending 31
December 2022 and future aircraft depreciation charges for
aircraft, with all other inputs staying constant, will be US$
956,542 (2021: US$ 175,160). The actual aircraft depreciation
charge for 2023 onwards will vary based on the residual value
estimates as at 31 December 2022.
Lease term
The Thai lease agreements were amended such that the lease term
may be extended by three years to 9 December 2029 (the "Extension
Period") with further scaled back monthly lease payments starting
from January 2027, subject to the Group retaining a right of early
termination in December 2026 after consulting the Lenders. The
Directors have applied judgement to determine the lease term i.e.,
period to 9 December 2026 or period to 9 December 2029. At
commencement of the amended leases, there was no reasonable
certainty that the lenders would approve an extension of the lease
given decision would depend on facts and circumstances around the
time of extension. Therefore, the Directors concluded that the
lease term was the period to 9 December 2026, same period as before
the lease modification
4) LEASE RENTAL INCOME
Period ended Period ended
30 June 2022 30 June 2021
US$ US$
Variable rent (PBH rent) 3,234,804 13,666
Fixed (straight-lining) rental
income 4,340,631 12,901,531
Total lease rental
income 7,575,435 12,915,197
--------------------------------- ---------- -------------------- --------------------
All lease rental income was derived from Thai Airways and the
related two Boeing 787-8 aircraft leased to them.
The lease terms provide for a power by the hour ('PBH')
arrangement until 31 December 2022 (i.e., rent will be payable by
reference to actual monthly utilisation of the Thai aircraft), with
monthly fixed lease payments of US$ 510,000 per month thereafter
until 2026. The monthly PBH rent amount is capped at US$
510,000.
The lease term may be extended by three years to 9 December 2029
(the "Extension Period") with further scaled back monthly lease
payments starting from January 2027, the extension is however
subject to the Group retaining a right of early termination in
December 2026 after consulting the Lenders. As detailed in note 3,
the lease term was determined to be the period to 9 December 2026,
see note 3 for further details.
The contractual fixed future lease rentals to be received under
non-cancellable operating leases effective as at the reporting date
are:
Boeing 787-8 Boeing 787-8 Total
Serial No: Serial No:
35320 36110
30 June US$ US$ US$
2022
< 1 year 3,060,000 3,060,000 6,120,000
1 to 2 years 6,120,000 6,120,000 12,240,000
2 to 3 years 6,120,000 6,120,000 12,240,000
3 to 4 years 6,120,000 6,120,000 12,240,000
4 to 5 years 2,698,065 2,007,097 4,705,162
>5 years - - -
24,118,065 23,427,097 47,545,162
-------------- ------------- ------------- -----------
Boeing 787-8 Boeing 787-8 Total
Serial No: Serial No:
35320 36110
30 June US$ US$ US$
2021
< 1 year - - -
1 to 2 years 3,060,000 3,060,000 6,120,000
2 to 3 years 6,120,000 6,120,000 12,240,000
3 to 4 years 6,120,000 6,120,000 12,240,000
4 to 5 years 6,120,000 6,120,000 12,240,000
>5 years 2,698,065 2,035,846 4,733,911
24,118,065 23,455,846 47,573,911
-------------- ------------- ------------- -----------
5) GENERAL AND ADMINISTRATIVE EXPENSES
30 June 30 June 2021
2022
(unaudited) (unaudited)
US$ US$
Administration fees 166,472 232,631
Aircraft agency fees 5,556 5,951
Aircraft security trustee fees 5,934 8,918
Aircraft valuation fees 4,119 2,874
Audit fees 41,089 41,585
Broker fees on sale of NAS
shares - 8,140
Company broker fees 83,951 83,951
Directors' fees and expenses 112,438 119,063
Foreign exchange losses (6,292) 412
Insurance costs, including
directors' 54,355 12,492
IT and printing costs 16,970 6,154
Legal fees 3,157 4,724
Liquidation costs in relation
to DPAG I & II - 19,488
Miscellaneous costs 4,157 8,887
Registrar fees 12,253 9,567
Regulatory fees 5,947 11,700
Restructuring fees in relation
to NAS 20,175 334,774
Restructuring fees in relation
to Thai 34,502 835,299
Tax advice fees 2,103 3,936
Total general and administrative expenses 566,886 1,750,546
-------------------------------------------- ------------ -------------
6) FINANCE COSTS
30 June 2022 30 June 2021
(unaudited) (unaudited)
US$ US$
Loan interest 2,194,840 3,146,054
Total finance costs at effective
interest rate* 2,194,840 3,146,054
Swap interest paid and payable - 228,277
Swap breakage costs - 939,806
Total finance costs 2,194,840 4,314,137
----------------------------------- ------------- -------------
* On liabilities measured at amortised cost
7) TAXATION
With the exception of DP Aircraft UK Limited, all companies
within the Group are exempt from taxation in Guernsey and are
charged an annual exemption fee of GBP1,200 each (2021:
GBP1,200).
DP Aircraft UK Limited is subject to taxation at the applicable
rate in the United Kingdom. The tax charge during the period ended
30 June 2022 was US$ 5,563 (period 1 January 2021 to 30 June 2021:
tax credit of US$ 42,078). The Directors do not expect the taxation
payable or refundable to be material to the Group.
A tax reconciliation has not been presented in these interim
financial statements as the effective tax rate of 0.14% is not
material and the reconciliation is not relevant to the
understanding of the Company's results for the period end.
8) PROFIT/(LOSS) PER SHARE
30 June 2022 30 June 2021
(unaudited) (unaudited)
US$ US$
Profit/(Loss) for the period 2,998,596 (24,171,431)
Weighted average number of shares 209,333,333 209,333,333
Profit/(Loss) per share 0.0143 (0.1155)
------------------------------------ ------------- -------------
There are no instruments in issue that could potentially dilute
earnings per ordinary share in future periods.
9) PROPERTY, PLANT & EQUIPMENT - AIRCRAFT & RELATED COMPONENTS
Aircraft Lease Premium Total
30 June 2022 (unaudited) (unaudited) (unaudited)
US$ US$ US$
COST
As at 1 January and 30 June
2022 238,731,161 17,398,493 256,129,654
----------------------------- ------------ -------------- ------------
ACCUMULATED DEPRECIATION
As at 1 January 2022 53,466,624 8,200,047 61,666,671
Charge for the period 478,271 - 478,271
As at 30 June 2022 53,944,895 8,200,047 62,144,942
----------------------------- ------------ -------------- ------------
IMPAIRMENT
As at 1 January 2022 58,839,697 9,198,446 68,038,143
Charge for the period - - -
As at 30 June 2022 58,839,697 9,198,446 68,038,143
----------------------------- ------------ -------------- ------------
CARRYING AMOUNT
As at 30 June 2022 125,946,569 - 125,946,569
----------------------------- ------------ -------------- ------------
Aircraft Lease Premium Total
31 December 2021 (audited) (audited) (audited)
US$ US$ US$
COST
As at 1 January and 31 December
2021 238,731,161 17,398,493 256,129,654
--------------------------------- ------------ -------------- ------------
ACCUMULATED DEPRECIATION
As at 1 January 2021 53,291,464 8,200,047 61,491,511
Charge for the period 175,160 - 175,160
As at 31 December 2021 53,466,624 8,200,047 61,666,671
--------------------------------- ------------ -------------- ------------
IMPAIRMENT
As at 1 January 2021 58,839,697 9,198,446 68,038,143
Charge for the period - - -
As at 31 December 2021 58,839,697 9,198,446 68,038,143
--------------------------------- ------------ -------------- ------------
CARRYING AMOUNT
As at 31 December 2021 126,424,840 - 126,424,840
--------------------------------- ------------ -------------- ------------
As detailed in note 3, as at 30 June 2022 there are no further
impairments to the aircraft. There are also no reversals of prior
year impairments.
The loans entered into by the Group to complete the purchase of
the two aircraft are cross collateralised. Each of the loans are
secured by way of security taken over each of the two aircraft.
10) INVESTMENTS HELD AT FAIR VALUE
30 June 2022 31 December
2021
(unaudited) (audited)
US$ US$
Opening balance - 15,630,526
Additions - -
Disposal proceeds - (4,069,880)
Realised loss - (1,252,152)
Unrealised fair value loss to
date of loss of control - (7,295,783)
Loss of control of subsidiary undertakings - (3,012,711)
Closing balance - -
--------------------------------------------- --------------- ------------
Fair value movement is made up as follows:
Realised loss - (1,252,152)
Unrealised loss - (7,295,783)
Closing balance - (8,547,935)
------------------ ------------
The investment in Norwegian Air Shuttle was derecognised in the
prior period as a result of loss of control of the assets and
liabilities of DP Aircraft Guernsey I Limited and DP Aircraft
Guernsey II Limited in the prior period.
11) RESTRICTED CASH
30 June 2022 31 December
2021
(unaudited) (audited)
US$ US$
Non-current assets
Maintenance reserves 14,843,101 14,465,329
------------------------ ------------- ------------
14,843,101 14,465,329
Current assets
Security deposit
accounts 90 90
Lease rental accounts 2,301,671 2,788,427
------------------------ ------------- ------------
2,301,761 2,788,517
Total restricted
cash 17,144,862 17,253,846
------------------------ ------------- ------------
Maintenance reserves collected, in line with the lease
agreement, are to be used solely to cover costs related to the
maintenance of the two Thai aircraft.
The majority of security deposits were transferred to Lease
Rental Accounts during the prior period and are being used to
service loan payments due to DekaBank in accordance with the
DekaBank financing arrangements. Monies received into the Lease
Rental Accounts during the PBH and fixed rent period are to be
transferred into Borrower Rental Accounts and applied in a specific
manner as agreed between DekaBank and the Group.
Access to the Lease Rental Accounts, Security deposit accounts
and Maintenance reserves accounts is physically restricted by
DekaBank therefore these monies are classified as restricted
cash.
12) TRADE AND OTHER RECEIVABLES
30 June 2022 31 December
2021
(unaudited) (audited)
US$ US$
Prepayments 46,523 110,996
Rent receivable 870,853 140,220
Reimbursable costs 280,000 -
Straight-lining lease asset 9,112,927 4,772,296
Total trade and other receivables 10,310,303 5,023,512
------------------------------------- ------------- ------------
Less : L ifetime Expected Credit
Loss provision
Straight-lining lease asset 1,001,511 -
----------------------------------- --- ---------- ----------
Total provision 1,001,511 -
---------------------------------- ---- ---------- ----------
Net trade and other receivables 9,308,792 5,023,512
----------------------------------------- ---------- ----------
The Group has assessed the straight-lining lease asset for
impairment. This balance represents the result of straight-lining
of future fixed Thai lease payments over the lease term. The Group
has performed an assessment on the rent receivable and the
straight-lining lease asset taking into account current and future
information relating to the airline industry as well as the lessee
specifically and concluded that the impairment provision as at 30
June 2022 is US$ 1,001,511 (31 December 2021: US$ nil). For the
remaining receivables, the Group has concluded that these are not
material thus any provision, if any, would also be immaterial and
so no further assessment is necessary.
Movements in the impairment provision for trade receivables are
as follows:
30 June 2022 31 December
2021
(unaudited) (audited)
US$ US$
Opening provision - 10,111,605
Increase during the period/year 1,106,575 12,508,499
Receivable written off (105,064) (22,620,104)
---------------------------------------- ------------- -------------
Closing provision 1,001,511 -
---------------------------------------- ------------- -------------
In the prior year, due to amendment of the lease agreements with
Thai, rental due between 1 January 2021 and 14 June 2021 of US$
12,508,499 was provided for and fully written off during the 2021
year together with the opening provision. In the current period the
provision increased by US$ 1,106,575 and rental due from Thai of
US$ 105,064 was written off as agreed per the Engine Exchange
Agreement entered into on 1 April 2022.
13) MAINTENANCE RESERVES LIABILITY
30 June 2022 31 December
2021
(unaudited) (audited)
US$ US$
Maintenance reserves -
Thai Airways 14,829,296 14,460,682
Total maintenance reserves 14,829,296 14,460,682
---------------------------------- -------------- -------------
Maintenance reserves liability relates to funds received from
Thai Airways reserved for covering the cost of maintenance.
14) TRADE AND OTHER PAYABLES
30 June 2022 31 December
2021
(unaudited) (audited)
US$ US$
Accruals and other
payables 336,539 317,017
Corporation tax payable 5,563 -
------------
Total trade and other
payables 342,102 317,017
-------------------------- ------------- ------------
15) SHARE BASED PAYMENT LIABILITY
30 June 31 December
2022 2021
(unaudited) (audited)
US$ US$
Asset manager fees share-based payment
liability 138,790 92,018
Director fees share-based payment liability 206,106 218,697
344,896 310,715
---- --------------------------------------------- ------------ ------------
Currently 20% of asset management fees, 10% of director annual
base fees and all additional director fees above the base fee are
being deferred and the intention is for these deferred fees to be
settled by way of issue of shares of the Company in the future at a
share price to be determined in the future. There is however no
formal agreements in place to this effect therefore reported fees
due as share based payment liability given might be settled in cash
future circumstances permitting. There has been no settlement of
any of the fees via the issue of equity in the current period (30
June 2021: US$ nil).
The share-based payment expense related to asset management fees
for the period is US$ 46,772 (30 June 2021: US$ 45,632) and this
forms part of the asset management fee line item in the Condensed
Statement of Comprehensive Income. Refer to note 21 for further
details.
The share-based payment expense related to director fees for the
period is US$ 11,045 (30 June 2021: US$ 11,906) and this forms part
of the general and administrative expenses line item in the
Condensed Statement of Comprehensive Income. Refer to note 20 for
further details.
16) BANK BORROWINGS
30 June 31 December
2022 2021
(unaudited) (audited)
US$ US$
Current liabilities: bank interest payable
and bank borrowings 8,049,720 136,010
Non-current liabilities: bank borrowings 90,396,871 98,304,863
------------
Total liabilities 98,446,591 98,440,873
--------------------------------------------- ------------ ------------
The borrowings are repayable as follows:
30 June 2022 31 December
2021
(unaudited) (audited)
US$ US$
Interest payable 141,728 136,010
Within one year 7,907,992 -
In two to five years 90,396,871 98,304,863
After five years - -
Total bank borrowings 98,446,591 98,440,873
------------------------ ------------- ------------
The table below analyses the movements in the Group's bank
borrowings:
30 June 2022 31 December
2021
(unaudited) (audited)
US$ US$
Opening balance 98,304,863 180,676,613
Loan modification adjustment - 432,976
Repayment of loan - (274,173)
Loss of control of subsidiary
undertakings - (82,530,553)
Principal bank borrowings 98,304,863 98,304,863
Interest payable 141,728 136,010
Total bank borrowings 98,446,591 98,440,873
--------------------------------- ------------- --------------
The table below sets out an analysis of net debt and the
movements in net debt for the period ended 30 June 2022 and 30 June
2021:
Cash and cash Derivative
equivalents Principal Interest Instrument Net Debt
US$ US$ US$ US$ US$
At 1 January
2022 1,179,211 (98,304,863) (136,010) - (97,261,662)
Cash flows (265,831) - 2,189,122 - 1,923,291
Non cash:-
Interest charge - - (2,194,840) - (2,194,840)
At 30 June
2022 913,380 (98,304,863) (141,728) - (97,533,211)
-------------- ------------- ------------ ------------ -------------
Cash and Derivative
cash equivalents Principal Interest Instrument* Net Debt
US$ US$ US$ US$ US$
At 1 January
2021 6,949,167 (180,676,613) (238,969) (4,257,198) (178,223,613)
Cash flows (5,769,956) 274,173 4,595,529 301,759 (598,495)
Non cash: -
Fair value movement - - - 459,015 459,015
Termination - - - 4,664,507 4,664,507
( 4,727,053
Interest charge - - ) (228,277) (4,955,330)
Penalty fees (939,806) (939,806)
Loan modification
adjustment - (432,976) - - (432,976)
Loss of control
of assets and
liabilities - 82,530,553 234,483 - 82,765,036
------------------ -------------- ------------ ------------- --------------
At 31 December
2021 1,179,211 (98,304,863) (136,010) - (97,261,662)
------------------ -------------- ------------ ------------- --------------
DekaBank Deutsche Girozentrale
During the year ended 31 December 2015 the Company utilised the
proceeds from the placing and the proceeds of two separate loans
from DekaBank Deutsche Girozentrale ('DekaBank') of US$ 78,500,000
each to fund the purchase of two Boeing 787-8 aircraft. The balance
on the loans at 30 June 2022 was US$ 98,446,591 (31 December 2021:
US$ 98,440,873).
The committed term of each loan was from the drawdown date until
the date falling twelve years from the Delivery Date of the
relevant Asset. Each Loan was to be amortised with repayments every
month in arrears over the term in amounts as set out in a schedule
agreed by the Company and the Lenders. Amortisation will be on an
annuity-style (i.e., mortgage-style) basis.
Interest on each DekaBank loan is payable in arrears on the last
day of each interest period, which is one month long. Interest on
the loan accrues at a fixed rate of 4.10 per cent including a
margin of 1.95 per cent per annum. If any amount is not paid by the
Borrower when due under the loan agreements, overdue interest will
accrue on such amount at the then current rate applicable to the
loan plus 2.0 per cent per annum. No overdue interest accrued on
unpaid amounts during the period as there was an agreement to defer
principal repayments as mentioned below. Note, the deferred
principal has its own interest terms different to the above.
The two DekaBank loans entered into by the Group to complete the
purchase of the two Thai aircraft are cross collateralised. Each of
the loan is secured by way of security taken over the two Thai
aircraft and enforce security over both Assets. This means that a
default on one loan places both aircraft at risk. Following the
enforcement of security and sale of the aircraft, the remaining
proceeds, if any, may be substantially lower than investors'
initial investment in the Company.
On 6 May 2021, subsequent to the new lease arrangements entered
into by the Company and Thai as described in note 4, the Company
and DekaBank have amended and restated the existing loan facility
agreements in respect of the Thai aircraft to accommodate the new
lease terms. Repayments of any principal will be deferred until the
end of the PBH arrangement, 31 December 2022; and the Company and
DekaBank will enter into discussions at that time to determine how
best to schedule interest payments, principal -
repayments and a final balloon repayment, having regard for both
the income being received by the Company in respect of the Thai
aircraft, and the running costs of the Company and its
subsidiaries. Effectively, post the PBH period repayment of
principal including the principal to be agreed as mentioned above
shall be deferred further and such deferred principal is to be
repaid only to the extent that amounts are available for
application towards such deferred principal.
From May 2021 interest is charged on the deferred principal at
the percentage rate per annum equal to the sum of five per cent
(5.0%) per annum (which, for the avoidance of doubt, includes the
Margin) plus LIBOR/SONIA for the applicable period (such rate to be
determined by the Facility Agent).
Prior to the loan amendment detailed above, the Company and
DekaBank had agreed that the Company would only be required to make
interest payments on its borrowings relating to the assets leased
to Thai, with no concomitant capital repayment obligation; and that
the Company would make no dividend payments while deferrals
remained outstanding under those borrowings.
The two loans related to the two Thai aircraft have a final
maturity date of 29 October 2026 and 9 December 2026
respectively.
17) SHARE CAPITAL
Period ended 30 June 2022 (unaudited) Subordinated
Administrative Ordinary
Share Shares Total
Issued and fully paid (no par Number Number Number
value):
Shares as at 1 January 2022 and
30 June 2022 1 209,333,333 209,333,334
---------------------------------------- --------------- ------------ ------------
US$ US$ US$
Share capital as at 1 January
2022 and 30 June 2022 1 210,556,651 210,556,652
---------------------------------------- --------------- ------------ ------------
Period ended 30 June 2021 (unaudited) Subordinated
Administrative Ordinary
Share Shares Total
Issued and fully paid (no par Number Number Number
value):
Shares as at 1 January 2021 and
30 June 2021 1 209,333,333 209,333,334
---------------------------------------- --------------- ------------ ------------
US$ US$ US$
Share capital as at 1 January
2022 and 30 June 2021 1 210,556,651 210,556,652
---------------------------------------- --------------- ------------ ------------
Subject to the applicable company law and the Company's Articles
of Incorporation, the Company may issue an unlimited number of
shares of par value and/or no-par value or a combination of
both.
The Subordinated Administrative Share is held by the Asset
Manager.
Holders of Subordinated Administrative Shares are not entitled
to participate in any dividends and other distributions of the
Company. On a winding up of the Company the holders of the
Subordinated Administrative Shares are entitled to an amount out of
the surplus assets available for distribution equal to the amount
paid up, or credited as paid up, on such shares after payment of an
amount equal to the amount paid up, or credited as paid up, on the
Ordinary Shares to the Shareholders. Holders of Subordinated
Administrative Shares shall not have the right to receive notice of
and have no right to attend, speak and vote
at general meetings of the Company except if there are no
Ordinary Shares in existence.
The Directors are entitled to issue and allot C Shares. No C
Shares have been issued since the Company was incorporated.
18) DIVIDS
The dividends declared and paid during the period ended 30 June
2022 are US$ nil (30 June 2021: US$ nil).
19) FAIR VALUE MEASUREMENT
Financial assets and financial liabilities at amortised cost
The fair value of cash and cash equivalents, trade and other
receivables, restricted cash and trade and other payables
approximate their carrying amounts due to the short-term maturities
of these instruments.
Derivative instruments held at fair value
In the prior period, the Group held interest rate swaps which
were valued on a recurring basis and were categorised within level
2 of the fair value hierarchy required by IFRS 13. The interest
rate swaps were terminated in the prior period.
20) RELATED PARTY TRANSACTIONS
The Directors of the Company received total fees from the Group
as follows:
Current 30 June 2022 30 June
fee 2021
(annual) (unaudited) (unaudited)
GBP US$ US$
Jon Bridel (Chairman) 66,000 42,412 44,545
Jeremy Thompson (Chairman of the
Audit Committee and Senior Independent
Director) 53,700 34,508 37,864
Harald Brauns (Chairman of the
Management Engagement Committee) 53,800 34,572 36,654
Total 173,500 111,492 119,063
----------------------------------------- --------- ------------- ------------
*Note: Directors fees were agreed in GBP, the financial
statements are presented in USD
Director fees are made up as follows:
30 June 2022 30 June
2021
(unaudited) (unaudited)
US$ US$
Base annual fees (cash) 100,447 107,157
Share based payment expense (note
16) 11,045 11,906
Total 111,492 119,063
------------------------------------ ------------- ------------
10% of base fees and all extra fees are currently being deferred
to be settled in the future via cash or by way of issue of equity
of the Company or both. There has been no settlement of director
remuneration via the issue of equity in the current period (30 June
2021: USD nil). Refer to note 15 for further details.
The Directors receive the following base annual fees:
-- Jon Bridel, Chairman GBP66,000 per annum;
-- Jeremy Thompson, Chairman of the Audit Committee and Senior
Independent Director GBP53,700 per annum; and
-- Harald Brauns GBP53,800 per annum.
The Directors' interests in the shares of the Company are
detailed below:
30 June 2022 31 December 2021
Number of Number of
ordinary shares ordinary shares
Jon Bridel and connected persons 90,000 90,000
Jeremy Thompson 15,000 15,000
Harald Brauns - -
21) MATERIAL CONTRACTS
Asset Management Agreementssss
The Asset Management Agreement dated 19 September 2013, between
the Company and DS Aviation was initially amended on 5 June 2015 to
reflect the acquisition of two new aircraft. A second amendment via
a side letter, effective 1 January 2021, was made to the Asset
Management Agreement on 7 May 2021.
Disposal fee
The initial amendment provides a calculation methodology for the
disposal fee which will only become payable when all four of the
Assets (two sold under receivership in the prior period and second
two currently held by the Group) have been sold after the expiry of
the second Thai Airways lease on 9 December 2026. The fee will be
calculated as a percentage of the aggregate net sale proceeds of
the four Assets, such percentage rate depending upon the Initial
Investor Total Asset Return per share being the total amount
distributed to an initial investor by way of dividend, capital
return or otherwise over the life of the Company. If each of the
Assets is sold subsequent to the expiry of their respective leases,
the percentage rate shall be:
-- Nil if the Initial Investor Total Asset Return per Share is less than 205%;
-- 1.5% if the Initial Total Asset Return per Share equals or
exceeds 205% but is less than 255%;
-- 2% if the Initial Total Asset Return per Share equals or
exceeds 255% but is less than 305%; or
-- 3% if the Initial Total Asset Return per Share equals or exceeds 305%.
In the event that any of the Assets is sold prior to the expiry
of its lease the percentage hurdles set out above will be adjusted
on the following basis:
(i) an amount will be deducted in respect of each Asset sold
prior to the expiry of its lease, equal to the net present value of
the aggregate amount of dividends per share that were targeted to
be paid but were not paid as a result of the early divestment of
the relevant Asset; and
(ii) a further amount will be deducted, in respect of each Asset
sold prior to the expiry of its lease, equal to the amount by which
the proportion of the non-dividend component of the relevant
percentage hurdle attributable to the relevant Asset would need to
be reduced in order to meet its net present value.
Per the second amendment, payment of any Disposal Fee per above
(if any) in connection with the sale of any of the Assets is
subordinated to the DekaBank loans and will only become payable
after the loans (including the deferred element) have been repaid
or prepaid in full.
The disposal fee is a cash-settled payment to the Asset Manager.
There is no disposal fee expected to be payable and hence no
provision recognised within these interim financial statements.
Management fees
The Asset Manager is paid a monthly base fee of US$ 15,085 (US$
16,666 up to 31 December 2020) per asset in respect of the two
Assets that are currently held by the Group, increasing by 2.5 per
cent per annum from May 2021.
As consideration for the Asset Manager agreeing to a reduction
of the monthly base fee in respect of the two Assets that are
currently held by the Group, the Company agreed that, when
permissible as advised by the corporate broker, the Asset Manager
shall receive an allocation of shares in the Company determined to
be of a value equivalent to the reduction in the monthly base fee
with respect to the two Assets. The share allocation will be
carried out using a share price for the conversion which is fair
and reasonable as advised by corporate broker.
20% of asset management fees are currently being deferred to be
settled in cash or by way of issue of equity of the Company in the
future at a share price to be determined in the future. See below
and refer to note 21 for further details.
In the period to 30 June 2022 asset management fees totalled US$
233,862 (30 June 2021 US$ 525,325) of which US$ 170,487 was due as
at 30 June 2022 (31 December 2021: US$ 122,941). US$ 46,772 (30
June 2021 US$ 45,632) of the asset management fees expense is a
share-based payment expense and of the total asset management fees
balance due as at period end, US$ 138,790 (31 December 2021: US$
92,018) is a share-based payment liability (see note 15).
22) SEGMENTAL INFORMATION
The Group is engaged in one operating segment, being acquiring,
leasing and subsequent selling of aircraft. The geographical
location of the Assets of the Group is Thailand, where the Assets
are registered. The income arising from the lease of the Assets
originates from a lessee based in Thailand.
23) SUBSEQUENT EVENTS
Subsequent to period end, DP Aircraft I Limited raised gross
proceeds of $750,000 through the issue of 30,000,000 new ordinary
shares in the capital of the Company at a price of US$0.025 per new
ordinary share which were issued to the investors on 13 July 2022
under tap issue. Immediately following admission, the Company's
issued share capital will consist of 239,333,333 Ordinary Shares
with voting rights.
COMPANY INFORMATION
Directors Jonathan Bridel
Jeremy Thompson
Harald Brauns
Registered Office East Wing
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3PP
Channel Islands
Asset Manager DS Aviation GmbH & Co. KG
Stockholmer Allee 53
44269
Dortmund
Germany
Solicitors to the Company Norton Rose Fulbright LLP
(as to English law) 3 More London Riverside
London
SE1 2AQ
United Kingdom
Advocates to the Company Mourant
(as to Guernsey law) Royal Chambers
St Julian's Avenue
St Peter Port
Guernsey
GY1 1HP
Channel Islands
Auditor KPMG, Chartered Accountants
1 Harbourmaster Place
IFSC
Dublin 1
Ireland
Administrator and Company Secretary Aztec Financial Services (Guernsey)
Limited
East Wing
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3PP
Channel Islands
Corporate Broker Investec Bank plc
30 Gresham Street
London
EC2V 7QN
United Kingdom
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END
IR FFFFLADITFIF
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