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Despite a year of rising interest rates, persistent inflation and a slower-than-expected recovery in China, most people that Cirium spoke to were in a jubilant mood, while also very aware of the shortage of aircraft in the market presenting both a challenge, and an opportunity.

Dragging the supply chain

Opening the conference was a presentation by Cirium Ascend Consultancy valuations manager Herman Tse, who noted that while passenger demand is strong, supply chain issues that have been crimping the ability of airlines to add capacity are not expected to abate any time soon.

This is being felt acutely by operators of Airbus A320neos powered by Pratt & Whitney PW1000G geared turbofan engines that have been facing ongoing issues.

“As of now we are seeing 20% of the GTF engine-powered aircraft being parked at the moment and for each engine it may take 360 days to fix it. So this situation will continue to throughout the next few years until probably 2026.”

Herman Tse

In a keynote delivered on the second day of the conference, Air Lease Corporation executive chairman Steven Udvar-Hazy noted that the issues were not limited to engines, but also avionics and other parts along the supply chain.

Severely short on new lift

Supply chain issues have been felt not only by operators, but also the OEMs which are struggling to catch up with years of under-production and more pressing quality issues from some suppliers.

Tse pointed out that there is a deficit of around 3,200 single-aisle aircraft in the market, based on aircraft that should have been delivered but have not. “So if I can make a big assumption here, the aircraft shortage remains until 2027,” he commented.

His view was echoed by Udvar-Hazy who says that there is a shortage of over 4,000 jets between what Airbus and Boeing planned to deliver between 2019 and 2024.

“So what does that mean? Existing leases have to be extended, airlines will continue to operate aircraft beyond their originally planned time and existing leases are extended.

“Airlines will have to reduce frequencies or reduce expected growth in their scale of operations, which will lead to higher load factors and higher yields. “

Steven Udvar-Hazy

With such a backlog already, and the spate of new orders, production lead times at both Boeing and Airbus are extending. Udvar-Hazy pointed to EVA Air’s recently announced order for 18 A350-1000s, the first of which won’t start delivering until 2029.

“So this is indicative of the longest lead times that we have ever seen on commercial jet aircraft with an average of six, six and a half years from order to actual deliveries,” he says.

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