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  • The Resurgence of Regional Aircraft: A Market Analysis

    Cirium Ascend Consultancy is trusted by clients across the aviation industry to provide accurate, timely, and insightful aircraft appraisals. The team provides the valuations and analysis the industry relies on to understand the market outlook, evaluate risks and identify opportunities.

    Discover the team’s industry reports & market commentaries. Read their latest expert analysis, viewpoints and updates on Thought Cloud.

    Solayappan-Ganesaan
    Solayappan-Ganesaan

    Solayappan Ganesaan, Aviation Consultancy and Valuations Intern, Cirium Ascend Consultancy

    The latest webinar, Regional Aircraft: Is the Market Bouncing Back? hosted by Cirium Ascend Consultancy, sheds light on key developments in the turboprop and regional jet market. Alex Vathylakis, principal valuations analyst, Arjan Meijer, president and chief executive of Embraer Commercial Aviation, and Ron Baur, president of Azzora, formed the panel, which was moderated by Delphine Wermeister-Levert, senior account manager. The panelists arrived at the following conclusions:

    • In the US regional jet market, there is a noticeable shift from 50-seater aircraft to 70-seaters, but no imminent scope clause changes on the horizon that might drive this shift further towards even larger aircraft.
    • MRO bottlenecks continue to pose challenges for regional turboprops as well as regional jets.
    • The focus of Embraer on the E195-E2 shows the OEM’s intention to expand in the small narrowbody segment and to compete with aircraft types such as the A220-300.
    • Secondary market values of turboprops are trending up, and this trend is also observed for the E190/195-E1s.

    Single-aisle jets are leading the global recovery in the aviation industry post-pandemic. While regional jets and turboprops have initially experienced a faster recovery in terms of utilisation, it has significantly slowed in the past two years.

    Regional Turboprops

    A common challenge currently faced by regional turboprops is MRO bottlenecks, resulting in a significant portion of the fleet being stored, and with only a very small number of ready-to-go aircraft available for sale or lease. In terms of flights tracked, the ATR 72-600 remains in growth mode as the only in-production regional turboprop today. Utilisation of the ATR 72-500 and Dash 8-400 has stagnated below 2019 levels, which, apart from the MRO challenges, can be attributed to part-outs and freighter/firefighter conversions respectively over the past four years.

    The outlook for the turboprop fleet varies by region, with all regions except Africa witnessing a decrease in fleet size. Africa stands out as the region that has fuelled growth by acquiring used aircraft.

    A notable observation is the absence of new orders for turboprops in the North American market, particularly in Canada. In the USA, passengers have long eschewed the use of turboprops in favour of regional jets, but in Canada, airlines may soon look to implement measures to address an aging turboprop fleet issue.

    Shifting the focus to OEMs, ATR is still yet to benefit from its monopoly (as DHC no longer manufactures new aircraft), but they do have a stable orderbook for three to four years as they look to renew aging fleets and enter new markets.

    Leasing activity in the regional turboprop market is influenced by an MRO bottleneck, resulting in a significant number of aircraft awaiting transition and placement. Concurrently, data from Cirium’s Fleets Analyzer indicates that some lessors have offloaded a considerable number of turboprops, mainly Dash 8-400 from their portfolios. Consequently, there is upward pressure on Market Lease Rates in the near future.  

    Regional Jets

    Smaller regional jets, such as the CRJ 100/200 and E145s, have experienced a significant increase in storage of aircraft, primarily due to the departure of several US operators from these fleets. Additionally, challenges like pilot shortage and the difficulty to overhaul the engines have driven the 50-seater aircraft out of the market due to the function of aircraft age. As a result, tracked flights for these aircraft have remained 60% below the levels recorded in 2019. Consequently, many operators have shifted their focus to 70-seater medium regional jets as a more favourable alternative in the scope clause compliant market (Scope clause in the USA, negotiated by pilot unions, limits regional aircraft to a maximum of 76 passengers and introduces a cap to the number of regional jets operated on behalf of major US airlines).

    The E175s have surpassed 2019 utilization levels, driven by two primary factors: increased deliveries of E175 aircraft and very low storage rates.

    This positive trend is expected to continue as the US heavy aircraft market anticipates ongoing demand for new aircraft, underscored by American Airlines’ order for 90 E175s, which may even replace the earlier models of the E175. This development highlights the role of medium regional jets in addressing the gap left by the retirement of the 50-seater fleet while US Scope Clause is not expected to change any time soon.

    With regards to the E2 GTF issues, storage rates are comparatively lower at 16%, in comparison to the storage rates of 22% for A220s and 36% for A320neos powered by GTF engines.

    Orders indicate a potential upward trend comparable to levels seen in 2018 as demand for more efficient and larger capacity regional jets continues to shape the regional aviation market.  If “crossover” types are included, it can be seen that interest has picked up and that competition has stimulated the wider 150 seat segment.

    Several factors contribute to this trend. Ron Baur notes, “The narrowbody market is sold out, and the E2 jets provide a cost-effective alternative to add frequency and open up new markets,” similar to what Scoot has accomplished. Additionally, the E2 offers a 25-30% reduction in trip costs and similar seat costs compared to smaller narrowbodies, according to Arjan Meijer.

    Lease Rates

    Much like most flight paths converge at a major hub, the market review naturally leads us to an analysis of Market Values and Market Lease Rate changes for regional jets over the past few years.

    The fleet weighted Market Value change for the ATR 75-500 is currently about 10% lower than pre-Covid levels. In contrast, the ATR 72-600 appears to be recovering well.

    However, the Dash 8-400 still has significant ground to cover, despite its very low availability. Ready-to-go aircraft in this category command a premium, but this price gap is expected to narrow in the coming months.

    The values for E175s remain stable, and this type continues to enjoy a dominant position in the market. On the other hand, the CRJ-900 has seen its value still significantly below pre-Covid levels, driven by softer demand. The E190 and E195 remain slightly lower than their pre-Covid values but show a slow but steady recovery, as noted by the transaction data gathered by Cirium (increases, especially in Market Lease Rates, were announced after the webinar in our October value review).

    The fleet-weighted Market Lease Rates for the ATR 72-500 have surpassed pre-Covid levels while the ATR 72-600 is showing signs of resilience, with current deals being negotiated north of the $100,000 mark – an amount not seen in the past four years in the secondary market. The Dash 8-400 reflects a similar trend with a slight lag.

    In contrast, the E2 and A220 have shown Market Lease Rates improvements of around 10% compared to pre-Covid levels, indicating a positive demand for these aircraft while the new types are also naturally less volatile.

  • The US Market Overview: Airlines

    Cirium Ascend Consultancy is trusted by clients across the aviation industry to provide accurate, timely, and insightful aircraft appraisals. The team provides the valuations and analysis the industry relies on to understand the market outlook, evaluate risks and identify opportunities.

    Discover the team’s industry reports & market commentaries. Read their latest expert analysis, viewpoints and updates on Thought Cloud.

    Yinan-Qin
    Yinan-Qin

    Yinan Qin, Senior Aviation Analyst, Cirium Ascend Consultancy

    PART THREE OF THREE – READ PART ONE: TRAFFIC AND PART TWO: AIRCRAFT ABS

    Q2 Financial Performance of US Airlines

    Given that major airlines will issue their Q3 results around the end of October, we are currently focusing on 2024 Q2 results to take a brief look at the financial performance of airlines in the United States.

    US airlines EBIT

    Source: Cirium Core, Airlines 2Q24 Financials

    The majority of the selected US-based airlines experienced moderate revenue increases during the second quarter of 2024, with year-on-year growth ranging from 2.0% to 6.9%.

    However, overall revenue growth momentum slowed compared to the same quarter last year due to softening yields and the slowing of passenger traffic growth from its recent Covid recovery to a longer-term mature market trend.

    JetBlue and Spirit Airlines in particular experienced revenue declines, blaming the intensified competition on domestic routes from market “overcapacity” and high sensitivity to passenger yields in their low-cost carrier (LCC) markets. Both airlines outlined a plan to cut underperforming routes, focus more on core leisure markets and enhance ancillary revenues.

    When it comes to profitability, six of the seven selected US airlines reported positive EBIT with only Spirit reporting losses.

    However, EBIT margins for most airlines narrowed compared to 2023 as most faced higher operating costs, driven primarily by increased labour costs due to new post-Covid contracts for pilots and cabin crew, as well as increased maintenance and fuel expenses associated with increased capacity and expanded fleet size.

    US airlines gross debt
    Leverage (Net Debt / TTM EBITDAR)
     AmericanUnitedDeltaSouthwestSpiritJetBlueAlaska
    23Q23.7x2.4x2.7x-1.3x25.3x3.1x1.6x
    24Q26.1x2.1x2.2x-0.6x717.7x-33.2x1.3x

    Source: Cirium Core, Bloomberg, Airlines 2Q24 Financials

    Several airlines continued their efforts to strengthen their balance sheets, achieving a year-on-year decline in gross debt by consistently paying down their obligations. However, JetBlue and Spirit saw an increase in gross debt. Leverage ratio measured by net debt/ Trailing Twelve Month (TTM) EBITDAR declined for most airlines while Spirit’s leverage ratio soared due to an increase in net debt position.

    On the other hand, Southwest reported a net cash position of $893 million as of June 2024 with substantial liquidity on hand, resulting in a negative leverage ratio.

    The negative leverage ratio position for JetBlue is, however, due to its deteriorated operating results in the first quarter of 2024, which led to a negative TTM EBITDAR. It is critical for carriers to enhance or maintain liquidity positions to rebuild their balance sheet and continue funding near-term aircraft deliveries.

    It is worth mentioning that Spirit’s financial health deteriorated substantially among the selected US airlines. According to Cirium Fleets Analyzer, Spirit is the largest US carrier operating an Airbus A320neo fleet equipped with PW1100G engines (116 out of 217 total aircraft), and the carrier grounded 20 aircraft per month on average during 2024. Although the carrier will receive $150 million to $200 million in credits as compensation from Pratt & Whitney for the full year 2024, this has largely disrupted the carrier’s operation since the onset of the GTF powder coating issue. While the airline failed to return to profitability and generate stable operating cash flow, its liquidity significantly diminished as a result of mounting debt obligations, extensive lease payments and pre-delivery payments. Additionally, the termination of the Spirit-JetBlue merger worsened the situation and left Spirit careening towards an unavoidable liquidity shortfall. As of June 2024, Spirit’s debt maturity schedule showed $1.3 billion in debt principal obligations (40.2% of total long-term debt outstanding) due by the end of 2025. According to a report by the Wall Street Journal on 3 October 2024, Spirit was in talks with its bondholders over the terms of a potential Chapter 11 filing. On the same day, Spirit’s stock price plunged by approximately 40%.

    Near Term Outlook and Countermeasure

    In 2024, US airlines are encountering increasing challenges in both revenue generation and cost management. Cash flows are under significant pressure due to tight profit margins, rising capital expenditure, heightening labour cost and potential spikes in fuel prices. Consequently, US airlines highlighted the near-term plan on the following aspects to weather the industrial headwinds:

    • Adjusting capacity to align with demand expectations: For example, American has scaled down its planned capacity growth, with a 3.5% increase for the second half of 2024. Delta also anticipates a decelerating capacity growth for the same period.
    • Rationalising route networks to improve yields: LCCs such as JetBlue and Spirit are eliminating less profitable routes and prioritising those with higher demand and yields. Additionally, American and Delta are expanding their transatlantic routes in summer 2025 to tap into the potential of this market segment.
    • Implementing effective cost-cutting initiatives: US airlines are focusing on reducing labour costs and fuel expenses to restore profit margins. While employee contract renegotiation is unlikely in the near future, airlines may right-size overhead and non-crew positions to reduce discretionary spending. Additionally, airlines may also need to develop fuel hedging strategies to mitigate the higher volatility in fuel prices amid the Middle East conflicts.
    • Strengthening balance sheet and deleveraging to enhance financial resilience: Carriers remain committed to paying down debt obligations and refinancing existing high interest debt structures. Take the big three airlines for example: American Airlines reduced its total debt by $1.8 billion during the first half of 2024 and highlighted its goal to reduce total debt by $15 billion by the end of 2025. Delta repaid $2.1 billion in debt in the first half of 2024, targeting a return to investment-grade ratings. United Airlines reported $6.2 billion in debt repayment in its six-month cash flow statement to reduce the airline’s interest burden in the years ahead.

  • The US Market Overview: Aircraft ABS

    Cirium Ascend Consultancy is trusted by clients across the aviation industry to provide accurate, timely, and insightful aircraft appraisals. The team provides the valuations and analysis the industry relies on to understand the market outlook, evaluate risks and identify opportunities.

    Discover the team’s industry reports & market commentaries. Read their latest expert analysis, viewpoints and updates on Thought Cloud.

    Yinan-Qin
    Yinan-Qin

    Yinan Qin, Senior Aviation Analyst, Cirium Ascend Consultancy

    PART TWO OF THREE – READ PART ONE: TRAFFIC AND PART THREE: AIRLINES

    The aviation asset-backed securities (ABS) market has encountered considerable challenges during and since Covid-19, further exacerbated by geopolitical conflicts and a relatively gloomy global economic outlook. These factors have collectively led to the downgrade of several ABS portfolios and a silent ABS market in the past two years, with a total of less than five portfolios issued in 2022 and 2023.

    After two years of market stagnation, lessors are now cautiously re-entering the market. In the first nine months of 2024, six new ABS portfolios were issued. Four of these consist purely of passenger aircraft, while the two PKAIR portfolios are essentially loan pools. The basic information of these portfolios are as follows:

    Note: *No information available for this tranche from Bloomberg Source: Cirium Core, Bloomberg

    Several Key Changes Observed Between Current Market vs Pre-pandemic Market

    Covid-19 has altered investor’s risk appetite with respect to airlines and aircraft, with an emerging preference for airline with robust credits and assets with higher liquidity. Comparing the four 2024-issued portfolios with those from 2019 within Cirium’s watchlist, there has been a notable shift towards next-gen aircraft. As more airlines upgauge and modernize their fleets with newer generation aircraft for better fuel efficiency and operational performance, lessors are naturally following this trend and building portfolios that feature these advanced aircraft.

    Single-aisle aircraft remained the dominant type in the new 2024 portfolios, representing 94% of the total asset pool measured by aircraft count.

    Popular variants continue to be the Boeing 737 Max 8, Airbus A320ceo and A320neo. On the twin-aisle side, all variants in the asset pool are newer generation aircraft, including the 787-9, A330-900neo and A350-900. This contrasts with the 2019 market where the A330-300 and 777-300ER were popular options.

    With regard to aircraft operating regions, lessees based in Asia-Pacific, Europe and North America were the top three in 2019 while Latin American lessees have become the largest market segment in the 2024 portfolio. There are no aircraft operating in Russia due to sanctions, while exposure to the Chinese market has declined significantly in 2024. This reflects investor concerns about the stagnant Chinese economy and increasing political tension between the USA and China.

    Coupon rates have inevitably increased for comparable tranches to reflect the higher interest rate environment. For instance, examining Carlyle’s ABS portfolio over the last couple of years reveals that the tranche A coupon rate has risen from around 4.0% (AASET 2019-1, AASET 2019-2, AASET 2020-1) to over 6.0% (AASET 2022-1, AASET 2024-1). Additionally, the tranche structure has been simplified with limited subordinate tranches and E notes issued after 2022.

    Overall, it is quite evident that the market preference is now leaning towards single-aisle, advanced technology younger aircraft with limited exposure to secondary market deals.

    Meanwhile, investors require higher yields during the post-pandemic period to mitigate the risk associated with higher interest rates and market volatility.

    Near-term ABS Market Outlook

    The ABS market has shown several positive signs that have further improved investor confidence. Meanwhile there is robust recovery in global traffic, an undersupplied market and an increasing presence of newer generation aircraft driven by fleet modernisation. Additionally, airlines have shown improved financial performance, bottom-line growth and balance sheet deleveraging, which have enhanced their credit ratings since the pandemic.

    More importantly, a confirmed interest rate drop will further enhance the market.

    The recent Federal Reserve interest rate cut of 50 basis points (rather than the expected 25 basis points) reflects improvements in inflation and employment rates and indicates lower likelihood of a tightening monetary market again. This reduction in interest rates will increase margins in asset pricing. Therefore, an increase in aviation ABS portfolios is anticipated in the future, although a return to levels seen pre-pandemic is unlikely in the near term. Investors are expected to re-enter the market cautiously, focusing more on asset quality than quantity.

  • Cirium Unveils Aircraft Maintenance Tracking & Projection Tool

    Cirium Ascend’s new Ground Events analytics tool is set to revolutionize the aviation aftermarket by providing the first truly global view of historical and projected aircraft maintenance events using satellite-based flight tracking.

    Ground Events, the latest addition to the Cirium Ascend portfolio, provides MROs, OEMs, aircraft parts suppliers and airlines with the ability to generate comprehensive analytics which includes market share trends, turnaround times to derive strategic insights on markets for airframe maintenance, cabin retrofits and aircraft paint work.

    The solution’s easy access to data makes Ground Events a powerful tool, helping users better understand aircraft maintenance events. Businesses such as MRO providers can analyse market share, forecast future ground events, and improve cost efficiency.

    Mehmet Erdogan
    Mehmet Erdogan

    “We collaborated with the market, including a major European OEM, to launch a first-of-its-kind solution which pinpoints when the last maintenance check actually occurred and predicts future events based on this. It’s our mission to support the industry to inform their analysis of aircraft maintenance and better plan for future checks and events, saving significant time and costs,” said Mehmet Erdogan, VP of Ascend.

    Cirium’s Ground Events tracks aircraft locations and dates on the ground, along with maintenance contract details, to analyze why a commercial aircraft has been grounded for seven or more consecutive days. It also offers insights into historical maintenance patterns and usage trends, allowing for future maintenance projections at the tail number level.

    In accessing Ground Events users can select from a range of maintenance events such as C-checks, Heavy checks, strip/painting, retrofits and/or a combination of any of the above for a customizable search over a chosen date range.

    The results can then be filtered by a variety of different fields such as operator, MRO provider, location, aircraft and engine data. The results are then displayed in an easily digestible format of tables and charts that can be compared to historical data and exported as required.

    The tool enables businesses to analyze the data to precisely place aftermarket services and parts where they are needed, understand maintenance patterns of different aircraft types, identify retrofit opportunities and overall, optimize how aircraft are being utilized.

    Ground Events shows, for example, that FedEx Express, a global delivery service company, permanently retired 22 Boeing 757s between March and May 2024 for fleet modernization. This anticipated the supply chain issues involving heavy maintenance for the 757 which peaked from Q2 2021 to Q1 of the following year, with a decline in fleet size and flight hours by the end of 2022.

    Similarly, the tool shows over 450 Airbus A330-200/300s are expected to undergo C or Heavy maintenance checks during the next eight quarters. For this, Cirium tracked nearly 650 A330ceos undergoing checks with 47 MRO providers in the past two years.

    Ground Events uses detailed data on aircraft maintenance from around 57,000 ground events dating back to 2018 to help predict trends and upcoming peaks and troughs in demand.

    It integrates proprietary fleet maintenance intelligence and satellite-based flight tracking to ensure precise locations and dates of aircraft on the ground. The data is supported by a team of fleet data experts and flight data analysis to ensure accurate and up to date information is shared, with an average of 2,700 updates per week.

    Find out more about Cirium Ascend Ground Events, and access a demonstration video of the tool.

  • The US Market Overview: Airline Passenger Traffic

    Cirium Ascend Consultancy is trusted by clients across the aviation industry to provide accurate, timely, and insightful aircraft appraisals. The team provides the valuations and analysis the industry relies on to understand the market outlook, evaluate risks and identify opportunities.

    Discover the team’s industry reports & market commentaries. Read their latest expert analysis, viewpoints and updates on Thought Cloud.

    Yinan-Qin
    Yinan-Qin

    Yinan Qin, Senior Aviation Analyst, Cirium Ascend Consultancy

    PART ONE OF THREE – READ PART TWO: AIRCRAFT ABS AND PART THREE: AIRLINES

    US Market Traffic Overview

    Passenger traffic

    Source: Cirium Core

    Airline passenger traffic in the US market has seen a robust recovery post-Covid and through 2023, with key segments such as US-Europe, US-Latin America and domestic US fully rebounding and surpassing capacity from the same month in 2019. In contrast, the recovery of trans-Pacific routes remains sluggish with volume still significantly below pre-Covid levels as of today.

    One factor contributing to this slow recovery is the heightened political tensions between US and China – one of the main markets in Asia contributing 31% of total flights in 2019. These tensions have created unfavorable market conditions, dampening travel demand between the two countries and perhaps making routes unprofitable for US carriers. According to the Cirium SRS Analyzer, the number of US-China direct flights original-destination (OD) pairs declined by 57.8% from 64 in 2019 to 27 in 2024. Meanwhile, the number of flights dropped from over 11,600 in 2019 to below 3,800 in 2024, marking a 67.4% decrease. It is reported that American Airlines, Delta Air Lines and United Airlines requested another extension from the US Transportation Department (DOT) in September 2024 for unused flights frequencies on routes connecting China to avoid losing those routes.

    Another factor to consider is that the US in-service twin-aisle fleet has hardly grown since 2019. Flights between the US and China require approximately two widebody aircraft just to service a single daily frequency.

    Considering that US carriers have redeployed a lot of capacity formerly serving China to other markets in the last five years, and also retired some older aircraft during Covid, and considering slow deliveries of 787s and A350s, the US carriers wouldn’t have the necessary aircraft anytime soon to return to their full, pre-Covid China timetable even if they wanted to and the demand existed. In light of this, we do not expect US-China capacity to return to pre-Covid levels in the short-to-medium term.

    US-based Airlines Fleet Overview

    Source: Cirium Core

    The current passenger fleet operated within the US market has grown from just over 6,200 aircraft in September 2019 to almost 7,000 in September 2024, reflecting a 2.3% CAGR. Meanwhile, the stored fleet ratio has declined from a peak of 51.9% in April 2020 to 8.6% as of September 2024, albeit still being 2.8 percentage points higher than pre-Covid levels. Both single-aisle and twin-aisle fleets maintained a below-average storage rate while turboprops and regional jets experienced a more sluggish recovery primarily due to a shortage of pilots and flight crews. The rise in inactive single-aisle aircraft since early 2024 is attributed to the temporary grounding of 47 Boeing 737 Max 9s following the door plug incident in January 2024 and A320neo GTF engine issue, which has grounded a monthly average of 32 US-operated A320neos equipped with PW1100G engine over the past nine months, most of which are from Spirit’s fleet. This situation is expected to persist until at least 2026 when the engines can be inspected, and any necessary parts can be replaced.

    Overall, the size of the current fleet in the American market is expected to continue growing, with 2,586 aircraft on order and 798 aircraft on option as of September 2024.

    The growth will be at a slower pace due to a stagnant production ramp-up from major OEMs, stemming from supply chain challenges and labour strikes (particularly at Boeing). The ongoing GTF engine issue will further exacerbate the under-supplied market dynamic in the near-term. However, on a positive note, the constrained supply should continue to underpin lease rate strength.

  • The A330neo: Is Airbus’s Middle Child Fighting Back?

    Cirium Ascend Consultancy is trusted by clients across the aviation industry to provide accurate, timely, and insightful aircraft appraisals. The team provides the valuations and analysis the industry relies on to understand the market outlook, evaluate risks and identify opportunities.

    Discover the team’s industry reports & market commentaries. Read their latest expert analysis, viewpoints and updates on Thought Cloud.

    Ascend analyst Tim Chun Hing Li
    Ascend analyst Tim Chun Hing Li

    Tim Li, Aviation Analyst, Cirium Ascend Consultancy

    Since July’s Farnborough air show, the Airbus A330neo has recorded 57 new firm orders and 60 options from four customers, surpassing all other models as the most ordered widebody aircraft in the past four weeks. This begs the questions: Is the A330neo – Airbus’s ‘middle child’ – making a comeback, and how so? Furthermore, how will a change in operator base affect the development of the type?

    Until recent weeks, Airbus’s order books have been dominated by the A320neo family and the A350, with backlogs of over 7,000 and 650 aircraft to date respectively. However, the A330neo is finally making its presence felt, especially with options from Flynas, additional orders from Virgin Atlantic, and particularly striking, new firm orders for 20 aircraft from VietJet Air and 30 from Cathay Pacific. These orders push the A330neo total order tally to 360 aircraft, with a current backlog of more than 200. This also positions Cathay as the second biggest airline customer for the A330neo programme, following Delta Air Lines and preceding TAP Air Portugal.

    Among all these new orders, Cathay Pacific’s is a particularly big shot in the arm for the previously moribund A330neo programme. As the fifth largest A330ceo operator, Cathay is expecting these A330neos to “progressively replace” its existing fleet of A330ceo and 777 classics, a motive which Airbus believed would bring orders from its vast A330ceo operator base due to its “low-risk” and commonality when it launched the re-engined family a decade ago. Looking back, 21 of the 51 airline A330ceo operators with more than five A330ceos originally selected the Boeing 787 as their next generation mid-gauge widebody – a clean-sheet design that entered service some seven years before the A330neo.

    Airbus A330neo and Boeing 787 Fleet Size of the Top 51 A330ceo Operators

    Airbus A330neo and Boeing 787 Fleet Size of the Top 51 A330ceo Operators

    Source: Cirium Fleets Analyser

    Cathay was one of the remaining 20 operators with a fleet of more than five A330ceos that had not placed orders for either the 787 or the A330neo. While ‘significant price concessions’ undoubtedly played a role in this final decision, one can infer that Cathay had the bargaining power to negotiate a similar discount from Boeing for the 787 or Airbus for more A350s. Therefore, it appears that primary drivers for Cathay to opt for the A330neo were the smaller backlog and more-favourable mix of operating and ownership costs and payload-range performance.

    The A330neo’s smaller backlog enables an earlier delivery timeline compared with the 787 and A350. OEMs have struggled for some time to crank up their production rate to go through their backlogs.

    The 787 backlog is 780 aircraft currently. Coupled with concerns over Boeing’s quality control arising from multiple incidents recently, even if Boeing was to increase its production rate to 10 per month, the earliest availability would not be until the end of the decade. In contrast, delivery for A330neo is achievable as early as 2028, given a delivery rate of four per month. Given that Cathay’s oldest aircraft is now 24 years old, beginning replacement three years earlier seems timely.

    Expected Number of Delivery and Current Yearly Delivery Rate

    Expected Number of Delivery and Current Yearly Delivery Rate

    Source: Cirium Fleet Analyser, Airbus, Boeing

    Although Cathay’s 48-strong A350 fleet can support all its operations, the airline needed an optimal solution to scale up capacity for its high-demand regional network. This is where the A330neo comes in. Ascend’s opinion on current delivery value suggests that an A330-900 is 33% cheaper than an A350-900. Even though the type is currently a less popular option comparing to the A350, it has seen lower volatility during downtime as its new generation technology allows a more efficient operation which is more attractive to operators when demand softens. Furthermore, the operating cost is reduced due to its commonality with the rest of Cathay’s Airbus fleet.

    Value Trends of A330-900 neo and A350-900

    Source: Cirium Value Time Series, On Delivery Market Value as of 22nd August 2024

    With all the above in mind, which of the remaining A330ceo operators would be expected for another major A330neo replacement order? Among the next 10 biggest A330ceo operators that have neither the 787 nor the A330neo, Air Transat and Aer Lingus are switching strategy to narrowbody long haul; Asiana is merging with Korean Air which operates 787s; Aeroflot is under sanction; Swiss’s fleet is younger and its mother group Lufthansa opted for the 787 though “had no immediate plans to introduce 787s to its fleet”, and Philippine Airlines just streamlined its fleet after recovering from Chapter 11. This leaves just Iberia, Sichuan Airlines, Brussels Airlines and Discover Airlines, with Sichuan the only one that does not have to follow a parent group decision. Operating both types simultaneously is unlikely either, with Virgin Atlantic being the only example, potentially joined by Hainan Airlines which hinted that in its stock exchange filing in April this year. The “Big Three” Chinese operators can be on watch as well since their 787 fleets are relatively small, though that also depends on the recovery pace of the Chinese aviation market.

    Instead of viewing it strictly as a replacement for the A330ceo, the A330neo presents itself as an ideal type for operators looking to scale up their network and operations.

    Prime examples include TAP, Condor, Cebu Pacific, ITA Airways and the newly joined VietJet Air. Notably, none of these top 10 A330neo operators have ever had a fleet of more than 10 A330ceos. The induction of the A330neo not only allows them to expand into the long-haul market, even for LCCs, but it also boosts the capacity of their trunk routes.

    These observations suggest that the A330neo operator base may end up being quite different from the A330ceo’s, composed of a higher proportion of mid-tier credit and smaller scale operators, particularly given the model is still in the early stages of its product cycle. This may dissuade some of the more conservative banks from financing the aircraft, leading to less presence in SLB, JOL/JOLCO or other financial markets, and potentially impacting its liquidity and value in the long term.

    Learn more about Cirium Fleets Analyzer.

    Monitor and benchmark key value and liquidity metrics by different aircraft asset classes. FIND OUT MORE ABOUT VALUE TRENDS.

  • Reshaping Air Routes: Focus on the Greater Bay Area

    Cirium Ascend Consultancy is trusted by clients across the aviation industry to provide accurate, timely, and insightful aircraft appraisals. The team provides the valuations and analysis the industry relies on to understand the market outlook, evaluate risks and identify opportunities.

    Discover the team’s industry reports & market commentaries. Read their latest expert analysis, viewpoints and updates on Thought Cloud.

    Lionel Olonga
    Lionel Olonga

    Lionel Olonga, Senior Valuations Analyst, Cirium Ascend Consultancy

    The Hong Kong Airport Authority’s initiative to incentivize airlines to establish new routes and increase flight frequencies is a strategic measure aimed at enhancing the region’s competitive edge. However, while this approach is a positive development, it may prove insufficient in addressing the broader challenges of manpower shortages and regional connectivity. Compounding these issues, some foreign carriers have withdrawn services from China, citing unfair competition due to restrictions on using Russian airspace. These unfavourable conditions in Greater Bay Area (GBA) airports raise questions about the region’s near-term prospects.

    Despite these efforts, Hong Kong International Airport (HKG) continues to operate below pre-pandemic capacity levels. Cirium data indicates that seat capacity departing from Hong Kong in Q2 2024 is 29% lower than in the same period in 2019. HKG is grappling with significant reductions in flights across all regions, with the most pronounced declines seen in routes to Africa, Europe, and Australasia. These challenges may be attributed to various factors, including political instability, economic pressures, and increased competition from neighbouring airports. However, the primary obstacle remains the persistent shortage of human resources.

    For instance, Cathay Pacific has revised its forecast for achieving full passenger capacity recovery, now aiming for the first quarter of 2025 rather than the end of 2024. This delay is attributed to a shortage of pilots and cabin crew. Additionally, ground handling service providers are grappling with staffing deficiencies, which are causing them to either reject flights from foreign carriers or impose excessively high service fees. These labour shortages are notably impeding the city’s connectivity and hindering its overall recovery within the global aviation industry. As a result, ticket prices are expected to stay high, with limited route options available to travellers.

    The Departing Seat Capacity of Major GBA Airports

    The departing seat capacity of major GBA airports

    Source: Cirium Core

    On the other side, the seat capacity of other two major Greater Bay Area (GBA) airports, Guangzhou Baiyun International Airport (CAN) and Shenzhen Bao’an International Airport (SZX), have exceeded the pre-COVID levels, thanks to the strong domestic market recovery. CAN shows overall growth in flight and seat capacity, with particularly strong growth in the Asian markets. However, there is a notable decrease in flights to North America and Australasia. The available-seat-kilometres (ASK) indicates that the recovery of the inter-continental traffic at CAN is still lagging. SZX has seen significant growth, particularly in flights to Asia, Europe, and the Middle East, reflecting its increasing importance as an international hub. However, it also experienced a sharp decline in Australasia and North America.

    The Capacity in Terms of Available-seat-kilometres (ASK) of Major GBA Airports

    Source: Cirium Core

    Flight Capacity by Region From Major GBA Airports

    Flight capacity by region from major GBA airports

    Source: Cirium Core

    Hong Kong is encountering intensified competition from within the Greater Bay Area (GBA), where international airlines are increasingly choosing direct routes to other regional hubs, potentially diverting traffic away from the city. To address this challenge, it is essential for Hong Kong to create a financially appealing environment for airlines to maintain their operations. A key component of this strategy involves addressing the ongoing staffing shortages, including those for pilots, cabin crew, and ground handlers. The government’s Labour Importation Scheme for the aviation sector is expected to alleviate these resource constraints in the near term, thereby supporting Hong Kong’s competitive position in the region. CAN and SZX both demonstrated growth between Q2 2019 and Q2 2024, with CAN increasing by 6.85% and SZX by a significant 18.39%. This suggests that both airports have been strengthening their positions as key regional hubs. The sharp growth in Shenzhen may indicate a strategic shift, potentially capturing market share from Hong Kong. However, both airports have seen a decline in flights to North America, reflecting the impact of geopolitical tensions. Overall, the expansion in these two GBA underscores their growing importance in the region, even as they navigate the challenges posed by shifting global dynamics.

  • How Twin-Aisles Came to the Fore at Quiet Farnborough

    Cirium Ascend Consultancy is trusted by clients across the aviation industry to provide accurate, timely, and insightful aircraft appraisals. The team provides the valuations and analysis the industry relies on to understand the market outlook, evaluate risks and identify opportunities.

    Discover the team’s industry reports & market commentaries. Read their latest expert analysis, viewpoints and updates on Thought Cloud.

    Max Kingsley-Jones, Head of Advisory, Cirium Ascend Consultancy

    A total of 260 new orders and order commitments were disclosed during the Farnborough air-show week in late July.  Although this was the lowest volume of show announcements for many a year Cirium Ascend estimates that the combined value of all the new deals is worth close to $26 billion (in Base Full-Life Value terms).

    The vast majority of the show announcements – 245 – were for the “big two”, with the remaining 15 being for regional turboprops (ATR and De Havilland Aircraft). Two-thirds (164) of the mainline aircraft orders and commitments were on the Airbus books.

    Cirium fleets data shows that there was a relatively high volume of widebody announcements during the week, with total orders and commitments for twin-aisles (including freighters) edging single-aisles,126 to 119. Total twin-aisle orders and commitments were worth $18.8 billion, versus $7 billion for the single-aisles.

    Farnborough Airbus/Boeing Announcements by Aircraft Category & Value

    bar chart: Farnborough Airbus/Boeing announcements by aircraft category & value

    Source: Cirium Fleets Analyzer, *Includes factory freighter. Data includes firm orders and commitments to order

    The emphasis this year on the twin-aisle market is unsurprising, given the excessively long lead times that now exist across the single-aisle production lines. The industry has been relatively under ordered on twin-aisles post Covid, but backlogs are now beginning to extend out towards the end of the decade.

    Together, Airbus and Boeing disclosed 91 new firm orders along with 154 commitments to order.

    Boeing closed on its rival in value terms (44%) thanks its relatively high proportion of twin-aisle/freighter announcements.

    The biggest show announcement in terms of total units came from Saudi low-cost operator Flynas, which disclosed commitments for 90 aircraft – 75 A320neo family aircraft and 15 A330-900s. There was a noticeable absence of the usual raft of Middle East show announcements – although Qatar Airways disclosed a pre-existing order for 20 777-9s placed back in March. Emirates was the only other announcement from the region, placing a new firm order for five 777F factory freighters.

    However, Asia-Pacific operators compensated, with their combined announcements for 106 aircraft from four operators accounting for 43% of show deals by unit. These included JAL (11 A321neos, 20 A350s and 10 787s), Korean Air (20 777-9s and 20 787s), VietJet Air (20 A330-900s) and Drukair (five A320neo family).

    Farnborough Airbus/Boeing Announcements by Region & Aircraft Category

    bar chart-Farnborough Airbus/Boeing category17

    Source: Cirium Fleets Analyzer, *Includes factory freighter. Data includes firm orders and commitments to order

    Other world regions were less represented, with Virgin Atlantic’s order for seven A330-900s being one of just two European announcements, Luxair being the other with two 737-10 Max orders. Just one US customer deal was announced – a commitment for four 777Fs from Miami-based National Airlines. Abra Group – parent of Gol and Avianca – was the sole Latin American announcement: a commitment for five A350s. In Africa, Berniq Airways of Libya placed orders for six A320neo family.

    There was none of traditional flurry of leasing company announcements at this year’s show, with only Macquarie AirFinance announcing an order (20 737-8 Max).

    Embraer was absent in terms of commercial order show announcements but was well represented in the aircraft display with its E-Jet E1 converted freighter, E2 passenger variant and C-390 airlifter present and did receive orders from the Netherlands and Austria for the latter. CEO of the Brazilian OEM’s commercial arm, Arjan Meijer, stated during the show that despite the radio silence, various deals for at least 300 aircraft are currently under negotiation.

    learn more about Cirium Ascend Fleets Analyzer.

  • Japan’s Airport Fuel Shortage – an Inbound Travel Problem?

    Cirium Ascend Consultancy is trusted by clients across the aviation industry to provide accurate, timely, and insightful aircraft appraisals. The team provides the valuations and analysis the industry relies on to understand the market outlook, evaluate risks and identify opportunities.

    Discover the team’s industry reports & market commentaries. Read their latest expert analysis, viewpoints and updates on Thought Cloud.

    Joanna Lu
    Joanna Lu

    Joanna Lu, Head of Consultancy Asia, Cirium Ascend Consultancy

    Japan, celebrated for its rich cultural heritage, technological innovation, and scenic beauty, has consistently attracted significant international tourism. There have recently been reports of critical fuel supply issues at regional and major airports like Narita, typically attributed to an influx of inbound travel. However, closer examination indicates that these challenges stem more from supply chain disruptions and labour shortages exacerbated by Japan’s aging population and stringent immigration policies, than from the increase in travel alone.

    The Japan National Tourism Organization (JNTO) reports a significant increase in tourists from South Korea, Taiwan, and other Asian countries. However, with a lag in outbound tourism from China to Japan, it is essential to examine evolving travel patterns and identify the current top destination markets for Japan. This analysis focuses on Japan’s international travel landscape, specifically seat capacity scheduled on key routes over the next two months and compares these trends with pre-pandemic levels.

    Utilizing Cirium’s schedule data, we observe shifts in airline capacity dynamics in the post-pandemic era. The Chinese market remains a significant gap for Japan, with a 6% decrease in seat capacity in Q3 compared to 2019. However, South Korea has become Japan’s largest international destination market, showing a 10% increase in seat capacity compared to Q3 2019.

    Additionally, Japan sees new market opportunities with Australia and Vietnam, projecting 29% and 9% growth in Q3 2024 versus 2019 levels, respectively.

    When examining the city level, significant variations across different routes indicate shifts in demand patterns.

    Strong Recovery in Key Markets

    The almost 20% increase in departing seats in July and August to Seoul underscores robust recovery, driven by cultural ties and expanded business engagements between Japan and South Korea. Increased diplomatic efforts and eased travel restrictions have also contributed to this surge. Currently, travel between Korea and Japan is quite accessible, with both countries having resumed visa-free travel for short-term visits. South Korean and Japanese citizens can travel between the two countries without a visa for stays up to 90 days for tourism or business purposes.

    Resilience in Business and Tourism Hubs

    Taipei has seen seats increase by 8% in July and 4% in August, signalling a resurgence in business travel and tourism, buoyed by the reopening of international conferences and exhibitions and robust tech industry collaborations between Japan and Taiwan. Shanghai’s seats are up by 2% in both July and August. Bangkok sees an increase in August, reaching pre-Covid levels, although seats are still down by 27% in July. Singapore’s seat capacity is up by 4% in both July and August, reflecting its resilience in facilitating regional travel, supported by robust air connectivity and strategic business ties with Japan. The city-state’s efficient handling of pandemic challenges has reinforced its appeal as a gateway for travellers to and from Japan. The Hong Kong market hasn’t fully recovered, being roughly 14% down in seat capacity mainly due to aircraft supply shortages at Cathay Pacific.

    Challenges in Traditional Outbound Markets

    However, traditional outbound markets such as Busan, Manila, and Honolulu have seen declines in departing seats compared to 2019 due to reduced Japanese outbound travel. Busan faces reduced demand amid competition from Seoul’s expanded connectivity, while Manila and Honolulu contend with decreased tourist spending power amidst economic uncertainties.


    Addressing the fuel supply shortage issue, this is likely driven by supply-side constraints rather than demand-side factors.

    Overall international seat capacity out of Japan in Q3 remains around 7% lower than 2019 levels, with domestic seat capacity down by 2%.

    While the total seat capacity out of Japan (both international and domestic) in Q3 2024 is 6% higher than the same time last year, there is insufficient evidence to attribute the current shortage to surging inbound travel demand.

    Jet fuel, a product of crude oil refining, presently sees declining production due to decreased demand for gasoline and other petroleum products amid energy-saving measures and decarbonization efforts in Japan. Japanese oil wholesalers are consolidating and reducing the number of refineries, with only 20 active refineries as of June 2024 compared to 49 in 1983. Consequently, fuel must travel further to reach airports, compounded by labour shortages impacting both maritime and land transportation operators. Technical issues at Japan’s largest refiner, ENEOS’s Kashima refinery, further exacerbate the situation.

    Fuel shortages are already causing problems at airports across Japan, particularly regional ones. Cirium schedule data by airport reveals significant variations in flight number growth across regional airports, explaining the severity of issues at certain locations. Cirium Ascend Consultancy will continue to monitor the situation but believes the primary driver of the crisis is not the rapid recovery of travel to Japan.

    Japan’s travel industry faces a complex landscape of recovery, resilience, and challenges. Addressing these issues will require strategic planning and collaboration across various sectors to ensure sustainable growth and stability in the face of evolving travel dynamics and supply chain constraints.

  • Cirium Ascend Base Value Updates July 2024

    Cirium Ascend Consultancy is trusted by clients across the aviation industry to provide accurate, timely, and insightful aircraft appraisals. The team provides the valuations and analysis the industry relies on to understand the market outlook, evaluate risks and identify opportunities.

    Discover the team’s industry reports & market commentaries. Read their latest expert analysis, viewpoints and updates on Thought Cloud.

    George-Dimitroff
    George-Dimitroff

    George Dimitroff, Head of Valuations, Cirium Ascend Consultancy

    Cirium Ascend released updated Base Value (BV) forecasts on 1 July 2024. They went live in Cirium’s Values Analyzer platform shortly after midnight BST (GMT +1). Some of the key themes in the latest revisions include:

    1. The BV floor is getting higher

      Engine values have been increasing more rapidly than aircraft values and the portion of an aircraft’s value that is attributable to its engines has been increasing steadily over the last few decades. Higher engine values mean higher part-out values toward the end of an aircraft’s life, which means that the floor at which BVs level off (which itself is not a horizontal line) is now higher than it used to be. This has been observed most recently with older generation aircraft but is also expected to apply in the future with new generation aircraft.

      Our single-aisle aircraft BVs have been relatively stable since 2014, with limited (if any) impairments during Covid.

      “However, it is becoming increasingly evident that older aircraft are “cashing out” at retirement, generating proceeds higher than historical trends suggest.”

      This is not just because of the current heated market environment.

      Our new BV curves for single-aisles are shallower to reflect this fact. They take engine values into account alongside other factors. However, the BV does not necessarily equal the Part-Out Value, even if it may be guided by it.

      Current BVs are broadly unchanged for most younger types but increase with age – be it the current BV of an older aircraft, or the future BV of any aircraft, young or old. Due to the compounding nature of increases, projections further into the future will see greater increases in Half Life values.

    2. Engine green time does not depreciate as fast as previously projected

      A thorough analysis of the change of engine overhaul and LLP stack value over time indicates that engine value green time is depreciating less rapidly than projected previously. We specifically focussed our analysis on how this “green time” depreciates in Phase 2 (out-of-production) and Phase 3 (retirement) of an engine’s life, and while some worse performing engines did have significant double digit percentage drops in certain periods of time, the longer-term trend has been one of more gradual decline.

      We have taken these findings into account to modify some (but not all) of the depreciation rates of engine green time, and in most cases the decline is now less steep.

      Please note that the three-phase methodology for treating engine green time value that was introduced in November 2023 remains in place and we have simply modified some of the parameters within that logic to reflect our new expectations for the future.

    3. Current production delays push some inflection points further into the future

      The ongoing supply chain issues and constrained production rates at all OEMs mean that there will be fewer new deliveries in the coming years than previously expected, and consequently fewer aircraft will be retired in the next few years than projected in the 2023 Cirium Fleet Forecast.  Consequently, the engine programmes powering newer generation aircraft will likely have longer production runs, and thus take longer to enter Phase 2 or 3 of their lives, than previously projected.

      Another factor that contributes to later entry into Phase 2 or 3 for engines is that OEMs have now made it clear that some (but not all) of the technological improvements that they are developing currently and in the next few years are expected to be fully retrofittable to in-service engines at their next shop visit, which means that older engines could be upgraded to the latest production standard.

      Therefore, such engines are now not expected to see their values decline prematurely due to replacement by a more efficient version of the same engine.

      Consequently, inflection points for such engines are moving further out into the future than previously expected.

    4. New years of build see annual BV growth above the long-term trend for longer

      In late 2022 we implemented a change to our new aircraft BVs for what was then the next three years of production (up until 2025), so that those years of build showed slower-than-usual declines in new pricing in real terms (or faster increase in absolute terms) than the historical long-term trend suggested. The current supply shortages, full orderbooks, high escalation rates and our projection that the single-aisle market will not return to a supply / demand balance until at least 2028, result in an extension of this “holiday” period by another 3 years (until 2028). Build years from 2029 onwards return to the long-term new value trend, and we will continue to monitor and review them in light of how OEM new pricing and the supply / demand balance evolve over the next few years.

      The net impact of these changes, each of which in themselves can be relatively small, potentially compound to lead to more substantial increases to some BVs, especially for mid-life and older aircraft, or forecasts further out into the future, especially on a Full-Life basis.  Ultimately, our aim is to continue to refine our forecasts to be able to provide expectations of residual value that are as realistic as possible within the dynamic and rapidly evolving industry landscape. We will be publishing a more detailed Inside Track on Values newsletter in the coming week fully detailing the BV changes type by type, which will be available as usual in the publications section of Values Analyzer.

    Learn more about Cirium Values Analyzer.

  • AAM Snapshot July 2024

    Cirium Ascend Consultancy is trusted by clients across the aviation industry to provide accurate, timely, and insightful aircraft appraisals. The team provides the valuations and analysis the industry relies on to understand the market outlook, evaluate risks and identify opportunities.

    Discover the team’s industry reports & market commentaries. Read their latest expert analysis, viewpoints and updates on Thought Cloud.

    YIRU ZHANG
    Yuri Zhang

    Yiru Zhang, Senior Valuation Analyst, Cirium Ascend Consultancy

    At the mid-point of the year, the Cirium Ascend team has noticed that the advanced air mobility (AAM) sector is getting more and more attention. This is reflected in the number of commitments and orders recorded in Cirium’s database, which has increased to over 14,500 as of 24 June 2024, with over 1,000 new commitments and orders since our last update in April 2024. Data coverage includes:

    MARKET GROUPINGMANUFACTURERTYPECOMMENT
    Regional Electric – SmallAura AeroERA
    Regional Electric – SmallHeart AerospaceES-19Programme cancelled, and revised to ES-30
    Regional Electric – SmallHeart AerospaceES-30
    Regional Electric – SmallLYTE AviationLA-44 Skybus
    Regional Electric – SmallMaeve AerospaceMaeve 01Programme cancelled, OEM revised to M80
    Regional Electric – SmallJektaPHA-ZE 100
    eVTOL – Urban Air MobilityAerofugiaAE200
    eVTOL – Urban Air MobilityDufour AerospaceAero3
    eVTOL – Urban Air MobilityBETA TechnologiesALIA-250
    eVTOL – Urban Air MobilityManta AircraftANN2
    eVTOL – Urban Air MobilityAscendance Flight TechnologiesAtea
    eVTOL – Urban Air MobilityOverair IncButterfly
    eVTOL – Urban Air MobilityHorizon AircraftCavorite X7Newly added
    eVTOL – Urban Air MobilityPlanaCopterPlane CP-01
    eVTOL – Urban Air MobilityWisk Aero LLCCora
    eVTOL – Urban Air MobilityTCab TechE20 eVTOL
    eVTOL – Urban Air MobilityEHangEH216
    eVTOL – Urban Air MobilityEve Air MobilityEve
    eVTOL – Urban Air MobilityCrisalion MobilityIntegrityNewly added
    eVTOL – Urban Air MobilityJaunt Air MobilityJourney
    eVTOL – Urban Air MobilityLilium GmbHLilium Jet
    eVTOL – Urban Air MobilityArcher AviationMidnight
    eVTOL – Urban Air MobilityOdys AviationOdys eVTOL
    eVTOL – Urban Air MobilityAutoFlightProsperity 1
    eVTOL – Urban Air MobilityJoby AviationS4
    eVTOL – Urban Air MobilitySkyDriveSD-05
    eVTOL – Urban Air MobilitySirius AviationSirius Jet
    eVTOL – Urban Air MobilityXTI Aircraft CompanyTriFan 600
    eVTOL – Urban Air MobilityAMSL AeroVertiiaNewly added
    eVTOL – Urban Air MobilityVolocopter GmbHVoloCity
    eVTOL – Urban Air MobilityVolocopter GmbHVoloConnect
    eVTOL – Urban Air MobilityEHangVT-30
    eVTOL – Urban Air MobilityVertical Aerospace Group LtdVX4
    eVTOL – UAV/UASBETA TechnologiesALIA-250c
    Business Electric – Single EngineVoltAeroCassio 330
    Business Electric – Single EngineBETA TechnologiesCX300
    Business Electric – Multi EngineEviationAlice
    Business Electric – Multi EngineBye AerospaceeFlyer 800
    Business Electric – Multi EngineElectraElectra eSTOL
    Business Electric – Multi EngineElectronElectron 5
    Business Electric – Multi EngineAirflowM200

    eVTOLs – Urban Air Mobility (UAM)

    The eVTOL – UAM sector has generated the most activity in the market both in terms of the number of aircraft in development, and commitments received to date. Since the last update in April 2024, the sector has attracted 640 new order commitments. The space now has a total of slightly under 11,000 order commitments captured by Cirium Fleets Analyzer. Eve Air Mobility and Vertical Aerospace continue to lead the sector with 2,900 and 1,553 commitments respectively.

    Source: Cirium Fleets Analyzer, as of 24 June 2024

    At the same time, the first certificated type – EHang – has made it to third place with 500 new commitments (including 50 on orders and 450 on options) from Xishan Tourism gained in May 2024. After the newly placed commitments, Xishan Tourism is now EHang’s largest customer and also its second buyer from China. The EHang EH216 orderbook is still concentrated in Asia, with the above mentioned China’s Xishan Tourism ordering 500 units, Indonesia’s Prestige Aviation at 101, United Arab Emirates’ Wings Logistics Hub at 100, China’s Shenzhen Boling Holding Group at 95 units, Malaysia’s Aerotree Flight Services Sdn Bhd at 61 units and Japan’s AirX Inc at 50 units.

    The global market for eVTOLs shows a varied regional distribution, with strong presence in North America (3,390), Asia-Pacific (3,185) and Europe (1,705), driven by differing levels of technological advancement, regulatory backing and investment interest.

    Source: Cirium Fleets Analyzer, as of 24 June 2024

    By looking at the chart below, North America has been accumulating a large number of orders at an early stage and has continued to lead since. As of 24 June 2024, North America is still leading at over 3,350 orders, driven predominantly by the USA (over 3,200). Asia-Pacific followed with rapid and sustained growth to nearly 3,200 orders, where India (900), China (501), Japan (402), South Korea (220) and Vietnam (200) were the top contributors. Europe’s total orders stood at slightly above 1,700, with Ireland now at 755, becoming the largest share and exceeding that for the UK at 473. Latin America and the Middle East followed, showing substantial orders of 550 and 355 respectively. In Latin America, Brazil dominates with 530 orders. In the Middle East, the known only contributors are UAE and Saudi Arabia with 245 and 110 orders separately.

    North America has been accumulating a large number of orders at an early stage and has continued to lead since.

    Source: Cirium Fleets Analyzer, as of 24 June 2024

    The sector has drawn significant private investments and has also received support from various countries and regions. The research and development of AAM is also part of the technological competition between different countries. In the USA, NASA’s Advanced Air Mobility (AAM) National Campaign and the FAA’s UAM (Urban Air Mobility) Concept of Operations aim to integrate eVTOLs into the national airspace, which involve substantial government investment and collaboration with private industry to develop safe and efficient eVTOL operations. The UK government launched the Future Flight Challenge, a £300 million ($380 million) programme that includes significant investment in eVTOL technologies to revolutionise air transport. The Chinese government is heavily investing in smart city projects, from which EHang received strong support. There are also Germany’s BMVI funding programme, Japan’s Public-Private Conference for Future Air Mobility Revolution, Dubai’s Roads and Transport Authority (RTA) partnership with Volocopter, and South Korea’s K-UAM (Korea Urban Air Mobility) Roadmap, etc.

    All of the above-mentioned programmes and support indicate that the AAM sector will experience rapid growth in the next decade.

    Business Electric – Multi-Engine

    In the business electric sector, Electra’s eSTOL has received almost 1,350 order commitments, including from notable clients like the helicopter lessor Bristow Group. However, the identities of the majority of these order commitments remain undisclosed. Heart Aerospace’s ES-30 follows with over 750 order commitments after the ES-19 programme was cancelled and switched to the ES-30. Aura Aero’s ERA holds third place with nearly 500 order commitments.

    Business electric – multi-engine

    Source: Cirium Fleets Analyzer, as of 24 June 2024

    Learn more about Cirium Fleets Analyzer.

    Sara Dhariwal

    Lead Appraiser – Helicopters & AAM

    Ascend analyst Tim Chun Hing Li
    Ascend analyst Tim Chun Hing Li

    Tim Chun-hing Li

    Aviation Analyst

    Pascal Chui
    Pascal Chui

    Pascal Chui

    Valuations Analyst

    YIRU ZHANG
    YIRU ZHANG

    Yuri Zhang

    Senior Valuations Analyst

    Eric Tamang
    Eric Tamang

    Eric Tamang

    Valuations Analyst

  • A Hot July for U.S. Travel — And a Surprisingly Cool Destination

    The story last summer in the closely-watched U.S. domestic and transatlantic markets was growth. The story this summer? More — a lot more. The insights below are from an analysis of Cirium Diio Mi schedule data.

    The U.S. Domestic Market: Up 6% in July 2024

    The major U.S. airlines have scheduled around 6% more domestic capacity this July than last year — with a notable exception. This July, JetBlue has scheduled 9.2% fewer domestic capacity compared to last. (JetBlue announced capacity cuts earlier in the year primarily due to staffing and the congested network on the East Coast of the U.S.) Southwest Airlines will schedule only 1.4% more seats for this July compared to last, having reduced its plans due to availability of the Boeing 737 MAX aircraft they rely on.

    The airlines’ plans differ substantially depending on the type of carrier. Three ultra-low cost carriers Frontier, Spirit, and Sun Country will bring significantly more capacity to their markets.

    Breeze Airways — which now boasts a fleet of 40 aircraft (of which 25 are Airbus A220) — shows a 33% increase in scheduled seats. In the aggregate, these carriers fly substantially fewer seats than the Big 4 U.S. airlines. American Airlines will fly the most seats out of any carrier at more than 20.5M scheduled seats, followed closely by Southwest Airlines.

    Scheduled Seats in July 2024

    AirlineJuly 2024July 2023Percentage Change
    Alaska Airlines5,152,7414,789,0667.59%
    Allegiant Air2,263,7162,154,8225.05%
    American Airlines20,519,68018,973,8298.15%
    Avelo Airlines294,490291,9440.87%
    Breeze Airways542,516406,81033.36%
    Delta Air Lines18,659,45317,777,3474.96%
    Frontier Airlines3,989,4722,939,32635.73%
    Hawaiian Airlines1,105,7051,124,554-1.68%
    JetBlue2,993,5423,298,323-9.24%
    Southwest Airlines20,325,41420,051,0831.37%
    Spirit Airlines4,740,1353,906,19421.35%
    Sun Country Airlines576,414462,21024.71%
    United Airlines14,407,78613,987,6543.00%

    Transatlantic Flying: Up 7.8% in 2024

    Airlines increased capacity in summer 2023 compared to 2022 by 18%, and are poised to do the same for July 2024. The transatlantic carriers — including the European operators — will deploy additional capacity from the U.S. to Europe, with schedules showing a 7.8% increase in seats flown over July 2023.

    The top carriers? United and Delta are following the lead they set last summer, finding opportunities for revenue premiums. This summer, watch for the Europe carriers to add — including Air France with a 15% increase in scheduled seats — perhaps betting on the strength of demand for the Paris Olympics.

    Airline NameJuly 2024July 2023Difference% Difference
    United Airlines722,428701,07521,3533.0%
    Delta Air Lines719,985685,49734,4885.0%
    American Airlines565,077533,37731,7005.9%
    British Airways419,169411,5677,6021.8%
    Lufthansa323,584292,85430,73010.5%
    Air France279,426242,50836,91815.2%
    Virgin Atlantic242,973223,51719,4568.7%
    Turkish Airlines209,672187,29122,38111.9%
    Aer Lingus163,591154,6748,9175.8%
    Iberia131,072114,42816,64414.5%
    Icelandair117,360104,60012,76012.2%

    Where Are the Destinations of Choice?

    For the European market, Denmark, Croatia, and Spain show the most growth in capacity from the U.S., with double-digit growth in flying.

    Denmark27%
    Croatia17%
    Spain16%

    For the U.S. domestic market, the usual U.S. domestic city-pairs always factor — between New York, Chicago, and Los Angeles. However, it may surprise readers to know that Seattle, Washington to Anchorage, Alaska will have the most seats flown in July 2024 — around 146,000 seats, some 2,000 more seats than between New York-LaGuardia and Chicago O’Hare. Alaska Airlines will fly almost 80% of these north-south flights.

    Learn more about Cirium Diio.

  • Airline Failures – Opportunity for Some?

    Cirium Ascend Consultancy is trusted by clients across the aviation industry to provide accurate, timely, and insightful aircraft appraisals. The team provides the valuations and analysis the industry relies on to understand the market outlook, evaluate risks and identify opportunities.

    Discover the team’s industry reports & market commentaries. Read their latest expert analysis, viewpoints and updates on Thought Cloud.

    Chris Seymore aviation market analysis
    Chris Seymore aviation market analysis

    Chris Seymour, Head of Market Analysis, Cirium Ascend Consultancy

    The recent failure of Australian low cost carrier Bonza, after less than 18 months of flying, highlights the fragility which startups can face in their first years. In an environment of delivery delays and capacity squeeze, airline failures can provide other airlines with opportunities to add capacity at short notice by leasing aircraft which suddenly become available. What is the recent experience?

    Over the past 18 months, since the start of 2023, looking at operators of the popular A320 and 737 family aircraft in particular, 18 carriers operating 177 aircraft have suspended or ceased operations.

    To date, some 50 of these aircraft, or just under 30%, have returned to service, while only three have been parted out.

    Bonza’s four leased 737-8s have ferried to Europe awaiting new lessees. With lessors accounting for over three quarters of the 177 total, returning aircraft represent a problem in dealing with the cost of an unexpected return, but also an opportunity to place with a better credit at increased rates in a capacity constrained market.

    It has averaged around 120 days to get these 50 aircraft placed and back in service and the average age of these aircraft is around 8 years.

    When Norwegian low cost airline Flyr ceased at the start of 2023, its six Max 8s were idle for only around seven weeks before rival Norwegian snapped them up; and its six 737-800s took a little longer but are all flying, most with Jet2.

    The Colombian market saw the cessation by Ultra Air and then Viva Air in March-May 2023, putting 29 A320s into the market. All but one are back in service, these have averaged 144 days to place and the majority have stayed in the local market with Avianca and LATAM Airlines Colombia, thereby minimising the cost of transition for the lessors.

    A320s and 737s From Ceased/suspended Operations – Current Status

    A320s and 737s from ceased/suspended operations – current status

    Source: Cirium Fleets Analyzer (data since Jan 1 2023)

    MYAirline in Malaysia ceased last November but six of its ten mid-life A320s averaged just 90 days before re-entering service, with Air Asia, GlobalX and Corendon Dutch, while three others are placed with IndiGo and Vueling and due to re-enter service.

    So what of the remaining 120 aircraft, which have an average age of 13 years and are averaging 267 days inactive to date?

    Cirium Fleets Analyzer records only 11 as being placed to date. These include five of nine leased 737-8s with Lynx Air, which stopped in February, going to fellow Canadian carrier WestJet. Six young A320s returned by Pacific Airlines of Vietnam after it suspended flights in March have yet to find new homes.

    54 aircraft (44%) are from the fleet of GoFirst of India, perhaps the highest profile casualty, which suspended flying in May 2023.

    With an average age of under 5 years and all but five being A320neos, these are obvious candidates for quick placement.

    But the drawn out process the lessors are having to go through to get them back, with courts ordering deregistration only last month, as well as issues with the GTF engines, mean that they all remain parked, frustratingly as the peak 2024 season is in progress.

    At the other end of the spectrum, the 30-strong fleet of charter carrier iAero Airways of North Carolina, which entered Chapter 11 and stopped flying in April, average almost 30 years old, being mainly 737-300/400s. Eastern Air Express has acquired these assets.

    So there is limited availability of young and newer generation aircraft available in the short term, with the prospect of the GoFirst fleet coming back into service in the coming year(s). Most recently the failure of Air Vanuatu has seen a young 737-800 returning to its lessor and one would expect that to be quickly placed.

    LEARN MORE ABOUT CIRIUM FLEETS ANALYZER.

  • Aircraft Value Dynamics

    Cirium Ascend Consultancy is trusted by clients across the aviation industry to provide accurate, timely, and insightful aircraft appraisals. The team provides the valuations and analysis the industry relies on to understand the market outlook, evaluate risks and identify opportunities.

    Discover the team’s industry reports & market commentaries. Read their latest expert analysis, viewpoints and updates on Thought Cloud.

    YIRU ZHANG
    Yuri Zhang

    Yiru Zhang, Senior Valuation Analyst, Cirium Ascend Consultancy

    Let’s begin by examining where values and lease rates stand today by aircraft category, and how they’ve moved during the last 12 months and last 60 months. The last 60 months effectively represents a benchmark against 2019, meaning pre Covid.

    Let’s begin by examining where values and lease rates stand today by aircraft category, and how they've moved during the last 12 months and last 60 months.

    You can see that in the last year, there were very large improvements in values and lease rates of narrowbody and widebody jets. For narrowbodies, the increases have been in the high teens on a fleet-weighted average basis.

    For widebodies, lease rates on a fleet-weighted average basis have risen almost 30%.

    But given the significant decreases during Covid, on a weighted average basis this shouldn’t be a surprise.

    And in fact, you can see that for widebody lease rates there is almost no visible rent bar, which means they’ve only just come back to the pre-Covid level.

    Values are still almost 20% down over 2019 and we think that is because a big portion of the fleet were relatively young A330ceos and 777s, production of which concluded during the Covid period. Some of these young fleets, i.e. aircraft that are seven to 10 years old, had significant value declines which may never be fully recovered.

    Narrowbodies on the other hand have seen lease rates recover to 2019 levels, but values are actually ahead, by about 15%.

    The regional aircraft market remains significantly below 2019 levels.
    That’s largely driven by a lack of flying activity in the USA, largely due to the pilot shortage, especially for the regional jet sector. There are also additional factors contributing to this decline, such as rising fuel costs and increasing operational expenses. And in the turboprop market, production has now ended for a lot of types. The DHC 8-400, for which production has been suspended, has seen a lot of market availability.

    And in the turboprop market, production has now ended for a lot of types. The DHC 8-400, for which production has been suspended, has seen a lot of market availability.

    Source: Cirium Core, passenger jets only

    To appreciate this chart, the concept of base value must first be understood. Base value is defined as the theoretical market where supply and demand are exactly balanced. So in good economic times when demand exceeds supply, market to base value should be above one, while in the obverse market value will be lower base and therefore the ratio is below one.

    The chart illustrates the “hot” market that existed at the beginning of 2019, then the downturn triggered by Covid, followed by the recovery starting in Q3 2021 leading through to today. Single-aisle market value exceeds base by 25%, while twin-aisle market value is also more than 15% above base. The twin-aisle increases are driven by some recent market value revisions, the latest of which being the A330ceo, which obviously has a large inventory that impacts the fleet-weighted result here.

    The twin-aisle increases are driven by some recent market value revisions, the latest of which being the A330ce.

    Source: Cirium Core Current Market Values, Current Base Values and fleet counts as at 14 Jun 2024

    Meantime the single-aisle ratio is largely being driven upwards by mid-life and older aircraft where demand remains very strong as a consequence of new aircraft delivery deficits which is presently driving strong demand and hence strong market values for those older aircraft. As shown in the above chart, the single-aisle MV/BV ratio is close to parity for new aircraft but increases with age, reaching approximately 160% by retirement age.

    Source: Cirium Core, passenger jets only

    Source: Cirium Core, passenger jets only

    The long term picture using the same data illustrates how today’s MV/BV ratios are at record levels. It also shows how widebody aircraft ratios did not fully recover after the global financial crisis of 2007/2008. They never even exceeded base for an entire 15-year period, only finally transitioning to positive from late last year, beginning of this year.

    Read more Ascend Consultancy articles. Learn more about Cirium Fleets Analyzer.