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  • AAM Snapshot April 2024

    READ ALL OF THE LATEST UPDATES FROM ASCEND CONSULTANCY EXPERTS WHO DELIVER POWERFUL ANALYSIS, COMMENTARIES AND PROJECTIONS TO AIRLINES, AIRCRAFT BUILD AND MAINTENANCE COMPANIES, FINANCIAL INSTITUTIONS, INSURERS AND NON-BANKING FINANCIERS. MEET THE ASCEND CONSULTANCY TEAM.

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

    Tim Li, Aviation Analyst, Cirium Ascend Consultancy

    As we move into the second quarter of the year, the Cirium Fleets Analyzer database logged slightly below 450 new order commitments for the Advanced Air Mobility (AAM) sector since the beginning of this year, taking the total to slightly over 13,500. The AAM market is inching closer to some of its initial target dates for operation, including Volocopter vowing to begin operations during the Paris Olympics 2024. Some progress has been made in the first quarter, with EHang kickstarting its public sale of the E216-S after obtaining the world’s first type certificate from the Civil Aviation Administration of China (CAAC), and other OEMs (Original Equipment Manufacturers) obtaining production organization approvals (POAs) from their regulators, which further paves the way towards production of the designs. However, there is still no absolute certainty that these operations will be realised.

    Data coverage Includes:

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

    eVTOL – Urban Air Mobility (UAM)

    The total number of order commitments captured by Cirium Fleets Analyzer for the eVTOL sector is now slightly above 10,300. EVE Air Mobility and Vertical Aerospace continue to stand out as the OEMs with the most order commitments, even though they did not record any new in the past nine months. These new commitments are predominantly from the Asia Pacific region and are lacking familiar names like lessors that previously logged.

    Source: Cirium Core, as of 3 April 2024

    Source: Cirium Core, as of 3 April 2024

    Sustaining Financing: A Vital Component for Industry Growth

    According to Cirium data, there has been a decrease in the rate of growth of order commitments. In the past six months, the net growth of total commitments amounted to just slightly below 600 units, with around 80% of activity from the Asia Pacific region. Overall, these order commitments observed represents a decline of over 50% compared to the previous six-month period. However, during this stage in the development cycle, a slowdown in the rate of orders is not unexpected.

    As per Cirium’s Fleets Analyzer database, there are currently more than 20 designs registered that have received order commitments, with new entrants continuing to emerge. These factors indicate that enthusiasm towards the AAM market has not yet started to fade.

    Source: Cirium Core, as of 3 April 2024

    An order commitment generally means payment is committed to be made in the future and is often subject to agreed terms and conditions. An example of such a condition is meeting development timelines. While commitments can increase the confidence of investors and eventually translate into payments, they are often not an immediate source of cashflow for the OEM. Product development, particularly of such pioneering technology, is both lengthy and costly. To achieve any milestones set out to fulfil promises and thereby the ability to realise the AAM vision, the OEMs will continue to require new financing, either from their parent companies, governments or existing/new investors.

    A decrease in direct financing would have significant implications for the future development of the industry. In order to ensure continued support for product development and marketing efforts, consolidation could be something to watch for in the near to medium-term future.

    Business Electric – Multi Engine

    Source: Cirium Core, as of 3 April 2024

    The total tally of order commitments for the electric business aircraft sector now stands over 3,200, marking an increase of approximately 500 commitments in the last six months. The Dallas-based JSX Airlines accounts for over 330 of them, spreading across types including Aura Aero’s ERA, Electra’s eSTOL, and Heart Aerospace’s ES-30. Electra’s eSTOL also received an additional commitment from US-based regional aircraft operators Surf Air (90), as well as from India’s Jet Set Go (50).

    *The European startup Maeve Aerospace has revised its strategy and introduced a new concept, an 80-seater hybrid-electric aircraft dubbed the M80. This means that the original M01 44-seater is now on hold. It remains uncertain whether the initial orders will be transferred.

    Most designs for this larger gauge concepts have now diverted from the vision of the aircraft being fully powered by electricity alone, and are instead based on a hybrid concept.

    The Cirium Ascend Consultancy AAM team will continue to provide valuable insight to the market. We would be pleased to hear any thoughts, comments or feedback you may have, so do not hesitate to contact us for more information.

    Sara Dhariwal
    Lead Appraiser – Helicopters & AAM

    Ascend analyst Tim Chun Hing Li

    Tim Chun-Hing Li
    Aviation Analyst

    Pascal Chui

    Pascal Chui
    Valuations Analyst

    Yuri Zhang

    Yuri Zhang
    Valuations Analyst

    Eric Tamang

    Eric Tamang
    Valuations Analyst

  • Dreamliner Fleet Leaders Approach Retrofit Sweet Spot

    James Mellon, Senior Aviation Data Research Analyst, Cirium

    Cirium is proud to be the Official Data Analytics Partner of AIX 2024.

    The first wave of Boeing 787-8s to enter service are now over a decade old; their airframes need heavy maintenance, and several airlines have recently announced accompanying cabin retrofit programmes. James Mellon, Senior Aviation Data Research Analyst at Cirium, draws on Cirium’s unique data insights to analyse this emerging market opportunity.

    Although regarded as a brand-new aircraft type, the Boeing 787 has been in commercial service since 2011. The oldest 787-8s have therefore been operating for well over a decade, and not only have they reached the point where their airframes require their first structural maintenance checks – they are prime candidates to undergo cabin refreshes too.

    Several airlines have recently revealed their 787-8 fleets will be retrofitted with new cabins over the next few years. However, these will not be the first examples to undergo major interior updates, as we can explore using Cirium’s recently launched Ground Events analytics tool.

    Since October 2019 Cirium has tracked 18 cabin retrofit events, involving 787-8s operated by All Nippon Airways (ANA), Japan Airlines (JAL) and United Airlines.

    United Airlines recently refreshed its entire widebody fleet with its new ‘Polaris’ business class and introduced ‘Premium Plus’ premium economy cabins. Ground Events Analytics shows all 12 of United’s 787-8s visited HAECO’s facility at Xiamen – Taikoo Aircraft Engineering – for the work to take place.

    Source: Cirium Ground Events

    In Japan, where the first 15 787-8s were delivered in 2011-12, the type is being used to launch new airlines. Low-cost carrier Zipair Tokyo was established by JAL in 2019, with the initial fleet comprised of the parent airline’s oldest 787-8s. Airframe maintenance checks and cabin retrofits were undertaken prior to transfer, introducing a higher-density layout with capacity increasing from 206 to 290 seats.

    The Zipair Tokyo fleet has since been supplemented with two factory fresh 787-8s, but due to Boeing pausing 787 deliveries between June 2021 and August 2022, both aircraft arrived later than originally planned. To meet increasing post-pandemic travel demand, JAL transferred over additional second-hand 787-8s to Zipair, requiring the same cabin retrofit work as previous aircraft.

    Ground Events analytics show that the six Zipair 787-8s were retrofitted both in-house and by third-party MRO providers at three different facilities.

    ANA launched AirJapan in February 2024, which like Zipair operates medium-haul low-cost services with older 787-8s transferred from the parent airline. Five more aircraft will be retrofitted with all-economy cabins and placed into service during 2024.

    The -8 was the initial variant of the 787, and 165 were delivered over a two-and-a-half-year period before the first stretched and longer-range 787-9s entered service.

    Source: Cirium Fleets Analyzer

    There has been a recent spate of airline announcements regarding 787-8 retrofit programmes. In many cases old seats will be replaced by new units to achieve commonality with new-build aircraft.

    Cirium fleets data shows seven 787-8s have been permanently withdrawn from use. In addition to four prototypes retained by Boeing, two former Norwegian airframes were parted out in 2023, and another airframe which was never delivered to an operator is being cannibalised.

    There are 383 787-8s in service and 11 in storage, while over 1,100 787s of all variants have been manufactured to date. The type’s order backlog of nearly 800 units – which includes a relatively modest 48 firm commitments for the 787-8 – means production is assured well into the 2030s.

    New widebodies are being manufactured and delivered at a slower rate than airlines want to acquire them. This is making second-hand aircraft desirable, increasing their value, and therefore with the intention to operate them for the long term the business case for cabin retrofits becomes justifiable.

    Six airlines have recently announced their 787-8s will undergo cabin retrofit work in the next few years. Central to these upgrades are new seats, in-flight entertainment and internet connectivity systems, which in some cases will result in the interiors matching other, typically younger, widebody types operated by these carriers.

    Source: Cirium Fleets Analyzer

    Having launched its new ‘Club Suites’ in 2019, British Airways (BA) will start installing the Collins Aerospace-manufactured business class seats into its 787-8 fleet in 2024. The old 2-3-2 seat arrangement makes way for a 1-2-1 configuration, improving accessibility with direct aisle access for all passengers. Together with upgrades to other cabins and the addition of wi-fi, these aircraft will then have interiors corresponding with their newly delivered counterparts, 787-10s and Airbus A350-1000s. The upcoming 787-8 work follows on from retrofits to BA’s 777 fleet, which were performed at BA’s maintenance facilities in Cardiff, Cirium’s Ground Events analytics shows.

    Ethiopian Airlines is enlisting Adient Aerospace to supply lie-flat Business class seats for its 787s. Although the airline has not announced which aircraft will be retrofitted, Cirium’s Fleets Analyzer shows the airline operates 10 787-8s featuring angled business class seats, with 150 degrees of recline and arranged in a 2-2-2 configuration. These aircraft are Ethiopian’s oldest 787-8s and were delivered between 2012 and 2014, before the latest-generation business class seats with privacy doors in a 1-2-1 configuration were widely available.

    Not all of the upcoming retrofits will see premium cabins change to a 1-2-1 configuration.

    Jetstar plans to retain its seven abreast seat arrangement, but as premium travel demand has grown it will increase the number of seats in this cabin from 21 to 44. The Qantas subsidiary has also announced that crew rest areas will be installed on its 11 787-8s, suggesting these aircraft could be used to open new long-haul markets. Fleets Analyzer shows Jetstar has 98 A320neo family aircraft on backlog, including 36 examples of the A321XLR. These long-range single-aisle jets could be deployed onto Jetstar routes currently served by the 787-8s, freeing them up to expand the carrier’s route network.

    With several airlines planning cabin retrofits for these relatively young aircraft, and at a time when heavy maintenance is required, logic would dictate that other airlines operating the 787-8 will also take the opportunity to update their fleets.

    Contact our team to discover how Ground Events enables businesses to understand when, where and why aircraft are undergoing retrofits and other maintenance events.

    Attending AIX Hamburg? Book a meeting with the Cirium team.

  • Navigating Offshore Helicopter Demand in 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.

    Eleni Maragkou, Valuations Analyst, Cirium Ascend Consultancy

    The offshore oil & gas (O&G) helicopter market presents the industry with more opportunities for replacement rather than growth in the next decade. The emphasis is predicted to be on newer designs with better economics and payload/range, according to the Cirium Helicopter Forecast and discussion at the latest Cirium webinar, Helicopter Offshore 2024. The panel provided perspectives on market dynamics and the future outlook, from industry experts comprising Bristow senior vice-president key accounts Samantha Willenbacher, Lider Aviacao chief executive Junia Hermont, and Cirium Ascend Consultancy lead appraiser helicopters and AAM Sara Dhariwal. The event was moderated by Cirium Ascend Consultancy head of consultancy operations Chris Wills, a senior ISTAT appraiser.

    In summary:

    • The ratio of the operational O&G helicopter fleet to the number of oil rigs decreased from a high of 1.1 in 2016 to 0.8 in 2024.
    • The in-service offshore configured fleet has contracted by around 25% from the peak in 2014.
    • Preference is shifting towards the cabin and range combinations of medium and super medium aircraft sizes.
    • The Cirium Helicopter Fleet Forecast predicts limited growth, with 90% of the 400 new deliveries forecast in the next 10 years to be replacements and a compound annual growth rate (CAGR) of just 0.3%.
    • Petrobras in Brazil is increasing activity, with an investment of $102 billion forecast during 2024-2028, while new bids for 2026-2027 are expected to add 50 aircraft.

    Sara Dhariwal noted that the proportion of operational helicopters relative to the number of active oil rigs has reduced from a high of 1.1 in 2016 to 0.8 today. It indicates that there has been a reduction in the significant surplus that existed following the O&G downturn. The reduction is due both to a recovery and increase in active oil rigs, and the fact that the in-service offshore configured fleet has contracted by around 25% since the peak in 2014.

    There is a shift in preference away from single engine and light/intermediate twins, towards the larger cabin and longer-range combination of the medium twin and super medium aircraft sizes. The Cirium Helicopter Forecast predicts that this trend is likely to persist in the next decade, driven by various factors including a move away from the heavy size due to limited replacement opportunity.

    Right sizing remains a key factor for the industry and helicopter values, with the past decade seeing both under- and over-capacity. The implications of this trend were also discussed, based on the future of the offshore market, with a need to adapt to changing market dynamics and for operators to invest in the right size of helicopters to meet demand and customer needs. Diversification of the fleet is key to mitigating supply-orientated risks.

    In the higher capacity helicopter categories, there is evidence that the super mediums, including the AW189 and the H175, are gaining more market share from the main heavy type, the Sikorsky S-92A.

    Competition in this size category is about to become even greater with the entry of the Bell 525 Relentless. During HAI HeliExpo 2024, Norwegian oil major Equinor announced a commitment for 10 Bell 525s, which is the first major order for the type.

    Deliveries are scheduled to begin in 2026. The increasing competition in this size category reflects the preference for helicopters with greater capacity and range, catering to the evolving needs of offshore operations. The Cirium Helicopter Fleet Forecast suggests that the trend is likely to continue into the next decade, driven by technology and changes in operational requirements.

    Age can be challenging if their age limit comes midway through a contract…

    Samantha Willenbacher, Senior Vice-president Key Accounts at Bristow

    Bristow’s Willenbacher commented: “Age can be challenging if their age limit comes midway through a contract… the older AW139s, short nose with TCAS 1 and we are seeing this a lot in Brazil which is switching more to requiring TCAS 2. That is a proportion of the AW139 fleet that is going to need to find a part of the world where these aircraft can operate. Customer requirements are shifting.”

    In terms of values, the Rotorcraft Aircraft Market Sentiment Index (RAMSI) by Cirium Ascend Consultancy focused on the offshore sector and indicated a positive trajectory for most in-production types operating in the sector with values trending upwards. The exception is the S-92A, where there appears to be some uncertainty, as it currently faces issues with a shortage of MRO and spares capacity.

    The Cirium Helicopter Fleet Forecast anticipates the focus to be on the replacement of around one-quarter of the current fleet, meaning that 90% of the forecast 400 new deliveries in the next 10 years will be replacements, and a CAGR of just 0.3%.

    The majority of the deliveries are predicted to be of newer designs with better economics and payload and range. The new medium sized Airbus H160 and super medium Bell 525 will be the latest types entering the offshore market. The forecast is for around 40% of deliveries to be of medium and super medium types, with the combined category anticipated to increase its share to 50% by 2032.

    The challenges in the O&G support industry include the importance of long-term contracts to drive investment confidence and encourage growth and stability in the sector.

    Petrobras contracts have only five years, so in order to invest in new helicopters, we need to have long-term contracts

    Junia Hermont, Chief Executive at Lider Aviacao

    The Cirium Helicopter Fleet Forecast anticipates limited growth over the next decade, driven by emerging markets. Challenges such as equipment diversification, contract terms and an aging fleet remain key considerations for operators. The emergence of new technologies such as manned and unmanned vertical take-off and landing aircraft (VTOLs), could present development opportunities for the industry but requires careful navigation through certification processes and operational adjustments.

    In conclusion, the offshore helicopter market presents both challenges and opportunities while seeing signs of recovery. By understanding the market dynamics, fostering confidence and embracing technological advancements, key industry players can navigate the evolving landscape and capitalise on recovery prospects in the years to come.

    FOR MORE INFORMATION, CONTACT US. Watch the webinar, Helicopter Offshore 2024, on demand now.

  • Ask and You Shall Receive: Talking to Data for Smart Insights

    Thomas Burke, Director of Software Engineering, UI Platform, Cirium

    Alex Brooker, VP of Research, Development and Discovery, Cirium

    In a world where data is often referred to as the new oil, the ways we access and analyze it are evolving at an extraordinary pace. Undoubtedly, one of the most exciting advancements in this space is the entry of large language models (LLMs) into the mainstream. Developers across all industries now have access to APIs that allow them to unlock the incredible capabilities of LLMs.

    Among the many promising applications of these technologies is the ability to bring natural language-driven data access into reality. Data practitioners are always on the lookout for efficiencies in extracting information from their data, and LLMs provide compelling new capabilities to achieve this.

    As powerful as LLMs are, it’s important to note that they cannot inherently understand your data, but when properly leveraged they can help you query and summarize data. They need some guidance, though, often provided in the form of metadata to aid in accurately converting a natural language prompt into a data query.

    One common method is Text-to-SQL. Leveraging the power of a general-purpose LLM, it involves providing the user’s question, a “system prompt” outlining the specifics of SQL behavior, and detailed metadata about your database schema to the LLM. The result? A SQL query that you can validate, sanitize, and execute against your database.

    “What is the current location of flight AA 100?”

    Another prevalent strategy is known as Function Calling. This technique employs a language model to generate parameters that can be used to call a function. For instance, to answer the questions “What is the current location of flight AA 100?” “What is the chance my flight could be delayed?”, Function Calling could generate necessary parameters to call the Cirium Sky API, summarize the returned data as natural language, and relay the output to the user without hallucinations.

    The choice between Text-to-SQL or Function Calling depends on the task at hand. While Text-to-SQL is arguably more expressive and can deliver complex insights, Function Calling might be preferable for reasons of reliability and security, dependent on the implementation.

    A Semantic Layer aids in flexible modeling and describing data in a way that’s programmatically accessible.

    Regardless of the technique you opt for, providing access to metadata is crucial. A common and effective solution for this is implementing a Semantic Layer. A Semantic Layer aids in flexible modeling and describing data in a way that’s programmatically accessible. This can help provide a scalable solution to ensuring appropriate metadata is provided to the language model.

    In summary, the integration of natural language-driven data access and analysis augments the capabilities of data professionals, automates complex tasks and promotes efficiency in dealing with substantial data sets. LLMs are only part of the system behind any product, and both Text-to-SQL and function calling are now part of the stack.

    As LLMs continue to evolve, we can expect even more exciting developments in this field. Stay tuned to this space for more updates and reach out to engage with our R&D team.

    Interested in the latest Generative AI technology?

    Contact the team to receive the latest updates or register your interest to work with our labs team. Learn more about Cirium Sky API.

  • 2023 Boeing 737 Production Rates

    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.

    RobMorris Cirium
    RobMorris Cirium

    Rob Morris, Global Head of Consultancy, Cirium Ascend Consultancy

    At the recent Bank of America Global Industrials conference in London on 20 March Boeing’s CFO Brian West was non-specific about the current 737 production rate but did note that previously the company did get to ‘low- to mid-30s’ per month. Cirium fleet data illustrates this via the chart below, which tracks first flights from both Boeing and Airbus’s key single-aisle production lines. However, it also clearly shows that Boeing achieved only 19 and 11 first flights in January and February respectively, well below the ‘low- to mid-30s’ that we can see was achieved between February and July last year when we saw a monthly average close to 36 aircraft. Since that time we have seen a clear downward trajectory and now production sits around ‘low- to mid-teens’.

    What does this mean for 2024 deliveries? At present, Cirium Ascend’s working hypothesis is for 500 737 Max deliveries this year. A few weeks ago that did feel like a robust assumption, but there now seems to be significant downside risk to this hypothesis.

    To date (as I write on 22 March), Cirium’s data records 58 737 deliveries in 2024, including one 737-800 based P-8 which is excluded from the analysis (but is included in the first flight data above). Hence, as we approach end of the quarter only 57 737 Max in that total. The same data indicates that Boeing have 167 Max in inventory – aircraft which have flown but not yet delivered – but this total includes 27 737-7 Max and 6 737-10 Max which almost certainly will not be delivered to customers in 2024 as neither variant has yet been certificated by FAA. Hence, the maximum we can assume will be delivered from inventory is 130 737-8 Max and 4 737-9 Max. Add those to the year-to-date total and we achieve 191 deliveries.

    This means that Boeing will need to fly and deliver a further 309 aircraft to achieve our current hypothesis of 500 deliveries.

    Applying simple arithmetic, that would mean more than 34 new-build aircraft per month if we assume that Boeing is able to ramp back up to its ‘low- to mid-30s’ next month. However, this seems an unlikely scenario. Perhaps more likely to assume that it will take up to three months before Boeing can fix its issues and start to increase production back towards those mid-2023 levels again.

    In this scenario, if we assume that production remains around today’s levels through June, then ramp back towards the ‘low- to mid-30s’ by September, the resulting additional new-build aircraft in 2024 is around 250 units. Adding those to the current total and estimated future deliveries from inventory results in a total 2024 delivery estimate of around 440 aircraft.

    There is one potential bright spot that mitigates this risk marginally. In Boeing’s Q4 earnings call on 29 January, CEO Dave Calhoun noted “there are around 25 airplanes produced in 2023 that are still WIP (work in progress)”. If these aircraft have not yet flown then they could be candidates to be completed and delivered this year, to some extent reducing that downside risk (albeit we don’t know what variant these are).

    Hence, the downside risk to our existing hypothesis of 500 737 Max deliveries in 2024 is around 40-60 aircraft.

    We are already hearing airlines speak of expected delivery shortfalls this year, which continues to exacerbate regional and global capacity shortages. Boeing’s production woes on the 737 need to be fixed quickly if this ‘crisis’ isn’t to continue for a long while yet.

    FOR MORE INFORMATION, CONTACT US.

  • The Future of the E175 and 70-Seater Regional Jets

    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.

    Alex Vathylakis
    Alex Vathylakis

    Alex Vathylakis, PhD, Principal Valuations Analyst, ISTAT Appraiser, Cirium Ascend Consultancy

    In a significant move for Embraer, American Airlines’ recent firm order of 90 new E175-E1 aircraft has not only boosted the OEM’s order book but also created another scope clause oxymoron: a past generation jet at the top of the OEM’s order book, accumulating a total of 190 orders which is almost 10 units more than the E195-E2. Based on American Airlines’ press release, the E175-E1 is expected to deliver through the early 2030s. As the Mitsubishi SpaceJet was already the first scope clause casualty, does the E175-E2 also now face the same threat? And how do the latest developments impact the existing fleet?

    Historical fleet trends show that North America continues to increase its concentration of 30-to-70-seater aircraft, with limited appetite for smaller regional aircraft in other parts of the World.

    At the same time, there seems to be no scope clause relaxation in sight, despite Embraer’s hope to deliver its first E175-E2 in the late 2020s. A substantial order from a non-US, perhaps Indian, operator would thus be the remaining hope for the programme, although this seems unlikely given the past long-term trends.

    While Embraer may have more flexibility to keep a programme dormant for longer, it is presumably more challenging to keep Pratt & Whitney committed to produce a scaled-down GTF engine at smaller volumes than initially planned due to the SpaceJet’s termination. This would be in addition to the major challenges which the wider GTF programme is facing at present and for the years to come.

    All of the above creates continued favourable winds for the larger scope clause compliant regional jets, and especially the most fuel-efficient, “Enhanced” winglet-equipped E175-E1 sub fleet. Despite the US concentration, they are expected to enjoy a solid liquidity advantage as well as better value retention compared to all other 50- to 70-seaters.

    This is also supported by the fact that the 50-seater market will continue to contract, as US Majors United and American follow Delta in exiting the ERJ-145 and CRJ100/200 types.

    At the same time, this is resulting in a reduction in flight frequencies on some routes or the complete cessation of others, making it remarkable that there is such inelasticity in the US market towards introducing turboprops, as perception, and arguably comfort, are not traded for greener, more fuel-efficient, and similarly sized turboprops.

    This suggests a growing opportunity for a new aircraft to fill the gap as well as to bridge a wider range of market classes, which could be anything from a less risky new-gen turboprop, or an open-rotor aircraft family, to a hybrid-electric or hydrogen-powered aircraft. Until then, E175-E1 program will have reached its 30th production anniversary by the time the last of this recent American Airlines order are delivered, marking the longest production run of a commercial passenger jet of its generation.

    SEE MORE ASCEND CONSULTANCY POSTS. LEARN MORE ABOUT CIRIUM FLEETS ANALYZER. OR FOR MORE INFORMATION, CONTACT US.

  • Airline Traffic Rebounds in 2023, Recovery Trends for 2024

    Kevin O’Toole, Chief Strategy Officer, Cirium

    The airline industry is finally back. With the numbers now in for 2023 it is clear that World passenger numbers came close to pre-pandemic levels, ending the year just 3% shy of the 2019 peak. But more significantly, passenger revenues have been hitting highs for the first time in four long years. The question now is how strong this revenue recovery will remain and whether the recovery in demand can translate it into more robust industry profitability.

    It is worth remembering the unprecedented nature of this latest industry downturn. The emergence of Covid as a global pandemic early in 2020 took passenger traffic down by 60% and even as demand returned two years later in 2022, traffic remained down by around 27% against pre-pandemic levels. Compare that with the impact of 9/11 in 2001 when world traffic fell by what now looks like a relatively modest 3% at its worst and was back a couple of years later despite the subsequent outbreak of SARS in Asia.

    Global Passenger Traffic & Revenues by Quarter – 2023

    QuarterPassenger numbersPassenger revenuePassenger traffic (RPK)
     vs 2022vs 2019vs 2022vs 2019vs 2022vs 2019
    Q153%-7%84%2%63%-11%
    Q234%-3%43%6%39%-6%
    Q325%-1%22%6%28%-2%
    Q426%-1%21%6%28%-1%
    Year 202333%-3%37%5%37%-5%

    By contrast this downturn has been longer and deeper than any on record. As a footnote, passenger traffic grew every year even during the Second World War. So, the return of revenues and traffic in 2023 is a welcome sign that the market is finally back to something approaching normality.

    Cirium’s Diio FM traffic and fares models show global passenger numbers narrowly beating pre-pandemic levels by the height of the summer in 2023. Although not quite enough to pull ahead for the full year, this was accompanied by a robust recovery in fares. Passenger revenues tracked at new highs throughout much of the year and ended 2023 up 5% on the previous peak. The optimism does come with caveats. Dollar inflation has risen by around 20% in the five years since 2019, so last year’s total remains down in real terms.

    Neither is the recovery uniform. Business travel continues to lag, with corporates not only under pressure to manage costs but now also to meet emissions targets.

    This shows through in returns from Amadeus and Sabre, where GDS agency bookings continued to trail pre-pandemic levels by around 30% during 2023. While there are other factors at play in reducing GDS levels, the contrast is stark compared with the recovery in passengers boarded.

    Long-haul demand has also lagged, perhaps not surprisingly given the restrictions slapped on cross-border travel during the pandemic. Global Revenue Passenger Kilometres (RPK) were down by 5% for 2023 as regional and domestic markets heated up but longer haul lagged.

    Leading that regional demand has been the US domestic market, where traffic has gathered pace steadily since Covid restrictions began to lift from the middle of 2022. It was ahead of the 2019 tally for every month in 2023. Passenger numbers ended the year 4% ahead of the previous peak and revenues were up by an impressive 17%.

    Western Europe has been following the US market’s upward trajectory, albeit with a lag, since its own somewhat chaotic reopening in the summer of 2022. RPKs were up by 6% within the region as route networks continued to expand and although passenger volumes ended the year still down by 2% against pre-pandemic levels revenue growth was robust, ending the year up by 9%.

    The same trajectory is also visible on the bellwether North Atlantic routes linking the US and Western Europe. While passenger traffic was consistently ahead of pre-pandemic levels since the summer season, revenues grew throughout much of the year to end 2023 6% ahead.

    passenger walking through airport

    While the pace of recovery begins to settle in western markets, Asia-Pacific is only now heading toward ahead. China, at the epicentre of the original Covid outbreak, again pulled on the brakes with a second wave of city lockdowns in the first half of 2022, taking Chinese numbers down again and slowing growth across the region.

    Even excluding mainland China and the Indian sub-continent from the calculations, demand has taken time to recover in the rest of East Asia and the Pacific.

    Passenger numbers within the region were running at 12% below their 2019 highs, perhaps 6-12 months behind US domestic and intra-European markets. But recovery is taking hold, with revenues on a par with 2019 and fares comfortably ahead.

    The ongoing recovery in Asia should help to keep world traffic moving upwards through 2024. The bigger question is perhaps whether airlines will be able to keep supply and demand in balance, especially as the input costs continue to rise. Going into 2024, analysis of the Cirium forward-looking schedule suggests that capacity growth remains modest at around 4% for the year and likely to run a point or two behind demand, as it has during 2023.

    That could still change. In previous recovery cycles, such as after 9/11, prospects of demand recovery ignited market share battles that took their toll on industry profits. This time could be different. The industry is more consolidated than it was two decades ago, and is getting more so with Hawaiian Airlines, ITA Airways, SAS and TAP-Air Portugal among those due to join larger groupings. The unprecedented nature of the pandemic, followed by armed conflicts in Europe and the Middle East, plus growing pressure around sustainability, could all damp enthusiasm for adding seats back into an uncertain market. How that plays out in 2024 will be well worth watching.

  • The Alaska – Hawaiian Merger

    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

    The recent termination of the JetBlue and Spirit Airlines merger has brought more attention to the merger of Alaska and Hawaiian Airlines. There are some similarities but also many differences in the two cases. The unsuccessful case might not be a bad sign for Alaska and Hawaiian.

    Route

    Alaska Airlines ranks as the fifth largest passenger airline in the US. It serves more than 100 destinations across North America, with three hubs including San Francisco International Airport (SFO), Portland International Airport (PDX), and Seattle Tacoma International Airport (SEA).

    Meanwhile, Hawaiian Airlines operates a wide network centered around Hawaii to major cities in Asia Oceania, and North America. Key routes are Honolulu to Tokyo, Maui to Seattle, and Honolulu to Los Angeles.

    Once the merger is completed, Alaska’s strong presence on the west coast combined with Hawaiian’s Hawaii-centered routes can bring more flexibility for travelers to connect among destinations covered, for example, Tokyo – Hawaii – San Francisco.

    Source: Alaska Airlines

    Fleet

    Optimization of the fleet structure is one thing that Alaska and Hawaiian must consider. Alaska’s fleet consists of two Boeing Single-Aisle types, 737 NG and 737 Max, with 80 more 737 Max orders through 2027 (which may be delayed due to the recent investigation). Hawaiian operates a fleet with Boeing 717 for domestic short-haul flights, and Airbus A321 and A330 for long-haul transpacific routes.

    Source: Cirium Fleets Analyzer

    In 2023 Hawaiian announced its plan to replace the 717 fleet by early 2024, but due to the increasing demand, there are still 18 717 currently in service. The previously mentioned potential replacements include A220 and E195 E2, while as the merger goes on, it was widely believed that the final pick would be 737 Max. However, given the recent turmoil at Boeing, this is becoming uncertain again.

    Hawaiian Airlines holds firm orders for 18 787-9 aircraft as of today. After the first delivery of the 787-9 earlier this year, Hawaiian Airlines now has three different aircraft types for long-haul missions. Hence, they need to decide which one to keep, to optimise cost on maintenance, training, etc.

    JetBlue-Spirit

    The JetBlue and Spirit merger was blocked by the Justice Department due to a violation of antitrust law. Spirit Airlines has benefitted its travelers by operating as an ultra-low-cost carrier. According to the US Bureau of Transportation (US DOT), in 2023 Spirit Airlines had 5.1% domestic market share. This means that if the merger happened, higher fares would apply to a large group of travelers which could potentially disrupt the market.

    From that perspective, their situation doesn’t seem to apply to the Alaska–Hawaiian case. According to the same statistics by USDOT, Alaska and Hawaiian rank fifth and tenth, respectively, with market shares of 6.4% and 1.7%. The combined 8.1% will still stay at fifth and far from United, which holds 16% shares.

    Source: US Bureau of Transportation

    Another difference is that the business models of Alaska Airlines and Hawaiian Airlines, or at least in terms of service, are not as different as they are between JetBlue and Spirit. There doesn’t seem to be a lot of opposition from either shareholders or passengers.

    At this point, it seems like there won’t be as many barriers for Alaska and Hawaiian compared to the earlier blocked merger. However, they still need to be careful about regulatory requirements, financial implications, and other issues for the merger to go through.

    SEE MORE ASCEND CONSULTANCY POSTS. LEARN MORE ABOUT Cirium Fleets Analyzer. OR FOR MORE INFORMATION, CONTACT US.

  • 737-800 Freighter Conversions; Exuberance Abating?

    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

    Cargo conversions of the Boeing 737-800 have been a success story since the first aircraft was modified in November 2017, as the fleet approaches 250 aircraft in the second quarter of 2024. Yet there are concerns that there is now some oversupply emerging. This may be borne out by the fact that 45 aircraft are currently parked.

    737-800 Annual Cargo Conversions 2017-2023

    Source: Cirium Fleets Analyzer

    The number of aircraft converted annually has steadily increased, with a new peak of 72 aircraft modified during 2023. There are three programmes available, from Boeing, Aeronautical Engineers (AEI) and IAI-Bedek. Boeing’s -800BCF has proven to be the most popular, accounting for almost two thirds of conversions, followed by AEI at 27% and IAI with just 7%. Three quarters of aircraft have been converted at MROs in China, notably in Jinan, Shanghai and Guangzhou.

    The -800 freighter is now in service with 62 operators in 38 countries, notably in Europe, China and the rest of Asia-Pacific. It will soon surpass the combined conversions of the predecessor 737-300/400SF; the extra pallet and 10% more volume than the -400SF has made the -800 a popular successor. Yet three quarters of conversions have actually been for growth rather than replacement, mainly to cater for expanding e-commerce demand.

    Operating lessors have largely driven the conversion market, accounting for almost 80% of business to date.

    Direct conversion orders by airlines/integrators have been limited, with ASL Group, China Postal and DHL the largest customers.

    The popularity of the conversion with lessors is evidenced by some thirty different entities modifying their aircraft. AerCap leads with a quarter of conversions to date, followed by BBAM at 10%.

    Driving the increase in conversions, especially in 2021-22 was the availability of passenger feedstock aircraft as the market struggled to recover from the Covid-19 pandemic. Surplus mid-life+ aircraft, typically after two leases, had conversion as an attractive option to extend their useful life. The average age at conversion has been 19 years in the past two years and across all conversions the ages have ranged between 10 and 25 years.

    But this scenario has now shifted, as airlines are struggling to add passenger capacity due to delays in getting new aircraft, due to supply-chain problems and the ongoing Max issues.

    Thus lessors are seeing much more activity in the passenger market, with lease extensions and being able to quickly place aircraft coming off lease. AEI noted late last year that it was seeing some conversion slot deferrals and indeed converted fewer -800 aircraft in 2023 than a year prior.

    However, a slowdown in conversions may not be such bad news for supply and demand, as almost 20% of the converted fleet is parked.

    Of the 45 currently parked, six can be effectively excluded as they are in Russia. Of the remaining 39, 11 are with airlines or integrators and most are yet to enter service post conversion. This leaves 28 lessor aircraft, of which 15 have been placed with lessees but are yet to enter service. Some of these were converted as long ago as mid-2022, indicative of the issues some lessors have had in placement. Thus just 13 are with lessors and have no future lessee yet identified; one of which was converted 15 months ago, so there is certainly some surplus of supply.

    This softening of demand has driven the Current Market Lease Rate down in the past three months, albeit they still remain close to the levels enjoyed in 2018/2019, as can be seen in the chart using data from our new Value Trends module.

    737-800 Freighter Market Lease Rate Trend

    Source: Ascend Value Trends; for 12-year old aircraft; mid year and current 2024

    Announced conversion orders halved last year to 34, but the backlog remains robust at around 120. The number converted in 2024 looks set to be lower than 2023, driven by the aforementioned feedstock issues, but the fleet is forecast to ultimately double, and conversions to continue into the 2030s.

    There remains the opportunity of significant replacement of over 200 737NGs and competition is limited. The rival A320 conversion programmes have gained limited traction to date as most focus is on the larger A321.

    So yes, there is some short-term surplus of converted 737-800s and impact on lease rates, but the headline number of 45 parked does not tell the whole story.

    SEE MORE ASCEND CONSULTANCY POSTS. LEARN MORE ABOUT Cirium Fleets Analyzer. OR FOR MORE INFORMATION, CONTACT US.

  • Airbus and Boeing’s Single-Aisle Successor Story

    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

    Passers-by to the GE Aerospace stand at February’s Singapore air show will see a scale model of what CFM thinks future turbine powerplants might look like. The GE Aerospace/Safran joint venture’s RISE open-fan concept probably holds more than few clues as to the propulsion technology for a future Airbus single-aisle.

    At the Airbus annual press conference earlier this month, CEO Guillaume Faury provided the most detailed update yet around Toulouse’s thinking for an A320 family successor. He clarified that this study is for an all-new “SAF (sustainable aviation fuel) airplane” which is separate to the “ZEROe” project – a sub-100-seater with hydrogen propulsion.

    Faury said the Airbus future single-aisle would be a “short- to mid-range” family with service entry targeted for the second half of the 2030s “that will rely on burning 100% SAF”. He explained that Airbus wants to use it to enable the industry’s transition from less than 1% SAF usage today to something much closer to 100% by 2050: “That’s the plane that will be in service at 2050.”

    While likely engine technology for this prospective aircraft was not discussed, the CFM RISE project clearly provides one potential avenue for Airbus. CFM says the technology demonstrator will have 100% capability with alternative energy sources such as SAF and hydrogen. It will serve as “the foundation for the next-generation CFM engine that could be available by the mid-2030s”. With its open-fan architecture, RISE has a target to reduce fuel burn and carbon emissions by 20% over today’s engines.

    Airbus and CFM plan to start testing a RISE technology demonstrator on an A380 around two years from now.

    The planned development timescale for the CFM next-gen powerplant matches that of Airbus. And one of the last times Airbus tested an advanced engine concept – the Pratt & Whitney GTF in 2008 – it went on to power the re-engined A320neo family.

    Cirium’s latest 20-year fleet forecast includes an assessment of the potential delivery stream for next generation single-aisles from Airbus and Boeing. We estimate a potential market for around 8,500 deliveries in the seven years from 2036, as production of today’s A320neo and 737 Max families will begin to decline. We expect the market to be split approximately 50/50 between the two protagonists.

    We can only speculate on the likely timing and make-up of seat sizes within these next-gen programmes. But Boeing’s current under-performance against Airbus in the single-aisle sector creates a more urgent need for a replacement, so our hypothesis is that Seattle would come to market slightly earlier.

    The initial offering could be a 180-seater from 2036, with smaller 150-seat and 125-seat versions to follow.

    Airbus could be around a year behind Boeing, bringing a family of 150-seat and 180-seat single-aisle successors from around 2037. A320neo and 737 Max family deliveries could conclude towards the end of the 2030s.

    Programme development is likely to take at least five or six years from go-ahead to the service-entry goal. So to meet the service-entry timeline OEMs would need to target securing commitments and a launch decision from the end of this decade at the latest. But the key pacing item – as ever – will be the progress of powerplant development and the timeframe engine OEMs set to achieve their performance and – crucially – durability goals.

    SEE MORE ASCEND CONSULTANCY POSTS. LEARN MORE ABOUT Cirium Fleet Forecast. OR FOR MORE INFORMATION, CONTACT US.

  • Why Production is the Key Aviation Metric to Watch in 2024

    Chris Wills, Head of Consultancy Operations, Senior ISTAT Appraiser, Cirium Ascend Consultancy

    The conclusion that we are (mostly) still climbing is what came out of the latest Cirium Ascend Consultancy webinar, Are we still climbing? The 2024 Market Outlook. Moderated by Lalitya Dhavala, Valuations Manager, Rob Morris, Head of Consultancy and George Dimitroff, Head of Valuations discussed the recovery over 2019 of key elements of the market.

    In Summary

    • Traffic is still mostly in the climb, having almost reached 2019 levels in November, the slight dip to 2.5% is not yet indicative of a stall, but we should be conscious of geopolitical risks and macroeconomics.
    • Capacity is up and is projected to climb to be 6% above 2019 levels early in 2024.
    • The global passenger fleet is on the rise, already bigger than in 2019 and a different composition.
    • Aircraft utilisation is climbing, with monthly hours back almost to 2019 levels.
    • Parked inventory is decreasing with around 400 of the young aircraft in storage (temporarily) GTF powered aircraft or 737-9s, although few of the latter remain stored. 
    • Deliveries are struggling to climb. With both deliveries and first flights lower in January 2024 over January 2023 and notably lower than in 2019.
    • Demand for older aircraft continues to climb, with inventories, values and lease rates reflecting that,
    • Commercial backlogs are climbing but are not at the historical highs previously seen when normalised as a percentage of the installed fleet.
    • Based on the Cirium Fleet Forecast there is headroom for orders to climb but this will further increase an already significant backlog as deliveries lag target.
    • Despite anecdotal indications trading is only in a shallow climb.
    • Values and lease rates are climbing, with room for further lease rate growth if interest rates don’t come down quickly/significantly.
    • New aircraft pricing is climbing, which we saw post 9-11 and then collapsed but that might not be the case in this cycle.
    • Engine value as a proportion of the total value of new aircraft is climbing, driven by higher spare engine, overhaul and LLP pricing but that can only continue with an increase in new aircraft pricing, otherwise engine values and maintenance costs would need to slow their rate of climb at some point.
    • The key thing to monitor in 2024 is production, for now specifically progress towards planned increases, however we should also be mindful of the risk if OEMs raise production rates too quickly in the next 5 years, that could ruin the party of rising values and lease rates.
    • Boeing may be forced to accept a lower market share in terms of volume than previously, as there is now a clear focus on quality.
    • Thank you again to everyone who voted for us as the 2024 Appraiser of the Year!

    In More Detail

    Looking at passenger traffic the trend is still positive, however there was a softening in December over November, so globally was down 2.5% over 2019. Large domestic markets, including the US saw some softening of demand, while capacity increased, which is something to watch. Traffic flows are of course seasonal and while the figures to 2019 are December to December, the summer season will be significant in defining if the recovery is still on track.

    Geopolitical risks are ever present, and if anything, risk is increasing.

    Macroeconomics should also be considered but so far rising prices have not impacted demand trends.

    The small softening compared to November, which was almost back to 2019 levels is at least not yet indicative of a stall in recovery.

    While capacity growing faster than traffic is not healthy long term, it can also be a leading indicator of forecast growth. Scheduled capacity marginally passed 2019 levels at the end of 2023 and the projection is a 6% increase over 2019 by the end of the first quarter this year.

    The global passenger fleet is in the climb and has now surpassed the in-service fleet of 2019. It is important to note, that while larger, the fleet in 2024 is different to that of 2019, just one example being the retirement of effectively all 747-400s during the downturn.

    Not only has the fleet grown, the other key capacity metric, utilisation has increased as well. Aircraft monthly hours flown are now nearly back to 2019 levels.

    The parked inventory is decreasing and while there is a portion that won’t return to service there are a significant number that may. Prime candidates are those that have been in storage for less than 2 years, as well as those less than 15 years old. That said, there are 1,000 aircraft over 15 years old, which typically we would not expect to return to service, but given the current supply constraints, some may return. The A320neo and 737-9s are only temporarily out of service and while there will be a rolling average of around 300+ parked in the coming months, ultimately all will return to service.

    The supply of new aircraft is one area where the market is struggling to climb. Deliveries and first flights were lower in January 2024 than in January 2023 and notably lower than in 2019. There are a multitude of factors driving these challenges, despite target monthly delivery rates above the current levels both Airbus and Boeing seem unlikely to achieve them over the coming year. However, longer term oversupply could be an issue if either OEM is tempted to push for even higher production rates once they have achieved their planned targets in 2025 or 2026.

    Commercial backlogs are climbing, approaching 14,000 firm aircraft orders, although as a percentage of the installed fleets they are not at historic highs. Single aisle aircraft peaked in 2020 at around 85% of the fleet (albeit skewed by fleet disruption that year; prior peak was 77% in 2014), while for widebody aircraft this was felt in the previous downturn peaking in 2008 at over 70%.

    Based on the Cirium Fleet Forecast, there is more room for more orders to be delivered towards the end of the decade, but given the already significant backlogs and the delivery challenges facing the OEM’s (Original Equipment Manufacturer), some of which have come post the completion of the most recent Ascend forecast, how much room is there for more orders?

    While the rolling average of sales with lease attached is growing, partly impacted by reduced trading at the end of the year and compared with the anecdotal indications that came out of Dublin at the end of January it is a slower climb then might be expected.

    While not for every type, the majority Values and Lease rates are climbing. On a fleet-weighted average basis, the Market-to-Base Value ratio is higher than it was before Covid.

    While lease rates are growing, they are still following values to a large extent, and there is still room for them to rise further this year. While recent increases are remarkable in percentage terms form the depts of Covid, if we compare them to historical levels, lease rates are not really that high, when inflation and interest rates are considered. It is also worth noting that ownership costs are the fourth largest item in the Direct Operating Cost (DOC) pie for airlines (after labour, fuel and maintenance), so operators can absorb higher lease rates with less pain than their other rising costs.

    New Aircraft pricing is climbing after decades of stagnation, which is a trend we have seen before between 2003 and 2008, but they then collapsed with the Global Financial Crisis and never truly recovered. However, that might not be the case in this cycle for a couple of reasons. The backlog is much bigger and stretches into the 2030s, meaning that OEMs already have an element of escalation built in, which works in favor of the continued rise in new delivery pricing. While supply constraints continue, they support increasing new aircraft prices, however as these are overcome later in the decade and if OEMs start to over-produce, some of the gains could be reversed or the rise could flatten.

    The ratio of engine value to the value of a new aircraft is climbing, but that does not appear sustainable for much longer.  If new spare engine, overhaul and life limited parts (LLP) pricing continue to grow, aircraft values also have to go up, otherwise arbitrage could be created encouraging the parting-out of young aircraft. The solution is for airframers to raise new aircraft pricing consistently and engine manufacturers have to rely less heavily on aftermarket revenues and sell new installed engines for more.

    The key thing to monitor in 2024 and going forward is production rates. For now, there are clear challenges with meeting delivery targets, and higher production rates are desperately needed, but if production continues to rise too much into the end of the decade or beyond, it could create over-supply and pressure values and lease rates once again. Of course, new aircraft are needed to meet demand as well as for replacement, particularly if we are to meet sustainability targets.

    In terms of competition, we don’t see the duopoly going away and the market needs it both for capacity but to maintain a competitive pricing landscape.

    We also don’t see Boeing being able or willing (or needing to) reduce pricing significantly on the 737, having already discounted a lot of white tails after the Max grounding. Lower delivery rates mean higher unit costs. That said, compensation for any heavily delayed deliveries could be expected to reduce the real final price that airlines pay. While Boeing may have focussed on defending market share in the past, it’s current focus is clearly on quality and not quantity. In the past, we may have predicted an all-new aircraft programme launch if market share was to drop significantly for one OEM or the other, however with such large and long-term backlogs there seems less opportunity for this in the near term. Therefore, we might see Boeing accept lower market shares for the time being in terms of volume than we have in the last two decades.

    Thank you again to everyone who voted for us as Appraiser of the Year and we will continue to live up to this accolade in doing everything the most awarded appraiser would be expected to, and more!

    WATCH THE WEBINAR ON-DEMAND, HERE.

  • Decoding Airline Passenger Traffic

    Will Livsey
    Will Livsey

    Will Livsey, Senior Product Manager, Cirium

    Ticket sale data tells part of the traffic story. To understand the intricacies of airline passenger traffic, we need to delve deeper into the data. A comprehensive understanding of the entire shopping and purchasing process is required. Marketing, pricing, equipment, and route planning are all affected by the ticketing cycle.

    Each stage of this shopper-to-flyer journey can yield invaluable insights into the traveler experience. Aviation and travel experts can use this data to analyze, plan, and improve revenue and the passenger experience.

    Breaking Down the Ticketing Process

    Traffic data can be broken into five key areas: interest, booked, ticketed, settled and flown.

    Shopped
    Interest is the earliest indicator of future travel. Data is sourced from travel searches across thousands of websites or an airline’s own points of sale systems. Cirium provides shopping insights through its traveler search data.

    Booked
    An airline booking is a record or reservation of a passenger’s intent to fly at some point in the future. A booking occurs before a ticket is sold. They can be held, changed, or cancelled. However, most consumer booking tools require purchase at time of booking, so corporate travel and travel agents will still book without immediate purchase.

    Ticketed
    When the booking is purchased, an airline ticket is issued using an assigned fare – tickets are issued by travel agents and air carriers. Tickets can still be reissued or exchanged.

    Settled
    Funds are passed to the airlines.

    Flown
    Airlines record the passengers as they board their flight. Through scanning or collecting a paper or digital boarding pass. Most airports and governments require airlines to submit their flown ticket data from the boarding process.

    Ticketing Data Types and Sources

    MIDT (Marketing Information Data Transfer)
    MIDT data is made up of bookings from the major global distribution systems (GDS) including but not limited to Sabre, Amadeus, Worldspan Galileo, Abacus, TravelSky and many others. It includes most bookings, not made directly with the airline.

    MIDT provides a wealth of information, including booking details, passenger information and fare estimates. It allows analysts to gain insights into market trends, demand patterns, and competitor performance. MIDT data allows analysts to study booking trends over time. By examining the origin and destination patterns, airlines can identify popular routes and adjust capacity accordingly.

    TCN (ticket control number)
    TCN is the backbone of ticketing data, facilitating tracking and management of individual transactions. TCN ensures accurate record-keeping, assists in resolving passenger issues, and aids in the reconciliation of financial transactions. Revenue managers rely on TCN to analyze ticket sales at a granular level, optimizing pricing and revenue strategies.

    TCN data can be valuable for understanding the preferences and travel patterns of specific customers, facilitating personalized marketing efforts. It can also be used to detect and prevent fraudulent activities by monitoring unusual or suspicious patterns in ticket transactions.

    ASP/BSP (Airline Settlement Plan/Billing and Settlement Plan)
    ASP and BSP are industry-wide systems that facilitate the settlement of financial transactions between airlines and travel agents. These clearinghouses streamline the financial aspects of airline ticket sales, ensuring a transparent and efficient process for revenue collection. Analysts keen on understanding the financial landscape of the aviation industry find ASP/BSP data instrumental to understand revenue streams and cashflow.

    Civil aviation authority
    Primarily consisting of information collected at boarding, this traffic data is usually aggregated by the regional civil aviation authority, such as the U.S. Department of Transportation, Eurostat, and the UK CAA. It provides the most accurate passengers flown data. In many cases it also tracks customer complaints and service issues.

    Read more about traffic and scheduling tools and request a demo of Cirium data.

    Making Use of Airline Traffic Data

    Cirium traffic data is often used alongside schedules data and appended with demographic and regional data that provides insights into travel habits and traveler personas of local airports.

    Cirium Diio provides a full spectrum of data and reporting tools including schedules, demand indicators, booking data and flown data. It can be accessed through SAAS tools, APIs or provided through a custom data warehouse and integrated into an airport or airline’s existing systems.

  • North American Airlines in 2023: Riding the Winds of Change

    JIm Hetzel Director of Product Marketing
    JIm Hetzel Director of Product Marketing

    Jim Hetzel, Director of Product Marketing, Cirium

     As we reach the end of 2023, it is evident that this has been a significant year for the airline industry, particularly for North American carriers, which is the home to four of the five largest passenger airlines worldwide in terms of flight operations. The industry has experienced a whirlwind of developments, including a continuous increase in travel demand after the pandemic, strain on airport infrastructure, labor shortages, and rising fuel costs. Additionally, the diverse routes and varying weather conditions in North America present additional complexities for airline operations.

    Despite these challenges, North American airlines have excelled in maintaining high operational efficiency and punctuality. Their ability to navigate these complexities is a testament to their resilience and adaptability. In terms of arrival performance, the overall rate for 2023 was 74.45%, with approximately 400,000 more scheduled flights compared to 2022, which had an on-time arrival rate of 74.26%.

    Investment in technology, coupled with an unwavering commitment to customer service, undoubtedly contributed to the impressive on-time punctuality.

    North American airlines have successfully adapted to these market challenges, while meeting the continuous increase in travel demand. Their investment in technology, coupled with an unwavering commitment to customer service, undoubtedly contributed to the impressive on-time punctuality statistics for the year.

    Delta Air Lines once again claims the top spot in terms of performance, with 84.72% arriving on-time on over 1.5M flight operations. Following closely behind, and deserving honorable mention, was Alaska Airlines boasting an OTP of 82.25% on over 400,000 flights and American Airlines at 80.61% on over 1.9M flights. These airlines performed exceptionally over the course of the year overcoming tremendous travel demand and disruptive weather events. Congratulations to Delta Air Lines for their exceptional and consistent on-time performance!

    In 2023, North American airlines underwent a remarkable transformation. They skillfully navigated the dynamic market landscape and elevated their operations in the face of increasing air travel demand. As we look ahead to 2024, we anticipate sustained operational excellence as challenges arising from labor shortages and airport infrastructure are gradually addressed and resolved.

    Report highlights

    • Delta Air Lines Secures Cirium’s Platinum Award for Operational Excellence for Fourth Year Running 
    • Aeromexico Recognized as the Most On-Time Airline in the Global Category 
    • Regional Leaders Announced: Delta Air Lines, Copa Airlines, Iberia Express, Japan Airlines, and FlySafair Take Top Honors 
    • Bogotá El Dorado International Airport Earns Cirium’s Inaugural Airport Platinum Award 
    • Riyadh King Khalid International Airport Named Most On-Time Global Airport for 2024
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  • Helicopter Offshore Market – What Will the Future Deliver?

    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.

    Sara Dhariwal, Senior Aviation Analyst, Lead Appraiser – Helicopters & AAM, Cirium Ascend Consultancy

    The spotlight is once again on the Sikorsky S-92A as concerns mount over the manufacturer’s ability to maintain the aircraft. The lack of parts supply has already prevented some of the type from returning to service. Norway’s energy minister Terje Aasland joined the debate in early 2024, suggesting to news outlet Energy Voice that “oil and gas activity may be hit by a lack of spare parts for S-92 helicopters”.

    Since the fatal crash of Airbus Helicopter’s H225 off the coast of Norway in 2016, the S-92A has been the main heavy helicopter operating in the oil and gas industry. Heavies play a crucial role as they possess the range and payload to complete a return journey to oil rigs furthest offshore without having to refuel.

    The current fleet of just under 200 S-92 helicopters therefore provide important support in transporting oil rig workers, and supplies, between shore and oil rig platforms. A disruption of its ability to operate could, at worst, disrupt the ability to continue to produce oil and gas.

    Source: Cirium Fleets Analyzer

    The highlighted issue brings attention to the risks associated with relying solely on a single helicopter model, such as the S-92A, which possesses comparable payload and range capabilities.

    However, until recently, there was an abundance of aircraft available to fulfil the mission requirements due to excess capacity resulting from the prolonged downturn in the oil and gas industry.

    The increasing demand within the industry has resulted in a swift utilisation of the stored fleet. The storage rates for the S-92 helicopters have experienced a notable decline, reducing from an average of 15% between 2018 and 2022 to a mere 7% at present.

    As a result, and in addition to overhauls required to get stored aircraft back in service, the already operational S-92A helicopters are accumulating higher flight hours, leading to an accelerated need for overhauls.

    This situation creates a potential bottleneck for demand of parts and maintenance capacity.

    In 2015, a new category helicopters were introduced to the market – the super mediums. The category includes Airbus Helicopters H175 and the Leonardo AW189. While they do not have quite the range/payload combination of a heavy, they have proved themselves a worthy replacement of the S-92A on most routes.

    Source: Cirium Fleets Analyzer

    The introduction to the market for the super mediums has so far been relatively slow. With a combined current fleet of just over 80 helicopters, no spare capacity, and a typical lead time of 18-24 months for new orders, they do not provide a short-term capacity solution when the S-92 is unavailable.

    The heavy/super medium categories are not the only type that have seen a sharp decline in deliveries for the offshore sector. The number of overall deliveries into the sector has reduced by over 70% in the past decade, compared to the previous 10-year period.

    Source: Cirium Fleets Analyzer & Cirium Helicopter Forecast

    Limited growth is predicted in the next decade, and the 2023 Ascend Helicopter Fleet Forecast suggests that focus will be on replacement of around 25% of the current fleet. That means a replacement of around 350 aircraft in the next 10 years, which would require an average of 35 deliveries per year. 

    There are two new types in the market such as the Airbus Helicopters H160 and yet-to-be-certified Bell 525 Relentless. They both have the ability to take some market share from the more established types.

    Even where new orders are an option, financing can be an issue. With the oil and gas downturn, dialogue about reducing reliance on fossil fuels and unfavourable contract terms from the oil majors are increasing investment uncertainty.

    Lessors have increased their share of the overall fleet operating in the offshore sector over the past decade. Lessors can be beneficial in raising finance and managing fluctuating capacity requirements, but a lessor-dominant market brings its own issues.

    Could the Coming Months Provide Some Clues as to the Future of the Sector?

    • Will there be an increase in order announcements, for what and from whom?
    • Will the start of the replacement cycle become more evident?
    • Will the lessors continue to increase market share, or will there be an increase in direct operator ownership?
    • Will oil majors step up to provide more stability?
    • Will there be an improvement in maintenance supply challenges?
    • What about further explorations vs renewables?

    This year is set to be another very interesting one for the helicopter industry and as always, the Cirium Ascend Consultancy team will be there to monitor the developments closely.

    Hear more from Sara as she welcomes special guests Junia Hermont, Líder Aviação, and Samantha Willenbacher, Bristow, to our upcoming webinar on the offshore market. To join them live on Thursday 14th March, register your place.

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