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  • The Impact of Rising Interest Rates on Lease Rent

    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.

    Toshimitsu Sogabe, Aviation Consultant, Cirium Ascend Consultancy

    The US Federal Reserve board has raised interest rates 11 times in a row since March 2022. It announced on May 1 that it would keep the policy interest rate unchanged. This was the sixth consecutive meeting at which there was no change to the federal funds rate target.

    Since there is a certain degree of correlation between interest rates and lease rents, it is likely that rising interest rates have contributed to the rise in lease fees. However, there is room for discussion as to whether the increase in lease rent has been sufficient.

    The above chart shows that the market lease rates of Airbus A320neo and Boeing 737 Max jets have reached the $400,000-per-month mark

    Source: Ascend Value Trends, Federal Reserve Economic Data (FRED)

    The above chart shows that the market lease rates of Airbus A320neo and Boeing 737 Max jets have reached the $400,000-per-month mark. The lease rate of the A320neo was over $400,000 per month in 2015 but was subsequently on a downward trend before finally recovering to that level this year.

    However, a review of interest rates during the same period shows that the yield on the 10-year US Treasury note was much lower in 2015 than the current level.

    Similarly, lease rates for the previous-generation 737NGs and A320ceos, whose new-aircraft prices would have been lower by a few million dollars, were at their highest level of over $400,000 per month in 2007/08, yet the yield on the 10-year US Treasury note at that time was again below the current level.

    Is the Extent of Lease-Rate Increases Insufficient?

    The reasons that lease rates for new aircraft are currently at the same or lower levels than in the past, despite the higher financing costs, are presumably as follows:

    (i) While demand for aircraft financing has been increasing, there are not enough sale-and-leaseback opportunities in the leasing market because of a lack of supply of next-generation aircraft, and therefore there has been excessive competition among lessors; and/or (ii) Leasing companies have high expectations for residual values, end-of-lease compensation and maintenance reserves when pursuing a transaction.

    As for (i) above, the most recent monthly production rates of Boeing and Airbus highlight a clear shortage of next-generation aircraft. For single-aisle aircraft, Airbus averaged 46 per month in 2024’s first quarter, whereas Boeing averaged 12 in February/March. Although the speculative orders placed by a handful of lessors for the new aircraft were able to secure their pipelines, lessors generally see challenges in securing new aircraft transactions. Some lessors are considering a strategic shift to secure the top line by acquiring mid-life aircraft. 

    Regarding (ii), it is believed that some lessors are increasing their expectations in anticipating higher residual values at lease expiry as well as lease-end compensations, because of the rising maintenance costs for both next-generation and previous-generation equipment and the fact that the supply of next-generation equipment is not keeping pace with the demand. However, caution is required when considering whether this will become a mid- to long-term trend.

    Cirium Ascend Consultancy will continue to monitor market changes in lease rates and any changes in lessors’ approaches to new sale-and-leaseback transactions.

  • Who’s Up and Who’s Down: Shining a Light on Aircraft Ground Time

    Andrew Doyle
    Andrew Doyle

    Andrew Doyle, Senior Director – Market Development, Cirium

    Unique insights into the previously opaque world of airframe maintenance checks and cabin retrofits are available following the launch of Cirium’s Ground Events Analytics. I used the new tool to take a look at the Chinese MRO market, the progress of Emirates’ massive Airbus A380 cabin refresh campaign and the impact of Boeing 787 delivery delays on demand for 767 upgrades.

    Lifting the Lid on China With Space-Based Tracking

    The competitive landscape for maintenance, repair and overhaul operations in China has been challenging to map out in the past due to difficulties in sourcing comprehensive flight tracking data, but Cirium’s partnership with space-based ADS-B service provider Aireon means aircraft ground time locations and durations can be precisely monitored for the first time. By combining this tracking information with Cirium’s market-leading aircraft and MRO contracts data, our market experts and data scientists have been able to develop sophisticated algorithms to infer – with a high degree of confidence – when and where specific aircraft are undergoing scheduled maintenance events.

    An illustration of the type of analysis that can be performed using Ground Events Analytics is shown in the tree map below, which ranks Chinese MRO providers by the total number of ground days per specific aircraft type logged during the 12 months to February 2024. In each case we can show the number of aircraft that underwent heavy checks and their median ground stay.

    Cirium Logo

    Getting to Grips With a Mammoth Retrofit Programme

    Turning our attention to Emirates, the new tool shows the carrier has managed to complete cabin retrofits – including installation of all-new premium economy cabins – for at least 22 of its A380s out of a total of 67 scheduled to receive the upgrade. Detailing its plans for one of the industry’s biggest ever retrofit programmes in November 2022, the carrier said it aimed to induct one aircraft every eight days with each upgrade taking approximately 16 days to complete, meaning all 67 A380s would be modified and returned to service by the end of May this year.

    Ground Events Analytics reveals that nine of the 22 aircraft confirmed to have been upgraded to date also underwent ‘C’ or ‘heavy’ maintenance checks during their ground stays.

    The shortest tracked ground time was aircraft A6-EVF – which received a cabin retrofit starting in mid-May 2023 – at 23 days. The 22 aircraft upgraded so far join the final six A380s that were delivered to Emirates with the new cabins already installed.

    Cirium Logo
    Ground Events Analytics reveals that nine of the 22 aircraft confirmed to have been upgraded to date also underwent 'C' or 'heavy' maintenance checks during their ground stays.

    Dreamliner Delivery Delays Hand New Lease of Life to Legacy Twinjets

    Finally, I took a look at how the suspension of 787 deliveries between May 2021 and July 2022 likely impacted on plans by United Airlines to upgrade the cabins on its legacy 767 fleet. My chart shows a marked ramp up in retrofit activity for the older twinjet type in the face of delayed Dreamliner hand-overs.

    Cirium Logo
    suspension of 787 deliveries between May 2021 and July 2022 data

    Find out more about how Ground Events Analytics can help you monitor and predict future aircraft maintenance events.

  • Volotea’s Efficiency Drives Excellent Passenger Experiences

    In the competitive landscape of European air travel, Volotea Airlines distinguishes itself not only through its unique route strategy but also by its unwavering commitment to operational excellence and customer satisfaction. A recent discussion between Cirium’s Jim Hetzel, Director of Product Marketing and Eduard Diviu, Volotea’s Chief Operating Officer, sheds light on the airline’s strategic maneuvers and operational focus areas that contribute significantly to its high passenger approval.

    Strategic Growth and Unique Route Selection

    Volotea’s growth strategy is both ambitious and strategic, the airline has increased its fleet from 41 aircraft at the end of 2023 to 44 to start the summer season of 2024 and boost operations from around 70,000 to nearly 80,000 flights this year. Also, for this 2024, Volotea estimates reaching 450 routes and anticipates offering between 12.5 and 13 million seats (between 12% and 16% more than in 2023).

    Unlike its competitors, Volotea zeroes in on connecting small and middle-sized cities, creating a niche market where it faces less competition and can offer more personalized service.

    This approach not only meets the underserved demand but also fosters a loyal customer base appreciative of the direct routes to their preferred destinations.

    Prioritizing Departure Performance

    While Volotea believes in excellent arrival on-time performance (OTP), a cornerstone of Volotea’s operational strategy is its focus on departure performance where they have more direct control of factors impacting their operations. Understanding the pivotal role timely departures play in the overall travel experience and the downstream impact on arrival performance, the airline has set rigorous standards to minimize both delays and cancellations. This dedication is reflected in Volotea’s compliance with EU 261 regulations, demonstrating Volotea’s commitment to punctuality and reliability. The outcome is an impressive reduction in flight delays to a mere 0.26% of flight operations, a testament to the airline’s operational efficiency and passenger-centric approach.

    Volotea leverages Cirium’s operational OTP data analytics to benchmark their performance against competitors in the region.

    Balancing Operational Costs With Customer Satisfaction

    Achieving a harmonious balance between maintaining low fares and operational costs while ensuring high levels of customer satisfaction is critical for any low-cost carrier.

    With a smaller fleet size than many of their competitors, Volotea excels in this domain by optimizing aircraft utilization and managing operational complexities with finesse.

    Despite the challenges posed by a limited number of spare aircraft and geographically dispersed bases in France, Italy, Spain and Greece, Volotea leverages its resources effectively to deliver exceptional service. The airline’s proactive stance on leveraging their spare resources not only for maintenance but also to swiftly address unforeseen disruptions minimizes the impact on passengers and maintains the airline’s reputation for reliability.

    Leveraging Operational Efficiency for Enhanced Passenger Experience

    Volotea’s strategic focus extends beyond just on-time departures to encompass efficient turn times and judicious use of spare aircraft. This comprehensive approach ensures minimal disruption, reduced cancellations, and keeps operational costs in check, allowing the airline to offer high value at the lowest possible cost as their customers demand. Such operational excellence directly correlates with positive passenger experiences, as evidenced by Volotea’s commendable NPS score of ~32 in 2023, an impressive improvement of 50% over 2022.  Volotea’s passenger experience is further underscored by exceptional review across independent sources.

    Volotea’s passenger experience is further underscored by exceptional review across independent sources.

    Volotea was awarded a four-star rating in 2024 and recognized by Skytrax -the industry’s most prestigious international air transport rating organization- in its global passenger satisfaction survey as the “Best Low-Cost Airline in Europe” at the 2023 World Airline Awards. The airline adds this accolade to its growing list of achievements, which includes consecutive wins for “Europe’s Leading Low-Cost Airline” at the World Travel Awards in 2021, 2022, and 2024. Furthermore, 92% of Megavolotea customers would recommend traveling with the airline, highlighting its high customer satisfaction rates.

    Looking Ahead

    As Volotea continues to navigate the skies of Europe, its commitment to operational efficiency, strategic growth, and customer satisfaction remains unwavering. Through a balanced operation that leverages full resource utilization and prioritizes punctuality, Volotea is set to soar higher, further cementing its position as a preferred choice for travelers seeking reliability, convenience, and value.

    Volotea’s success story is a compelling example of how strategic planning, operational efficiency, and a customer-centric approach can converge to create a positive and memorable travel experience. As the airline moves forward with its ambitious plans, passengers can expect continued excellence in service, reaffirming Volotea’s status as a leading low-cost carrier in the European aviation space.

    “Our goal is to consistently provide the best service to our passengers, enhancing their travel experience from booking to the end of their journey at very competitive rates.

    Every year, we adjust our commercial program and operational set-up to maintain high utilization while ensuring top on-time performance (OTP) and reliability.

    So far this year, our OTP15 exceeds 83%, and we are focused on maintaining this punctuality for the flights we operate during the summer season. In 2023, Volotea achieved a flight completion rate of 99.3%, ranking us among the top three airlines in Europe. This level of efficiency is achieved through our crews’ hard work and skill, who manage quick turnarounds, typically between 25 to 35 minutes, which is essential for our continuous improvement and customer satisfaction”. Eduard Diviu, Chief Operating Officer Volotea.

    CIRIUM IS DELIGHTED TO BE SUPPORTING VOLOTEA’S OUT-OF-THE-BOX THINKING AND PROUD TO BE ITS DATA PROVIDER. TO LEARN MORE ABOUT CIRIUM’S POWERFUL DATA AND CUTTING-EDGE ANALYTICS, EXPLORE CIRIUM AIRLINE OPERATIONS. 

  • Diminution in Aircraft Value: Some Widely Held Misconceptions

    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.

    Tony Brooks, ISTAT appraiser
    Tony Brooks, ISTAT appraiser

    Anthony Brooks, Senior Analyst – Certified Civil Expert Witness, Cirium Ascend Consultancy

    Diminution in Value is defined as “the calculation of damages in a legal dispute” and describes a measure of value lost due to a circumstance or set of circumstances. Where aircraft are concerned, this usually refers to an incident where the aircraft has suffered damage of some nature. The purpose of Aircraft Diminution in Value due to damage is to provide the claimant with a form of compensation for an incident which may affect the re-sale value of the aircraft.

    We all see regular articles and news stories where aircraft sustain damage from airport vehicle collisions, during maintenance or even incidents on the production line.

    Over the last 20 years we have provided reports involving aircraft which have been involved in a wide variety of incidents at different stages of operation or production.

    OPERATIONAL STATUS OF AIRCRAFT AT POINT OF INCIDENT CIRIUM ASCEND CONSULTANCY DIMINUTION IN VALUE CASES

    In fact, In the cases that we have been involved in to-date, over 80 percent have involved an aircraft not in operation at altitude. These include 36% involving a stationary aircraft (largely those involved in airport vehicle collisions), 27% have occurred on the production line at different stages of construction and 18% whilst in maintenance.

    Misconceptions

    One broadly held misconception is the view that when damage to an aircraft occurs, the cost of the repairs equates to the Diminution in Value and is paid out by the insurer. The repair cost in fact is totally separate from any potential loss in value due to damage history and is usually settled fairly quickly by the insurance company. A Diminution in Value claim can take years to settle through the Court or Arbitration process if not agreed at an earlier stage.

    Another widely held view is that even though an aircraft is repaired back to a condition pre-incident and, in some cases, resulting in it being in a better condition than before, that there should therefore be no loss in value. One can also argue that this should also be the case where a damaged area is replaced with brand new components rather than instigating a repair. Unfortunately this is not always the case.

    Damage history can be a bargaining lever in negotiations between a buyer and seller.

    Even if there are no ongoing special inspections instigated as a result of the damage (which itself can sometimes seriously affect its value) a perception issue can remain with the aircraft over its lifetime. Damage history can be a bargaining lever in negotiations between a buyer and seller, the strength of which can depend on several factors, one being the market conditions at the time of the incident. In a situation with low availability the seller’s bargaining power will be greater as the buyer has less aircraft to choose from whereas in a market with high availability the buyer will have a higher choice of undamaged aircraft to choose from and so the seller may have to offer a larger discount due to the damage in order to sell the aircraft.

    Look out for a Viewpoint article later on this year where I will be explaining the Diminution in Value subject in more detail including its purpose within the aviation industry, we’ll outline some more of the factors we analyse which determine to what extent, if any, a Loss in Value exists and we’ll also look at the methods used in dispute resolution.

    FOR MORE INFORMATION, CONTACT US. 

  • A Snapshot of the Long Range Business Jet Market

    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.

    Youcef Berour Minarro
    Youcef Berour Minarro

    Youcef Berour Minarro, Principal Valuations Analyst, Cirium Ascend Consultancy

    On the 29th March 2024, after over a year of delay and with particular uncertainty over recent months, Gulfstream’s new G700 which sits in the Long Range business jet segment received its FAA type certification which marked a key milestone towards customer deliveries. This milestone also marks a revenue recovery for the parent company, General Dynamics which claimed the delays faced by the longer FAA certification process, following the Boeing 737 Max incident, resulted in a loss of $1 billion in revenues and $250 million in earnings for 2023.

    Once delivered, the 10X will be Dassault’s largest and longest range aircraft, competing directly with Bombardier’s Global 7500 and Gulfstream G700

    In addition to receiving certification, Gulfstream also announced performance improvements for the G700, namely the take-off and landing distances which are now shorter than originally planned. With this positive development for the G700, we think this makes a good excuse to look into how the Long Range business jet market as a whole is doing and what we should expect for 2024.

    Other OEM Developments

    Following its FAA and EASA certifications in 2023, deliveries are now underway for Dassault’s Falcon 6X, two aircraft are now in service with production expected to ramp up this year. Cirium’s own new delivery forecast is predicting approximately 15 handovers this year before ramping up into 2025. Dassault’s in-development Falcon 10X which was originally scheduled for EIS in 2025, has now been delayed by two years to 2027, citing supply chain issues. Once delivered, the 10X will be Dassault’s largest and longest range aircraft, competing directly with Bombardier’s Global 7500 and Gulfstream G700.

    Bombardier’s Global 8000 remains in-development having been re-launched in 2022 as a longer range variant of the Global 7500 (over 165 aircraft now in service). The 8000 is intended to replace the 7,700nm range 7500, which is certified up to Mach 0.925, and features the same fuselage/length. Performance gains will come from software updates on the GE Passport engines and optimisation of the empty weight allowing more fuel to be carried in the existing tanks. Bombardier is planning to offer a retrofit option to 7500 owners via a Service Bulletin (SB). The Global 8000 is expected to enter service in 2025.

    The current in-service business jet fleet stands at over 23,000 aircraft, of which the Long Range segment accounts for almost 4,000 aircraft.

    Fleet Size

    The current in-service business jet fleet stands at over 23,000 aircraft, of which the Long Range segment accounts for almost 4,000 aircraft, or 17% of the whole business jet fleet. Aircraft in this segment typically feature over 5,000 nautical miles in range and are typically the flagship products for the various OEMs. The spread of OEMs in this segment is much more limited compared to the rest of the business jet fleet, the Long Range market is currently dominated by Gulfstream (49%), Bombardier Global family (28%) and Dassault (24%). The Gulfstream G550 is the most popular type in this segment, with 570 aircraft in service, followed closely by the tri-jet Falcon 900 family with 529 aircraft in service.

    Source: Cirium Fleets Analyzer, In-service, April 2024

    Source: Cirium Fleets Analyzer, In-service, April 2024

    Inventory and Liquidity

    Based on publicly listed availability, over a 12-month period in 2023, our analysis suggests that total inventory levels for Long Range business jet aircraft increased significantly in 2023 compared to 2022. At the beginning of 2023, there were around 160 Long Range business jets available for sale in the public domain, or just over 4% of the fleet. By the end of 2023, this figure increased to over 230 aircraft (50% increase). We are seeing a similar trend for the whole business jet fleet, with the Midsize segment showing the greatest increase in inventory levels over a 12 month period.

    As at April 2024, there are currently 230 Long Range business jet aircraft for sale, which equates to 6% of the fleet for sale.

    In terms of liquidity, Cirium Fleets Analyzer data shows a decrease in the total fleet transacted in 2023, around 20% less than 2022. So far in 2024, we have seen a relative slow down in second hand sales, and increased days on market for aircraft which suggests the market may be softening.

    liquidity, Cirium Fleets Analyzer

    Source: Cirium Fleets Analyzer and Publicly Sourced Inventory

    What Does 2024 Look Like for Long Range Category Values?

    So far this year, inventory is still trending up while liquidity is trending down as aircraft appear to be sitting on the market for longer. We are seeing a general trend of pricing reductions when discussing with aircraft traders as it pertains to our aircraft value reviews. Already over the course of the first four months of this year, we have seen some softening in aircraft values during reviews. In this size category alone, we have conducted reviews across the Gulfstream G450, G550, V, and G650/G650ER types, observing reductions in Market Value opinion ranging from 2% to as much as 11%, although most notably by as much as 20% on the G450 as its market in particular has significantly slowed down since a reduction in charter operations. We should note that younger G650ER aircraft have seen values remain stable, while Bombardier’s Global 7500 has seen our opinions increase by 2-6%. We should not be surprised to see more of the same through 2024, and we’ll report our analysis to the market as it happens.

    FOR MORE INFORMATION, CONTACT US. LEARN MORE ABOUT CIRIUM FLEETS ANALYZER.

  • Cirium Joins Trees4Travel for Sustainable Travel Solutions

    EmeraldSky logo representing aircraft and flight emissions

    London, UK – 22 April 2024 – Cirium, the global leader in aviation data analytics, has formed a strategic partnership with Trees4Travel, a pioneer in merging technology with business objectives to further environmental sustainability.  This collaboration boosts the travel industry’s ability to make environmentally friendly decisions by offering accurate insights into air travel emissions, both during the booking process and for ESG reporting.

    The partnership is centered around the introduction of Cirium’s Emerald Sky, a groundbreaking and fully auditable aircraft emissions platform.

    Unlike traditional carbon calculators relying on assumptions and estimates, Emerald Sky utilizes cutting-edge techniques and Cirium’s access to exclusive data to precisely calculate the fuel consumption and CO2 output of aircraft. It meticulously considers crucial factors including specific aircraft and engine configuration, age, flight duration (both physical taxi and airtime), and passenger and cargo load, providing a comprehensive calculation based on fuel burn as opposed to distance estimates. This precision in measuring aircraft CO2 emissions offers stakeholders valuable insights for developing far more effective CO2 reduction strategies.

    Through this partnership, corporations will have the ability to modify travel practices by choosing flights with lower carbon emissions, which in turn helps reduce the environmental impact of business travel. It supports streamlined reporting on environmental efforts and accurately tracks progress towards achieving significant carbon reductions . As a result, Trees4Travel corporate customers can make smarter travel decisions, enhance their environmental disclosures and Environmental, Social, and Governance (ESG) reporting, and effectively benchmark their progress.

    Trees4Travel is dedicated to promoting sustainable practices within the travel and events industries, encouraging a shift towards more regenerative operations. Cirium is committed to leading the aviation industry towards a net-zero emissions future by 2050 through dependable, independent emissions analysis

    “This partnership is a critical milestone in Cirium’s mission to provide the most comprehensive and accurate flight emissions tracking in the industry.”

    Jeremy Bowen, CEO of Cirium

    “Cirium has significantly invested in the development of Emerald Sky, an advanced platform that leverages schedule information from over 900 airlines, updated 280,000 times daily, and fully auditable.”

    “You cannot reduce what you do not measure – this collaboration takes carbon management to another level.”

    Nico Nicholas, CEO of Trees4Travel

    “We are absolutely delighted to offer Cirium’s leading technology – with the number of global air passengers expected to increase significantly over the next 30 years, together with corporate sustainability reporting regulations coming in thick and fast, Cirium’s scrupulous flight analytics being offered within our existing carbon calculators allows us to offer a whole suite of ultra sophisticated tools to measure emissions, from scope 1 to scope 4 (soon!). An important ‘string to our bow’ for both us and our TMC partners, backing that up with our nature and tech hybrid decarbonization programs means we have a world changing environmental offer,” says CEO Nico Nicholas of Trees4Travel.

    About Trees4Travel
    Trees4Travel is an environmental ‘tech and business for good’ company, enabling the travel and events industries to transform and cultivate a regenerative approach to their activities by measuring, managing, and mitigating emissions, through simple, affordable, impactful climate contributions. A hybrid process of restoring forests, biodiversity, supporting communities, whilst simultaneously investing into clean energy projects and innovations, focusing on 15 of the 17 United Nations Sustainable Development Goals. Trees4Travel creates global partnerships to harmonise travel and events with the environment, to educate and build a more ethical, sustainable world for now and future generations to come. www.trees4travel.com

    About Cirium 
    Cirium® is the world’s most trusted source of aviation analytics. The company delivers powerful data and cutting-edge analytics to empower a wide spectrum of industry players. It equips airlines, airports, travel enterprises, aircraft manufacturers, and financial entities with the clarity and intelligence they need to optimize their operations, make informed decisions, and accelerate revenue growth. 

    Cirium® is part of LexisNexis® Risk Solutions, a RELX business, which provides information-based analytics and decision tools for professional and business customers.  The shares of RELX PLC are traded on the London, Amsterdam and New York Stock Exchanges using the following ticker symbols: London: REL; Amsterdam: REN; New York: RELX. 

    For more information, follow Cirium® on LinkedIn or visit cirium.com.

  • Flight Forward: Examining the ACMI Ecosystem in Europe

    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 ACMI (Aircraft Crew Maintenance Insurance) market continued to show strong demand in Europe last year, with more than 130 wet-leases recorded in Cirium’s database during Q4 2023 involving passenger jets. Passenger demand remains strong, with latest IATA data indicating traffic grew more than 20% in February over 2023, which Ascend estimates to be more than 4% growth over February 2019.

    The number of wet-lease transactions in Europe reached a new peak in 2023, with almost 700 transactions involving 368 different aircraft, with an average lease duration of two months.

    Many aircraft were contracted for up to six months, covering the period of peak demand around the summer season, especially by leisure orientated airlines.

    The chart below shows that in Q1 2024, there has already been 150 wet-lease transactions to European carriers.

    While both traffic and aircraft utilisation continue to increase, the supply of new aircraft remains constrained due to the supply chain issues affecting production rate by OEMs, as well as the well-known issues with the Max and GTF.

    To meet the growing demand in summer 2024, Fly2Sky Airlines has secured an ACMI contract for two Airbus A320s, registered LZ-MDI and LZ-FSD, from SkyUp Airlines Malta. Leading European ACMI operators include SmartLynx Malta with 27 aircraft and SmartLynx Latvia with 21 aircraft. Those two airlines are part of the Avia Solutions Group of airlines. CityJet will operate five CRJ1000s for Lufthansa, indicative that regional aircraft are also active in the European market. UK-based ACMI start-up carrier Ascend Airways, part of Avia Solutions Group, has received its air operators’ certificate from the Civil Aviation Authority (CAA) and has acquired its first 737 Max-8 in Q1 2024. A further new ACMI provider, Fly4 Airlines, which is 49% owned by TUI and 51% by Poland’s Enter Air, is launching services with leased, former TUI, Boeing 737-800s this summer.

    Cirium Fleets Analyzer data shows that the mid-life jet trading market is active, increasingly global and with a diverse set of airline customers.

    The chart below shows the fleet where the operator is an airline ACMI, ranging from youngest of 5 years (737 Max) to oldest 35 years (BAe 146) with a preference of 16-17-year-old A320s and 737s. These are the most popular aircraft for ACMI operations with 115 aircraft in service, proving that mid-life to older aircraft are still important assets flying.

    ACMI leasing in Europe looks set for another good year in 2024, given the current and continuing supply-side constraints. ACMI leasing offers great flexibility, especially for the peak travel seasons in which we will see it play a vital role.

    FOR MORE INFORMATION, CONTACT US. LEARN MORE ABOUT CIRIUM FLEETS ANALYZER.

  • 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.