Category: Program

July 8, 2024

AAM Snapshot July 2024

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

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

Yiru Zhang, Senior Valuation Analyst, Cirium Ascend Consultancy

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

MARKET GROUPING		MANUFACTURER	TYPE	COMMENT
Regional Electric – Small	Aura Aero		ERA
Regional Electric – Small	~~Heart Aerospace~~		~~ES-19~~	Programme cancelled, and revised to ES-30
Regional Electric – Small	Heart Aerospace		ES-30
Regional Electric – Small	LYTE Aviation		LA-44 Skybus
Regional Electric – Small	~~Maeve Aerospace~~		~~Maeve 01~~	Programme cancelled, OEM revised to M80
Regional Electric – Small	Jekta		PHA-ZE 100
eVTOL – Urban Air Mobility	Aerofugia		AE200
eVTOL – Urban Air Mobility	Dufour Aerospace		Aero3
eVTOL – Urban Air Mobility	BETA Technologies		ALIA-250
eVTOL – Urban Air Mobility	Manta Aircraft		ANN2
eVTOL – Urban Air Mobility	Ascendance Flight Technologies		Atea
eVTOL – Urban Air Mobility	Overair Inc		Butterfly
eVTOL – Urban Air Mobility	Horizon Aircraft		Cavorite X7	Newly added
eVTOL – Urban Air Mobility	Plana		CopterPlane CP-01
eVTOL – Urban Air Mobility	Wisk Aero LLC		Cora
eVTOL – Urban Air Mobility	TCab Tech		E20 eVTOL
eVTOL – Urban Air Mobility	EHang		EH216
eVTOL – Urban Air Mobility	Eve Air Mobility		Eve
eVTOL – Urban Air Mobility	Crisalion Mobility		Integrity	Newly added
eVTOL – Urban Air Mobility	Jaunt Air Mobility		Journey
eVTOL – Urban Air Mobility	Lilium GmbH		Lilium Jet
eVTOL – Urban Air Mobility	Archer Aviation		Midnight
eVTOL – Urban Air Mobility	Odys Aviation		Odys eVTOL
eVTOL – Urban Air Mobility	AutoFlight		Prosperity 1
eVTOL – Urban Air Mobility	Joby Aviation		S4
eVTOL – Urban Air Mobility	SkyDrive		SD-05
eVTOL – Urban Air Mobility	Sirius Aviation		Sirius Jet
eVTOL – Urban Air Mobility	XTI Aircraft Company		TriFan 600
eVTOL – Urban Air Mobility	AMSL Aero		Vertiia	Newly added
eVTOL – Urban Air Mobility	Volocopter GmbH		VoloCity
eVTOL – Urban Air Mobility	Volocopter GmbH		VoloConnect
eVTOL – Urban Air Mobility	EHang		VT-30
eVTOL – Urban Air Mobility	Vertical Aerospace Group Ltd		VX4
eVTOL – UAV/UAS	BETA Technologies		ALIA-250c
Business Electric – Single Engine	VoltAero		Cassio 330
Business Electric – Single Engine	BETA Technologies		CX300
Business Electric – Multi Engine	Eviation		Alice
Business Electric – Multi Engine	Bye Aerospace		eFlyer 800
Business Electric – Multi Engine	Electra		Electra eSTOL
Business Electric – Multi Engine	Electron		Electron 5
Business Electric – Multi Engine	Airflow		M200

eVTOLs – Urban Air Mobility (UAM)

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

Source: Cirium Fleets Analyzer, as of 24 June 2024

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

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

Source: Cirium Fleets Analyzer, as of 24 June 2024

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

Source: Cirium Fleets Analyzer, as of 24 June 2024

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

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

Business Electric – Multi-Engine

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

Source: Cirium Fleets Analyzer, as of 24 June 2024

Learn more about Cirium Fleets Analyzer.

Sara Dhariwal

Lead Appraiser – Helicopters & AAM

Tim Chun-hing Li

Aviation Analyst

Pascal Chui

Valuations Analyst

Yuri Zhang

Senior Valuations Analyst

Eric Tamang

Valuations Analyst

July 3, 2024

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

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

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

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

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

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

Scheduled Seats in July 2024

Airline	July 2024	July 2023	Percentage Change
Alaska Airlines	5,152,741	4,789,066	7.59%
Allegiant Air	2,263,716	2,154,822	5.05%
American Airlines	20,519,680	18,973,829	8.15%
Avelo Airlines	294,490	291,944	0.87%
Breeze Airways	542,516	406,810	33.36%
Delta Air Lines	18,659,453	17,777,347	4.96%
Frontier Airlines	3,989,472	2,939,326	35.73%
Hawaiian Airlines	1,105,705	1,124,554	-1.68%
JetBlue	2,993,542	3,298,323	-9.24%
Southwest Airlines	20,325,414	20,051,083	1.37%
Spirit Airlines	4,740,135	3,906,194	21.35%
Sun Country Airlines	576,414	462,210	24.71%
United Airlines	14,407,786	13,987,654	3.00%

Transatlantic Flying: Up 7.8% in 2024

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

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

Airline Name	July 2024	July 2023	Difference	% Difference
United Airlines	722,428	701,075	21,353	3.0%
Delta Air Lines	719,985	685,497	34,488	5.0%
American Airlines	565,077	533,377	31,700	5.9%
British Airways	419,169	411,567	7,602	1.8%
Lufthansa	323,584	292,854	30,730	10.5%
Air France	279,426	242,508	36,918	15.2%
Virgin Atlantic	242,973	223,517	19,456	8.7%
Turkish Airlines	209,672	187,291	22,381	11.9%
Aer Lingus	163,591	154,674	8,917	5.8%
Iberia	131,072	114,428	16,644	14.5%
Icelandair	117,360	104,600	12,760	12.2%

Where Are the Destinations of Choice?

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

Denmark	27%
Croatia	17%
Spain	16%

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

Learn more about Cirium Diio.

June 28, 2024

Improved On-Time Performance and Competition in Canada

Improved On-Time Performance

It’s not easy operating an airline in Canada — a large country with three major hub airports in Toronto, Montreal, and Vancouver, and a variety of weather challenges no matter the time of year. Nevertheless, the Canadian carriers demonstrated solid on-time performance in spring 2024, which bodes well for summer travel. Indeed, among North American airlines, WestJet was third, and Air Canada sixth, for on-time performance in May 2024.

In June 2024 (at the time of writing), the major Canadian carriers had comparatively high completion rates. Completion factor measures the number of flights flown compared to those scheduled. At the time of writing, Porter Airlines had a 99.52% completion factor, Flair Airlines at 99.27%, WestJet at 98.58%, and Air Canada posted 97% — with the latter on a significantly higher number of flights than its Canadian brethren.

Toronto-Pearson Airport: Marked Improvement

Toronto-Pearson Airport has faced challenges related to on-time performance in recovery from the pandemic. However, the airport has demonstrated consistent and improved departure performance in 2024 to date — even in the winter months of 2024. Toronto-Pearson’s D14% — the percentage of flights scheduled that departed within 14:59 of the scheduled departure time — consistently averaged around 70% in the first half of 2024 and into late June 2024. (Last June, Pearson’s D14% was around 59%). In May 2024, Toronto-Pearson had 70.96% of its flights depart on time, on around 14,500 flights. By way of comparison, the best performing U.S. airport in May 2024 was Salt Lake City, with 82.69% of flights departing on-time on around 10,000 flights. The best performing Canadian airport, Calgary International Airport, had a D14% of 77.07% on around 6,000 flights.

The Canadian Domestic Market: Seats Flown Up 6% in 2024

The Canadian airline industry has witnessed many changes in 2024 to date. Indeed, ultra-low cost carrier Lynx departed the market in bankruptcy, and long-time premium carrier Porter Airlines has taken delivery of Embraer E2-195 jets. At the time of writing, Porter has 33 jets in service, and is primed to increase its Canadian domestic flying by 63% (measured on seats flown) this July compared to last. WestJet will increase their July seats flown by 8% compared to last July. In contrast, ultra-low cost carrier Flair will fly 7.5% fewer seats this July 2024, compared to last July.

Transatlantic Flying from Canada to Europe: Up Almost 7% in 2024

Air Canada, Transat, and WestJet are the perennial airlines flying Canadian customers to European destinations, and vice-versa. Air Canada will fly twice as many seats as Air Transat, increasing its seat count by 3.3% this July compared to last. (These carriers will benefit from the general transatlantic demand, and phenomena such as North American customers seeking to enjoy Taylor Swift concerts or the Paris Olympics). Transat is up 6.2% on seats in July 2024 compared to July 2023, with WestJet increasing its seats flown by almost 20,000 seats in the month of July 2024 alone compared to July 2023.

	Jul 2024	Jul 2023	Diff	Percent Diff
Airline Name	Seats	Seats	Seats	Seats
Air Canada	451,984	437,607	14,377	3.3%
Air Transat	216,433	203,756	12,677	6.2%
WestJet	71,428	52,480	18,948	36.1%
TOTAL	739,845	693,843	46,002	6.6%

Learn more about Cirium On-Time Performance Reports.

June 24, 2024

Airline Failures – Opportunity for Some?

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

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

Chris Seymour, Head of Market Analysis, Cirium Ascend Consultancy

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

LEARN MORE ABOUT CIRIUM FLEETS ANALYZER.
June 20, 2024

Aircraft Value Dynamics

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

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

Yiru Zhang, Senior Valuation Analyst, Cirium Ascend Consultancy

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

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

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

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

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

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

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

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

Source: Cirium Core, passenger jets only

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

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

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

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

Source: Cirium Core, passenger jets only

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

Read more Ascend Consultancy articles. Learn more about Cirium Fleets Analyzer.
June 18, 2024

Lessor Direct Orders – A Good Bet Paying Off

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.

Thomas Kaplan, Senior Valuations Consultant, Cirium Ascend Consultancy

During the depths of the pandemic, airlines and operating lessors with new aircraft deliveries due from Airbus or Boeing were typically happy to defer those deliveries if they could. The strategy of lessors having speculative orderbooks was in question as there was increased risk of having to accept delivery of unplaced aircraft, or placing those deliveries at depressed lease rates. In today’s strong demand environment with reduced delivery rates of new aircraft, a near term delivery slot is suddenly rare and highly prized. With strengthening Market Lease Rates, the lessor strategy of having speculative orders now appears to be paying off.

Who are the lessors with the largest orderbooks and who have access to the prized near-term slots?

We will limit the analysis to Airbus and Boeing as they are the most backed-up in terms of orders with almost no availability before 2030, especially in the narrowbody segment. The operating lessor orderbook with Airbus and Boeing is over 2000 aircraft, with most due for delivery this decade.

Source: Cirium Fleets Analyzer fleet data; Airbus and Boeing aircraft

As we expect the current supply and demand imbalance to persist at least through 2026, the conditions for placing lessor orders should remain favourable in this period. The below chart shows which lessors have scheduled deliveries from their orderbooks from now to the end of 2026. Avolon has the largest lessor orderbook with over 400 aircraft, however only a quarter of these are expected to be delivered in the next two and a half years. This also includes 32 A330-900neos, which do not have the same supply constraints as other types and thus lessens their early-slot advantage.

Source: Cirium Fleets Analyzer fleet data; Airbus and Boeing aircraft

Air Lease Corporation and AerCap have the largest number of aircraft delivering in this time frame at over 200 and 150 respectively. However, in both cases according to Cirium fleet data, two thirds of these are already placed with airline lessees. If these placements were not negotiated recently during the tighter market conditions, that leaves only around 60 available jets with each lessor to place at good rates. Our database estimates that SMBC Aviation Capital has 75 unplaced narrowbodies due for delivery by 2026 which puts them in a strong position in this seller’s market. Our database may not capture all the negotiated placements and letters of intent, so remaining availability may be even less.

While stock prices move based on many factors, we note that Air Lease (AL) and AerCap (AER) stocks have performed well this year, increasing by ~10% and ~24% respectively since January.

In contrast, BOC Aviation, another publicly traded large lessor but with a fewer near-term orderbook positions, has seen its stock more flat, down around 4% YTD. Of course, these stock movements are not just because of an OEM backlog, but investors may want to take note of the current advantage these positions hold.

Given the lack of lessor orders for 2029 and beyond, lessors will need to order quickly if they want to make furthers bets on speculative delivery slots. Otherwise, the Purchase and Leaseback market will remain the only option for lessors to grow their fleet of new aircraft organically. This has historically been a far more competitive market and if lessors are not able to renew their speculative orderbooks, then it can only become even more competitive with consequences for pricing. But that is a story for another day.

Learn more about Cirium Fleets Analyzer.
June 17, 2024

Is A330neo Coming to China? – A Suitability Analysis

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

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

Yuanfei Zhao (Scott), Senior Aviation Analyst, Cirium Ascend Consultancy

Recent market developments suggest the potential introduction of the A330neo, the successor to the popular twin aisle type A330ceo, to China. A June release from Bloomberg indicate discussions are ongoing between Airbus and Chinese airlines for the sale of over 100 A330neo aircraft. While Airbus has yet to confirm these discussions, the market awaits further developments.

This raises the interest to examine the potential of this type to be introduced to the China market. From a cost and performance perspective, the A330 family has been designed primarily for short to medium range dense routes while offers competitive pricing relative to its counterparts, such as the A350s. Cirium’s data illustrates this, with the full life market value of a Trent-powered A330-900neo (built in January 2024) and devoid of additional specifications, estimated at approximately USD107 million. In contrast, the equivalent figure for an A350-900 stands at USD158 million..

“This pricing strategy positions the A330neo favourably in terms of unit cost, operational expenses, and performance balance within its designated market segment, despite its capability to operate long-haul routes.”

Such characteristics clearly differentiates itself from other main twin-aisle types such as the A350, or the 787 and the 777, which primarily target longer-range routes.

The chart below demonstrates the average block range for each of the aforementioned aircraft type operated by Chinese airlines on all flights departing from China since 2015, encompassing both domestic and international routes.

Source: Cirium Schedules data

The average block range flown by the Chinese A330ceo fleet is 2,250km, whereas for the A350, 787 and 777, the ranges are 2,530km, 2,920km and 3,780km respectively.

This underscores that not only does the A330ceo fleet operate on shorter routes on average compared to other main twin-aisle types in China, but the average block range of other long-haul types operated by Chinese airlines is also not significantly longer than that of the ceo fleet.

Analysis of flights operated by Chinese airlines between 2015 and 2023 reveals that only 14% of these flights exceed 5,000km. Given this context, it appears economically prudent for Chinese airlines to utilise more of the A330 fleet on the majority of their short to medium-range routes.

Source: Cirium Fleets Analyzer

From a fleet planning perspective, out of the 212 in-service and stored A330ceo aircraft in China, 33 units (15% of the total fleet) are currently aged 15 years or older.

“These aircraft are likely to face fleet planning decisions before the end of this decade. Additionally, approximately 22% of the fleet is on operating leases with foreign lessors, including Chinese fund-backed lessors registered outside of China.”

The destinies of these leased aircraft upon lease expiries are subject to higher uncertainties, with lessors having the flexibility to decide whether to extend leases, relocate assets to more lucrative markets, retire and part out the aircraft for better value extraction, or covert them from passenger aircraft to freighters based on prevailing market dynamics.

In summary, the cost and performance characteristics of the A330 family aircraft align well with the Chinese market, offering a balanced combination of asset unit cost, operational cost (on a per-seat basis) and type/route suitability. If Chinese airlines intend to maintain or even expand their A330 fleet in the long run, it is advisable to commence planning for the new generation neos. However, major considerations include the scarcity of delivery slots and production rate constraints of OEMs, which have resulted in virtually no available delivery slots for aircraft like the A350 and 787 before the end of this decade. While there may be a limited number of A330neo delivery slots still available during this decade due to the relatively small orderbook of this type, they are unlikely to be plentiful.

Consequently, it may be until the next decade before new A330neos can establish a sizeable fleet within Chinese airlines for replacement or growth, even if orders are confirmed and placed promptly.

Learn more about Cirium Schedules, Cirium Fleets Analyzer.
May 21, 2024

Quantifying Volatility in Aircraft Values

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.

Thomas Sweeney, Valuations Associate, Cirium Ascend Consultancy

In the current supply constrained environment, the majority of aircraft values are on an upward trajectory. All of our existing market analysis indicates that this constrained supply will continue for several years yet and potentially for the majority of this decade. Demand is projected to resume its growth trend, although there is some risk in this assumption. Having just experienced the extreme downturn of the pandemic we are well placed to assess the risk that each asset presents based both analysis of historical data and understanding of the market dynamics of that type.

To illustrate how various assets have performed, we plot the graphical distribution of Market-to-Base Value ratio around a balanced market, which is represented by a MV/BV ratio of one. Below are examples of these graphs for three different aircraft types on a 10-year horizon which demonstrate the full range from stable to highly volatile.

The Airbus A350-900 is an asset which has proved very popular with operators and investors. An efficient new generation aircraft, it is an optimal size for many operators’ long-haul networks and production has been more stable than for its competitor, the Boeing 787. This has resulted in relatively stable values for the type:

It is unsurprising that Market Values for the type have mostly been below Base, given that a large proportion of its in-production life has been taken up with the pandemic.

It is more noteworthy that Market Values have barely gone below 90% of Base.

It demonstrates the relatively low volatility of this type. Demand for this aircraft is high with a diverse operator base and it has had time to prove its performance. It is the largest in-production type at present, as the 777X continues to struggle in certification. This is driving the view that demand, and hence values, are unlikely to fall significantly in the near and medium-term.

The newest Boeing 737-700s (2012-2018) have a less stable profile, with Market Values showing significant time spent between 75% and 90% of Base:

The Boeing 737NG family has been a very successful programme and demand for this key narrowbody type can only fall so far. However, this variant of the family is one of the more volatile types. The smallest variant in a family is generally less popular as a consequence of its relatively poorer seat mile economics. The -700 is highly concentrated with Southwest Airlines, which has 380 aircraft, comprising over half of its in-service commercial fleet. These younger aircraft are both a smaller portion of the fleet and face faster depreciation and higher volatility as they are late in the production cycle, already being taken over by newer technology. Despite these aspects, the type retains the same engines as other more popular variants of the 737NG family and as such, is prevented from the extreme volatility that can be seen on other types.

The Airbus A380 is an example of a type that has shown very high volatility as scepticism over its economic viability became increasingly widespread over the past decade:

By now, the Airbus A380’s weaknesses are well known – such a large aircraft requires a high load factor to remain profitable and selling enough seats to maintain this load factor is challenging on all but the densest routes.

Its very high concentration in Emirates’ fleet, with which the type is almost synonymous, and very small operator base renders it difficult to trade on the open market.

The pandemic showed that the A380 was amongst the earliest aircraft types to be stored or retired and this is reflected in the third chart, where the Market Values fall below even 50% of Base.

In conclusion, understanding the value trends and market dynamics for different aircraft types is essential in the current supply-constrained environment. These types show that there isn’t one key factor in volatility. Both elements of the physical value of the asset, such as position in production cycle and technical capability, and economic value, such as an optimised size for high load factors and yields, play a part in volatility. A statistically rich historical dataset and understanding of the market position of each asset allows us to both quantify downside value risk and predict future volatility.
May 20, 2024

Can COMAC Truly Challenge the Airbus and Boeing Duopoly?

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.

Rob Morris, Global Head of Consultancy, Cirium Ascend Consultancy

Since the unfortunate 737-9 Max accident in January laid bare Boeing’s continued 737 production woes, we have been asked many times about the potential for COMAC to step up and fulfill single-aisle aircraft demand which is being frustrated by slow Boeing deliveries. The question is further magnified when considering Airbus’s own struggles to ramp A320 family production, which came close to averaging 60 aircraft per month in 2019 before reverting to less than 40 per month through the pandemic, up from the current 50 or so per month towards the planned target of 75 per month in 2026. As one senior leasing executive put it at ISTAT Asia in Hong Kong in early May “Boeing and Airbus have offered a window of opportunity for COMAC”. Another said “AB today becomes ABC in ten-years time”. In essence, the door is open for COMAC but can they step through it?

From a demand perspective, the opportunity certainly exists.

Our latest Cirium Fleet Forecast, published in November 2023, projects demand for more than 40,000 single-aisle and twin-aisle passenger jet deliveries over the next 20 years.

In the 20-year period 2000-2019 Airbus and Boeing between them delivered just under 19,600 commercial passenger jets (including five from the legacy McDonnell-Douglas range which Boeing had acquired in 1997, rendering 2000 the year that the large commercial aircraft market became the duopoly we know today). Hence, unless today’s duopolists are able to double their output through 2043, there is certainly headroom for a third player.

But can COMAC step up with the current C919 to exploit the opportunity in the commodity single-aisle space where that demand projection estimates almost 33,000 deliveries? The orderbook signals optimism, with 998 aircraft currently recorded as on firm order in Cirium’s fleet database to add to the five which have already been delivered. However, as the chart below illustrates that backlog is shown as scheduled for delivery through 2040, a far longer delivery horizon than any competing Airbus or Boeing single-aisle. Only 46% of the backlog is committed to six airlines, all of whom are domiciled in China. The remaining 543 aircraft are on order with 12 operating lessors, all of whom are Chinese owned and domiciled aside from BOC Aviation. These aircraft will need to find customer placements and it is unusual for a new aircraft programme to feature so many lessors so early in its genesis. This perhaps suggests how airlines are viewing the C919 for now, although the recent orders for 100 each from Air China and China Southern are likely to have a much firmer status than many of the lessor orders.

Cirium’s Fleet Forecast also signals optimism, with the current projection for just under 1,700 C919 programme deliveries through 2042. The vast majority of those deliveries are expected to be to domestic customers, with only around 250 aircraft expected to be sold to export customers largely in belt and road countries where political influence can drive sales campaigns. With more than 6,000 new single-aisle deliveries expected in China over the forecast period, C919 is expected to capture around 25% market share compared to Boeing’s 30% and Airbus’s 45%.

With that optimism, how is COMAC performing today as it strives to break into the single-aisle market, and how does that performance benchmark to the most recent successful market entrant which of course was Airbus in the late 1980s? Airbus delivered its first A320 to Air France in March 1988. COMAC delivered its first C919 aircraft to China Eastern Airlines in December 2022. 17 months later, COMAC have now delivered five aircraft to that single customer. Within 17 months of the first delivery of its A320 back in 1988, Airbus had delivered 49 units to nine different airlines in Europe, North America and Asia. Ten times as many aircraft delivered globally by Airbus more than 35 years ago when the market was inter alia much smaller than it is today. Airbus did have one significant advantage over COMAC today, in that since the 1960s Airbus’s partner companies in France and the UK had manufactured and delivered more than 630 passenger single-aisle aircraft, Caravelles, Tridents and One-Elevens, to almost 90 customers globally, facilitating aircraft support networks which Airbus was able to leverage to ensure their customers enjoyed dispatch reliability and performance necessary to establish the A320 family as a credible and global competitor to the then competing Boeing and McDonnell Douglas single-aisle aircraft. COMAC does not have that support network in place and thus has to work very hard to build it to support airline customers who will be expecting performance and dispatch reliability that benchmarks favourably against those delivered by the established Airbus and Boeing products.

How are the aircraft already delivered performing today? Cirium’s data shows that China Eastern’s five aircraft are presently scheduled on three domestic routes from Shanghai Hongqiao to Chengdu, Beijing and Xi’an.

Flight tracking data confirms that in April the aircraft operated a total of 398 flights, averaging 5.9 hours per day.

In the same month, all Boeing 737-8 Max and A320neo in service in China averaged 8.1 and 8.4 hours flown per day respectively, so C919 is clearly being scheduled and flown conservatively for now averaging around 70% of the Boeing and Airbus peers, as the aircraft starts to prove itself in operational service. However, there are already signs of improvement since as recently as February C919 was achieving only around 50% of the average daily hours of 737 and A320. There are also signs of improvement from a route perspective, with a C919 reportedly scheduled to operate a single Shanghai Hongqiao to Hong Kong return sector on 1 June 2024, with further reports that this will subsequently become a regular route for the aircraft type.

What about the future? As already noted, Cirium’s backlog indicates an expectation that COMAC will deliver more than 130 aircraft to customers in 2031. COMAC themselves have stated an intention to develop a production capacity of up to 150 aircraft annually within the next five years. COMAC are also developing a family of aircraft, somewhat akin to Airbus’s strategy with the A320 augmented with smaller and larger A319 and A321 variants. The shorter fuselage ‘plateau’ version was launched in February with an order by Tibet Airlines. At face value the potential to manufacture 150 aircraft annually by 2029 seems ambitious. It took Airbus more than ten years to achieve more than 150 annual deliveries, albeit the 168 A320 family aircraft delivered in 1998 did represent more than 30% market share in the then single-aisle market where Boeing delivered 324 aircraft that year and McDonnell Douglas (by then owned wholly by Boeing) delivered 42 aircraft. Cirium’s forecast projects delivery of around 1,800 single-aisle aircraft globally in 2029, so 150 aircraft from COMAC would represent less than 10% of the total market.

There is no doubt that the door is potentially open for COMAC to step through and join Airbus and Boeing in the large commercial aircraft market. However, this analysis suggests that the pace at which COMAC will walk through that door is relatively slower than Airbus walked through the same door more than 30 years ago. At present Boeing is clearly weakened, but with time Boeing will fix its issues and return the Boeing 737 family to a level of production some four times larger than COMAC’s stated intent in 2029. In the same timescale Airbus is likely to be producing its own A320 family at around six times the scale that COMAC intend.

The barriers to entry in the large commercial aircraft market have always been huge – potentially insurmountable for many as witnessed by Bombardier’s ultimately doomed efforts with its CSeries. COMAC are the latest challenger. COMAC does enjoy is a huge domestic market, where China will perhaps consume as many as 15% of all new single-aisle deliveries. It can leverage that domestic market to generate sales. But for now the relative pace of those sales seems set to be much slower than even Airbus achieved as it entered the market in the 1980s. Hence, it seems likely that it will be a very long time before AB today genuinely becomes ABC.

LEARN MORE ABOUT CIRIUM FLEET FORECAST.
May 16, 2024

Middle East Reshapes Aviation’s Future With Innovation

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

In the heart of the Middle East, a quiet revolution is taking place. The region’s aviation industry, long a symbol of ambition and growth, is undergoing a remarkable transformation that promises to reshape the future of air travel.

With a commitment to innovation, sustainability, and passenger experience, the Middle East is poised to set new standards for the global aviation community. As global stakeholders gather for the Arabian Travel Market in Dubai this week, let’s explore the initiatives and specific regional opportunities.

At the forefront of this transformation is the United Arab Emirates, home to some of the world’s most renowned airlines and airports. Dubai-based Emirates Airline, a $29 billion entity, has consistently pushed the boundaries of what’s possible in aviation.

With a fleet of over 250 aircraft and a network spanning more than 140 global destinations, Emirates has leveraged the latest technologies to deliver an exceptional passenger experience. From in-flight entertainment systems to biometric security measures, the airline’s commitment to innovation has set a high bar for the industry.

But Emirates is not alone in its pursuit of excellence. Abu Dhabi-based Etihad Airways and low-cost carriers like flydubai and Air Arabia have also made significant strides in enhancing their services and expanding their reach. For pure operational performance, Oman Air won Cirium’s regional OTP award for 2023 and was placed 3^rd globally. In March 2024, King Khalid International Airport (RUH) was the second most on time airport globally with an on time departure of 87.32%. These airlines and airports have recognized the importance of adapting to changing customer needs and embracing sustainable practices to ensure long-term success. To that end, minimising cancelled flights and delays is something everyone can agree is a positive step – in what has been a challenging month for aviation in the region overall.

Cirium’s Middle East and Africa OTP Regional Update – Published April 2024

Middle East & Africa witnessed a 12% surge in the number of flights canceled in March. The region had 1,950 flights canceled compared to 1,739 last month. Safair (FA) was still the undisputed leader in both the Middle East & Africa region and the low-cost carrier category in March.

The airline concluded the month with an outstanding OTP of 96.67%, up nearly three points from 93.96% in February.

This was also the highest performance score among all carriers across all global regions and all categories. Oman Air (WY) followed in second place, also with an impressive OTP of 93.32%. With a remarkable thirteen-point increase over last month’s performance, Royal Jordanian (RJ) climbed from seventh to third place this month with an OTP of 89.68%. Gulf Air (GF) remained in fourth place with an OTP of 88.35%, a 4-point increase over February’s OTP of 84.08%. Qatar Airways (QR) finished the month in fifth place with an OTP of 87.36%, a 4-point increase over the previous month’s OTP of 83.27%. Airports in the region also showed huge improvements in their performance this month. King Khalid International Airport (RUH) secured the second-place spot in the global airports category with an OTP of 87.32% following a 4-point increase from last month’s OTP of 83.13%. Kuwait International Airport (KWI) delivered an OTP of 87.32%, up nearly 7 points from February’s performance of 80.51%. Meanwhile, Izmir Adnan Menderes Airport (ADB) turned in an OTP of 91.61%, a 2-point increase over last month’s OTP of 89.57%.

Innovation Hubs Enable Collaboration

One of the most exciting developments in the region’s aviation industry is the emergence of innovation hubs like Emirate’s Ebdaa in Dubai. Ebdaa serves as a catalyst for creativity, collaboration, and sustainable energy. This state-of-the-art facility brings together the brightest minds from universities, technology suppliers, and startups to drive the development of cutting-edge solutions. From hydrogen-powered aircraft prototypes to advanced air traffic management systems, the groundbreaking projects emerging from Ebdaa are testament to the region’s commitment to shaping the future of aviation.

But innovation is not limited to the development of new technologies. The Middle East’s aviation industry is also pioneering new approaches to training and passenger experience.

Emirates, for example, has also embraced extended reality and immersive experiences to enhance the onboarding and training of its aircrew and employees. By providing realistic simulations of the working environment, these technologies are reducing training times and ensuring a smoother transition for new hires.

Similarly, Dubai International Airport, one of the world’s busiest, is leading the charge with its plans for a fully touchless, walk-through experience through 2024. Passengers will enjoy seamless check-in, security clearance, and boarding processes, thanks to advanced biometric technology. This initiative not only reduces wait times and enhances safety but also provides a more hygienic and convenient travel experience in the wake of the COVID-19 pandemic. Similar advancements are being implemented across the region, revolutionizing the way passengers navigate airports and interact with airline staff.

However, the rapid growth and innovation in the Middle East’s aviation industry are not without challenges. The region faces a shortage of skilled labour, with estimates suggesting that the UAE alone will require around 22,000 pilots and crew members by 2033. To address this issue, countries in the region are investing in training and development programs, partnering with educational institutions to nurture the next generation of aviation professionals.

Another challenge is the need for sustainable practices in the face of climate change. While the Middle East’s airlines and airports have made significant strides in reducing their carbon footprint, there is still much work to be done. The adoption of sustainable aviation fuels, the development of more fuel-efficient aircraft, and the implementation of eco-friendly ground operations are all critical steps in ensuring the industry’s long-term sustainability. To this end airlines and airports across the region are investing heavily in eco-friendly initiatives, such as the adoption of sustainable aviation fuels, the development of fuel-efficient aircraft, and the implementation of green ground operations. Etihad Airways, for example, has pledged to reduce its carbon emissions by 50% by 2035 and achieve net-zero emissions by 2050. These efforts are not limited to operational benefit but are also vital for securing the financial backing for the industry with many deals coming with “green strings attached”. Cirium has also invested heavily in this area and recently secured accreditation for Emerald Sky from the Rocky Mountain Institute for the first climate-aligned finance framework tailored for the aviation industry.

Despite these challenges, the mood in the Middle East’s aviation industry is one of optimism and determination.

The region’s leaders recognize the immense potential of the sector and are committed to investing in its future. From the ambitious plans of Saudi Arabia to the strategic partnerships being forged across the region, there is a sense of unity and purpose in driving the industry forward.

In the coming years, we can expect to see even more groundbreaking advancements emerging from the region. From the development of hydrogen-powered aircraft to the implementation of seamless, touchless travel experiences, the Middle East’s aviation industry is pushing the boundaries of what’s possible. As these innovations take flight, they will not only transform the way we travel but also inspire a new generation of entrepreneurs and innovators. The Middle East’s aviation success story is a testament to the power of vision, collaboration, and innovation. As the region continues to invest in its people, its infrastructure, and its technologies, it is laying the foundation for a brighter, more sustainable future. With its eyes fixed firmly on the horizon, the Middle East is ready to take the global aviation industry to new heights, one innovation at a time.
May 15, 2024

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.

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.
May 1, 2024

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.

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.
May 1, 2024

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, Principal Valuations Analyst, Cirium Ascend Consultancy

On the 29^th 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

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.

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.
April 17, 2024

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.

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