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Ascend Consultancy, Expert view, Financial investments

Aircraft values and lease rates increase significantly: Cirium Ascend Consultancy

October 26, 2023

Narrowbody aircraft values have risen 20% over the last 12 months, and widebody values are up more than 10%, Cirium Ascend’s latest outlook shows.

26 Oct 2023 – Steve Goldstein (New York) Air Transport Reporter, Cirium Dashboard

Narrowbody aircraft values have risen 20% over the last 12 months, and widebody values are up more than 10%, Cirium Ascend’s latest outlook shows.

“In the last 12 months, we’ve seen some pretty significant increases to both values and lease rates,” said George Dimitroff, Cirium Ascend’s head of valuations, on 26 October during a webinar hosted by the consultancy.

I think the widebodies are the ones to watch because that’s changing fastest.

George Dimitroff

He adds that lease rates are above 2019 levels and “up significantly compared to one or two years ago”.

Cirium Ascend global head of consultancy Rob Morris notes that amid strong demand for travel, aircraft delivery volumes from manufacturers “continue to fail to meet expectations”. Additionally, the availability of used aircraft “continues to decline fundamentally”.

Today, single-aisle inventory availability is 60% lower than it was in 2021 at the same point in October.

Rob Morris

Morris adds that “widebody markets which were in surplus even before the pandemic began now [are] in significant deficit for supply”.

Lessors are benefiting from the combination of strong travel demand, delivery delays from manufacturers and a tight used aircraft market, Morris argues.

“The pricing environment for lessors, certainly on the supply side, has never been so good.”

Shane Matthews, head of strategic and market analysis for Irish lessor SMBC Aviation Capital, admitted during the webinar that “everything is in a good place”.

It’s great that we’ve seen the consumer come back with the confidence that they’ve come back. And that’s allowed the airlines to expand and it’s allowed our industry to grow.

Shane Matthews

Matthews notes that increases in aircraft values and lease rates are mitigated by the rising cost of finance.

“When you’re dealing with things that are as expensive as [aircraft] we have found that the finance cost can have as much an impact on the values as anything else,” he says.

“We are coming out of a period of very loose monetary policy into a period of very tight monetary policy. And we are looking at a period of where interest rates have gone higher and significantly higher even the last couple of months. The reality as I see it is that the owners of the aircraft are going to require a higher return.”

Matthews adds that aviation is still in its post-pandemic recovery phase, particularly in Europe where carriers still have not fully restored their networks, and in Asia, which is in the “early stage” of its recovery.

Further recovery, particularly in Asia, is going to drive strong demand for widebody aircraft, Matthews argues.

“That’s the reality, and we are starting to see that also in the pricing in the market out there.”

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