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Shortening Of Airliner Life Cycle : A380 Example  
User currently offlinefaro From Egypt, joined Aug 2007, 1542 posts, RR: 0
Posted (1 year 7 months 1 week 6 days 22 hours ago) and read 20336 times:

In a neighbouring thread A380 - Airbus Close To 'Significant Order' Part #2 (by iowaman Jan 17 2013 in Civil Aviation) , mention is made of SQ/EK being behind a (speculative) new and significant order for A380's. The reasoning is that these carriers' earliest A380 deliveries would be hitting their lease return dates by the end of the decade and would need replacing.

My question is are we witnessing an effective shortening of airliner life cycle here or is this phenomenon specific to major carriers like SQ and EK only? Can we expect the present A380's in SQ/EK's fleet to easily find a new home after being returned to their lessor or will they experience significant devaluation due to such hypothesised life cycle shortening?

I have the impression that this phenomenon is gaining ground and that the 20-year useful life may become a thing of the past with major carriers.


Faro


The chalice not my son
54 replies: All unread, showing first 25:
 
User currently onlinegemuser From Australia, joined Nov 2003, 5638 posts, RR: 6
Reply 1, posted (1 year 7 months 1 week 6 days 21 hours ago) and read 20209 times:

Quoting faro (Thread starter):
this phenomenon specific to major carriers like SQ and EK only?

It is specific to the general business and especially the tax (including deprecation) environment in their home base.

Gemuser



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User currently offlinePanHAM From Germany, joined May 2005, 9330 posts, RR: 29
Reply 2, posted (1 year 7 months 1 week 6 days 21 hours ago) and read 20214 times:

EK is leasing several of its aircraft, not only the 380s. with money from German private investors who can use their investment as tax shelters. Similar to investment in ships. I haven't seen the details and the fine print of such participation in ownership companies. EK will certainly have the option to extend the lease, or simply return the aircraft to the lessors.

With a 777, the options to find a new lease is by far greater than with a A380. If a relativley new A380 has to be scrapped concerns the carrier rather less. The investors may go broke over it, specially if they have part of their investment financed through loans.

.

.



E's passed on! That parrot is no more! He has ceased to be! E's expired and gone to meet 'is maker!
User currently offlineRara From Germany, joined Jan 2007, 2079 posts, RR: 2
Reply 3, posted (1 year 7 months 1 week 6 days 21 hours ago) and read 20164 times:

Good question.

Does it really make sense to retire such young planes from the fleet? Yes they're leased, but I can't imagine that maintenance costs would go up so radically as to make it necessary to replace the plane.

Anyway the risk lies with the lessors. I'm pretty sure they don't amortise the plane in ten or twelve years. They must speculate on a lucrative second-hand market..



Samson was a biblical tough guy, but his dad Samsonite was even more of a hard case.
User currently offlinena From Germany, joined Dec 1999, 10709 posts, RR: 9
Reply 4, posted (1 year 7 months 1 week 6 days 21 hours ago) and read 20174 times:

Quoting faro (Thread starter):
My question is are we witnessing an effective shortening of airliner life cycle here or is this phenomenon specific to major carriers like SQ and EK only? Can we expect the present A380's in SQ/EK's fleet to easily find a new home after being returned to their lessor or will they experience significant devaluation due to such hypothesised life cycle shortening?

I have the impression that this phenomenon is gaining ground and that the 20-year useful life may become a thing of the past with major carriers.

In particular SQ offloads their planes at a typical age of 12-15 years. As they have an excellent reputation almost all their planes find new homes afterwards (the recent 777 scrapping being a first as much as I know). Note that not a single ex-SQ 744 has been scrapped yet, and all are still active, despite the oldest being close to 24 years old now.
EK holds on to their planes a bit longer, but starting in 2016/17 they will be swamping the market with dozens of 77Ws, and SQ will soon join them. It indeed is a question wether all those planes might find new homes, there are just too many, and too many relatively young ones at a time when a new, slicker competitor comes to the market. The market still can accept 60+ new 777s in a year, but I doubt the used-plane market could absorb more than half per year by the end of this decade. As for the A330/340/777 market I indeed see the danger of a shortened lifecycle of an increasing number of planes.
As for the A380, their number is much lower, and a few frames coming off-lease now and then should be absorbed. We are talking about maybe two dozen planes between 2020-25. Also who knows if the leases wont be prolonged?


User currently offlinefaro From Egypt, joined Aug 2007, 1542 posts, RR: 0
Reply 5, posted (1 year 7 months 1 week 6 days 21 hours ago) and read 20140 times:

Quoting gemuser (Reply 1):
Quoting faro (Thread starter):
this phenomenon specific to major carriers like SQ and EK only?

It is specific to the general business and especially the tax (including deprecation) environment in their home base.

I may be wrong but I thought the UAE did not have a nominal, Western-style tax regime but a very watered-down one.


Faro



The chalice not my son
User currently offlinefaro From Egypt, joined Aug 2007, 1542 posts, RR: 0
Reply 6, posted (1 year 7 months 1 week 6 days 21 hours ago) and read 20093 times:

Quoting PanHAM (Reply 2):
With a 777, the options to find a new lease is by far greater than with a A380. If a relativley new A380 has to be scrapped concerns the carrier rather less. The investors may go broke over it, specially if they have part of their investment financed through loans.

With what we have seen with 777A scrappings of some 3-4 years ago, it is indeed not impossible that we may see A380's getting scrapped by the end of the decade, horrendous a thought as that is...


Faro



The chalice not my son
User currently offlinena From Germany, joined Dec 1999, 10709 posts, RR: 9
Reply 7, posted (1 year 7 months 1 week 6 days 21 hours ago) and read 19967 times:

Quoting PanHAM (Reply 2):
With a 777, the options to find a new lease is by far greater than with a A380.

Sure. But a major point is, that its the sheer numbers we are talking about that are the point here. There a huuuge numbers of 777s swamping the market beyond 2015, but only few A380s a year starting around 2020. While half a dozen A380s should be able to be placed on the secondhand market in a year I am much more doubtful about more than 50 777s (which, by 2020, will be the norm of retired and off-lease Triple Sevens).


User currently offlineRonaldo747 From United States of America, joined Feb 2009, 378 posts, RR: 0
Reply 8, posted (1 year 7 months 1 week 6 days 21 hours ago) and read 19961 times:

Quoting faro (Reply 6):
it is indeed not impossible that we may see A380's getting scrapped by the end of the decade, horrendous a thought as that is...

  

Do not forget that SQ and EK are the operators with the most early A380s on their tarmac which are heavier than later built. With the new A380s with extended MTOWs on the horizon, the early birds might be faster off as usual.


User currently offlinePanHAM From Germany, joined May 2005, 9330 posts, RR: 29
Reply 9, posted (1 year 7 months 1 week 6 days 21 hours ago) and read 19930 times:

I doubt that EK pays corporate taxes in the UAE., the owners are satisfied with the profit and decide whether to take that profit out of the company or use that for future investments.

As to the depreciation, if leased, the leasing rates are costs. There is no depreciation since the aircraft are no owned.

The leasing companies depreciate their investment. When aircarft are financed through the German "KG" model, there is a separate KG for each individual aircraft.



E's passed on! That parrot is no more! He has ceased to be! E's expired and gone to meet 'is maker!
User currently offlinefaro From Egypt, joined Aug 2007, 1542 posts, RR: 0
Reply 10, posted (1 year 7 months 1 week 6 days 20 hours ago) and read 19814 times:

Quoting PanHAM (Reply 9):
As to the depreciation, if leased, the leasing rates are costs. There is no depreciation since the aircraft are no owned.

For information, in 2011 Emirates incurred AED 4.3 billion of operating lease costs (aircraft not on balance sheet) but also had AED 3.6 billion of depreciation charge on assets held on financial leases (on-balance sheet, including aircraft owned outright).

http://content.emirates.com/english/...ages/EK-AR-10-11_tcm233-750566.pdf

At 31.12.2011, they had a total of AED 19.5 billion of aircraft held on financial leases (ie, depreciated) being the bulk of the total aircraft held of AED 21.0 billion. Total aircraft operating lease liabilities however amounted to AED 28.8 billion being superior by 37% to all aircraft held on-balance sheet.


Faro

[Edited 2013-01-18 03:04:09]


The chalice not my son
User currently offlineLTBEWR From United States of America, joined Jan 2004, 13081 posts, RR: 12
Reply 11, posted (1 year 7 months 1 week 6 days 20 hours ago) and read 19497 times:

Other factors that could affect the primary and secondary life cycles of these large aircraft will be fuel prices, major mx costs, new generation, the success of mid-sized, more efficient aircraft that offer a better experience for passengers like the 787 and A350, tax laws in various countries and overall economic conditions.

One also has to wonder if newer generation aircraft are really being designed for a service life beyond 15-25 years due to changing technology, a need for higher replacement rates, the demand for more fuel efficient a/c, if for the other reasons I cited, and economic need by the big a/c makers to want more turnover to be able to sell more units for their own economic needs.


User currently onlinegemuser From Australia, joined Nov 2003, 5638 posts, RR: 6
Reply 12, posted (1 year 7 months 1 week 6 days 20 hours ago) and read 19497 times:

Quoting faro (Reply 5):
I may be wrong but I thought the UAE did not have a nominal, Western-style tax regime but a very watered-down one.
Quoting PanHAM (Reply 9):
I doubt that EK pays corporate taxes in the UAE.

The point is both countries have a more favorable tax environment than most other countries, which makes turning over aircraft, as opposed to more expensive maintenance as the aircraft get older, the better business decision.

Gemuser



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User currently offlinePanHAM From Germany, joined May 2005, 9330 posts, RR: 29
Reply 13, posted (1 year 7 months 1 week 6 days 19 hours ago) and read 19349 times:

Quoting faro (Reply 10):
For information, in 2011 Emirates incurred AED 4.3 billion of operating lease costs (aircraft not on balance sheet) but also had AED 3.6 billion of depreciation charge on assets held on financial leases (on-balance sheet, including aircraft owned o

Yes, but the leasing model I mentioned is an operating lease. I know trhat EK has a mix of financing their aircraft, they may even buy some out of cash flow. However that kind of expansion would be difficult to finance form cash flow, especially when many of the aircraft operated are on operation leases and do not produce cash flow from depreciation.



Quoting gemuser (Reply 12):
The point is both countries have a more favorable tax environment th

well, in case of the UAE, the owners are everything in unison, there is no cpomparison to a normal "western " country



E's passed on! That parrot is no more! He has ceased to be! E's expired and gone to meet 'is maker!
User currently offlineart From United Kingdom, joined Feb 2005, 3382 posts, RR: 1
Reply 14, posted (1 year 7 months 1 week 6 days 19 hours ago) and read 19331 times:

Quoting faro (Thread starter):
Can we expect the present A380's in SQ/EK's fleet to easily find a new home after being returned to their lessor or will they experience significant devaluation due to such hypothesised life cycle shortening?

If owners have depreciated their A380's to $0 after 10 years. surely they can find lessees/customers for a few 10-12 year old, well maintained A380's at the end of this decade? I think of holiday operators expanding capacity for long haul tourism ex-Russia, China, India over the course of the decade. If the demand from them is there, employing 10-12 year old A380's at a commensurate price would be ideal, wouldn't it? I can't think how you would move 500 tourists to far flung destinations at a lower cost.


User currently offlineCRJ900 From Norway, joined Jun 2004, 2178 posts, RR: 1
Reply 15, posted (1 year 7 months 1 week 6 days 19 hours ago) and read 19329 times:
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Could it also be that the first 20-25 aircraft off the production line didn't meet performance guarantees (weight, SFC etc) and thus they will always be more inefficient than their later siblings - hence, SQ and EK has the option to return them when the lease expires and replace them with new aircraft that have all the improvements?


Come, fly the prevailing winds with me
User currently offlinena From Germany, joined Dec 1999, 10709 posts, RR: 9
Reply 16, posted (1 year 7 months 1 week 6 days 19 hours ago) and read 19208 times:

Quoting Ronaldo747 (Reply 8):
Do not forget that SQ and EK are the operators with the most early A380s on their tarmac which are heavier than later built.

Thats true and will surely influence the lease rates when they are being offered secondhand after 2020.

Quoting CRJ900 (Reply 15):
hence, SQ and EK has the option to return them when the lease expires and replace them with new aircraft that have all the improvements?

Option. They dont need an option. When the lease term expires they can just hand them back even without taking new ones. As far as I now the very last EK A380 on order are already meant to replace early-builts, just like the past-2016 built 77Ws are meant to replace early-builts of the same type.


User currently offlineKarelXWB From Netherlands, joined Jul 2012, 11367 posts, RR: 33
Reply 17, posted (1 year 7 months 1 week 6 days 19 hours ago) and read 19154 times:

Maintaining a young fleet is a certain strategy to keep the maintenance costs low (imagine you have to pay the 3th or 4th D-check!), plus the newer models are performing better. Tim Clark said the newest models are up to 4 tons lighter then the oldest units. The 2013 'improved models' will do even better. If you can get a better aircraft for the same leasing costs, why not?

It will be interesting to see what will happen with those second-hand A380s by the end of the decade.

[Edited 2013-01-18 04:31:06]


Only two things are infinite, the universe and human stupidity. And I'm not sure about the universe.
User currently offlinecmf From , joined Dec 1969, posts, RR:
Reply 18, posted (1 year 7 months 1 week 6 days 19 hours ago) and read 18980 times:

Quoting gemuser (Reply 12):
The point is both countries have a more favorable tax environment than most other countries, which makes turning over aircraft, as opposed to more expensive maintenance as the aircraft get older, the better business decision.

What rules are those?

Quoting art (Reply 14):
If owners have depreciated their A380's to $0 after 10 years. surely they can find lessees/customers for a few 10-12 year old,

How does the depreciated value have any influence on if the can find lessees/customers?


User currently offlineEPA001 From Netherlands, joined Sep 2006, 4723 posts, RR: 39
Reply 19, posted (1 year 7 months 1 week 6 days 18 hours ago) and read 18861 times:
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Quoting CRJ900 (Reply 15):
Could it also be that the first 20-25 aircraft off the production line didn't meet performance guarantees (weight, SFC etc) and thus they will always be more inefficient than their later siblings - hence, SQ and EK has the option to return them when the lease expires and replace them with new aircraft that have all the improvements?

Although somewhat heavier then anticipated, even the first A380 exceeded the performance guarantees Airbus made. So there will be no problem in that department, but of course newer A380's are getting better and better on almost a daily basis.  


User currently offlineastuteman From United Kingdom, joined Jan 2005, 10008 posts, RR: 96
Reply 20, posted (1 year 7 months 1 week 6 days 17 hours ago) and read 18570 times:
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Quoting faro (Reply 6):
it is indeed not impossible that we may see A380's getting scrapped by the end of the decade, horrendous a thought as that is...

Nothings impossible, of course. But I wouldn't hold your breath  

Rgds


User currently offlineart From United Kingdom, joined Feb 2005, 3382 posts, RR: 1
Reply 21, posted (1 year 7 months 1 week 6 days 17 hours ago) and read 18462 times:

Quoting cmf (Reply 18):
Quoting art (Reply 14):
If owners have depreciated their A380's to $0 after 10 years. surely they can find lessees/customers for a few 10-12 year old,

How does the depreciated value have any influence on if the can find lessees/customers?

Thank you for your question. I may have got this wrong, but aren't companies in a better position to lower prices to customers for use of an asset with no asset value in the company's books?


User currently offlinesxf24 From United States of America, joined Aug 2007, 1261 posts, RR: 0
Reply 22, posted (1 year 7 months 1 week 6 days 17 hours ago) and read 18438 times:

Quoting art (Reply 14):
If owners have depreciated their A380's to $0 after 10 years. surely they can find lessees/customers for a few 10-12 year old, well maintained A380's at the end of this decade? I think of holiday operators expanding capacity for long haul tourism ex-Russia, China, India over the course of the decade. If the demand from them is there, employing 10-12 year old A380's at a commensurate price would be ideal, wouldn't it? I can't think how you would move 500 tourists to far flung destinations at a lower cost.

There is no secondary market for A380s. Airbus saw to that with the complexity and cost of a highly customizable interior.


User currently offlinelightsaber From United States of America, joined Jan 2005, 13014 posts, RR: 100
Reply 23, posted (1 year 7 months 1 week 6 days 17 hours ago) and read 18285 times:
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Higher fuel prices will drive to shorter replacement cycles. That is just smart business. Hower:

Quoting gemuser (Reply 1):
It is specific to the general business and especially the tax (including deprecation) environment in their home base.

  

But fuel prices will show an impact.

Quoting cmf (Reply 18):
How does the depreciated value have any influence on if the can find lessees/customers?

If the business is run at a profit, the aircraft may be offered for less. If depreciated enough, one can sell the plane for parts.   

Lightsaer



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlinebobmuc From Germany, joined Nov 2011, 406 posts, RR: 0
Reply 24, posted (1 year 7 months 1 week 6 days 16 hours ago) and read 18113 times:

Quoting sxf24 (Reply 22):
There is no secondary market for A380s.

I think it's to early to decide this. As art mentioned, there are already some ideas of using second-hand A380's in 5 to 10 years.

It's also way to early to decided, if the A380 (or other new airplanes) has a different life cycle compared to older types. I think the discussed situation with the A380 (eg EK replacing 10 year old airplanes) has a lot more to do with:
- busines model of the airline: using newest technology with all benefits (eg less maintenance cost, more efficient airplanes, reputation of the airline, etc.) versus flying old/used/depreciated stuff with less investment cost etc.
- other financing/leasing options today compared to 20 years ago.
- capital situation of the airline


User currently offlineStitch From United States of America, joined Jul 2005, 30907 posts, RR: 87
Reply 25, posted (1 year 7 months 1 week 6 days 16 hours ago) and read 18775 times:
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If an A380 is scrapped, it will be for the same reasons a 777 is scrapped - the value of the parts as spares exceeds the value of the aircraft as a whole.

It will not be because the A380 has become undesirable, just as 777s are not being scrapped now because they are undesirable.


User currently offlinefaro From Egypt, joined Aug 2007, 1542 posts, RR: 0
Reply 26, posted (1 year 7 months 1 week 6 days 16 hours ago) and read 18557 times:

Quoting lightsaber (Reply 23):
Higher fuel prices will drive to shorter replacement cycles. That is just smart business.

I wonder though, from a lofty, macroeconomic point of view, are shorter replacement cycles contributing to or reducing economic efficiency? You gain on the fuel side yes, but then need a new aircraft to continue that efficiency trend. So far the second-hand markets seem to be taking up the older aircraft in a fairly orderly manner but one day we may for example get a 77W glut and prices will plunge. And this will contribute to massive losses on the books of owners/lessors.

From a theoretical, GDP point of view, I wonder whether these shorter life cycles will have a net positive or negative effect...


Faro



The chalice not my son
User currently offlineUnited_fan From United States of America, joined Nov 2000, 7485 posts, RR: 7
Reply 27, posted (1 year 7 months 1 week 6 days 16 hours ago) and read 18823 times:

Quoting na (Reply 7):
There a huuuge numbers of 777s swamping the market beyond 2015

By 2015,the oldest 777 wil be 20 years old,so....



'Empathy was yesterday...Today, you're wasting my Mother-F'ing time' - Heat.
User currently offlineastuteman From United Kingdom, joined Jan 2005, 10008 posts, RR: 96
Reply 28, posted (1 year 7 months 1 week 6 days 15 hours ago) and read 18614 times:
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Quoting faro (Reply 26):
I wonder though, from a lofty, macroeconomic point of view, are shorter replacement cycles contributing to or reducing economic efficiency?
Quoting faro (Reply 26):
I wonder whether these shorter life cycles will have a net positive or negative effect...

You talk as if these "shorter lifecycles" are now fact, when in fact they're anything of the sort.
It pure conjecture, as is the notion that there is no aftermarket.

Rgds


User currently offlinefaro From Egypt, joined Aug 2007, 1542 posts, RR: 0
Reply 29, posted (1 year 7 months 1 week 6 days 15 hours ago) and read 18209 times:

Quoting astuteman (Reply 28):

You talk as if these "shorter lifecycles" are now fact, when in fact they're anything of the sort.
It pure conjecture, as is the notion that there is no aftermarket.

Granted; purely speculative on my part. I guess we would need to live through significant lease remittals post-2015 to have an appreciation of where life cycle trends are pointing to.


Faro



The chalice not my son
User currently offlineart From United Kingdom, joined Feb 2005, 3382 posts, RR: 1
Reply 30, posted (1 year 7 months 1 week 6 days 15 hours ago) and read 18177 times:

Quoting sxf24 (Reply 22):
There is no secondary market for A380s. Airbus saw to that with the complexity and cost of a highly customizable interior.

I take your point that changing the interior to all Y would be expensive. Why not just keep the existing high density seat layout used by one of the current operators, have a standard service level throughout the aircraft (meals, cutlery etc) but offer J seats inherited at a premium? Take out F seats and do something with the space created?


User currently offlinecmf From , joined Dec 1969, posts, RR:
Reply 31, posted (1 year 7 months 1 week 6 days 15 hours ago) and read 17756 times:

Quoting art (Reply 21):
Thank you for your question. I may have got this wrong, but aren't companies in a better position to lower prices to customers for use of an asset with no asset value in the company's books?

&

Quoting lightsaber (Reply 23):
If the business is run at a profit, the aircraft may be offered for less. If depreciated enough, one can sell the plane for parts.

You always try to get as much as you can. If you look at the book value to set the price then you're not running a business on commercial terms.


User currently offlineStitch From United States of America, joined Jul 2005, 30907 posts, RR: 87
Reply 32, posted (1 year 7 months 1 week 6 days 15 hours ago) and read 17614 times:
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In terms of frames that were sold and leased-back, the aftermarket may very well be the current operators as the lessors will almost assuredly prefer to just extend the lease rather then have to re-confifgure and re-market them.

I have read on this forum that SQ turns over their owned assets at around the decade-mark because of Singapore depreciation schedules. But with SQ having sold and leased-back at least some of their A380s, those depreciation schedules no longer apply and therefore I don't see why SQ could not just renew the lease and continue to operate those planes for another 10-year cycle if they continue to meet SQ's requirements / expectations.


User currently offlinefaro From Egypt, joined Aug 2007, 1542 posts, RR: 0
Reply 33, posted (1 year 7 months 1 week 6 days 15 hours ago) and read 17293 times:

Quoting Stitch (Reply 32):
But with SQ having sold and leased-back at least some of their A380s, those depreciation schedules no longer apply

This is the case if they are taken back on operating leases. Accounting treatment (US GAAP, IFRS, etc) mandates booking of depreciation for financial leases (leased assets are carried on-balance sheet).


Faro



The chalice not my son
User currently offlinebrons2 From United States of America, joined Sep 2001, 3013 posts, RR: 4
Reply 34, posted (1 year 7 months 1 week 6 days 13 hours ago) and read 15446 times:

Quoting sxf24 (Reply 22):
There is no secondary market for A380s. Airbus saw to that with the complexity and cost of a highly customizable interior.

What if the secondary market chooses to use the seating config as-is?

I think your assessment is premature.



Firings, if well done, are good for employee morale.
User currently offlinebrons2 From United States of America, joined Sep 2001, 3013 posts, RR: 4
Reply 35, posted (1 year 7 months 1 week 6 days 13 hours ago) and read 15422 times:

And while we're on the subject, the 787 should be another candidate for such exchanges down the road. The 787-8 won't meet the original weight targets to frame 90 I believe? And the current engines don't meet the original spec either.

An example produced at the end of the decade should suffer none of these deficiencies, though. Wouldn't surprise me to see especially the first 25ish replaced very quickly, as they are the most seriously overweight.



Firings, if well done, are good for employee morale.
User currently offlinegoosebayguy From United Kingdom, joined Sep 2009, 397 posts, RR: 0
Reply 36, posted (1 year 7 months 1 week 6 days 12 hours ago) and read 14670 times:

We could be approaching a situation where just a few airlines, EK, SIA, BAW, LH, will have a monopoly on ordering the 380 new whilst other airlines can only pick up their cast offs years later. This means a few airlines will always have the most efficient 380's while others have less efficient more costly to operate 380's. Nice advantage to have if you cabn order new and keep the order books busy years in advance.

User currently offlineKC135TopBoom From United States of America, joined Jan 2005, 12138 posts, RR: 51
Reply 37, posted (1 year 7 months 1 week 6 days 11 hours ago) and read 13490 times:

Some second hand A-380s may find a new home as P2Fs or even a P2C (pax to combi). A P2C conversion should have no problem if it is configuered as all cargo on the main deck and all pax on the upper deck.

User currently offlineStitch From United States of America, joined Jul 2005, 30907 posts, RR: 87
Reply 38, posted (1 year 7 months 1 week 6 days 11 hours ago) and read 13238 times:
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Quoting KC135TopBoom (Reply 37):
A P2C conversion should have no problem if it is configuered as all cargo on the main deck and all pax on the upper deck.

I have wondered how fire and smoke suppression would work in such a configuration. I'm sure it could be implemented, but at what cost in terms of both monetary and structural weight?


User currently offlinebongodog1964 From United Kingdom, joined Oct 2006, 3572 posts, RR: 3
Reply 39, posted (1 year 7 months 1 week 6 days 11 hours ago) and read 12828 times:

One huge influence on the life of airliners is inflation.

If you cast your mind back to the days of the 741 & 742 many if not all developed nations had double digit inflation. By the time an early build jumbo had done 10 years service a direct replacement was more than double the original purchase cost. It then made huge sense for the major operators to repeatedly D check and refurbish their fleet due to the prohibitive cost of replacement, also the replacement models weren't particularly more efficient.

Now we have low inflation and some quite large gains in efficiency, it skews the figures towards a shorter fleet life.


User currently offlineastuteman From United Kingdom, joined Jan 2005, 10008 posts, RR: 96
Reply 40, posted (1 year 7 months 1 week 6 days 10 hours ago) and read 11603 times:
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Quoting brons2 (Reply 34):
Quoting sxf24 (Reply 22):There is no secondary market for A380s. Airbus saw to that with the complexity and cost of a highly customizable interior.
What if the secondary market chooses to use the seating config as-is?

Or chooses not to use a seating configuration at all?   

Quoting KC135TopBoom (Reply 37):
Some second hand A-380s may find a new home as P2Fs

  
Based on early comments from FX I certainly wouldn't dismiss this possiblility, whatever we might believe about the prospects for a new-build freighter

Rgds


User currently offlineart From United Kingdom, joined Feb 2005, 3382 posts, RR: 1
Reply 41, posted (1 year 7 months 1 week 6 days 9 hours ago) and read 10495 times:

Quoting astuteman (Reply 40):
What if the secondary market chooses to use the seating config as-is?

Or chooses not to use a seating configuration at all?

I'm not sure even Miachael O'Leary would take things that far.  


User currently offlineBurkhard From Germany, joined Nov 2006, 4395 posts, RR: 2
Reply 42, posted (1 year 7 months 1 week 6 days 9 hours ago) and read 10441 times:

Quoting sxf24 (Reply 22):
There is no secondary market for A380s. Airbus saw to that with the complexity and cost of a highly customizable interior.

An airline like Transaero that operates 747-300 still will take a deep look for sure.


User currently offlinefrmrcapcadet From United States of America, joined May 2008, 1714 posts, RR: 1
Reply 43, posted (1 year 7 months 1 week 6 days 8 hours ago) and read 9878 times:

Recently a thread was discussing regulatory changes which could put an end of life on older planes. IIRC it mentioned that some of the older 737s could be affected. I suspect that newer planes, including 380 could eventually be affected, but does anyone know how many years out that might be?


Buffet: the airline business...has eaten up capital...like..no other (business)
User currently offlinesxf24 From United States of America, joined Aug 2007, 1261 posts, RR: 0
Reply 44, posted (1 year 7 months 1 week 6 days 7 hours ago) and read 8949 times:

Quoting art (Reply 30):
I take your point that changing the interior to all Y would be expensive. Why not just keep the existing high density seat layout used by one of the current operators, have a standard service level throughout the aircraft (meals, cutlery etc) but offer J seats inherited at a premium? Take out F seats and do something with the space created?

This rarely pencils out long-term for an airline, since you're increasing the gap between CASK and RASK.

Quoting brons2 (Reply 34):
What if the secondary market chooses to use the seating config as-is?

I think your assessment is premature.

I talk to airlines about issues like this on a regular basis. Airlines that operate large, mid-life aircraft generally have an interest in having configurations, amenities, and brands that align with the rest of their fleets. With the A380, this proposition is very expensive for lessors and/or existing operators.

Quoting KC135TopBoom (Reply 37):
Some second hand A-380s may find a new home as P2Fs or even a P2C (pax to combi). A P2C conversion should have no problem if it is configuered as all cargo on the main deck and all pax on the upper deck.

The A380 is not a viable freighter.


User currently offlineStitch From United States of America, joined Jul 2005, 30907 posts, RR: 87
Reply 45, posted (1 year 7 months 1 week 6 days 7 hours ago) and read 8784 times:
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Quoting sxf24 (Reply 44):
The A380 is not a viable freighter.

I'm inclined to believe it is not a viable general-cargo freighter, but it might have a role in express cargo.

I say "might" knowing full well 5X wanted it for express cargo purposes, but I believe Jet A is more expensive in January of 2013 than it was back in January of 2001. So the economics of operating the type as an express carrier may no longer look as favorable. FX also has the 777F now, and that plane was not on offer back in 2001.


User currently offlinezotan From United States of America, joined Jan 2005, 609 posts, RR: 0
Reply 46, posted (1 year 7 months 1 week 6 days 6 hours ago) and read 8005 times:

I work in leasing.

It's costly for airlines to return aircraft. Especially for ones as large as the A380. And's its very difficult for lessors to re-place aircraft as large as the A380 because the market is so small. So I would be very surprised if EK actually returned their early A380s. Most likely they will just extend or buy through a direct purchase or finance lease.


User currently offlinezotan From United States of America, joined Jan 2005, 609 posts, RR: 0
Reply 47, posted (1 year 7 months 1 week 6 days 6 hours ago) and read 7936 times:

Quoting bongodog1964 (Reply 39):
One huge influence on the life of airliners is inflation.

Inflation does not really matter in this equation since ticket prices would be going up as well. So, in fact, inflation has very little impact on the life of commercial airlines.

Currency exchange rates is another story though ..


User currently offlinelhcvg From United States of America, joined May 2009, 1556 posts, RR: 1
Reply 48, posted (1 year 7 months 1 week 6 days 4 hours ago) and read 6938 times:

Quoting Burkhard (Reply 42):
An airline like Transaero that operates 747-300 still will take a deep look for sure.

I think that's an excellent point! At the right price, a carrier like that may well be interested in a used EK 380. Granted, we might be talking the above example of an EXTREMELY low lease rate, but that's not out of the question given the inherently limited market for a secondhand, 1st-run, 380 even if it has "low miles".


User currently offlineJAAlbert From United States of America, joined Jan 2006, 1583 posts, RR: 1
Reply 49, posted (1 year 7 months 1 week 6 days 3 hours ago) and read 6230 times:

Quoting zotan (Reply 46):
It's costly for airlines to return aircraft.

Interesting! Can you share with us the sort of expenses an airline incurs in returning a leased aircraft? How much $$ are we talking about?


User currently offlinelhcvg From United States of America, joined May 2009, 1556 posts, RR: 1
Reply 50, posted (1 year 7 months 1 week 6 days 2 hours ago) and read 5757 times:

Quoting JAAlbert (Reply 49):
Interesting! Can you share with us the sort of expenses an airline incurs in returning a leased aircraft? How much $$ are we talking about?

I think a big part is what was mentioned above about how they don't really intend for you to ever turn it in. In other words, it's not exactly like a Camry where you bring it back to Joe's Toyota after x months and swap for your shiney new one, then they sell or crush that Camry. A plane may have substantially reduced value (take the pessimistic view of this A380 discussion for instance), to the point where they have a really tough time moving it at any kind of attractive price. OTOH, you can pretty much always sell that Camry for a few grand and be ok - maybe you don't end up making any more than a low KBB value, but it's a few bucks. Another issue is, just WHAT exactly do you do with a 380 that you can't move (that much ramp space anywhere but a junkyard might be pretty pricey after a few months).

That's not very technical and may not hit all the points, but I think those are a few of the obstacles.


User currently offlineastuteman From United Kingdom, joined Jan 2005, 10008 posts, RR: 96
Reply 51, posted (1 year 7 months 1 week 5 days 22 hours ago) and read 3818 times:
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Quoting sxf24 (Reply 44):
The A380 is not a viable freighter.

Can't beat having an expert put us right with such conviction.........  
It is of course an opinion, not a fact, as it is portrayed.

FX at one time for certain saw up to 200 A380F's flying in 20 years, mostly P2F's, and went on record as such...

Maybe as Stitch points out things have moved on since then.
From my seat though, none of the things he points out (price of fuel, availability of the 777F) appear to dent the A380's case as a package freighter - certainly as FEDEX saw it back when the comment was made.

I'm not nearly as convinced as you seem to be that the case for an A380 P2F conversion is "not viable".

Rgds


User currently offlinePanHAM From Germany, joined May 2005, 9330 posts, RR: 29
Reply 52, posted (1 year 7 months 1 week 5 days 20 hours ago) and read 3258 times:

Quoting sxf24 (Reply 44):
The A380 is not a viable freighter.

May be the A380-900 will be. They sill would have to have answers on the equipment for loading the upper deck
The present high loaders can handle all types and are available at all major airports, the A380 would have miuch less flexibility.

As to the conversions, the question whether this is viable or not depends on the floor strenght of the upper deck.

Essentially, there will be 2 customers for such a conversion and that may simply not be enough to justify this.



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User currently offlineKC135TopBoom From United States of America, joined Jan 2005, 12138 posts, RR: 51
Reply 53, posted (1 year 7 months 1 week 5 days 17 hours ago) and read 2984 times:

Quoting PanHAM (Reply 52):
Quoting sxf24 (Reply 44):The A380 is not a viable freighter.

May be the A380-900 will be.

We don't know if there will ever be an A-389, yet.

Quoting PanHAM (Reply 52):
They sill would have to have answers on the equipment for loading the upper deck
The present high loaders can handle all types and are available at all major airports, the A380 would have miuch less flexibility.

That's why I think a P2C configueration might be an option. But as Stitch pointed out, designing a fire surpression system for such a configueration might be difficult and expensive.


User currently offlineplanesmart From New Zealand, joined Dec 2004, 905 posts, RR: 0
Reply 54, posted (1 year 7 months 1 week 5 days 9 hours ago) and read 2542 times:

Are u confusing aircraft life cycles with finance life cycles?

Financing commercial aircraft, whether purchase or lease, is incredibly complex. For example, just because an airline purchases or leases say 10 identical aircraft at the same time, doesn't mean all 10 will have the same terms and conditions, or that in turn the leasing company will have financed them on the same terms and conditions.

With say a 10 year lease, the leasing company will be in talks with the leasee (which may not be the operator), operator, existing syndicates, prospective syndicates, buyers, leasees and operators at least 3 years before the lease expires. And this work might be duplicated (though smaller $'s), for engines, spares and major systems (for example the airframe may be leased from one syndicate, and the engine/s from another, or multiple others).

If not negotiated originally, the leasing company will try to arrange a standby lease (at lower cost), whereby the operator continues to use the aircraft, week to week, until a new owner or operator is contracted.

A huge part of an aircraft sale or lease is contingent on tax considerations, for all parties involved, including the treatment of leases, capital and operating losses, depreciation, and interest paid and earned.

However, a general rule of thumb, is well run, successful (term has to be used with care) airlines maintain modern fleets, just as surface and sea freight companies maintain modern vehicle and ship fleets respectively.

Also, don't overlook the manufacturer in the equation. Buybacks are commonplace, as controlling the supply of used aircraft influences new and used prices, just as vehicle manufacturers do with fleet sales, including to rental and leasing companies.

Back to the original question. Aircraft lifecycles may be reducing, again, not unlike vehicles & ships, driven by safety authorities, regulations, customer preferences and economics.


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