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LAXintl
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Aircraft Values, And Lease Pricing - Summer 2020

Tue Jul 14, 2020 3:49 pm

Since I received many requests, here is an update on commercial aircraft valuations and market lease rates. Obviously global fleet groundings due COVID-19 will have an impact and early signs can be seen in the below numbers which are current as of May 2020.

List shows estimated current market value (in USD) based on the oldest to newest airframes, along with sample monthly lease rates also based on oldest to newest airframes for common models.

Pax
A220-100 - $25.8 - 34.0M, $180-255,000
A220-300 - $31.4 - 39.8M, $195-295,000
A319 – $7.0 - 35.7M, $60-280,000
A320 – $3.0 - 43.7M, $45-310,000
A320NEO - $39.6 - 49.0M, $300-380,000
A321 – $10.9 - 51.2M, $130-370,000
A321NEO - $48.0 - 58.5M, $320-410,000
A330-200 – $12.7 - 70.0M, $125-600,000
A330-300 - $8.5 - 85.5M, $100-660,000
A350-900 - $101.0 - 155.0M, $650-1,150,000
A380 - $50.0 - 213.0M, $340-1,920,000
B737-700 - $7.5 - 33.5M, $95-280,000
B737-800 - $11.0 - 43.5M, $105-320,000
B737-900ER - $18.7 - 45.5M, $190-355,000
B737MAX8 - $46.5 -51.0M, $220,000-375,000
B767-300ER – $7.0 – 33.0M, $95-330,000
B777-200ER – $10.4 – 34.5M, $100-310,000
B777-300ER – $42.0 – 149.0M, $300-1,250,000
B787-8 - $66.0 - 119.0M, $530-950,000
B787-9 - $95.0 - 146.0, $705-1,110,000
CRJ700 – $5.0 – 19.0M, $70-175,000
CRJ900 - $6.0 – 23.5M, $80-200,000
Q400 – $4.9 – 19.9M, $68-185,000
EMB175 – $9.0 – 27.0M, $100-215,000
EMB190 – $9.9 – 30.5M, $110-205,000
ATR-72 – $3.4 – 21.3M, $60-185,000

Freighter
A330F – $49.0 - 77.0M, $350-640,000
B744F – $12.0 - 30.0M, $180-400,000
B748F – $92.0 - 173.0M, $750-1,400,000
B763F – $18.0 - 74.0M, $230-550,000
B777F – $82.5 - 152.0M, $700-1,150,000


The information is derived from actual transactions along with market valuations and is current as of May 2020

Sources: IBA/ISTAT


=


Some observations:

> Brand new type like A220 has seen decline in their market value - possibly due small fleet size/customer base
> Larger narrowbody market models like Airbus A320 and Boeing 737NG families surprisingly held up well. Suspect reported weakness has not yet made it broadly into transactions and MAX delays helping prop things up.
> A330 family and 777-200ER saw significant valuation decline
> 767-300ER actually saw rising value likely due freighter feedstock demand
> 787, in particular, -9 maintaining strong valuation
> Large RJs holding up, though smaller variant values continue to decline
> Freighters held up well
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MoKa777
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Tue Jul 14, 2020 5:04 pm

Yay! It's here!

Thank you LAXintl!
Never be proud. Always be grateful.
 
MIflyer12
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Tue Jul 14, 2020 5:14 pm

LAXintl wrote:
> Larger narrowbody market models like Airbus A320 and Boeing 737NG families surprisingly held up well. Suspect reported weakness has not yet made it broadly into transactions...


Maybe. They are also very broad markets with many operators worldwide and lots of transactions (in a typical time). These should be much more efficient markets - not sellers chasing few potential buyers.
 
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lightsaber
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Tue Jul 14, 2020 5:18 pm

Link to prior thread:

viewtopic.php?f=3&t=1440991

I filtered out odd entries where the difference in engine time since overhaul looks to be swinging values about, always on the low value: A319/320, B73G, 738 and 767-300ER.

For example, with the 767-300ER if a Pratt example sold with poor state engines, that could be last times $3.2 million while if the cheapest airframes had good condition GE CF6 engines, those engines alone could add $4 million to the transaction.

I suspect the rise in A319 and A320 values were that no one is buying scrap airframes if the engines both need overhaul in today's market. I speculate the cheapest A319/320/B73G/738 are not selling as the business case to overhaul and rent out engines as spares probably has issues today.

Overall, after select filtering, it is about a 7% drop in values for pax frames. I admit, less of a drop than I expected.

The most modern widebodies did well. Every other widebody looks to be freighter stock.

I speculate the RJ market is being heavily impacted by the value of green time CF-34-8 engines.

The Q400 market took an unsuprising hit.

Lightsaber
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FlyingElvii
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Tue Jul 14, 2020 5:53 pm

Interested to see what the CRJ-200/E145's are going for right now. With all of the end-of-life spares out there and the pilot shortage over, there could be some interesting opportunities out there, especially for charter.
 
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Tue Jul 14, 2020 6:01 pm

LAXintl wrote:
Since I received many requests, here is an update on commercial aircraft valuations and market lease rates. Obviously global fleet groundings due COVID-19 will have an impact and early signs can be seen in the below numbers which are current as of May 2020.

List shows estimated current market value (in USD) based on the oldest to newest airframes, along with sample monthly lease rates also based on oldest to newest airframes for common models.

Pax
A220-100 - $25.8 - 34.0M, $180-255,000
A220-300 - $31.4 - 39.8M, $195-295,000
A319 – $7.0 - 35.7M, $60-280,000
A320 – $3.0 - 43.7M, $45-310,000
A320NEO - $39.6 - 49.0M, $300-380,000
A321 – $10.9 - 51.2M, $130-370,000
A321NEO - $48.0 - 58.5M, $320-410,000
A330-200 – $12.7 - 70.0M, $125-600,000
A330-300 - $8.5 - 85.5M, $100-660,000
A350-900 - $101.0 - 155.0M, $650-1,150,000
A380 - $50.0 - 213.0M, $340-1,920,000
B737-700 - $7.5 - 33.5M, $95-280,000
B737-800 - $11.0 - 43.5M, $105-320,000
B737-900ER - $18.7 - 45.5M, $190-355,000
B737MAX8 - $46.5 -51.0M, $220,000-375,000
B767-300ER – $7.0 – 33.0M, $95-330,000
B777-200ER – $10.4 – 34.5M, $100-310,000
B777-300ER – $42.0 – 149.0M, $300-1,250,000
B787-8 - $66.0 - 119.0M, $530-950,000
B787-9 - $95.0 - 146.0, $705-1,110,000
CRJ700 – $5.0 – 19.0M, $70-175,000
CRJ900 - $6.0 – 23.5M, $80-200,000
Q400 – $4.9 – 19.9M, $68-185,000
EMB175 – $9.0 – 27.0M, $100-215,000
EMB190 – $9.9 – 30.5M, $110-205,000
ATR-72 – $3.4 – 21.3M, $60-185,000

Freighter
A330F – $49.0 - 77.0M, $350-640,000
B744F – $12.0 - 30.0M, $180-400,000
B748F – $92.0 - 173.0M, $750-1,400,000
B763F – $18.0 - 74.0M, $230-550,000
B777F – $82.5 - 152.0M, $700-1,150,000


The information is derived from actual transactions along with market valuations and is current as of May 2020

Sources: IBA/ISTAT


=


Some observations:

> Brand new type like A220 has seen decline in their market value - possibly due small fleet size/customer base
> Larger narrowbody market models like Airbus A320 and Boeing 737NG families surprisingly held up well. Suspect reported weakness has not yet made it broadly into transactions and MAX delays helping prop things up.
> A330 family and 777-200ER saw significant valuation decline
> 767-300ER actually saw rising value likely due freighter feedstock demand
> 787, in particular, -9 maintaining strong valuation
> Large RJs holding up, though smaller variant values continue to decline
> Freighters held up well



While your yearly threads are great, current valuations are way too optimistic. Especially the top end figures seem to reflect ask prices, not bid prices or a reasonable trading price.
The spread is huge right now and barely any transactions are occurring because there is no demand.
Even lessors are scrambling for an edge.

Aircraft are liabilities right now, not assets.

If you have a brand new A320neo and you are in need of cash, 20-30 million would be a reasonable pricing range, nobody is going to give you 40 millions for one.
 
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UPlog
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Tue Jul 14, 2020 8:48 pm

Thank you. Always find these threads interesting.

No surprise about freighters. Utilization is up, and frames being pulled from storage even.
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Tue Jul 14, 2020 9:40 pm

Waterbomber2 wrote:
LAXintl wrote:
Since I received many requests, here is an update on commercial aircraft valuations and market lease rates. Obviously global fleet groundings due COVID-19 will have an impact and early signs can be seen in the below numbers which are current as of May 2020.

List shows estimated current market value (in USD) based on the oldest to newest airframes, along with sample monthly lease rates also based on oldest to newest airframes for common models.

Pax
A220-100 - $25.8 - 34.0M, $180-255,000
A220-300 - $31.4 - 39.8M, $195-295,000
A319 – $7.0 - 35.7M, $60-280,000
A320 – $3.0 - 43.7M, $45-310,000
A320NEO - $39.6 - 49.0M, $300-380,000
A321 – $10.9 - 51.2M, $130-370,000
A321NEO - $48.0 - 58.5M, $320-410,000
A330-200 – $12.7 - 70.0M, $125-600,000
A330-300 - $8.5 - 85.5M, $100-660,000
A350-900 - $101.0 - 155.0M, $650-1,150,000
A380 - $50.0 - 213.0M, $340-1,920,000
B737-700 - $7.5 - 33.5M, $95-280,000
B737-800 - $11.0 - 43.5M, $105-320,000
B737-900ER - $18.7 - 45.5M, $190-355,000
B737MAX8 - $46.5 -51.0M, $220,000-375,000
B767-300ER – $7.0 – 33.0M, $95-330,000
B777-200ER – $10.4 – 34.5M, $100-310,000
B777-300ER – $42.0 – 149.0M, $300-1,250,000
B787-8 - $66.0 - 119.0M, $530-950,000
B787-9 - $95.0 - 146.0, $705-1,110,000
CRJ700 – $5.0 – 19.0M, $70-175,000
CRJ900 - $6.0 – 23.5M, $80-200,000
Q400 – $4.9 – 19.9M, $68-185,000
EMB175 – $9.0 – 27.0M, $100-215,000
EMB190 – $9.9 – 30.5M, $110-205,000
ATR-72 – $3.4 – 21.3M, $60-185,000

Freighter
A330F – $49.0 - 77.0M, $350-640,000
B744F – $12.0 - 30.0M, $180-400,000
B748F – $92.0 - 173.0M, $750-1,400,000
B763F – $18.0 - 74.0M, $230-550,000
B777F – $82.5 - 152.0M, $700-1,150,000


The information is derived from actual transactions along with market valuations and is current as of May 2020

Sources: IBA/ISTAT


=


Some observations:

> Brand new type like A220 has seen decline in their market value - possibly due small fleet size/customer base
> Larger narrowbody market models like Airbus A320 and Boeing 737NG families surprisingly held up well. Suspect reported weakness has not yet made it broadly into transactions and MAX delays helping prop things up.
> A330 family and 777-200ER saw significant valuation decline
> 767-300ER actually saw rising value likely due freighter feedstock demand
> 787, in particular, -9 maintaining strong valuation
> Large RJs holding up, though smaller variant values continue to decline
> Freighters held up well



While your yearly threads are great, current valuations are way too optimistic. Especially the top end figures seem to reflect ask prices, not bid prices or a reasonable trading price.
The spread is huge right now and barely any transactions are occurring because there is no demand.
Even lessors are scrambling for an edge.

Aircraft are liabilities right now, not assets.

If you have a brand new A320neo and you are in need of cash, 20-30 million would be a reasonable pricing range, nobody is going to give you 40 millions for one.

Agree Waterbomber2. If you subtract transactions contracted in previous months / years falling in May 2020, there would be no meaningful new transactions.

Even new aircraft for delivery in May on, are having milestone payments forgiven / discounted, deferred and retrospective credits increased. New 'real' prices underpin the used market.

If creditworthy, you can lease a used aircraft for half these rates or less, after incorporating cash incentives, lease holidays, no final balloon payment. The most popular used aircraft lease offering in June was 'fly by the hour', which reduces effective lease rates and residual values.
 
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lightsaber
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Wed Jul 15, 2020 1:58 pm

Waterbomber2 wrote:
LAXintl wrote:
Since I received many requests, here is an update on commercial aircraft valuations and market lease rates. Obviously global fleet groundings due COVID-19 will have an impact and early signs can be seen in the below numbers which are current as of May 2020.

List shows estimated current market value (in USD) based on the oldest to newest airframes, along with sample monthly lease rates also based on oldest to newest airframes for common models.

Pax
A220-100 - $25.8 - 34.0M, $180-255,000
A220-300 - $31.4 - 39.8M, $195-295,000
A319 – $7.0 - 35.7M, $60-280,000
A320 – $3.0 - 43.7M, $45-310,000
A320NEO - $39.6 - 49.0M, $300-380,000
A321 – $10.9 - 51.2M, $130-370,000
A321NEO - $48.0 - 58.5M, $320-410,000
A330-200 – $12.7 - 70.0M, $125-600,000
A330-300 - $8.5 - 85.5M, $100-660,000
A350-900 - $101.0 - 155.0M, $650-1,150,000
A380 - $50.0 - 213.0M, $340-1,920,000
B737-700 - $7.5 - 33.5M, $95-280,000
B737-800 - $11.0 - 43.5M, $105-320,000
B737-900ER - $18.7 - 45.5M, $190-355,000
B737MAX8 - $46.5 -51.0M, $220,000-375,000
B767-300ER – $7.0 – 33.0M, $95-330,000
B777-200ER – $10.4 – 34.5M, $100-310,000
B777-300ER – $42.0 – 149.0M, $300-1,250,000
B787-8 - $66.0 - 119.0M, $530-950,000
B787-9 - $95.0 - 146.0, $705-1,110,000
CRJ700 – $5.0 – 19.0M, $70-175,000
CRJ900 - $6.0 – 23.5M, $80-200,000
Q400 – $4.9 – 19.9M, $68-185,000
EMB175 – $9.0 – 27.0M, $100-215,000
EMB190 – $9.9 – 30.5M, $110-205,000
ATR-72 – $3.4 – 21.3M, $60-185,000

Freighter
A330F – $49.0 - 77.0M, $350-640,000
B744F – $12.0 - 30.0M, $180-400,000
B748F – $92.0 - 173.0M, $750-1,400,000
B763F – $18.0 - 74.0M, $230-550,000
B777F – $82.5 - 152.0M, $700-1,150,000


The information is derived from actual transactions along with market valuations and is current as of May 2020

Sources: IBA/ISTAT


=


Some observations:

> Brand new type like A220 has seen decline in their market value - possibly due small fleet size/customer base
> Larger narrowbody market models like Airbus A320 and Boeing 737NG families surprisingly held up well. Suspect reported weakness has not yet made it broadly into transactions and MAX delays helping prop things up.
> A330 family and 777-200ER saw significant valuation decline
> 767-300ER actually saw rising value likely due freighter feedstock demand
> 787, in particular, -9 maintaining strong valuation
> Large RJs holding up, though smaller variant values continue to decline
> Freighters held up well



While your yearly threads are great, current valuations are way too optimistic. Especially the top end figures seem to reflect ask prices, not bid prices or a reasonable trading price.
The spread is huge right now and barely any transactions are occurring because there is no demand.
Even lessors are scrambling for an edge.

Aircraft are liabilities right now, not assets.

If you have a brand new A320neo and you are in need of cash, 20-30 million would be a reasonable pricing range, nobody is going to give you 40 millions for one.

The top end of the range is for previously agreed dale/leaseback transactions on new aircraft. So for purposes of this thread, they are accurate. Usually deals are negotiated ahead of time. As long as the airline kept within its provisions, the leasing company is obligated to continue with prior terms. Usually helping pump cash into the airline.

We can agree few aircraft are trading. This is not a liquid market. Normally, the estimated sales price of an aircraft is within a few percent of the actual sales price on high volume airframes. In the prior thread, posted data from Leeham showing down further. I would guess many transactions were pre-negotiated deals with higher value aircraft.

There also used to be as we Americans say a "junker" business of buying the worst 737 and A320 and parting them out. As there is zero demand for engine parts today, only engines with significant green time have value. So no one should be buying the lowest value aircraft as there is no busy case in this market.

Lightsaber
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LAXintl
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Wed Jul 15, 2020 3:32 pm

Lets not forget that maintaining higher book values is something both lessors and especially airlines want.

If lower market values were to remain for long periods then airlines would be in even deeper troubles as they must mark to market their assets which in todays world means balance sheet troubles where fleets are pledged as collateral security, and also potentially set off covenants tied to fleet values. Could be nasty domino effect, likely everyone including banks don't want to see.

So while today's true market value might not match the book values, if there are very few transactions, companies will likely ignore them and stick with the established book values hoping for forward stability.
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Waterbomber2
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Wed Jul 15, 2020 6:50 pm

LAXintl wrote:
Lets not forget that maintaining higher book values is something both lessors and especially airlines want.

If lower market values were to remain for long periods then airlines would be in even deeper troubles as they must mark to market their assets which in todays world means balance sheet troubles where fleets are pledged as collateral security, and also potentially set off covenants tied to fleet values. Could be nasty domino effect, likely everyone including banks don't want to see.

So while today's true market value might not match the book values, if there are very few transactions, companies will likely ignore them and stick with the established book values hoping for forward stability.



Companies have a duty to mark their assets accurately to reflect their fair market value, so that investors and debtors can accurately determine the company's fair equity value or the value of collateral assets. Manipulating the book value of assets is fraud.

If asset values plummet and the company is worth less than zero, they need to file for bankruptcy.
Otherwise, there would be no such thing as bankruptcies.

A situation of financial distress is no reason to allow fraud.
When things turn bad, companies go bankrupt, that's how it is and has always been.
The good thing is that when you play the game according to the rules, economies display resilience and come back.
If you don't allow economies to function properly, they will also lose their resilience and fail to come back.
 
smartplane
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Wed Jul 15, 2020 10:25 pm

lightsaber wrote:
The top end of the range is for previously agreed dale/leaseback transactions on new aircraft. So for purposes of this thread, they are accurate. Usually deals are negotiated ahead of time. As long as the airline kept within its provisions, the leasing company is obligated to continue with prior terms. Usually helping pump cash into the airline.

We can agree few aircraft are trading. This is not a liquid market. Normally, the estimated sales price of an aircraft is within a few percent of the actual sales price on high volume airframes. In the prior thread, posted data from Leeham showing down further. I would guess many transactions were pre-negotiated deals with higher value aircraft.

Even previously agreed sale / leaseback transactions on new aircraft are being re-priced, payment holidays, terms extended, payments discounted / forgiven, OEM-related financiers taking out post-shipment finance at zero, retrospective credits being topped up and used to make delivery payments.

Customers still taking delivery, as scheduled, as priced, are definitely keepers.
 
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Thu Jul 16, 2020 3:52 pm

These numbers were the most optimistic I've read. This link from CAPA aviation, the most pessimistic:

https://centreforaviation.com/analysis/ ... met-530864

"A significant proportion of leased aircraft are operated by smaller airlines, with smaller balance sheets, who may be struggling more in the current crisis.

In addition, as even the bigger and stronger airlines seek to cut capacity and costs, non-renewal and even cancellation of leases has been a means to achieving these aims."

I have trouble believing numbers aren't bad with about half the aircraft parked. At this time, the market hasn't dropped to the clearing price.

There is the law of supply and demand and a large marketplace here.

At this point, it is not sellers taking bids, but rather buyers. If an airline presents an interest to say buy 20 narrowbody aircraft, they will solicit bids.

Take Allegiant, I see them growing early. If the leasing companies getting the massive returns from Indigo (120 over two years), GoAir (15 CEO to leave fleet), JetBlue, or any other V2500 powered A320CEO would have to make a nice offer to switch from CFM engines.

Or in the 737 market, SpiceJet is returning their short term leased 737s.

Aircraft on the ground do not make money for anyone. With the huge deluge of MAXes coming and Airbus maintaining, in my opinion, too high a production rate, the prices must fall to clear the market.

Widebodies will be worse. With the costs savings of new types, old widebodies drop to the value they compete (which can be less than scrap value) or freighter stock. But as excited as I am by freighter conversions, there is limited demand.

Due to the high cost to hold onto flyable aircraft, some fraction must accept reality and sell.

Once prior contracts are completed, prices will drop. Unfortunately, it is too late for a "V" recovery.

I agree with smartplane, previously negotiated deals are being renegotiated.

This isn't the prisoner's delima. Prices must drop until there is a volume of transactions. Sellers withholding sales means buyers cannot buy.

With probably 4,000 to 5,000 aircraft scrapped. Scrappers won't bid very high either (new unbalanced supply/demand) and leasing companies always leased, when possible, as that was far higher value than scrapping.

Unfortunately, interesting times.

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lightsaber
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Fri Jul 17, 2020 1:26 am

A little more on why I think aircraft are being over produced:
https://aviationweek.com/ad-week/suppli ... -19-crisis



“If 2023 really is the year we’d get back to 2019 levels, that means for the next couple of years, no aircraft are needed for growth,” Epstein said during an Aviation Week webinar in June. “With 60% of new aircraft deliveries traditionally going to meet industry growth, now all that is needed is the roughly 40% for replacement.”

“We’re looking at a couple of years’ worth of needing zero production,” Pastushan said.



When we have so much discussion here for replacement, when so much of aircraft production is for growth Unfortunately, until 2024, it looks like all production is replacement and until perhaps 2022, nothing is required, even with my pessimistic retirement schedule. There is just too much surplus today.

So I speculate aircraft values will drop hard until mid-2022.

Lightsaber
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Waterbomber2
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Wed Aug 19, 2020 2:11 pm

In my opinion, it's a mistake for OEM's to reduce the production rate.
Now is an opportunity to move over from a built-to-order production system to an off-the-shelf system.

Having huge backlogs that go unfulfilled for years and not being able to deliver aircraft as soon as required carries a missed opportunity cost.

OEM's have huge fixed costs and they need to keep the supply chain moving or risk losing suppliers. Not today or tomorrow perhaps, but this isn't over by January. We're looking at a multi-year crisis that will also drag down most blue chip companies.

If I were at the head of Airbus and Boeing, I would be building aircraft at a high rate, with borrowed capital.
As soon as new aircraft will be in demand again, OEM's would want to have the aircraft almost ready to go. This would give them a leg up on the competitor who would still have to start building them. White tails could then command a premium over aircraft to be delivered X years later.
What I would also do as Airbus and Boeing is to build inventory of aircraft being liquidated at firesale prices. This sustains the price in used markets.

Will they do either of these?
Clearly no, but then again, we're talking about amateur-run corporations that begged to be saved after failing to build reserves.
 
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Tue Aug 25, 2020 11:44 am

Leeham has updated a partial narrowbody survey. I say partial as they have the A321, but not A320 and A319 (which I suspect is doing as bad as the 737-700).
https://leehamnews.com/2020/08/25/hotr- ... -aircraft/
One interesting tidbit:
Plans at Airbus and Boeing through 2023 are too high relative to deliveries,” Bernstein writes. “This is particularly an issue for Airbus, which intends to produce 40 A320neos per month through 2021. Airbus was able to deliver those in July, but we do not believe that rate can be sustained. It is an issue for Boeing and Airbus on widebodies, who are already delivering far fewer airplanes than they are producing.”

I believe the overproduction will increase the surplus aircraft. Normal supply and demand will kick in and overproduction of the A320NEO family will force more returns of A320CEO. In particular at Easyjet, Indigo, GoAir, Avianca, Azil, and Cebu Pacific. I also believe the MAX return to service will impact the market.
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MIflyer12
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Tue Aug 25, 2020 11:50 am

lightsaber wrote:
I believe the overproduction will increase the surplus aircraft. Normal supply and demand will kick in and overproduction of the A320NEO family will force more returns of A320CEO. In particular at Easyjet, Indigo, GoAir, Avianca, Azil, and Cebu Pacific. I also believe the MAX return to service will impact the market.


Do you have idea any of the number of leased A319/320 coming due within the next 24 months? Add to that numbers tossed back on the market due to bankruptcy restructurings/liquidations.
 
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Tue Aug 25, 2020 1:32 pm

MIflyer12 wrote:
lightsaber wrote:
I believe the overproduction will increase the surplus aircraft. Normal supply and demand will kick in and overproduction of the A320NEO family will force more returns of A320CEO. In particular at Easyjet, Indigo, GoAir, Avianca, Azil, and Cebu Pacific. I also believe the MAX return to service will impact the market.


Do you have idea any of the number of leased A319/320 coming due within the next 24 months? Add to that numbers tossed back on the market due to bankruptcy restructurings/liquidations.

In the last thread, we discussed this:
viewtopic.php?f=3&t=1440991&start=50
I do not have a total. Easyjet is reducing their CEO fleet, quantity unknown.
Indigo will remove all 123 A320CEO in 24 months.
GoAir will remove their 12.

But then we have Avianca and others.
A319CEOs were trading just above scrap before. With Easyjet reducing their fleet, I would expect a drop in scrap values to clear the market.

Allegiant has mentioned going to an all 186 seat A320 fleet, no time frame given. This means eventual A319 and older 177 seat A320 retirement. They aren't setting up new contracts yet.

In the prior thread I posted Leeham links noting A320 CEO values dropped about 20%.

This isn't just A320s naturally. Widebodies are in far worse shape, in particular large widebodies and the MAX return to service will push down 737NG pricing.

I couldn't tell you how many A319 or A320s come off lease in 24 months. In a normal market, there is so much growth, 60% of new aircraft are for growth and 40% for replacement.

I personally do not expect any growth above 2019 levels before 2022 for narrowbody aircraft, two more years for widebodies. In other words, all 2020 and 2021 production is pretty much surplus. The A320NEO at 40/month will just suck up airline cash as by end of 2021, there just won't be 800 narrowbodies needing retirement. When adding about 800 MAX (Top of the head estimate, I'm sure someone here has calculated more precisely), that is a lot of parked 737NG and A320CEOs looking for new opperators. My back of the envelope math says about a thousand narrowbody aircraft surplus start 2022; many more over the next 8 months.

If we don't have a partial return (say > 80% of 2019) to normal by June 2021, I must be more bearish as that means we lost the springback in the economy and start from a brutally lower normal where growth is 3% to 8% from that new low.

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Re: Aircraft Values, And Lease Pricing - Summer 2020

Wed Aug 26, 2020 8:10 pm

Update by Leeham on 5 year old narrowbody values:
https://leehamnews.com/2020/08/25/hotr- ... -aircraft/

I look at data for a living. A big part of my job is seeing if the data is playing a trick on the team. This data from Leeham looks to be too synthetic, in other words, no transactions or transactions only at predetermined values.

The A321 sticks out as an outlier. In no way should an A321 be holding up value better than either a 739 or 738 if the lease rate is lower. This implies people are artificially keeping values or lease rates high (different for different leasors).

This tells me the market hasn't found ground. (Severely over-supplied). :cry2:

I LOVE working new commercial aviation design, analysis, and testing. This tells me, work other projects for 5+ years... sniffle.

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dstblj52
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Thu Aug 27, 2020 2:50 am

lightsaber wrote:
Update by Leeham on 5 year old narrowbody values:
https://leehamnews.com/2020/08/25/hotr- ... -aircraft/

I look at data for a living. A big part of my job is seeing if the data is playing a trick on the team. This data from Leeham looks to be too synthetic, in other words, no transactions or transactions only at predetermined values.

The A321 sticks out as an outlier. In no way should an A321 be holding up value better than either a 739 or 738 if the lease rate is lower. This implies people are artificially keeping values or lease rates high (different for different leasors).

This tells me the market hasn't found ground. (Severely over-supplied). :cry2:

I LOVE working new commercial aviation design, analysis, and testing. This tells me, work other projects for 5+ years... sniffle.

Lightsaber

I have to say I wonder if that going to be the solution in us to the small narrowbody feeder fleet cheap used low utilization A319's or 737-700 easy to acquire and handle due to the vast fleets of similar jets you can fly them hard in the high season and its reduces the amount of overpaying you have to give pilots for the fleet to meet minimum hours (delta has experienced this on the md89/717 fleets). whereas just rolling the average hours per month from say 85/75 might cover for parking the fleet
 
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Tue Sep 15, 2020 10:10 pm

dstblj52 wrote:
lightsaber wrote:
Update by Leeham on 5 year old narrowbody values:
https://leehamnews.com/2020/08/25/hotr- ... -aircraft/

I look at data for a living. A big part of my job is seeing if the data is playing a trick on the team. This data from Leeham looks to be too synthetic, in other words, no transactions or transactions only at predetermined values.

The A321 sticks out as an outlier. In no way should an A321 be holding up value better than either a 739 or 738 if the lease rate is lower. This implies people are artificially keeping values or lease rates high (different for different leasors).

This tells me the market hasn't found ground. (Severely over-supplied). :cry2:

I LOVE working new commercial aviation design, analysis, and testing. This tells me, work other projects for 5+ years... sniffle.

Lightsaber

I have to say I wonder if that going to be the solution in us to the small narrowbody feeder fleet cheap used low utilization A319's or 737-700 easy to acquire and handle due to the vast fleets of similar jets you can fly them hard in the high season and its reduces the amount of overpaying you have to give pilots for the fleet to meet minimum hours (delta has experienced this on the md89/717 fleets). whereas just rolling the average hours per month from say 85/75 might cover for parking the fleet

Delta, United, and American need a pretty large low utilization fleet for feed. Once premium traffic returns, if the A319s, A329CEOs, or 73G/738 even MAX are cheap enough, they'll buy.

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MDGLongBeach
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Tue Sep 15, 2020 10:29 pm

Probably a stupid question, but i'm genuinely curious, how has Delta retiring the last large fleet of MD80s affected the value of the MD80 in the short term? I'd imagine with the large influx of airworthy aircraft into the parts market, the price would temporarily increase until maintenance providers completely stop supporting the aircraft as only a few airlines remain in operating the aircraft in very small numbers.
 
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Wed Sep 16, 2020 12:13 pm

Waterbomber2 wrote:
In my opinion, it's a mistake for OEM's to reduce the production rate.


In a way, you are right. We've seen few past years a race, where it wasn't about A vs B race, or price per unit, but about delivery time.

If A321 would be available in 6 months instead of 6-8 years, it would be in much better market share than it is now. Same with B vs A, of course.

Still, there's price to pay. As an entity (say lessor), you'd have to:
1. Maintain your current ops - on a much worse conditions, where everyone tries to save money on your frames; and
2. Make an advance investment, worth approx half the production (probably more, since some frames will be NTU) and spend money on them.

Even if we assume one family, and 30 planes a month for production cost, it's more or less a billion monthly. And probably 36 months until you get the effect.

You know someone with 35 billion spare cash? There could be one or two companies out there with such a spare, but certainly not aviation. Heck, that's twice the cost of developing new aircraft. Brand new, from scratch.

On the other hand, how much is that valued by companies on the other end? I can imagine someone paying 10% extra for earlier option. Max, it's probably less than that, with so many lease options/older frames available.

So, you would need zillions investment to gain some 3% a year from what you would earn otherwise. On cost of increasing the chance you'll never make it to the 2023-2024.

Sorry, don't see it coming. Even if there was a "standard" plane with slight adjustment to every customer, so it can be all fitted on already built airplane (which is not the case, I think).

Cheers,
Adam

PS. There's also problem on the other end. Ahead orders allow to plan production, which is important for suppliers (you buy some elements a year or two ahead, to allow them to be produced). You increase risk rapidly moving to "ready frames" approach. The problems Boeing encountered with 737MAX grounding would go to new extreme level.
Last edited by gloom on Wed Sep 16, 2020 12:17 pm, edited 1 time in total.
 
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Wed Sep 16, 2020 12:54 pm

We have another thread to discuss the production rates of aircraft. Feel free to discuss the impact on lease or resale pricing here:

viewtopic.php?f=3&t=1451221
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smartplane
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Wed Sep 16, 2020 7:56 pm

gloom wrote:
Waterbomber2 wrote:
In my opinion, it's a mistake for OEM's to reduce the production rate.


In a way, you are right. We've seen few past years a race, where it wasn't about A vs B race, or price per unit, but about delivery time.

If A321 would be available in 6 months instead of 6-8 years, it would be in much better market share than it is now. Same with B vs A, of course.

Still, there's price to pay. As an entity (say lessor), you'd have to:
1. Maintain your current ops - on a much worse conditions, where everyone tries to save money on your frames; and
2. Make an advance investment, worth approx half the production (probably more, since some frames will be NTU) and spend money on them.

Even if we assume one family, and 30 planes a month for production cost, it's more or less a billion monthly. And probably 36 months until you get the effect.

You know someone with 35 billion spare cash? There could be one or two companies out there with such a spare, but certainly not aviation. Heck, that's twice the cost of developing new aircraft. Brand new, from scratch.

On the other hand, how much is that valued by companies on the other end? I can imagine someone paying 10% extra for earlier option. Max, it's probably less than that, with so many lease options/older frames available.

So, you would need zillions investment to gain some 3% a year from what you would earn otherwise. On cost of increasing the chance you'll never make it to the 2023-2024.

Sorry, don't see it coming. Even if there was a "standard" plane with slight adjustment to every customer, so it can be all fitted on already built airplane (which is not the case, I think).

Cheers,
Adam

PS. There's also problem on the other end. Ahead orders allow to plan production, which is important for suppliers (you buy some elements a year or two ahead, to allow them to be produced). You increase risk rapidly moving to "ready frames" approach. The problems Boeing encountered with 737MAX grounding would go to new extreme level.

Lessors played a big part in helping to even out production rates, placing speculative orders for aircraft, both NB and A330.

In the 60's, 70's and first half of the 80's, the airlines themselves performed this role, placing speculative orders and options, which they on-sold profitably to other airlines.

In more recent years, the OEM's themselves (and related strategic / partly owned partners) have performed this role, especially for WB aircraft.

Do OEM's have the financial capacity to design, manufacture, sell and finance commercial aircraft, holding portfolios for longer, when asset life / values are eroding more quickly (nothing to do with durability)?

New and used WB values must pancake. A temporary buffer while customers complete acquisitions, with a high level of milestone payments already made, and / or take delivery to protect accumulated retrospective credits. And A & B have acted as lenders of last resort, to fund the balance of 'close to completion' aircraft, along with the engine OEM's.

WB margins have been overstated for a decade, which the OEM's haven't needed to face, because there has always been a bigger and better deal just around the corner. Now, instead of contingent retrospective credits being applied to new orders, they are being cashed in on no orders, so should be applied to the original order.
 
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Wed Sep 16, 2020 9:38 pm

MDGLongBeach wrote:
Probably a stupid question, but i'm genuinely curious, how has Delta retiring the last large fleet of MD80s affected the value of the MD80 in the short term? I'd imagine with the large influx of airworthy aircraft into the parts market, the price would temporarily increase until maintenance providers completely stop supporting the aircraft as only a few airlines remain in operating the aircraft in very small numbers.

I'm going to go with the fact that the aircraft were already worth essentially nothing, DL really only pulled ahead the MD88 retirement by a few months. They were all scheduled to be retired by December 2020 and DL was basically running the fleet on "fumes" the past two years with hording / scavaging parts, green-time engines, and basically the last large scale operator of the MD-80.
A few frames were destined to go on to other charter / on-demand operators but that I am sure is stalled out with the current state of the industry.
The airframes themselves may be airworthy, but critical rotable parts were becoming increasingly scare with remaining green time. DL was basically using all the last of it could.
The active fleet was actually a bit larger in early 2020 than anticipated back in 2018 when they started the fleet draw-down plan. With how strong demand was in 2019, projections for peak summer 2020, and A321NEO delays, DL ended up keeping about 6-10 extra MD88s in service into 2020.

All water under the bridge at this point.
 
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Tue Sep 22, 2020 2:50 pm

Leeham just released updated values for 5 year old widebody aircraft.

https://leehamnews.com/2020/09/22/hotr- ... ase-rates/

The main part if the market, for 5 year old used has dropped about 10% in value. Less desirable widebodies, even only 5 years old, are about a 20% drop in values. This is with very low demand. In other words, pent up supply.

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Re: Aircraft Values, And Lease Pricing - Summer 2020

Thu Apr 08, 2021 2:46 am

Is there an update to this thread I missed?
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Thu Apr 08, 2021 8:49 am

lightsaber wrote:
Is there an update to this thread I missed?


Lol I am in a cab just now and thought the same as I googled to see if the same was posted too as it has been a while since there was an update now that we are in Summer 2021 season.
 
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Re: Aircraft Values, And Lease Pricing - Summer 2020

Thu Apr 08, 2021 9:47 pm

Hi,
I am not sure it makes much sense to post anything at the moment, as the valuation data is always trailing by several months and its moving like a yo-yo. All it takes is one piece of news that a certain frame is being parked by some operator, and yesterdays price is no longer valid.

Really only frames holding good value on secondary market are the newest of new types along with freighter feedstock like 767-300s.

Anyhow here are a few tidbits.

Image
https://i.ibb.co/Wgq3RH5/narrowbodies.jpg
Image
https://i.ibb.co/jkc6JsS/widebodies.jpg
Image
https://i.ibb.co/m8tv8Nx/regional.jpg
Image
https://i.ibb.co/M7ybL7h/aircraft-rating.jpg
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