Regional Aircraft Markets - aviationnews-online.com · 2017-12-07 · flightglobal.com/consultancy...

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Regional Aircraft Markets7th December 2017

Rob Morris, Global Head of Consultancy

1

flightglobal.com/consultancy 2

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The Flight Ascend Consultancy Team

4

Rob MorrisGlobal Head of Consultancy

Peter MorrisChief Economist

Chris SeymourHead of Market Analysis

Henk OmbeletSenior Analyst

Richard EvansSenior Analyst

Chris WillsHead of Consultancy Ops.ISTAT Sr. Appraiser

Tony BrooksSenior AnalystISTAT Appraiser

Ben ChapmanValuations ManagerISTAT Appraiser

Lionel OlongaValuations Analyst

Ryan HammacottRisk Analyst

Joanna LuHead of Advisory Asia

Thomas KaplanValuations Analyst

Dennis LauAviation Analyst

Michael HuiAviation Analyst

VacantSenior Consultant

Kevin NgAviation Analyst

Sara DhariwalValuations Analyst

Eva KaragianniValuations Analyst

Oliver FordValuations Analyst

Luke SmithValuations Analyst

Valerie BershovaValuations Analyst

George DimitroffHead of ValuationsISTAT Appraiser

Michael LapsonSenior AnalystISTAT AppraiserDaniel HallSenior AnalystISTAT AppraiserASA Sr. AppraiserSyed ZaidiAviation Analyst

David GriffinSenior AnalystISTAT Appraiser


Regional Jet MarketsTurboprop Markets


Regional Jets

6


Some definition – what is a Regional Jet?


Average 150 regional jet deliveries annually through current demand cycle

0

50

100

150

200

250

300

350

400

Ann

ual D

eliv

erie

s

100-Seat85-Seat70-Seat50-Seat

Source: Flight Fleets Analyzer, passenger aircraft only


Deliveries predicted to decline marginally before pick-up again in next decade

0

50

100

150

200

250

300

350

40019

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

1320

1420

1520

1620

1720

1820

1920

2020

2120

2220

2320

2420

2520

26

Ann

ual D

eliv

erie

s




Fleet growth has stagnated but mix is changing

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,00019

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

1320

1420

1520

1620

17

Pass

enge

r Reg

iona

l Jet

Fle

et




Fleet trend is predicted to continue

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,00019

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

1320

1420

1520

1620

1720

1820

1920

2020

2120

2220

2320

2420

2520

26

Pass

enge

r Reg

iona

l Jet

Fle

et




Less than 1,000 aircraft in firm order backlog, with 50% scheduled through 2021

0

20

40

60

80

100

120

140

160

180

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 TBC

Sche

dule

d D

eliv

erie

s

COMACSukhoiMitsubishiBombardierEmbraer



Stored fleet continues to grow but 50-seaters drive volume

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

15.0%

17.5%

20.0%

22.5%

0

100

200

300

400

500

600

700

800

900

Stor

ed F

leet

at Y

ear E

nd

100-Seat85-Seat70-Seat50-Seat% of Fleet



Current idle inventory is 828 aircraft

0

20

40

60

80

100

120

1400 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 30+

Airc

raft

in S

tore

Aircraft Age (Years)


Source: Flight Fleets Analyzer, passenger aircraft only, 5 December 2017

38 aircraft included with future lease identified43 aircraft included with future sale identified


50-seat jets driving lower retirement age

0

5

10

15

20

25

30

0

20

40

60

80

100

120

Aver

age

Age

at R

etire

men

t

Ann

ual R

etire

men

ts

>25 Years Old<25 Years OldAvg Age at RetirementAvg Age at Effective Retirement

Source: Flight Fleets Analyzer


Marked difference between small & larger RJs, wide spread of curves over history


0%

20%

40%

60%

80%

100%

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

Airc

raft

Ret

ired

Mean +/- 1SD (all RJs) last 20 yrs End 2010 all RJs End 2015 RJ30-50 End 2015 RJ70-100

50% survivor point has a mean of 20 years, but varies

widely by size and type

2016 Flight Fleet Forecast uses 50% survivor

assumption of 17/20 years


Scope Clause

Scope clause is a pilot contract issueTypically restricts the amount of capacity that a mainline airline can pass down to its regional partnerIntent is to protect pilot jobs and wage structures in mainline carrierEach airline’s scope clause is different but typically restrictions apply around

Number of aircraftSeat capacity of aircraftMaximum take-off weight of aircraft

Scope can change by negotiation but pilots need a lot of convincing to accept change as they zealously protect contract conditions in airlines which are typically highly unionised


Current US Major airlines scope clause


Scope clause consequence in US

Neither MRJ90 nor E175E2 are current scope clause compliantE175, CRJ900 and MRJ70 are current scope clause compliant81% of current E175 fleet (and 92% of backlog) operates in US; 67% of current CRJ900 fleet operates in USCurrently all three Majors (American, Delta and United) are saturated for 76-seaters so no further growth potentialNo changes are expected to scope clause in next contract round (at least)Only opportunity for more 76-seaters will be for replacement of existing aircraft


Relatively fewer RJs managed by operating lessors

0%

5%

10%

15%

20%

25%

30%

35%

0

200

400

600

800

1000

1200

1400

Ope

ratin

g Le

ase

Port

folio

Op Lease PortfolioShare of Fleet



Operating leasing portfolio is highly concentrated


0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

1 6 11 16 21 26 31 36 41 46 51 56 61 66 71

Cum

ulat

ive

valu

e of

Por

tfolio

Lessor Rank

50% of fleet by value is managed by only four

operating lessors


Top 20 lessors manage 85% of the global portfolioManager In Service Storage Order Current Portfolio Portfolio CMV ($mn)Nordic Aviation Capital 126 23 18 149 2,409.6GECAS 208 131 5 339 1,760.8Avolon 44 5 49 808.5Falko 51 8 59 521.1GTLK - State Transport Leasing Company 21 5 9 26 452.4CDB Aviation Lease Finance 20 20 20 378.9Sberbank Leasing 23 2 25 376.2ICBC Leasing 19 40 19 372.6AVIC International Leasing 18 18 284.5ALM - Aircraft Leasing & Management 11 11 236.9BoCom Leasing 10 10 236.7TAT Leasing Services 14 14 199.5Regional One Inc 20 22 42 198.9VEB-Leasing 11 3 14 188.1Chorus Aviation Capital 8 2 10 177.4GOAL German Operating Aircraft Leasing 10 10 167.4JetFleet Management Corp 16 16 134.1TrueNoord 7 7 130.6Castlelake 14 14 127.4Aircastle Limited 6 25 6 125.0



More than 90% of RJ fleet have CMV < BV


0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

50% 60% 70% 80% 90% 100% 110% 120% 130% 140% 150%

Cum

ulat

ive

% o

f Fle

et

CMV / BV

Single-AisleTwin-AisleRegional Jet


RJ value retention presently better that single-aisle or twin-aisle

Source: Flight Values Analyzer, representative 2005 build aircraft

30%

40%

50%

60%

70%

80%

90%

100%

110%

2005 2006 2007 2008 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

CM

V / O

rigin

al C

MV

100-Seat RJ150-Seat SA300-Seat TA


RJ values less volatile than other classes….

Source: Flight Ascend Ratings

100-seat RJ

150-seat SA

300-seat TA


….which is reflected in our Asset Ratings


100-seat RJ

150-seat SA

300-seat TA


Turboprops

27


Turboprops retain their own market niche

Source: Flight Schedules

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

0 500 1,000 1,500 2,000 2,500

Cum

ulat

ive

% o

f Sch

edul

ed

Freq

uenc

ies

Sector Length (km)

TurbopropRegional Jet


Shape of global turboprop fleet is changing

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,50019

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

1320

1420

1520

1620

17

Pass

enge

r Tur

bopr

op F

leet


Source: Flight Fleets Analyzer, passenger airline Western built turboprops only


Orderbook reflects shift to larger aircraft

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50

100

150

200

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300

350

Ann

ual D

eliv

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s



2017 excludes 30 ATR72 Freighters for FedEx


…as does delivery profile

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50

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450

Ann

ual D

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s




ATR dominates the (relatively small) firm order backlog

0

20

40

60

80

100

120

2018 2019 2020 2021 2022 TBC

Sche

dule

d D

eliv

erie

s

Others

Bombardier

ATR



Even fewer turboprops managed by operating lessors but preference is for larger aircraft

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

200

400

600

800

1000

1200

1400

Ope

ratin

g Le

ase

Port

folio

Op Lease PortfolioShare of FleetShare of ATR72/Q400



Operating leasing portfolio is even more concentrated


0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

1 6 11 16 21 26 31 36 41 46 51

Cum

ulat

ive

valu

e of

Por

tfolio

Lessor Rank

70% of fleet by value is managed by only six

operating lessors


Top 20 lessors manage 93% of the global portfolioManager In Service Storage Order Current Portfolio Portfolio CMV ($mn)Nordic Aviation Capital 208 46 35 289 3,025.2Chorus Aviation Capital 41 2 43 685.6DAE Capital 39 1 9 49 658.4Elix Aviation Capital 61 21 82 593.2Transportation Partners 32 32 495.4GECAS 25 1 10 36 363.4Avation PLC 15 5 5 25 306.8Avmax Aircraft Leasing 38 46 84 291.0GOAL 17 17 215.8Aergo Capital 16 16 192.1ACIA Aero 21 1 22 114.0Montrose Global 25 2 27 113.2Showa Leasing Co Ltd 10 10 103.7Skytech-AIC 9 9 99.1Erik Thun AB 16 9 25 92.6Castlelake 15 4 19 81.6Doric 6 6 67.7JetFleet Management Corp 10 9 19 65.8Rockton AB 17 2 19 62.9Jetstream Aviation Capital 26 10 36 61.9



TP value retention is best of any asset at present

Source: Flight Values Analyzer, representative 2005 build aircraft

30%

40%

50%

60%

70%

80%

90%

100%

110%

2005 2006 2007 2008 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

CM

V / O

rigin

al C

MV

100-Seat RJ150-Seat SA300-Seat TA70-seat TP


Asset Ratings also reflect better value outlook



Summary & conclusions

Regional jet and turboprop markets are smaller / more specialised than single-aisle “commodities”There are several specific market categories within these marketsSome assets display better residual value retention and lower volatilityOperating leasing is relatively lower penetrated

Reflects lower volume marketMore specialised market knowledge / asset management skills required

Opportunity knocks?


Rob MorrisHead of Consultancy

+44 (0)20 8564 6735+44 (0)7730 [email protected]

Regional Aircraft Markets - aviationnews-online.com · 2017-12-07 · flightglobal.com/consultancy...

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Transcript of Regional Aircraft Markets - aviationnews-online.com · 2017-12-07 · flightglobal.com/consultancy...