What’s hot and what’s not: the latest review of market trends, aircraft values and lease rates
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Transcript of What’s hot and what’s not: the latest review of market trends, aircraft values and lease rates
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7/31/2019 Whats hot and whats not: the latest review of market trends, aircraft values and lease rates
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Whats hot and whats not10th July 2012
Les Weal, Head of ValuationsOlga Razzhivina, Valuations Manager
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Aircraft values- whats hot, whats not
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Markets values across the sectorsi. Cargoii. Single aisleiii. Twin aisle
iv. Turboprops
2012 Base Values update
Recovery path
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Cargo a sector transforming?
FedEx founder Fred Smith said that the global freight business would see some drastic changes
in the future. Not only would air carriers face competition fromships, customers would look for customised door-to-door delivery options.
FedEx has seen a decline in fiscal fourth-quarter profits -- international priority airfreight-shippingvolumes fell 3 per cent in its fiscal fourth quarter that ended on May 31, while its US domesticexpress volume fell 5 per cent, compared to a 4 per cent decline in the previous quarter -- and haschalked out a plan for cost-cutting. Speaking at a post-earnings conference, Smith said that
the traditional airport-to-airport business "is not growing. This while thedoor-to-door express segment is growing, and the movement of goods on thewater is growing".
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Core freighter widebodies
4
$0m
$20m
$40m
$60m
$80m
$100m
$120m
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
B744F-5yr
MD11F-10yr
B744SF trend
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ascendworldwide.com
Single-Aisle aircraft utilisation 2.5% below peak levels
Source: Ascend Online Fleets
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Market values in harmony
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Market values on different tracks?
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Market values in different universe?
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In production widebodies the bright spot
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$0m
$10m
$20m
$30m
$40m
$50m
$60m
$70m
$80m
2006 2007 2008 2009 2010 2011 2012
A333HGW MV 10yrA333HGW BV 10yr
B772ER MV 10yr
B772ER BV 10yr
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Geographical spread: A330s
9%
4%3%
24%
46%14%
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Out of production prone to catastrophe
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$0m
$10m
$20m
$30m
$40m
$50m
$60m
$70m
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
A343MV-10yr
A343BV-10yr
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Turboprops the real hot spot
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$0m
$2m
$4m
$6m
$8m
$10m
$12m
$14m
$16m
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
AT72-10yr
D8Q4-5yr
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Base values 2012
No radical changes but plenty of aircraft on watch
Economic and fuel prices in keeping with recent trends
Default inflation realigned to 2%
Useful lives will they become shorter?
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Retirements of younger aircraft are increasing
Source: Ascend Online Fleets
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Useful life analysis-aggregation of 24 type/series
0%
25%
50%
75%
100%
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36
%RemaininginP
axService
Aircraft Age (yrs)
AggregatedEarly Middle
Late All Vintages
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Market recovery-pushed to the right?
Historical MV/BV relationship
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
History Optimistic Pessimistic
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Looking beyond the horizon: cycle indicators10th July 2012
Eddy Pieniazek, Director & Global Head of Consultancy
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Agenda Looking beyond the horizon
What is the Horizon? How far is Beyond? World Economics and long-term changes in traffic patterns
Fuel and Airline Profits
Show me the Money
Aircraft financing and impact on production cycle
Deliveries Next Five Years 2012-2016
Aircraft trading used marketplace
Beyond the Horizon
10 Year outlook - funding
Narrowbody and Widebody Landscape 2020-2022
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Developing world marching to a catch up beat
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Major change in the balance of key route markets
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New paradigm of high fuel prices
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0
50
100
150
200
250
300
350
0
20
40
60
80
100
120
140
JetFuelcperUSGallon
CrudeOil$
perBarrel
Global Crude Oil and Jet Fuel Prices
Oil Price Jet Fuel
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Profit cycle shows a break from previous trends
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Recent profits/losses have been in two year cyclesIATA forecast range for 2012 was +/- 0.8%
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Traffic data trends
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Passenger traffic growth of 6.9% and capacity increase of 8.2% in 2011Passenger markets still showing gains however Air freight hascontinued to decline or stagnate (-1.9% in February 2012)
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2012 Jet Deliveries
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2012 New Deliveries Funding
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New Sources of Capital
Since 2008 there have been few new sources of capital to the industry
Unsecured lessor marketExIm backed bondsSmall number of commercial banksSmall number of credit funds
Is it sufficient to make up for the scaling back of European banks?Opportunity exists for new sources but they have been slow to enter marketOld aircraft - big concern: new sources likely to start with new aircraft
ECA backed loans in 2011/2012: c.30-35% of finance provided.2013 unclear with the intro of new ASU and greater costs for export credit may still becheaper than commercial loans but gap is smaller (100bps to 30bps for Category 1borrower). With deliveries rising, hard to see ECA going away
Capital markets - Unsecured finance has replaced ABS for some lessors.Restrictions on financing older aircraft and increased new aircraft funding requirements will
make increased capital markets issuance a must
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Commercial Jet Deliveries Forecast Next 5 YearsIn 2012$ assuming Base Value on delivery
Source Ascend Online Fleets & Global Fleet Forecaster
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
$110
2012 2013 2014 2015 2016
US
$
Bill
ions
SINGLE-AISLE TWIN-AISLE REGIONAL JET
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Commercial Jet Deliveries Forecast Next 5 Years
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
SA FORECAST SA BACKLOG TA FORECAST TA BACKLOG RJ FORECAST RJ BACKLOG
No
ofa
ircraft
2012 2013 2014 2015 2016
FEW SLOTS LEFT
Source Ascend Online Fleets & Global Fleet Forecaster
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Used Western Built Aircraft Sales Transactions
29
0
100
200
300
400
500
600
Jan Feb March April May June July Aug Sept Oct Nov Dec
Numberofusedaircraftsalestransactions
2006
2007
2008
2009
2010
2011
2012
Source: Ascend Online
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Sales with lease attached the missingcomponent
These trades are held back by lack of secondarypurchasers and the lack of finance
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MV/BV closely linked to volume of transactions
These volumes are at similar levels to 2004
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Forecast 10 Year Global Deliveries By Region13,000+ ordered aircraft, ~$1,000 billion based on 2012 Base Value (2012$ terms)
Asia/Pacific,
$242b, 23%
Latin America,
$52b, 5%
Middle East,$144b, 14%
North America,
$186b, 18%
Europe, $262b,
24%
China, $139b,
13%
Africa, $33b, 3%
36% of $1,000bn market in Asian region
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Beyond the Horizon - Narrowbody LandscapeJet Segmentation by Type:1960 to 2011, Forecast to 2020
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
NumberofAircraft
inService
MS-21
C919
737 Max
A320neo Family
CSeries
717
737 (NG)
MD-90
A320ceo Family
737 (CFMI)
757
MD-80
737 (JT8D)
DC-9
727
Convair
Soviet Types
Caravelle
Old British Types
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0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
NumberofAircraftinService
A350
787
A380
777
A330
A340
MD-11
A310
767
A300
DC-10
L-1011
TriStar
Beyond the Horizon - Widebody LandscapeJet Segmentation by Type:1960 to 2011, Forecast to 2022
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The information contained in our databases and used in this publication has been assembled from many sources, and whilst reasonable care has been taken to ensure accuracy, theinformation is supplied on the understanding that no legal liability whatsoever shall attach to Ascend A Flightglobal Advisory Service, part of Reed Business Information Limited, its offices,or employees in respect of any error or omission that may have occurred