Airlines have sales
Aircraft for sale: Airlines want to get rid of passenger planes
It remains to be seen whether there will be buyers for the used machines. “Basically the market is down. There is great uncertainty, nobody makes a decision, ”says Ulf Gedamke from aircraft finance specialist 360 Aircraft Finance GmbH (360 AF). At the same time, however, the example of the Canadian OWG shows that things are still going on here and there.
“There is movement in smaller planes like the A319. They are now gladly taken again because nobody knows how many passengers will be flying in the near future, ”says Gedamke. You will also see one or the other airline that is on the verge of the current crisis ready to take over free aircraft capacities. "
There are also still a few transactions in the long-haul market, observes Gedamke's colleague Peter Smeets: “There are sometimes clear differences in the individual aircraft types. If a model fits a business model that also works in the crisis, the banks are still ready to finance it. This applies, for example, to the Airbus A350. "
Surplus of aircraft
But one thing is certain: the pandemic and its severe consequences have seriously affected the used aircraft business. It is not just the efforts of many airline managers to reduce their “fleet” that lead to oversupply. In addition, there are insolvencies, which means that larger quantities of aircraft capacities come onto the market, but cannot be arranged again immediately.
"This also has an effect on the prices, which have fallen significantly on average," says Gedamke. It is difficult to quantify how large the value adjustments are. That depends on many factors, such as the development of the oil price. If it stays very low, there is hardly any motivation to buy used, more modern jets. At the same time, older aircraft could then become attractive, especially if prices have fallen significantly. The question of how quickly air traffic will pick up again is also crucial.
The British consultancy IBA, which specializes in aircraft evaluations, provides guidance. At the beginning of July she announced some key data. According to this, the loss in value of new and modern jets of the “series” Airbus A220 and A320neo is estimated at around five to eight percent. The comparable Boeing 737 Max had to cope with a bigger minus because the aircraft was not allowed to take off after two crashes for over a year and there were many cancellations, according to the study.
Short and medium-haul jets of the older generation such as the A320ceo or the Boeing 737-800 have to accept a price discount of between nine and 16 percent, according to an IBA analysis. In the long-haul sector, the modern aircraft of the two types Airbus A350 and Boeing 787 still do relatively well. IBA puts the price drop here at four to 13 percent.
In contrast, older generations - especially those jets with four engines such as the A380, the Boeing 747 or the Airbus A340 - have seen a real price slump of up to 40 percent. Even before Corona, these extremely large aircraft had problems finding buyers. It is difficult for the airlines to fill the jets. For this reason, A380s that are only ten years old are now being cannibalized and their parts recycled. Corona has massively accelerated this trend.
“At the airlines, all forecasts have been set to zero, so there are also many plans for the fleets,” says Gedamke: “All the old equipment is now being decommissioned at an accelerated rate and is no longer used for a second or third party. It goes straight to the recycling of the individual parts. ”According to Smeets, it will therefore take longer for the used aircraft market to recover. “There is currently hardly any interest in the used parts market. Many airlines can use spare parts from the existing fleet. "
This is a new situation for airlines, but also for lessors. In the past, too, there were occasionally problems in finding a new buyer for a certain type of aircraft. But in the current crisis, this applies across the board across all model series. Michael Santo from the aviation consultancy H&Z therefore fears that this will also have consequences for the balance sheet. "The leasing companies and financing funds have considerable risks on their books here."
Nevertheless, Smeets of 360 AF firmly believes that the leasing companies will come through the crisis well. “Lessors are usually asset managers for other investors. These investors have a certain investment pressure, also in the future, ”he says. The leasing companies would continue to be important customers for aircraft manufacturers in the future. "Many investors are accepting such an exogenous shock as the current pandemic and continue to provide funds."
Smeets even sees a certain opportunity for leasing companies in the crisis. Many airlines would receive state aid along with interest rates customary in the market. “There is great interest in repaying this financial aid quickly. The sale and leaseback of your own jets is a good option here, ”believes the expert. This would give lessors the opportunity to talk to new customers. "And they have the opportunity to have a greater say in prices in these discussions because the customer has a certain need to refinance."
But it is also clear: the experts at the leasing companies will in future take a closer look at who they are dealing with. “In the past, the competitive situation pushed the subject of risk management into the background. Everyone wanted to do business, ”explains Gedamke. Corona has changed that. "Lessors will not only get into the numbers of customers, they will also take a close look at what the business model looks like."
But all of this will be done cooperatively. “Both sides need each other - also in the future.” In addition, many airlines do not have an external rating; Nobody wants to risk that.
More: Airbus and Boeing are preparing for a long crisis
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