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Values of Older Widebodies Remain Under Pressure

January 20, 2020

The values of used widebodies continue to remain under pressure with the outgoing models particularly impacted by the arrival of new products and indeed, the competition for passengers.

IATA reports that for November 2019, International Traffic grew by only 3.1 percent compared to November 2018. For the first eleven months of 2019 traffic increased by 4 percent thereby being less than the long term average. Despite the delivery of A350s and B787s in numbers, capacity increased by less than 1 percent in November versus the same month a year previously and in the first eleven months capacity increased by 3.2 percent. This means that load factors improved to 82 percent, only slightly less than the 83 percent for domestic and international combined. The delivery rate of new widebodies has slowed with only some 15 B777-300ERs being delivered through to November 2019. The lack luster rate of capacity growth signals that carriers are perhaps seeing new aircraft acting as replacement rather than growth capacity. Aircraft are therefore being retired. A significant part of international growth is undertaken by narrowbodies but in Asia and the Middle East, widebodies undertake more of the international work. For the first eleven months of 2019, traffic increased by only 2.2 percent in the Middle East with capacity remaining virtually the same. In Asia, the region for growth generation, traffic increased by 4.9 percent thus equating to the long term average.

The widebody market is therefore under pressure as operators seek to trim back capacity to more match demand. Newly delivered aircraft are therefore displacing older aircraft such as the A330-200/-300s, B767s, B777-300ERs, B747-400s. There are still A330-200s previously operated by Thomas Cook in storage. The market for used widebodies is therefore more difficult particularly when seeking to sell an aircraft without an attached lease. Values of those widebodies built in the 1990s are particularly exposed with virtually all such A330s, A340s, B767s, B777s, and B747-400s fortunate to possess values in excess of $10 million. The values of the B777-200ER have fallen by more than 13 percent over the last twelve months and even the B777-300ER has experienced an eleven percent decline. The move to operate the most efficient of aircraft will intensify in a relatively short timeframe given the issue of climate change. The fuel component of long haul flights is that much greater than on regional and domestic flights and as such relative efficiency plays a greater role for those operators needing to portray green credentials as well as keeping down expenses.

 

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