The result of 27 airlines ceasing or suspending operations in 2019 has been an increased supply of aircraft into the secondary market. The storage level of widebody commercial aircraft surpassed that of widebody and narrowbody aircraft combined since 2014 (excluding the Boeing Max in 2019). Additionally the number of parked and stored Airbus A330s, comprising both Airbus A330- 200 and A330-300 models, reached 161 in January 2020, representing a 13% storage level. As a result of this oversupply, lease rates and market values have been suppressed. However, the current low lease rates of A330s may open more opportunities for the low-cost long-haul carriers.
The widebody leasing market is less fluid than that for narrowbodies and is heavily dominated by sale leasebacks for new deliveries. Despite the Airbus A330ceo's leasing performance being the lowest on record, the number of new lease starts for the family still shows how well the aircraft performs for operators. Considering these current low lease rates, we expect some carriers to take advantage of their ability to secure such a capable aircraft for a fraction of its usual cost. Our market intelligence platform IBA.iQ indicates that the number of aircraft starting or terminating their leases over the last 15 years has been higher for the A330-200 variant than the A330-300. Asia-Pacific remains the most popular region for the A330-300 model, while the A330-200 has reaffirmed its popularity in European markets. In terms of lease ends, there have been more events occurring in North America and Europe & CIS for both A330 models.
The number of A330 part-outs has increased significantly over the last decade, totalling 45 aircraft in January 2020. Since the first A330 aircraft parted-out in 2012 with Malaysia Airlines, there have been 24 scrapped A330s originating from Asia-Pacific based operators including Malaysia Airlines (8), Philippine Airlines (5), Vietnam Airlines (5), Thai Airways International (3), China Eastern Airlines (1), AirAsia X (1) and Batavia Air (1).
A further eight A330s were parted-out by six European airlines, three operators shared seven scrapped A330s in the Middle East and two Latin American operators have parted-out six A330 models so far.
The Airbus A330P2F conversion programme, launched in 2012, is a collaboration between ST Aerospace, Airbus and their joint venture EFW. So far, they have delivered eight A330P2F freighters to three customers. Detailed information on aircraft converted up to now is shown in the table below.
IBA.iQ shows 14 Airbus A330s were retired in 2019. As the lease rates and market values are increasingly suppressed, more A330s are likely to be attracted by these freighter conversion programmes.
A build-up of bankruptcies, fleet management decisions and lease ends have heavily impacted the A330 fleet's lease rates and market value since 2015. The effect of lease returns, including relatively young aircraft, has significantly influenced rates across the board. The bankruptcies of WOW Air, Jet Airways and XL added additional units to the market and caution still surrounds both Hong Kong Airlines and SAA who hold 24 units between them. The aircraft's high capability ensures its continuing attraction and some operators are taking advantage of rates normally reserved for much older assets to secure relatively young aircraft. With the outbreak of the coronavirus Covid-19, operators in China are facing huge challenges to their revenue generation due to lack of passenger demand. This will create more speculation over the heavily troubled HNA Group, which currently operates 45 A330-300 and 31 A330-200 aircraft in its fleet.
Values of mid-build A330-300s have softened by over 30% in some cases and early builds are likely to face part-out due to the limited demand. Nevertheless, IBA expects there will still be demand for re-leases of the earlier deliveries should they become available.
Turning to the A330-200 model, IBA has seen a similar 30% reduction for early- to mid-builds and up to a 35% decline in lease rates for mid-build A330-200s.
Pricing correction is required for many older A330 aircraft, as storage levels have reached record proportions and associated lease yields cannot justify current values. Opportunities to convert ageing A330s could help to reset its depreciation profile and prompt a reassessment of market expectations long-term.
To find out why InsightIQ is fast becoming the leading online data intelligence platform, sign up for a demonstration using the link below.
AuthorsSee full profileSee full profile
Whilst 737 MAX sale and leaseback rates look set to strengthen in the near term, the future looks bleak for direct lease rates. As far back as the mid 2018s, lessors were experiencing difficulty placing the MAX, resorting to placements with weaker credit airlines at increasingly softer rates. By the end of the 2018s, rates had dipped as low as $270,000 - $280,000 and, as 2019 dawned, even before its grounding many lessors and operators were questioning the MAX's value against the comparative attraction of its 737-800 sibling.
Following on from last week's session where IBA presented their approach to valuations and lease rates, our panel take a deeper dive looking specifically at commonly traded aircraft types. Topics covered included; IBA's opinion on likely market performance in the near and long term, which assets types are more vulnerable and a 30 minute Q&A session with our panel. The webinar was chaired by Phil Seymour, an ISTAT Senior Appraiser Fellow and former ISTAT International Appraisers' Program Chairman. Phil was joined by Stuart Hatcher and Mike Yeomans - two of IBA's Senior ISTAT Appraisers, and David Archer, IBA's Senior Engine Analyst. Our senior ISTAT appraiser team also review the impact from Covid-19 on future asset performance for specific Narrowbody and Widebody aircraft. If you have further questions please contact: Mike Yeomans
As production draws to a close and the line moves over to the 777X, IBA's award winning appraisal team looks at the long term Lease Rate Performance for the 777-300ER. As of 30th January 2020, IBA's data intelligence platform IBA.iQ shows the 777-300ER fleet with 800 active aircraft, 18 parked/stored/damaged and 37 on backlog with zero part-outs.
The widebody leasing market is less fluid than that for narrowbodies and is heavily controlled by sale leasebacks for new deliveries. The market started its recovery from a post 9/11 slump in 2003 and this resurgence was affected by the global financial crisis only slightly. Since 2015, however, excess capacity has exerted immense pressure on rates in the market. Bankruptcies, fleet management decisions and lease ends, particularly young lease ends, have each played a part.
Historically, new delivery market lease rates have correlated well with 5-year swap rates, usually with a 6 to12-month lag. However, recent IBA research revealed that, despite rate increases since 2016, market lease rates have in contrast declined. We examined lease performances of the A320ceo and 737-800 both when new and at 10 years and summarise our key findings as follows:
The A330ceo is now in its replacement phase. Secondary market availability and storage are relatively high and the A330-200 in particular has been in oversupply for some time. Powered by IBA.iQ, our advisory teams have seen lease rates soften in recent years. The wave of pre-GFC delivered aircraft have returned from their initial leases which has put downward pressure on rentals in the market.
The current Airbus A330 market is characterised by relatively high levels of storage and availability, which are contributing to pressure on current market values and lease rates. At the time of writing, the parked and stored fleet across the two Airbus A330-200 and A330-300 models is around 88 units.
If you have already been provided with your InsightIQ credentials, click InsightIQ. If you are looking for IBA.iQ, click IBA.iQ.