IBA Insights

IBA Identifies A New Trend In Mature Aircraft Asset Management, October 2019

Using the valuation tool IBA.iQ, it considers the lease rate comparison of several A320 vintages and their respective engines.  

London/Dublin/Tokyo – October 3rd 2019: IBA, the independent aviation advisory, valuation and consulting firm has identified a growing trend in mature aircraft management where the leasing of core engine assets is managed separately to the aircraft as a whole.  This is becoming increasingly evident based upon the strengths of the CFM-56-5/7B and V2500-A5 engines within the A320 and 737NG fleets.

“Engines are well known to be the principal driver of maintenance costs for aircraft and towards end-of-life they are fundamental to the assets’ value.  However the market is increasingly looking to lease an aircraft’s two engines separately to the airframe,” comments Terry Dawson, Managing Director – Digital at IBA and leader of the Firm’s data intelligence services and business strategy for the IBA.iQ platform. “Whilst in relative terms this is still fairly unusual and aircraft demand requirements in the narrowbody sector remain robust, the asset values of A320ceo and 737NG aircraft have both benefitted from the strength of the CFM56-5B, CFM56-7B and V2500-A5 markets.”

The following chart outlines the achievable lease rate in the market of several A320 vintages alongside their comparable engine the CFM56-5B4/P.

A graph illustrating the lease rate of two engines vs. aircraft

IBA observes that there are further reports of this ‘asset splitting’ spreading to A330 aircraft with demand for good condition engines driving a premium.

“The trend applies more so to maturing airframes around 18-19 years, but nonetheless it is becoming an increasingly common occurrence based upon the demand the engine market has been experiencing.  We are hearing that more aircraft lessors are looking at this option for revenue generation” continues Dawson.

IBA believes this could be an opportunity for aircraft lessors to look more broadly at the engine market as a source of revenue. Increased engine availability might put engine lessors under pressure as potentially there could be more competition in the traditional spare engine lessor space.”

Having an accurate picture of historical, current and future values is essential for those buying, selling, financing, investing in or operating aircraft engines. The iQ Engines module within IBA.iQ combines IBA’s core expertise in aircraft and engine appraisals with market and data intelligence to analyse factors that can impact the value of aircraft engines. Click here for more information or to register for a free two week system trial.

If you have further questions please contact: Terrydawson@iba.aero

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