Most aircraft values are expected to continue to rise in 2014, as demand remains healthy and the availability of second-hand aircraft slows.
“The dark ages seem to be over for at least some aircraft types,” says George Dimitroff, vice-president of the Americas at Ascend, during a webcast on 2014 trends today.
Narrowbody prices are expected to either increase or stay flat this year, he says. The 737-800 will maintain its slight lead to the Airbus A320 with new aircraft values rising slightly and five-year-old aircraft values remaining flat.
Values in the relatively newer Airbus A321 and Boeing 737-900ER market are expected to continue rising in 2014, with the latter maintaining a lead over the former. Dimitroff says that this is “partly due to upsizing by airlines who are seeking lower seat mileage costs”.
In the USA, Alaska Airlines, Delta Air Lines and United Airlines are scheduled to take delivery of 37 737-900ERs and American Airlines Group and JetBlue Airways 38 A321s during the remainder of 2014, Flightglobal’s Ascend Online database shows.
The A321 with sharklets, which entered service in the third quarter of 2013, carries a premium over both the 737-900ER and A321 without sharklets, says Dimitroff.
On the widebody front, Airbus and Boeing types continue to command strong values despite concerns over end-of-line aircraft risk. The Boeing 777-300ER maintains its pricing gap to the Airbus A330-300, says Dimitroff. However, this is unlikely to continue as the Airbus A350 enters service and Boeing discounts the aircraft in order to buoy its order book prior to the entry into service of the Boeing 777-9X, he says.
“This may not be a sustained trend,” he says. “What we may see is reduced new pricing post 2015” in order for the airframer to build its orderbook.
Lufthansa Group chief executive Christoph Franz told Flightglobal in January that they would hope to achieve any such discount on the 777 freighter in order to replace the remainder of Lufthansa Cargo’s Boeing MD-11 fleet.
“There are at least 13 MD-11 freighters waiting for roll over,” he says. “For us, this gives a perspective that there will be demand in the future for further freighter aircraft and the 777, as we have already five on our order book, is a nice aircraft and hopefully we would be one of the customers.”
Strong demand is partially driving rising aircraft values. Traffic rose 5.4% on a capacity increase of 5.3% in 2013, says Chris Seymour, head of market analysis at Ascend, citing IATA data.
Airlines generated about $20 billion in net profits in 2013 – the most in the past decade – he says. North America lead the pack with $8 billion in net profits followed by Asia-Pacific carriers with about $4 billion.
Fewer second-hand aircraft are also driving values up. The industry is entering a period of “lower lease renewals” because many of the five- to seven-year leases on 737 and A320 aircraft signed before 2007 have already been renewed, says Dimitroff. This drives up the value of second hand aircraft as demand exceeds supply, he adds.
Orders and deliveries will remain relatively flat in 2014. Ascend expects both Airbus and Boeing to secure about 1,400 orders each and deliver about 1,450 aircraft total, says Seymour.
The orders estimate comes in slightly below the combined 2,858 that the airframers secured in 2013, and deliveries are slightly above the 1,274 made during the year.
Airlines and lessors will need about $107 billion in funding for aircraft deliveries in 2014, says Brendan McHenry, a senior analyst looking at risk advisory at Ascend. The largest share, about 36%, is expected to come from bank debt followed 31% from cash.
Debt capital markets will provide about 16% and export credit agencies about 14% of the funds, he says.