Lessors downplay Neo impact on residuals

Source: Flightglobal.com
This story is sourced from Flightglobal.com

In a shift of opinion from just one year ago, executives on the lessors' panel at the 28th annual ISTAT conference aren't concerned about the residual value impact of the Airbus A320neo family on current generation A320s.

A year ago, lessors -as well as appraisers and financiers- were whinging about the presumed immediate and negative affect on legacy A320 values if Airbus proceeded with the Neo. It has, and now the lessor opinion has changed-and so, it appears, has that of financiers if unscientific ISTAT surveys are any indication.

Jeffrey Knittel, president, CIT Transportation Finance, recalled last year's ISTAT conference surveys and the negative reactions before asking for a show of hands among lessors and bankers at this year's event. Only a handful of these groups indicated they still had concerns.

Steve Townend, deputy MD and chief commercial officer for BOC Aviation and a member of Knittle's ISTAT panel, noted that the first Neos "won't replace aircraft of today, they will replace the MD80s and 757s and 20-year old 737s and A320s."

GECAS CEO Norman Liu, another panelist, said, "You can't say it will have zero impact on residuals, but it's six years away. By 2027 you might get parity point" on deliveries of the Neo to the current A320s. "That's when you will have residual affect."

The third panelist, Steven Udvar-Hazy, cautioned appraisers.

"I hope the appraisal community doesn't overreact to Neo. It's five years away and in meantime a lot more current generations will be built and will have a higher proportion of the installed base," he commented. " It will take another three to four years where Neo will even be 10% of installed fleet. The impact will be a very slow progression. A lot of Neos will be for growth, not replacement."