MROAM: Retirement of younger aircraft to continue, says CIT

Atlanta
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The retirement of younger aircraft and the parting out of their parts is a trend that is likely to continue in the MRO sector, as airlines continue to face high fuel prices.

This trend is particularly strong in the narrowbody market, says Nicholas Pastushan, chief investment officer of CIT Transportation Finance at the MRO Americas conference in Atlanta.

Pointing to 2012's aircraft retirement data, Pastushan notes that were some "anomalies". Besides the retirement of 40-year-old aircraft like McDonnell Douglas DC-9s, there were also substantial numbers of 10-15 year-old aircraft that were retired, says Pastushan.

This is partly due to airlines choosing to upgauge to bigger aircraft in the face of high fuel prices. For example, airlines would rather operate Airbus A320s or A321s instead of the smaller A319s.

"When you shrink an airplane, you hurt the economics," says Pastushan. The operating weight per empty seat is higher in a shrunken aircraft, he explains.

"The young airplanes being parted out is a big trend," he adds, saying that he expects the trend to accelerate as demand for younger aircraft for part-outs continues.

"The wave of younger retirements is going to continue as long as demand and supply imbalances continue," says Pastushan.

As a result, manufacturers are likely to see competition from these young aircraft parts with their original equipment manufacturer aftermarket sales, he adds.