What appraisers expect in 2009

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

CAO asked five appraisers their view on narrowbody and widebody aircraft this year:

1) Do you see the second-hand market for narrowbodies improving this year?

Ascend's director of consultancy Eddie Pieniazek: "Used jet transactions peaked in May 2007 with 350 in a month, by November 2008 we were down to 77. We anticipate an increase in transactions in 2009, though not (necessarily) an improvement in values. We see continued pressure keeping market values below base values for at least another 18 months. There is no immediate reason to assume otherwise. Fleet inventory is likely to take that long to re-balance."

Avitas' VP Asset Aviation Doug Kelly: "2009 is expected to be another difficult year as airlines continue to shed capacity due to the recession."

Collateral Verifications' VP Commercial Aviation Services Gueric Dechavanne: "Yes, but I don't see this happening until the 3rd or 4th quarter of this year. The lack of capital in the market has put the second-hand market on hold and until this changes, it will be difficult for anyone to take advantage of the market conditions, unless they have cash on hand to do so."

IBA Group's senior analyst Jonathan McDonald: "No! Boeing 737NG and A320 aircraft, the CRJ700/900, Embraer 170/190s will get absorbed back into the market when and if operators of such types have to defer, offload or fail. But lease rates and values will be more "economical" on operators' wallets. As for the 737 Classics, MD80s, 717s, F100s, F70s, 146s, MD90s, aircraft will get traded but it will prove challenging to re-market much of this equipment because the banks will be more reluctant to raise finance against assets exposed to high oversupply, increasing age, high fuel consumption, noise and weak market penetration."

MBA's President and CEO Bob Agnew: "The answer to this question really depends on the aircraft one is speaking about. In general the market will remain weak throughout 2009. With significant contraction by major carriers and manufacturers continuing to produce aircraft close to record levels, a glut in the market will likely stay with us throughout 2009."

2) Do you see the second-hand market for widebodies improving this year?

Pieniazek: "Similar to narrowbodies, except perhaps slightly less downward pressure. The strongest markets (and those which will rebound sooner) are likely to be the longer distance routes involving Asia, which implies widebodies - but this may not occur until 2010."

Kelly: "Similar to narrowbodies in that 2009 will be another difficult year."

Dechavanne: "Maybe. Although the market for in-production widebodies is strong and has remained stable, widebodies have always been viewed as higher risk due to the reconfiguration and remarketing costs. This will certainly reduce the appetite for second-hand transactions from the market."

McDonald: "With news that a number of 767 operators failed last year, American Airlines "dumping" their A300-600Rs, China Southern, Cathay looking to offload early 777-200 fleets and rumours that British Airways is to part out one or two earlier 747-400s, it really is not a great time to get involved in widebody secondary market activity."

Agnew: The answer to this question is somewhat more difficult to try to define. Given the problems at Boeing and the lack of clarity at Airbus on their respective new widebodies, conditions could strengthen existing widebody aircraft values. However, with oil prices at recent record lows and the implosion of the major finance markets in New York and London, international traffic will likely remain soft for the near-term. The recent scramble by many major carriers to increase international operations has begun to turn. The most likely scenario remains that widebody aircraft will soften in value but not to the extent that narrowbodies will."