Market Commentary. Boeing VALUE TRENDS. Boeing SUMMARY. Boeing , Q4 2017

Transcription

1 Boeing SUMMARY Over 4,500 in service, over 460 on order. Considered the most liquid narrowbody today. A total of more than 180 operators very popular among a good mix of mainline, charter and low-cost carriers; good regional distribution, and a favourite with the leasing community. Storage and availability low; around 1% of total fleet in storage, availability less than 15. Younger aircraft finding new lessees well ahead of lease return dates. Around 53% on operating lease very active leasing market. Boeing 737 production increasing to 57/month by 2018; few 737NG slots left. Split Scimitar winglet offers further-improved fuel burn. Freighter conversion programmes launched by AEI, Bedek, Boeing, AEI and Pemco first converting now, with over 100 orders. Values stable, Lease Rates last increased in Q Orders being balanced by cancellations and swaps to Max; few slots left before Max. Re-engined 737 Max 8 now in service, to replace -800 on the line after several years, but large -800 fleet will not be replaced until well into the 2020s. Used to have a nine-seat advantage over Airbus A320 in single-class layout, but A320ceo now matches capacity of the , although -800 has better pitch and more seats in two-class layout. Lower-weight aircraft without winglets are less desirable than (high gross weight) models with CFM56-7B26/27. More replacement choices: A320neo and Max 8 in service, Irkut MC-21, Comac C919 for 2020s. 737 Max 7 redesign has just 17 fewer seats. Boeing VALUE TRENDS Source: Flight Ascend Values Analyzer Generic spec, Half-Life or better MARKET VALUES Build Year Oct-15 Oct-16 Oct $14.40m $11.95m $10.40m 2005 $22.70m $20.50m $18.55m $41.25m $38.20m BASE VALUES Build Year Oct-15 Oct-16 Oct $15.07m $13.89m $12.32m 2005 $21.12m $19.31m $17.88m $41.84m $38.32m MARKET LEASE RATES (5-YEAR) Build Year Oct-15 Oct-16 Oct $0.175m $0.150m $0.150m 2005 $0.245m $0.205m $0.215m $0.340m $0.325m CURRENT MARKET VALUE / BASE VALUE RATIOS Build Year Oct-15 Oct-16 Oct % 86% 84% % 106% 104% % 100% MARKET LEASE RATE / CURRENT MARKET VALUE Build Year Oct-15 Oct-16 Oct % 1.26% 1.44% % 1.00% 1.16% % 0.85% Generic Specification Engines MTOW CFM56-7B24 155,500lb Values and Lease Rates may be different for other specifications. Please contact Flight Ascend for valuation of these and any specific aircraft. 1

2 BOEING VALUE AND LEASE RATE TRENDS Source: Flight Ascend Values Analyzer Market Values were last reduced by 5-6% in Q to account for annual depreciation. The type had a challenging year in 2016 and after several market corrections, we deemed that it was not necessary to apply the full annual depreciation amount for the time being. Values still range from $10.4 million for a 1997-build to $38.2 million for a build aircraft. Market Values for new 2017 aircraft are at $40.65 million. Higher specifications will lead to higher values Market Lease Rates last increased at the start of Q for all but the oldest year of build, by 2-9%, with the higher percentages for older aircraft. Lease Rates still range between $150,000/month for a 1997-build aircraft, and $325,000/month for a 2016-build. New 2017-builds command Lease Rates of $340,000/month. Higher specifications may lead to higher Lease Rates. During the July 2017 Base Value review, Current Base Values were reduced slightly for vintages, while those for later builds were stable. Our Future Value curves were steepened slightly based on macroeconomic inputs. Boeing Value and Lease Rate Development $50m $40m $30m $20m $10m $0.50m $0.40m $0.30m $0.20m $0.10m $m $0.00m Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Current CMV CMV CMV MLR MLR MLR Boeing MV/BV Ratio Development 110% 105% 100% 95% 90% 85% 80% 75% 70% Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Current CMV/CBV CMV/CBV CMV/CBV 2

3 BOEING MARKET OUTLOOK Short-Term Market Outlook Boeing Market Values were last reduced by 5-6% in Q to account for annual depreciation. This followed a decrease of around 2-8% in early Q Following a thorough review of a large number of transaction datapoints, Lease Rates were last increased in early Q by 2-9%, with the highest rises for older vintages, as the market for the type picks up the slack it experienced in Q3 and Q4 of Current Base Values were mostly unchanged in the July 2017 review, except for the oldest vintages, which were reduced slightly by 1% to 5%. Market Values for these older vintages have dropped significantly below Base in an otherwise strong market, driving a small permanent impairment to their Base Values. The drop in forecast value for 2027 is 1% for most vintages and up to 6% for a 1997-vintage. Programme now is 20 years old but the type remains the most liquid single-aisle on the market, with 180+ operators. Over 5,000 ordered, with a backlog of 460 aircraft. Boeing to increase overall 737 family production rate from 47/month to 52/month in 2018 and 57/month in 2019 to ensure a smooth transition to the 737 Max, which entered service in Q Net orders slightly negative in Q3 2017, although it is estimated that Boeing only has very few remaining open slots on the 737NG before the transition to the 737 Max. Very active leasing market. High levels of leasing activity and over 50% of the fleet on operating lease. This shows that lessors have confidence in the future liquidity of the type. Flybondi to launch low-cost carrier operation in Argentina with aircraft. Storage levels down from 40 to 30 this quarter; typically due to seasonal trends in the peak Summer period. Stored fleet ratio is very low at around 1%. This remains one of the best ratios in the industry and shows continuing strong demand for the Aircraft continue to be placed quickly. Low availability in the market with fewer than 15 currently publicly available for lease or sale; most being available in 2018 to Q The aircraft type has a major presence with scheduled or charter operators and LCCs, and a very standardised cabin / seating configuration, all of which allow aircraft to be placed quickly once they become available. The APB Split Scimitar winglet (designed for the Max) can be implemented on the current -800, certified in Q to further reduce fuel burn by an extra 1% (over existing winglets). Over 500 aircraft now have the Split Scimitar winglet. Medium and Long-Term Market Outlook The additional maximum capacity of nine seats has historically helped the remain very competitive against its rival A320ceo, although the A320 is now also certified up to 189 seats. The standard 737 Max 8 will have 189 and the Max 200 version will increase seats to 200, through use of an extra emergency exit aft of the wing. New 737 Max 7 design boosts seating to 172 and has longer range than the Max 8, but aimed more at hot and high operations. Order backlog demonstrates that this remains the most popular 737NG variant, and that airlines and lessors have confidence in the type well into the end of the decade, despite the introduction of the Max. The type is expected to remain the most liquid single-aisle well into the future. This is due to the size of the current fleet, backlog, and its success with both lessors and a broad range of operators in terms of operator and geographical location. Mid-life aircraft could face liquidity and values issues in the future as LCCs look to remove aircraft from their fleet at this age in large numbers. This could lead to oversupply of 10- to 15-year-old aircraft from the current generation in the coming years if operator demand fails to keep pace. 3

4 Continued product improvements, such as longer maintenance intervals, new space-saving lavatories in 2014, Scimitar winglets etc., support long-term demand. Boeing states that some 90% of the order backlog has the new Sky interior with pivot bins, each of which can hold four standard-sized carry-on bags. New Space Bins, capable of accommodating six standard-size carry-on bags, became an option on the -800 since late A320neo deliveries began in Q1 2016, offering improved fuel burn. Boeing responding with the re-engined 737 Max 8 due in Q but is unlikely to impact values immediately as there is a large -800 fleet, which will not start to be replaced in any significant numbers until well into the 2020s. Other replacements are emerging, albeit on a small scale C919 from China and MC-21 from Russia, likely from 2020 at earliest most likely to be concentrated in their home markets cargo conversion programmes in development at AEI, Boeing, IAI Bedek and Pemco to follow. It is a proven airframe with newer technology, and aircraft are now aged years, making freighter conversions a logical next step and breathing additional life into older -800s, for both operators and lessors. GECAS announced in Q that it is the launch customer (for 10) for the AEI SF conversion programme full freighter capable of 11.5 pallets (23.5-tonne) of freight on the main deck (one pallet more than a -400SF), with a Combi capable of six pallets up to the overwing exit, plus 90 seats. Expected to get supplemental type certification in 2017 with Swedish operator West Atlantic to become the initial operator. ACG announced order for 15 aircraft in October Boeing launched its own BCF programme in Q1 2016, conversions will take place at selected facilities near customer demand, including Boeing Shanghai. GECAS (five), Hangzhou-based YTO Airlines and Beijing-based China Postal Airlines (ten each) are launch customers. First deliveries will take place in Q IAI Bedek is also developing an -800SF conversion, after its first -700SFs. Spectre Air Capital to take up to 15. Pemco will follow its -700SF STC with an -800SF. No all-new replacement design from Airbus or Boeing likely until well into the next decade at earliest. BOEING MARKET ACTIVITY Source: Flight Fleets Analyzer A summary of market activity in Q shows: Variant Net Orders Deliveries Sales Leases Lease Returns Cargo Conversions Retirements N/A Winglets N/A Winglets Scimitar N/A 0 Total N/A 1 Orders and Type Swaps We observed the following orders / type swaps for the Boeing during Q3 2017: Customer Order Type Variant Date Qty. Lion Air Swapped from -900ER 800 Winglets Sep Cancellations We observed the following order cancellations for the Boeing during Q3 2017: Operator Variant Transaction Qty. SunExpress 800 Winglets Cancelled order 7 4

5 Deferrals No deferrals were recorded for the Boeing during Q Deliveries We observed the following deliveries for the Boeing during Q3 2017: Operator Variant Qty. Aeroflot Russian Airlines 800 Winglets 5 Aerolineas Argentinas 800 Winglets 3 Aeromexico 800 Winglets 1 Air China 800 Winglets 1 Air Europa 800 Winglets 2 American Airlines 800 Winglets 5 China Eastern Airlines 800 Winglets 6 China Southern Airlines 800 Winglets 9 China United Airlines 800 Winglets 3 Donghai Airlines 800 Winglets 1 Egyptair 800 Winglets 2 Fuzhou Airlines 800 Winglets 1 Hainan Airlines 800 Winglets 9 Hebei Airlines 800 Winglets 2 Iraqi Airways 800 Winglets 2 Japan TransOcean Air 800 Winglets 1 Nok Air 800 Winglets 1 Norwegian Air Int l 800 Winglets 1 Rossiya Airlines 800 Winglets 1 Ruili Airlines 800 Winglets 1 Ryanair 800 Winglets 6 Saudi ARAMCO Aviation 800 Winglets 2 Shandong Airlines 800 Winglets 5 Shanghai Airlines 800 Winglets 5 Shenzhen Airlines 800 Winglets 5 Southwest Airlines 800 Winglets 6 Suparna Airlines 800 Winglets 2 United Airlines 800 Winglets 4 Urumqi Airlines 800 Winglets 1 Virgin Australia 800 Winglets 3 Xiamen Airlines 800 Winglets 10 5

6 Sales During Q3 2017, we registered a total of 58 sales, including 27 sale and leasebacks on delivery, 22 purchases with leases attached, five sale and leasebacks and four straight sales: Variant Vendor Buyer New Operator Transaction Qty. 800 AerCap SASOF III (A4) Sun Country Airlines Existing Lease Air China WWTAI Airopco BPA Ireland Fortress Investment Group Purchased Air China WWTAI Airopco II DAC Fortress Investment Group Purchased Winglets Aerolineas Argentinas Aircastle Aerolineas Argentinas SLB delivery Winglets Air Europa Aviation Portfolio Fund 1 Air Europa SLB delivery Winglets Air Europa GOAL Air Europa SLB delivery Winglets ALC B Tempelhof Aircraft Leasing (Ireland) Air Austral Existing Lease Winglets American Airlines Hudson Aviation Leasing American Airlines SLB delivery Winglets American Airlines Mystic Aviation Leasing American Airlines SLB delivery Winglets American Airlines ORIX Aviation American Airlines SLB delivery Winglets American Airlines ORIX Aviation Systems American Airlines SLB delivery Winglets American Airlines Rowley Aviation Leasing American Airlines SLB delivery Winglets Arctic Aviation Asset SMBC Aviation Capital Norwegian Air Int l SLB delivery Winglets Aviakapital-Servis VTB-Leasing Aeroflot Russian Airlines SLB delivery Winglets Aviakapital-Servis VTB-Leasing Rossiya Airlines SLB delivery Winglets Avolon ORIX Aviation Ryanair Existing Lease Winglets Avolon ORIX Aviation Xiamen Airlines Existing Lease Winglets Celestial Aviation Trading 13 ORIX Aviation Xiamen Airlines Existing Lease Winglets Celestial Aviation Trading 22 ORIX Aviation Garuda Indonesia Existing Lease Winglets Celestial Aviation Trading 38 ORIX Aviation Garuda Indonesia Existing Lease Winglets Celestial Aviation Trading 73 Accipiter Investments Aircraft 1 Transavia France Existing Lease Winglets China Eastern Airlines Unannounced China United Airlines SLB delivery Winglets China Eastern Airlines Unannounced Shanghai Airlines SLB delivery Winglets DY1 Leasing FLIP No 156 Norwegian Existing Lease Winglets DY1 Leasing FLIP No 159 Norwegian Existing Lease Winglets DY1 Leasing FPG Trust Norwegian Existing Lease Winglets DY2 Leasing FPG Trust Norwegian Existing Lease Winglets ECAF ABS Portfolio Unannounced Taimyr Air - NordStar Existing Lease Winglets Egyptair DAE Capital Egyptair SLB delivery Winglets Fiji Airways Willis Lease Finance Fiji Airways SLB Winglets General Electric Capital Corp ORIX Aviation Aerolineas Argentinas Existing Lease Winglets General Electric Capital Corp ORIX Aviation Hainan Airlines Existing Lease Winglets Hebei Airlines Jianxin Jin No.52 Leasing (Tianjin) Hebei Airlines SLB delivery Winglets Pegasus ALC B Air Lease Purchased Winglets Transavia France Argentiere Aviation DAC Transavia France SLB Winglets Virgin Australia Short Haul 2017 No1 Virgin Australia SLB delivery 1 6

7 Variant Vendor Buyer New Operator Transaction Qty. 800 Winglets Virgin Australia Short Haul 2017 No2 Virgin Australia SLB delivery Winglets Xiamen Airlines ICBC Leasing Co Xiamen Airlines SLB delivery 4 *SLB=Sale & lease-back *SLB Delivery=Sale & lease-back on delivery Leases During Q3 2017, we registered a total of 22 Boeing dry-leases, including 18 straight leases and four lease agreements for aircraft on orders (sub-leases not included): Variant Lessee Lessor Transaction Qty. 800 Azur Air Fortress Investment Group Leased in Blue Panorama Airlines Fortress Investment Group Leased in Winglets Andes Lineas Aereas Macquarie AirFinance Leased in Winglets Comair (South Africa) Avolon Aerospace Leasing Leased in Winglets flyegypt ORIX Aviation Leased in Winglets Jeju Air FPG Amentum Leased in Winglets Jet Airways DAE Capital Leased in Winglets LOT Polish Airlines AerCap Leased in Winglets Nordwind Airlines Air Lease Leased in Winglets Ruili Airlines CDB Aviation Lease Finance Aircraft on order Winglets Solaseed Air SMBC Aviation Capital Aircraft on order Winglets Sriwijaya Air ICBC Leasing Co Leased in Winglets TUI fly FPG Amentum Leased in Winglets T'way Air AerCap Leased in Winglets T'way Air Macquarie AirFinance Leased in Winglets US-Bangla Airlines Fortress Investment Group Leased in Winglets Scimitar NewGen Airways AerCap Leased in 2 Lease Returns We observed the following lease returns for the Boeing during Q3 2017: Variant Lessee Manager Transaction Qty. 800 Air China CDB Aviation Lease Finance Returned Winglets Air China ICBC Leasing Co Returned Winglets Air Europa FPG Amentum Returned Winglets Air Europa ORIX Aviation Returned Winglets flydubai AWAS Returned Winglets Korean Air Macquarie AirFinance Returned Winglets Norwegian Air Int l FPG Amentum Returned Winglets Rossiya Airlines Avolon Aerospace Leasing Returned Winglets Shandong Airlines Fortress Investment Group Returned Winglets Xiamen Airlines ICBC Leasing Co Returned 1 7

8 Known Scheduled Lease Expiries We are aware of the following lease expiries for the Boeing in the coming six months (NB this data is based on original lease terms and some leases may already have been extended): 800 Air China CDB Aviation Lease Finance Jet2 Aviation Capital Group Jet2 BBAM Shandong Airlines Fortress Investment Group Titan Airways Fortress Investment Group Winglets Air Europa Castlelake Winglets Air Transat Avolon Aerospace Leasing Winglets AirExplore Apollo Aviation Group Winglets Anadolu Jet Deucalion Aviation Funds Winglets Arkia Macquarie AirFinance Winglets China United Airlines AerCap Winglets Comair (South Africa) GECAS Winglets Enter Air GECAS Winglets flydubai BBAM Winglets flydubai DAE Capital Winglets flyegypt Aero Capital Solutions Inc Winglets GOL Avolon Aerospace Leasing Winglets Hainan Airlines AerCap Winglets Izair SMBC Aviation Capital Winglets Jet2 AerCap Winglets Jet2 Aviation Capital Group Winglets Kulula Volito Aviation Services AB Winglets LOT Polish Airlines Air Lease Winglets Mango GECAS Winglets Med View Airlines Deucalion Aviation Funds Winglets Norwegian Avolon Aerospace Leasing Winglets Norwegian Air Int l DAE Capital Winglets Okay Airways AerCap Winglets Palau Pacific Airways BBAM Winglets Pegasus SMBC Aviation Capital Winglets Shanghai Airlines AerCap Winglets Skymark Airlines SKY Leasing Winglets Smartwings Macquarie AirFinance Winglets South African Airways Macquarie AirFinance Winglets SunExpress Aviation Capital Group Winglets SunExpress BBAM Winglets Titan Airways BBAM Winglets Transavia Airlines AerCap Winglets Transavia Airlines DAE Capital Winglets Transavia Airlines SMBC Aviation Capital Winglets Travel Service Airlines Apollo Aviation Group Winglets Travel Service Airlines BBAM Winglets Travel Service Poland Apollo Aviation Group Winglets TUI fly Avolon Aerospace Leasing Winglets TUIfly Unannounced Winglets Turkish Airlines ALM - Aircraft Leasing & Mgmt Winglets Turkish Airlines BBAM 1 8 Variant Lessee Manager Qty.

9 Variant Lessee Manager Qty. 800 Winglets Scimitar Sunwing Airlines Aviation Capital Group Winglets Scimitar Sunwing Airlines Avolon Aerospace Leasing Winglets Scimitar Travel Service Poland BBAM Winglets Scimitar TUI Airlines Nederland Aviation Capital Group Winglets Scimitar TUI Airlines Nederland Avolon Aerospace Leasing Winglets Scimitar TUI Airlines UK Air Lease Winglets Scimitar TUI Airlines UK Avolon Aerospace Leasing Winglets Scimitar TUI Airlines UK Macquarie AirFinance Winglets Scimitar TUIfly Unannounced Winglets Scimitar WestJet Wings Capital Partners Investments 1 Retirements We observed the following permanent retirement for the Boeing during Q3 2017: Variant Operator Manager Vintage Qty. 800 Winglets ANA Trading Corp USA ANA Trading Corp USA Future Activity Suparna Airlines is planning to purchase two -800s from Hainan Airlines, both part of HNA Group. Jet Airways is planning to lease two from SMBC and one each from DAE and CDB. Flybondi will lease one from Deucalion, Swift Air two from Travel Service and Ukraine International one from DAE. The first two SFs will complete freighter conversion in Q (with GECAS from AEI and Boeing). At least seven aircraft are scheduled to return to service in Q BOEING STORAGE Source: Flight Fleets Analyzer The number of stored aircraft is around 1% of the total fleet. No Aircraft Boeing Stored Fleet Development % % % % 0.6% % % 0 0.0% Current Stored Stored Fleet Share 9

10 Currently there are aircraft in storage, including 20 with winglets and 10 without. Of these, seven are scheduled to return to service, three are to be placed with new lessees and two will undergo freighter conversion: Variant Operator Manager Event Qty. 800 Air China Air China Air China CDB Aviation Lease Finance CDB Aviation Lease Finance CDB Aviation Lease Finance To be leased in Shandong Airlines Fortress Investment Group VEB-Leasing VEB-Leasing Winglets 9 Air Harvest Int l Fin. Lease To return/enter service Winglets Air Europa Castlelake Winglets Air India Express Air India Express To return/enter service Winglets Air Lease Air Lease Winglets Arik Air Arik Air To return/enter service Winglets Buraq Air Buraq Air To return/enter service Winglets flydubai DAE Capital To be leased in Winglets GECAS GECAS Winglets GECAS GECAS Sched. freighter conversion Winglets Jetran Int l Jetran Int l Winglets Kenya Airways GECAS To return/enter service Winglets Malaysia Airlines Avolon Aerospace Leasing To return/enter service Winglets Norwegian Avolon Aerospace Leasing Winglets Norwegian Air Int l DAE Capital To be leased in Winglets Primera Air Nordic Genesis Aircraft Services To return/enter service Winglets VEB-Leasing VEB-Leasing - 2 BOEING AVAILABILITY Source: Airfax We are aware of at least aircraft being publicly marketed as available for sale or lease, including: Variant YOB Listed by Availability From Note SMBC Lease Aug Orix Aviation Lease One Q1 2018, two Q Aircraft Orix Aviation Lease Q Orix Aviation Sale Q Aircraft FPG Amentum Lease Q Aircraft World Star Aviation Lease May 2018 Fresh C-check AerSale Sale/lease Immediately Aviator Capital Sale/lease April

11 BOEING FLEET OVERVIEW Source: Flight Fleets Analyzer There are currently 4, aircraft in passenger service with 184 airline and non-airline operators, 466 aircraft on order with 47 customers, and 30 in storage. The in-service fleet consists of 3,850 winglet-equipped aircraft, 568 Scimitar winglet-equipped aircraft and 112 without winglets. All of the on-order fleet have winglets. Of the stored aircraft, 20 have winglets and 10 are without. 5,000 Boeing Fleet Development 4,000 3,000 2,000 1, In Service On Order Regional Distribution Currently there are 4,773 Boeing aircraft in service / on order with airline operators, including 1,967 aircraft with 71 carriers in Asia-Pacific, 1,400 aircraft with 60 carriers in Europe, 873 aircraft with 12 carriers in North America, 243 aircraft with nine carriers in Latin America and the Caribbean, 171 aircraft with 24 carriers in Africa and 119 aircraft with six carriers in the Middle East. Boeing Fleet Distribution (In Service / On Order) N. America 18% Africa Lat. Am & 4% Carib 5% Middle East 3% Asia-Pacific 41% Europe 29% 11

12 Top Carrier and Operating Lessor Distribution The main Boeing carriers and operating lessors are presented in the following tables: Top 5 Boeing Airline Operators Qty. (In Service/On Order) Ryanair 462 American Airlines 304 Southwest Airlines 197 China Southern Airlines 154 United Airlines 141 TOTAL 1,258 Top 5 Boeing Operating Lessors Qty. (In Service/On Order) AerCap 252 GECAS 234 SMBC Aviation Capital 192 BBAM 134 Avolon Aerospace Leasing 133 TOTAL