Avolon and Boeing argue that concern about the fate of A320s and 737NGs is overblown. A recent Avolon study, for example, concludes that it will take eight years from entry into service for the MAX and NEO to build 35% shares of their respective family fleets, which the lessor describes as the “tipping point” for the valuations of the aircraft they will be replacing.
But this view is far from universal. “It is by no means guaranteed that the only value impact is after a significant part of the old fleet is replaced,” says Bert van Leeuwen, managing director of aviation research for DVB, which cites the valuation history of the late-built 737 Classics as an example.
DVB's recent research, using historical value data from Ascend, found the value of 10-year-old A320 aircraft dropped from 79% of their new value in 2000 to just 43% in 2012. Lease rates for 10-year-old A320s are following a similar line, van Leeuwen says, falling from 85% of the lease rate for a new A320 to just 54%.
The same trend is starting to emerge for 737-800s, van Leeuwen says, with the value of 10-year-old aircraft in that model dropping to 54% from 67% over the past five or six years.
Aviation Week's Fleet & MRO Forecast projects about 250 A320 retirements over the next five years. Aviation Week's forecast for all aircraft models is based on historical trends and other factors, including but not limited to projected maintenance requirements, aircraft operating economics, airframe versatility and flexibility, and ownership type.
But Owen Geach, IBA Group's commercial director, notes a potential restraint on A320 retirements: too many would flood the market with spare engines, lowering the part-out value to the point where an early teardown does not make financial sense.
Boeing 737 Classics: The number of 737-300s, -400s and -500s being retired jumped by about 40% in 2012, primarily for the -300s and -500s. Moreover, they are being retired relatively young: under 24 years for the -300s and under 21 for the -500s, both of which use CFM56-3B1 engines.
The demand for -500s is less than for the other Classics because they are smaller—a particular disadvantage with the escalation in fuel costs—and none are being converted to freighters.
Boeing 747-400: Geach says 747 values have fallen so dramatically over the past six years that the aircraft have reached the point where there only real value is in their engines, although some airlines still will operate the aircraft until the end of their useful lives because they are expensive to replace. The 747-400s use Pratt & Whitney PW4062, Rolls-Royce RB211-524H2-T or General Electric CF6-80C2B5Fs.