26 Feb 2020
The available markets for used widebodies are examined more closely in a recent article featured in Aircraft Commerce, featuring Alun Roberts our VP of Engines.
The widebody market is not as liquid and as dynamic as the narrowbody market. Narrowbodies can be transferred relatively easily between operators, making them more tradeable assets, even at the end of their economic life.
Transferring widebodies between operators is more expensive and timeconsuming, due to the high cost of reconfiguration and customisation that major airlines incorporate in their flagship long-haul products. This limits the secondary market for widebodies, making them more risky investments.
Aircraft have an estimated economic life cycle. Often wideboy aircraft, after 20 years of operation, are converted to a freighter aircraft. In these cases, there are important age rules in different jurisdictions of the world which may therefore restrict the secondary market.
The most likely fate for aircraft that do not have the optimum status for conversion to freighter, are in relatively poor maintenance condition, or for which there is little or no demand for freighter conversion or any other role, is to be dismantled for rotable components and other equipment, and for acquisition of the aircraft engines.
This is usually economic for the last portion of a type to be retired, or the poorer quality variants of a type that have engines and components that can be used by all. It will also often be the only option for aircraft that have low demand as used passenger aircraft and do not have a P-to-F programme available.
The engines will account for most of the aircraft’s value. The amount will depend on their maintenance status, and market value as determined by demand and supply factors. Market values of used engines, and time-continued engine modules will move up and down for several years. They can help airlines operate fleets of used aircraft while avoiding some expensive engine shop visits.
In other cases, the only option is permanent removal from service if there is no market for the aircraft or its components
There are lessors who specialise in the secondary market and in part-out activities. Despite the lack of liquidity of widebody assets, midlife lessors have found strategies to realise value in the used widebody market.
It is not unusual for big lessors to dispose of a portfolio by tranching aircraft in the same age bracket and selling them to a specialised smaller lessor.
Our VP of Engines, Alun Roberts, comments on the A330 and 777 families:
… “Most of the A330-33 Trent 700 fleet is enrolled on a maintenance program. A lot of these agreements are not transferable, so the liquidity of the entire airframe is affected” …
…” There is a good degree of commonality between the 777-200LR and the 777-300ER. Some part-outs have occurred on the 777-200LR, but this only involved components. Since a high percentage of these engines are enrolled with the OEM’s and MRO’s maintenance care agreements, it is still a challenging market for parting out the engine’s internal components…
…” When we look at the 777, we put a value on the engines from a green-time aspect with the inclusion of residual value on external components. We value the airframe and the parts.” …,/p>
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