Jetrader - Spring 2018 - 60

Angus Mackay
Senior ISTAT Certified Appraiser
Principal
ICF International
Tel: 1-617-218-2121
angus.mackay@icf.com
www.icf.com/aviation
Kara Levine
ISTAT Certified Appraiser
Manager
ICF International
Tel: 1-703-855-2685
kara.levine@icf.com
www.icf.com/aviation

Background
Airbus and Boeing have largely operated
a duopoly in the over 100-seat aircraft
market since the purchase of McDonnell
Douglas by Boeing in the late 1990s. In
the late 2000s, induced by sustained high
fuel prices and potential challenges to
the then-existing industry dynamic from
Bombardier with its CSeries and from
China's Comac C919, the major airframers
brought forward plans to update their narrowbody product lines. Rather than waiting
until the 2020s to launch all-new designs,
Airbus (later followed by Boeing) opted
to take advantage of the engine advancements from Pratt and Whitney, with its
geared turbofan (GTF) PW1000G, and CFM
International, with its LEAP-X engine, and
offer re-engined narrowbody aircraft. The
advancements from the engine manufacturers, coupled with aerodynamic and
airframe improvements, were expected to
deliver fuel savings of up to 15 percent.
The Airbus A320neo (New Engine Option)
program, comprising A319, A320 and A321
family variants, was officially launched
in December 2010, and orders from Virgin
America (30 A320neos) and Indigo followed
shortly thereafter. The A320neo became
one of the fastest selling aircraft ever with
more than 2,000 orders placed in the two
years following the program's launch.
The primary change in the A320neo
over the A320ceo (Current Engine Option)
relates to the engines. Like its predecessor,
the A320neo is offered with two engine
options, the CFM International (CFMI)
LEAP-1A and the Pratt & Whitney (PW)
PW1100G-JM. The LEAP-1A is a significant
improvement over CFM's venerable CFM56

line that powers the A320ceo family, Boeing
737NG and Airbus A340-200/300 aircraft.
The LEAP-1A incorporates scaled-down
technologies from GE's GEnx Low Pressure
Turbine - such as flexible blades - as
well as utilizing advanced composites
materials. The bypass ratio of the engine
is 11:1, an improvement over the 5-6:1
of the CFM56-5B. The Pratt & Whitney
PW1100G-JM, colloquially known as the
GTF, is considered a more radical technology shift. It uses a reduction gearbox to
permit the fan of the engine to rotate at a
different speed than the rest of the engine
modules to maximize engine efficiency
and reduce the number of engine stages.
According to Pratt & Whitney, the engine
offers improved fuel efficiency of 16 percent and reduces the noise pollution by
more than 50 percent. To date, both engines
have experienced reliability problems.
The A320neo retains the same cabin
fuselage shape and length as the earlier A320ceo, but it can seat up to nine
more passengers due to the "Space-Flex"
cabin, which introduces a new galley and
lavatory configuration. Other changes to
the airframe are wingtip devices known
as "sharklets," providing a 3.5 percent
increase in fuel efficiency. Sharklets were
first available for retro- and line-fit on
A320s starting in 2012 and are standard
on the A320neo. Improved cabin air purifying systems, lighting and storage are also
introduced with the A320neo.
As of November 2017, 169 A320neo
aircraft were in service with more than
28 airline operators worldwide.

MARKUS MAINKA/SHUTTERSTOCK.COM

appraisal

Airbus A320neo

Market Outlook
The A320neo competes in the larger narrowbody aircraft space against its predecessor, the A320, as well as the Boeing 737-800
and Boeing's re-engined offering, the 737
MAX 8. To date, the Airbus A320neo has
recorded more than 3,500 orders, and its
backlog continues to outpace that of the
latter aircraft. The orderbook for the aircraft
is particularly strong in the Asia-Pacific
region, in part due to the growth of low cost
carriers such as IndiGo and AirAsia. Much
of the backlog for the A320neo seems to
be dedicated to traffic growth rather than
replacement as the majority of the current
in-service fleet of the A320 is less than
10 years in age (2,612 out of over 4,000).
The overall market for the A320neo is
still developing, and the aircraft has certainly faced short-term challenges with
respect to engine program development.
However, with the strong orderbook from
a diverse set of airline operators and leasing companies, the aircraft seems destined
to gain a significant market share of the
large narrowbody segment. If Airbus's bid
for Bombardier passes regulatory muster,
the aircraft likely will not face a significant competition outside of that offered by
Boeing, and as a result, it is likely that the
duopoly position of the two manufacturers
will continue over the next decade.

A320neo Fleet Status
Number of
Operators

Region

Active Fleet

Firm Backlog

In Service +
Backlog

Options

Africa

0

0

23

23

0

Asia/Pacific

14

84

1,215

1,299

254

Europe

6

43

442

485

329

Middle East

0

0

178

178

70

North America

2

12

172

187

0

South America

6

27

371

398

40

Unknown
Grand Total

0

0

1,141

1,141

10

28

166

3,542

3,711

703

Airbus A320neo Half-Life Appraisal Values (Assumes Leap-1A Engines)
Year of
Delivery

CMV
BV
US$ MM US$ MM

Future Base Values - Inflated at 1.5% per annum

2017

2017

2016

46.1

46.1

43.2

40.5

38.1

35.9

33.8

32.3

31.2

30.4

29.5

28.2

2017

49.3

49.3

46.2

43.3

40.6

38.3

36.0

34.4

33.2

32.2

31.1

29.7

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60 The official publication of the International Society of Transport Aircraft Trading
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Jetrader - Spring 2018

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