Jetrader - Fall 2014 - (Page 32)

Aircraft Recyclers Debate the Coming 'Tsunami' of Retired Aircraft Mix of low interest rates, high fuel prices and new aircraft models equals uncertain outlook T By James Careless "The aviation industry is facing an aircraft retirement tsunami," said ICF International Principal Richard Brown at the 2014 Aircraft Fleet Recycling Association's (AFRA) Annual Meeting on 18 June 2014. He told AFRA delegates that the rate of aircraft retirements will reach an astounding 1,000 aircraft a year by 2024. Based on current data, AFRA expects between 1,200-1,800 aircraft to be dismantled and torn down over the next three years. Julie Felgar, Boeing Commercial Airplanes's managing director of environment strategy, agreed. She told AFRA delegates that a "wave of aircraft retirements is coming" driven by the availability of new fuel-efficient aircraft, with 41 percent of today's fleet leaving service in the next two decades. As a result, "there is a significant opportunity for companies to dismantle and recycle these retired airplanes to the highest standard rather than parking them in the desert," Felgar said. However, not everyone in the aircraft recycling industry agrees with these dire predictions. "It's clear that there are more aircraft due to retire, but this will vary year on year," said Bradley Gregory. He is the commercial director at Air Salvage International (ASI) and an AFRA board member who has carefully studied aircraft retirement trends during ASI's 18 years of operation. "Although there are lots of aircraft expected to be dismantled in the next few years, the beginning of 2014 has been very quiet in Europe with very few aircraft being disposed of," added Kevin O'Hare, CEO of Sycamore Aviation at Durham Tees Valley Airport, UK. "Some of this has been due to aircraft leases being extended over the summer period as utilization has increased," he said. "Also, a big factor in the short-term shortage of aircraft is the EU261 ruling, which allows passengers to claim a large amount of compensation for three-hour delays to flights. Because of this, we are aware that some European airlines are holding on to some older aircraft as standby aircraft, to support the fleet during the peak season." Whether or not a "retirement tsunami" is on the way is of great importance to 32 The official publication of the International Society of Transport Aircraft Trading aircraft recyclers. A big influx of retired aircraft could drive prices down for recycled parts on the global market. At the same time, such a glut could reduce the prices aircraft owners are asking for their surplus equipment, allowing aircraft recyclers to pay less and potentially earn more on the parts they extract and eventually sell. Arguments for the Tsunami According to AFRA, many factors are creating the approaching tsunami of retired aircraft. "The combination of demographics as aircraft reach the end of their economic life, low interest rates, relatively high fuel prices and the introduction of new models is causing the retirement of unprecedented numbers of aircraft, while new technology and OEM production rates are also exacerbating aircraft retirements," Brown said. Tim Zemanovic is CEO of Aircraft Demolition, LLC of Burnsville, Minnesota. Like Sycamore Aviation, Aircraft Demolition is a dual-accredited AFRA member (for aircraft disassembly and parts recycling). He takes the tsunami threat very seriously.

Table of Contents for the Digital Edition of Jetrader - Fall 2014

A Message from the President
Reach for the Stars
Beauty Contest
Boeing’s Current Market Outlook for 2014
Aircraft Recyclers Debate the Coming ‘Tsunami’ of Retired Aircraft
Engine Support Plans Shift Market
The Second Life of Aircraft: Does It Still Exist?
Restructuring Aircraft Leases in Bankruptcy
Aviation History
Aircraft Appraisals
ISTAT Foundation
Advertiser Index

Jetrader - Fall 2014