Jetrader - March/April 2011 - 18

Such small incremental changes, however, need to be supplemented by periodic sea changes; those permanent developments which redefine the industry standard.
With ﬂeet growth leveling off during the 1970s to a stable 4.4 percent, the share of older equipment crept up to near 50 percent by 1980 and has been fairly stable since, drifting down to nearly 45 percent at present. The second interesting point to note is that it wasn’t until the late 1980s that we saw a meaningful portion of the ﬂeet begin to approach their expected useful lives of 20 to 25 years. Fleet share for aircraft 20 years old and above peaked at 20 percent just before the ﬁrst Gulf War in the early 1990s and then gently fell over the subsequent 10 years to around 10 percent where it has remained since. Clearly there are a number of factors inﬂuencing the use of older aircraft over the past 25 years. The fact that an aircraft remains in service does not imply that it has remained with the same operator or in the same region or in the same role. Until the mid-1980s, older passenger aircraft were in very short supply, so it makes perfect sense that U.S. and European carriers could ﬁnd eager buyers for their ﬁrst waves of “gently used” equipment as they sought to re-ﬂeet. From an operational standpoint, the last 25 years have also seen some fundamental changes to the way airlines think about efficient utilization of their aircraft. I am sure many of us remember the time when the mantra was that it was impossible to achieve a year-round load factor above 70 percent. The recent summer peaks of 90 percent load factor have proven the potential of sophisticated yield management reservation systems. In fact, within the short-haul sector most aircraft are typically in use more than 10 hours a day. Low-cost carriers have been the principal drivers of these developments. But to be fair, airlines can only exploit the tools which they have available. Here the OEMs have stepped up to the plate. All aircraft and especially the engines that power them are on what could be termed a continuous improvement program; the beneﬁts stemming from design, materials, technology transfer and measured by lower fuel burn, lower maintenance costs (increased time between events), and improved reliability. A rule of thumb talks to an average 0.5 percent to one percent per annum improvement, which is always welcome.

Such small incremental changes, however, need to be supplemented by periodic sea changes; those permanent developments which redeﬁne the industry standard. Despite its speed and champagne ﬂute elegance, the Concorde would not meet our criteria for sea change, but the development of the turbofan engine, the Boeing 747, the advent of long-range twin engine ﬂying (ETOPS), and maybe to a lesser extent Fly-by-Wire are in our opinion such sea change events. Thanks to the tardy delivery of the 787, we can perhaps say that the coming decade offers the potential for more of these type of products entering commercial service. Needless to say, these changes are frequently viewed as likely to be detrimental to immediate predecessor aircraft types in terms of useful life or values, but in reality, for most vintages the outcomes are not as dramatic as might be expected. If we concentrate for the moment just on narrowbody aircraft, there is a rich history of technological improvement and innovation to consider. Chart 2: Narrowbody Fleet Development by Type illustrates the historical ﬂeet growth of narrowbody passenger jets, showing the waves of successive aircraft models’ build up and ebb from the global ﬂeet. In Chart 2, we can track the developments of the 20 narrowbody aircraft types which have been introduced over the past 60 years. After the torrid pace of development from the 1960s, the large aircraft programs of the day remained active and in production well into the 1980s. Despite the existence of a real diversity of manufacturers in those early days, the pre-1985 dominance of the 727s, DC-9s and the 737 JT8Ds bears a striking similarity to the current in-production duopoly. These aircraft crushed their competitors and maintained large populations long after production ceased. It was only in the early 1990s and then again post-September 11th that the market

Chart 2

18 The ofﬁcial publication of the International Society of Transport Aircraft Trading

Jetrader - March/April 2011

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