Jetrader - Fall 2014 - 41

The Second
Life of Aircraft:
Does It Still Exist?

The impact of aircraft
economic age and age restrictions

I

By Adrian M. Lee, Chief Executive Officer, Probus Aviation Limited
It was first suggested that I might like to
write this article for Jetrader magazine
several months ago. My first thought upon
reading the article summary was that there
had better be a second life for aircraft,
otherwise I may have to rethink my career
choices!
As the chief executive officer of Probus
Aviation Limited, a U.K.-based aircraft
remarketing company, I have been involved
in the remarketing of commercial transport
aircraft since the late 1990s. I have been
involved in the sale of several hundred aircraft on behalf of owners, lessors, operators
and financiers and have also appeared as
an expert witness on the subject of aircraft
remarketing at the High Court in London.

Economic Age and
Aircraft Backlogs
The business of aircraft remarketing
pre-supposes not only a second life but also
a third or even a fourth life for aircraft. The
successful placement of secondary market
aircraft means that businesses such as ours
need to define secondary markets and identify requirements within those markets.
Historically, the received wisdom has been
that the economic life of an aircraft was
around 25 years. Of course, over the years,
this has changed and undoubtedly come
down and in certain types faster than others. In addition, more and more countries
have introduced restrictions on the age
of aircraft that can be operated on their
registers, which has, of course, had some
effect on the secondary market.
On the other side, we are seeing
the consequences of the significant

production backlogs from the manufacturers. As of 30 June 2014, Airbus had a
production backlog of 5,546 aircraft. This
is composed of 4,372 aircraft from the
A320 Family, 243 A330s, 742 A350s and
189 A380s. The position for Boeing is very
similar. Again, as of 30 June 2014, their
production backlog amounted to 5,237
aircraft. This number is composed of 3,931
B737 aircraft, 50 B747 aircraft, 48 B767
aircraft, 339 B777 aircraft and 869 B787
aircraft. The effect of these backlogs is
to maintain a consequential demand for
secondary market aircraft-especially in
the narrowbody sector.
As a remarketing company, we are finding that demand for good-quality Airbus
A320 aircraft and Boeing B737 aircraft is
growing continuously. This has had the
inevitable effect of supply and demand on
values and the previous, well-documented
declines in values of A320 Family aircraft-
especially the A320 and A321 types-has
been reversed in recent years to the point
where some appraisal companies are starting to record actual increases in the values
of certain aircraft. For the Boeing B737,
whilst it did not suffer to the same extent
the downward pressure on values, it has
nonetheless experienced a firming up of
values, especially the -800 models, as
demand for quality secondary market aircraft has increased.
In recent years, even airlines such as
British Airways have been forced into the
secondary market in order to meet their
demand for increases in capacity requirements. Unable to acquire new A320s quickly
enough, the airline successfully sourced

the necessary aircraft on the secondary
market. This is something that would have
been considered inconceivable not so many
years ago. More recently, we are aware of
flag-carriers and other well-known, major
airlines having to reconsider their options
as existing aircraft leases begin to reach
maturity and redelivery dates loom. When
those airlines commenced some of their
operating leases on certain narrowbodies,
their expectations were that at lease-end
the aircraft would simply be redelivered and
replaced with new equipment. The backlog positions at Airbus and Boeing have
now forced those airlines to seek lease
extensions (and not always with success)
on their existing older aircraft to ensure
that demand for ever greater capacity can
continue to be met.
These backlogs have been driven by the
ever-increasing global demand for more
and more aircraft. This demand has come
not just from the well-understood emerging markets in Asia-Pacific but also from
the advanced aviation markets of North
America and Europe. According to the latest Airbus Global Market Forecast (GMF), by
2032 around 60 percent of all traffic will
still involve the advanced aviation markets.
The fastest-growing region is expected to
be the Middle East, with a forecast growth
rate of 7.1 percent per annum between now
and 2032, accounting by then for around
12 percent of all traffic carried. Worldwide,
the growth figure is forecast to be 4.7 percent per annum. Again, from the Airbus
GMF, by 2032 the fleet of passenger aircraft
with 100+ seats and of freighter aircraft
Continued on page 43
Jetrader  *  Fall 2014 41



Jetrader - Fall 2014

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

A Message from the President
Calendar/News
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.com
Advertiser Index
Jetrader - Fall 2014 - cover1
Jetrader - Fall 2014 - cover2
Jetrader - Fall 2014 - 3
Jetrader - Fall 2014 - 4
Jetrader - Fall 2014 - 5
Jetrader - Fall 2014 - 6
Jetrader - Fall 2014 - A Message from the President
Jetrader - Fall 2014 - 8
Jetrader - Fall 2014 - 9
Jetrader - Fall 2014 - Calendar/News
Jetrader - Fall 2014 - 11
Jetrader - Fall 2014 - Reach for the Stars
Jetrader - Fall 2014 - 13
Jetrader - Fall 2014 - 14
Jetrader - Fall 2014 - 15
Jetrader - Fall 2014 - Beauty Contest
Jetrader - Fall 2014 - 17
Jetrader - Fall 2014 - 18
Jetrader - Fall 2014 - 19
Jetrader - Fall 2014 - 20
Jetrader - Fall 2014 - 21
Jetrader - Fall 2014 - 22
Jetrader - Fall 2014 - 23
Jetrader - Fall 2014 - 24
Jetrader - Fall 2014 - 25
Jetrader - Fall 2014 - 26
Jetrader - Fall 2014 - 27
Jetrader - Fall 2014 - Boeing’s Current Market Outlook for 2014
Jetrader - Fall 2014 - 29
Jetrader - Fall 2014 - 30
Jetrader - Fall 2014 - 31
Jetrader - Fall 2014 - Aircraft Recyclers Debate the Coming ‘Tsunami’ of Retired Aircraft
Jetrader - Fall 2014 - 33
Jetrader - Fall 2014 - 34
Jetrader - Fall 2014 - Engine Support Plans Shift Market
Jetrader - Fall 2014 - 36
Jetrader - Fall 2014 - 37
Jetrader - Fall 2014 - 38
Jetrader - Fall 2014 - 39
Jetrader - Fall 2014 - 40
Jetrader - Fall 2014 - The Second Life of Aircraft: Does It Still Exist?
Jetrader - Fall 2014 - 42
Jetrader - Fall 2014 - 43
Jetrader - Fall 2014 - Restructuring Aircraft Leases in Bankruptcy
Jetrader - Fall 2014 - 45
Jetrader - Fall 2014 - 46
Jetrader - Fall 2014 - Aviation History
Jetrader - Fall 2014 - 48
Jetrader - Fall 2014 - 49
Jetrader - Fall 2014 - 50
Jetrader - Fall 2014 - 51
Jetrader - Fall 2014 - 52
Jetrader - Fall 2014 - Aircraft Appraisals
Jetrader - Fall 2014 - 54
Jetrader - Fall 2014 - 55
Jetrader - Fall 2014 - ISTAT Foundation
Jetrader - Fall 2014 - 57
Jetrader - Fall 2014 - Advertiser Index
Jetrader - Fall 2014 - cover3
Jetrader - Fall 2014 - cover4
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