Jetrader - Autumn 2015 - 33

The Second Life of
Commercial Aircraft
Experts provide insight into the used aircraft market

A
By Benét J. Wilson

As Airbus and Boeing continue to post
record commercial orders, it begs the question: What are the best options for a second
life for used aircraft? We polled market
experts to get their thoughts.
David Yu, based in Beijing, is the CFO and
managing director of Inception Aviation
Holdings Limited, an aircraft leasing and
finance company. He is also an adjunct
professor of finance at New York University
Shanghai and executive director of Asia
for IBA Group.
"It's a fact that there are many new
aircraft on the order books. What I see,
as an airline, is I can't get new planes
when I want them, so I have to go to
the used aircraft market," he said. "In
China, we have a lot of new airlines that
want new aircraft, but they can't get them
because they can't wait two or three years
for them. So they are more interested in
having three- to seven-year-old aircraft.
So that's not an old aircraft, but a second
lease has made things quite interesting in
the Asia market."
The most popular used aircraft in Asia
right now are the A320, and 737-800s, said
Yu. "These are bread-and-butter mainline
aircraft," he said. "A330s and 777s are
popular with the longer-haul carriers in
Southeast Asia. People are definitely looking more at used aircraft because of the
fact that oil has been cheaper. A lot of
companies are not hedging, so it helps the

bottom line and reinforces the viability of
older aircraft."
When it comes to dismantling and partout aircraft, Air China and other legacy
carriers are selling old aircraft to partout companies, said Yu. "There should be
more demand in the region for replacement
aircraft as newer aircraft come online,"
he said.
As for where for used aircraft can go, Yu
said that Africa is always a home for them.
"Europe is also taking second-hand aircraft.
But if a place like Iran opens up, there could
be even more demand," he said. "They're
basically in need of parts and aircraft, so
the floodgates will open."
In the old days, Africa was the natural
home for used aircraft, said Mark Gregory,
CEO and managing director of UK-based
Air Salvage International, an aircraft parts
and salvaging company. "But now the rules
say you can't take on aging aircraft, so it's
difficult to say which regions will be the
best markets for aging aircraft," he said.
Adrian Lee is the CEO of UK-based Probus
Aviation Limited, which remarkets commercial aircraft. The market for second-life
aircraft depends on the aircraft type, he
said. "If we're talking aircraft like older
types such as B737-400s, some of those
are going to the freight conversion route,
whereas newer types such as the A320-200
and B737NG aircraft maintain a strong
demand," he said. "We are a remarketing

company, so our particular specialty is to
place aircraft in the secondary market."
Looking at the used aircraft market,
options really depend on age, said Gregory.
"Second-life aircraft over 12 years old does
leave plenty of opportunity to keep them
operational," he said. "But when you get to
aircraft that returned around 15 years old,
it really depends on the aircraft type and
where it was operated whether the owner
sells or consigns the aircraft for part out or
keeps it operational," he said.
Gregory said his company averages
between 50 and 60 aircraft a year between
the ages of 10 and 15 years old. "Finding
another operator on an aging aircraft can
sometimes be tough, but is still by far
your best bet," he said. "Some aircraft,
like the 747-400, have seen values plummeting quickly due to high maintenance
costs. But the longer you can keep aircraft
flying, the better."

Part-Out Options
Disassembly of narrowbody aircraft is
often more desirable than widebody when it
comes to parting out older aircraft, Gregory
said. "Forty percent of our inventory are
A320s, A321s and A319s," he said. "The
remaining components are 747-400s, 737
CLs, NGs and 767s."
Gregory's company is also seeing newer
generation aircraft. "We recently took
delivery of an Embraer E170, which is a
Jetrader  *  Autumn 2015 33
Jetrader - Autumn 2015

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