Jetrader -May/June 2013 - 22

However, Jiang said it’s imperative to
specify which surrogate is being used for
the calculation to ensure a meaningful
quantitative analysis.

Research Results Indicate
Stable Life
After looking at all the commonly
used surrogates for aircraft economic
life, the Boeing team’s findings indicate
that—whatever the measure in common
use—the results derived from the concept
as defined show that economic life has
remained stable for more than 15 years
(see Chart: Multiple Measures Support a
Constant Economic Life Assumption Over
the Past 15 Years).
And in response to anecdotal comments about early retirements of currentgeneration airplanes like the 737 Next
Generation and the Airbus A320, Boeing’s
research shows that their trends are in line
with the history of their predecessors, with
no meaningful change over the last two
decades, and going forward.
Harkening back to her work on Boeing’s
annual Current Market Outlook, Jiang
recalled that the latest report reflects
the same view—with the forecasted need
for 34,000 new jetliners over its term, of
which 41 percent are expected to be for
replacements and 59 percent for growth.
Jiang and her colleagues are developing
an in-depth technical paper based on their
research to be available in the near future.
For the recent ISTAT Americas event
in Orlando, the Boeing team developed a
white paper that elaborates on the findings
discussed in this article. It can be found
in the form of a downloadable PDF on the
Boeing Commercial Airplanes website at
www.boeing.com/assets/pdf/commercial/
aircraft_economic_life_whitepaper.pdf.
Meanwhile, the Boeing researchers
are more than open to discussing their
approach and findings.

Multiple Measures Support a
Constant Economic Life Assumption
Over the Past 15 Years

Years since delivery reaching 50% survival
35

Single-Aisle
In-service & parked pax/frtr
Single-Aisle
In-service pax/frtr
Twin-Aisle
In-service & parked pax/frtr
Twin-Aisle
In-service pax/frtr

30
25
20
15
1980

1985

1990

1995

2005

2010

Note: Regional jets (90 seats and
below) are excluded.

Average Age (year)
40
35

Freighter age
at scrapped

30

Freighter age
at leaving service

25

Pax a/p excl. RJ age
at scrapped

20

Pax a/p excl. RJ age
at leaving service

15
1980

1985

1990

1995

2000

2005

2010

The upper chart shows historical trend lines for airplane cohort survival rate between 1980
and 2012. The vertical axis represents the number of years between delivery of a typical
cohort of airplanes and the date at which 50 percent of the airplanes in that cohort have
been retired. Single-aisle cohorts are represented in light blue and twin-aisles in dark blue.
The dotted lines track the total surviving fleet, including in-service and parked airplanes.
The solid lines track the revenue-generating fleet, which includes only in-service airplanes.
According to Boeing’s findings, each line shows that airplane retirements have remained stable
for more than 15 years. The manufacturer said that in analyzing similar data, care should
be taken to ensure that that nominal volatility in the data does not indicate a trend line,
so it looked carefully at the data’s long-term trends.
The lower chart depicts the trends of the average age of single-aisle and twin-aisle airplanes
that have been permanently removed from commercial service. The solid lines represent the
average age at which the airplanes leave service. The dashed lines represent the average
age at which the airplanes are scrapped. The difference between the solid and dashed lines
reflects the time that the airplanes are in storage prior to being scrapped. The trend lines
show that the average airplane age at end of service has remained stable for more than
15 years, gradually increasing as technology advances have been implemented. Over time,
significant events, regulation and technology shifts have had impactful influence on the data,
although often over only limited periods. These help explain some of the variation and data
noise in the trends observed. The decline in average age of retired airplanes over the last two
to three years is very likely caused by the combined outcome of trend correction, impact of
the great recession, a weak cargo market and parting-out some young airplanes. At present,
the industry is experiencing the initial wave of 737 Classic, MD80 and A320 retirements; and
the volume of 737 Classic and MD80 retirements echoes their delivery cycle. Consequently, the
average ages of passenger airplanes at the time of their leaving service and being scrapped
are likely to fluctuate as this wave passes through.
“We’re happy to share the process,” Jiang
said, inviting those with questions to contact
her at helen.jiang@boeing.com.

Editor’s note: Thanks to Boeing for supplying
the editorial content for this story.

Question: How would you
evaluate the economic life of
this cohort?

Uncovering Economic Life Definitions
Example:
Given a cohort of six airplanes (all exactly the
same and produced in the same year), having the
following status:
• scrapped at 20 years old
• scrapped at 22 years old
• scrapped at 24 years old
• scrapped at 26 years old
• scrapped at 35 years old
• flying at 36 years old

2000

One can calculate:
The average age of this cohort is 27.2 years
and growing, (20 + 22 + 24 + 26 + 35 + >36)/6. It
is important to note that the average age of this
cohort will continue to grow as there is still one
airplane flying.
The average useful life of this cohort is 27.2 years
and growing, the calculation is the same as above.
The 50 percentile survival age is 24 years, at
which half of the cohort is scrapped.
Excerpt from the ISTAT Appraiser Handbook.

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

LIFE, ECONOMIC USEFUL (from ISTAT
Handbook)
As it pertains to an aircraft or
engine, the economic useful life is
the period of time over which it
is (or is expected to be) physically
and economically feasible to operate it in its intended role. Periodic
maintenance and repair will usually
be required in order to preserve
safety and effic iency during the
economic useful life.


http://www.boeing.com/assets/pdf/commercial/aircraft_economic_life_whitepaper.pdf http://www.ISTAT.org

Jetrader -May/June 2013

Table of Contents for the Digital Edition of Jetrader -May/June 2013

A Message from the President
ISTAT Calendar/News
Despite Challenges in United States and Abroad, Optimism Abounds at ISTAT Americas 2013
Defining Airplane Economic Life
The Future of Freighters
Trends in Aircraft Values
Aircraft Appraisals
ISTAT Foundation
Advertiser.com/Advertiser Index
Jetrader -May/June 2013 - cover1
Jetrader -May/June 2013 - cover2
Jetrader -May/June 2013 - 3
Jetrader -May/June 2013 - 4
Jetrader -May/June 2013 - A Message from the President
Jetrader -May/June 2013 - 6
Jetrader -May/June 2013 - 7
Jetrader -May/June 2013 - ISTAT Calendar/News
Jetrader -May/June 2013 - 9
Jetrader -May/June 2013 - Despite Challenges in United States and Abroad, Optimism Abounds at ISTAT Americas 2013
Jetrader -May/June 2013 - 11
Jetrader -May/June 2013 - 12
Jetrader -May/June 2013 - 13
Jetrader -May/June 2013 - 14
Jetrader -May/June 2013 - 15
Jetrader -May/June 2013 - 16
Jetrader -May/June 2013 - 17
Jetrader -May/June 2013 - 18
Jetrader -May/June 2013 - 19
Jetrader -May/June 2013 - 20
Jetrader -May/June 2013 - Defining Airplane Economic Life
Jetrader -May/June 2013 - 22
Jetrader -May/June 2013 - 23
Jetrader -May/June 2013 - The Future of Freighters
Jetrader -May/June 2013 - Trends in Aircraft Values
Jetrader -May/June 2013 - 26
Jetrader -May/June 2013 - Aircraft Appraisals
Jetrader -May/June 2013 - 28
Jetrader -May/June 2013 - 29
Jetrader -May/June 2013 - Advertiser.com/Advertiser Index
Jetrader -May/June 2013 - cover3
Jetrader -May/June 2013 - cover4
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