ISTAT Jetrader - Autumn 2020 - 38

Air Travel Resiliency

Annual Passengers (millions)

Air Travel Resilient Despite Financial
and Geopolitical Challenges

1

Source: Boeing Commercial Outlook 2019-2038

The Aviation Cycle
Air Travel Resilient Despite Financial
and Geopolitical Challenges

Source: IBA, The New Curve: Understand, navigate and adapt to the complexities and challenges in the
wake of Covid-19, 11-Jun-2020

1

Backlogs matter a lot to manufacturers, but
I'm not sure they are a good indicator of long-term
deliverability of demand.
created. This is an acknowledgement
of global governmental recognition that
the air transportation network is public
transport, and it is the most efficient
public transport because it is the
one that requires the least amount of
subsidization by the governments and,
in heathy periods, generates a lot of
taxes. But it is absorbing the short-term
demand decline. So, the question is,
what does the future hold, and what
are the consequences to the other
38

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participants in the market? We have
to look at the pressure points in the
system and how we see that playing
out on people who buy airplanes and
people who build airplanes.
Past downturns, primarily 9/11,
give us a good sense that if you have a
prolonged softness in the market and
overcapacity, then the single aisle -
the most ubiquitous aircraft - is likely
to see value declines in the range of
about 15%, and lease rates in the range

of 20%. Those are interesting numbers
because in the past downturns, I've
had many debates with friends whether
those numbers really indicate the
degree of volatility or the extremes of
volatility in aircraft values, because
when you have such a significant shift
in aircraft values, what happens is a
lot of market participants in the current
environment are financially strong
entities, and they're not obliged to trade
or get rid of their assets in the down
market. What happens, and what we've
seen consistently in the past several
downturns, is people simply sitting on
those assets, and so the theoretical
value may be 15-20% lower. But there's
not much trading in those valleys, so
the bid and the ask are quite wide.
Widebodies, being less liquid, have a
higher degree of volatility and probably
longer holding times. What we've
seen is about a 20% decline in the
extremes in values and maybe 25% in
lease rates, which means a much more
narrow market, much less liquidity and
much more expensive aircraft transfers.
Consistently - we're starting to see
it in this downturn, and we've seen it in
every past downturn - people use this
as an opportunity to update their fleets,
first by accelerating the retirements
and then as you start coming out of
the downturn, replacing the retired
airplanes with newer equipment. The
timing is somewhat fortuitous. You
never want a pandemic to be fortuitous,
but we were approaching a bow wave
of retirements, both for single aisles
and widebodies, and that bow wave
probably will move to the left in the
current environment, and you'll see
accelerated retirements both in the
single aisles and widebodies.
What does this all mean for the
businesses of aircraft manufacturers
and people that buy airplanes? Well,
here's where we started the year. First
of all, 2019 saw a decline in deliveries
that had nothing to do with an
underlying demand. That entirely was
a consequence of the MAX grounding.
So we were planning, in 2018, to have



ISTAT Jetrader - Autumn 2020

Table of Contents for the Digital Edition of ISTAT Jetrader - Autumn 2020

ISTAT Jetrader - Autumn 2020 - Intro
ISTAT Jetrader - Autumn 2020 - Cover1
ISTAT Jetrader - Autumn 2020 - Cover2
ISTAT Jetrader - Autumn 2020 - 1
ISTAT Jetrader - Autumn 2020 - 2
ISTAT Jetrader - Autumn 2020 - 3
ISTAT Jetrader - Autumn 2020 - 4
ISTAT Jetrader - Autumn 2020 - 5
ISTAT Jetrader - Autumn 2020 - 6
ISTAT Jetrader - Autumn 2020 - 7
ISTAT Jetrader - Autumn 2020 - 8
ISTAT Jetrader - Autumn 2020 - 9
ISTAT Jetrader - Autumn 2020 - 10
ISTAT Jetrader - Autumn 2020 - 11
ISTAT Jetrader - Autumn 2020 - 12
ISTAT Jetrader - Autumn 2020 - 13
ISTAT Jetrader - Autumn 2020 - 14
ISTAT Jetrader - Autumn 2020 - 15
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ISTAT Jetrader - Autumn 2020 - 17
ISTAT Jetrader - Autumn 2020 - 18
ISTAT Jetrader - Autumn 2020 - 19
ISTAT Jetrader - Autumn 2020 - 20
ISTAT Jetrader - Autumn 2020 - 21
ISTAT Jetrader - Autumn 2020 - 22
ISTAT Jetrader - Autumn 2020 - 23
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ISTAT Jetrader - Autumn 2020 - 27
ISTAT Jetrader - Autumn 2020 - 28
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ISTAT Jetrader - Autumn 2020 - 30
ISTAT Jetrader - Autumn 2020 - 31
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ISTAT Jetrader - Autumn 2020 - 40
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ISTAT Jetrader - Autumn 2020 - 49
ISTAT Jetrader - Autumn 2020 - 50
ISTAT Jetrader - Autumn 2020 - 51
ISTAT Jetrader - Autumn 2020 - 52
ISTAT Jetrader - Autumn 2020 - Cover3
ISTAT Jetrader - Autumn 2020 - Cover4
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