ISTAT Jetrader - Autumn 2020 - 44

APPRAISAL

Aircraft Part-Out
Analysis
David Rushe
ISTAT Certified Appraiser
Magellan Aviation Group

david.rushe@magellangroup.net
www.magellangroup.net

Photo courtesy of Natascha Greenier of Magellan.

T

he validity of the
traditional 25-year
aircraft economic
life model has
been one of the
foremost talking
points for aircraft
valuations during the last decade given
the rate of new and upgraded aircraft
types entering the market. Key to this
discussion has been the end-of-life
Residual Value of an aircraft, which
makes retirement and part-out a
realizable option in terms of revenue
generation for the owner. The impact
of COVID-19 has led aircraft owners
to reassess their fleet plans in light of
falling passenger demand, weakened
economic activity and downward
pressure on aircraft trading values,
which will likely result in increased
part-outs.
The underlying value of a mature
aircraft is influenced by factors such
as replacement technology options,
fuel burn, (re)financing costs and
global economic activity. In addition,
an aircraft typically reaches a point
in its operating life when the cost of
upcoming maintenance events takes
on a more critical role in determining
how long it can economically remain in
service. From a lessor perspective, the
presence or absence of maintenance
reserves will also play a role in the
aircraft part-out decision. The reserve
"pot" retained by the lessor and the

44

* T H E O F F I C I A L P U B L I C AT I O N O F I S TAT

The A320ceo and 737NG market segment has been
a competitive space for lessors and financiers over the
years; this trend is reflected in the part-out market.
realizable trading value of an asset in
the market can often be more attractive
then re-leasing and undertaking the
associated transition costs.
The A320ceo and 737NG market
segment has been a very competitive
space for lessors and financiers
over the years, and this a trend that
is reflected in the part-out market.
For the past three to four years, any
737NG or A320ceo asset that was
offered for part-out saw a high degree
of competing bids from new and
established aftermarket players. As a
result, part-out values have held firm.
Prior to COVID-19 (and it continues
to be the case), the most commonly
offered A320ceo family teardown asset
was the A319. This article will take a
look at one and discuss the A320ceo
family more generally. Magellan
Aviation Group estimates the partout value of a 15-year-old V2524-A5
powered A319 as follows:
The engines assume approximately
two years of green time remaining at
lease rates of $45,000 per month plus
reserves, at which point a discounted
part-out Residual Value is applied

(COVID-19 has made forecasting
Residual Value more difficult). Lifelimited parts (LLPs), high-pressure
turbine (HPT) blades, fan blades, HPT
nozzles, and core and low-pressure
turbine (LPT) hardware form the bulk
of the part-out value for the V2500-A5
in addition to line-replaceable units
(LRU) and accessories including the
integrated drive generator (IDG), starter
and hydromechanical unit (HMU).
Core values now range from US$1
million upwards.
Should an A320ceo family
aircraft have engines with green
time remaining, the V2527-A5 and
V25333-A5 engines are expected
to have a premium over the 22k
or 24k-rated options on the A319.
V2500-A5 nacelle items (inlet cowls,
thrust reversers, fan doors and the
common nozzle assembly) used to
have a value premium over equivalent
CFM56-5B units, but this has eroded
somewhat in recent years as the
number of part-outs has increased.
APUs that are close to an LLP limiter
or run-out in terms of exhaust gas
temperature (EGT) margin, a key


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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
ISTAT Jetrader - Autumn 2020 - 16
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
ISTAT Jetrader - Autumn 2020 - 24
ISTAT Jetrader - Autumn 2020 - 25
ISTAT Jetrader - Autumn 2020 - 26
ISTAT Jetrader - Autumn 2020 - 27
ISTAT Jetrader - Autumn 2020 - 28
ISTAT Jetrader - Autumn 2020 - 29
ISTAT Jetrader - Autumn 2020 - 30
ISTAT Jetrader - Autumn 2020 - 31
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ISTAT Jetrader - Autumn 2020 - 34
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ISTAT Jetrader - Autumn 2020 - 36
ISTAT Jetrader - Autumn 2020 - 37
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ISTAT Jetrader - Autumn 2020 - 40
ISTAT Jetrader - Autumn 2020 - 41
ISTAT Jetrader - Autumn 2020 - 42
ISTAT Jetrader - Autumn 2020 - 43
ISTAT Jetrader - Autumn 2020 - 44
ISTAT Jetrader - Autumn 2020 - 45
ISTAT Jetrader - Autumn 2020 - 46
ISTAT Jetrader - Autumn 2020 - 47
ISTAT Jetrader - Autumn 2020 - 48
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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