H1 2019 Aircraft Transitions Update

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H1 2019 Aircraft Transitions Update

Trent 700 powered A330 transitions continue to lead the market

The first half of 2019 has seen a significant volume downturn in the widebody aircraft transitions market, with just 50 aircraft transitioning to new operators, a 51% volume reduction on H1 2018. However, Rolls-Royce powered aircraft continue to lead the way in terms of widebody transitions volume, spearheaded by the A330 platform.

Given the consistently low rate of monthly transitions seen across the widebody aircraft types and engine OEMs, 2019 is likely to be the lowest volume of widebody transitions for 5 years. It’s however important to understand the underlying trends and to look beyond the headlines.

Firstly, 2018 volumes may have been artificially high with the distress rehoming of aircraft from several airline bankruptcies in addition to the continued success for legacy aircraft transitions, likely due in part to the economic benefit of a sustained period of relatively low fuel prices seen last year.

The three major engine OEMs (Rolls-Royce, General Electric, and Pratt & Whitney) have all transitioned fewer aircraft than in H1 2018, with Pratt & Whitney suffering the largest reduction, down 68% year on year (mainly due to the H1 2018 one-off benefit in placement of 16 x PW 4000 powered ex-airberlin aircraft). Whilst the overall volume of Rolls-Royce powered aircraft is down year on year (-16 a/c), there are a further 20 aircraft transitions being actively supported (plus 6 aircraft scheduled to return to operation) across both Airbus A330s and Boeing 777s.

Trent 700 for the Airbus A330 family

The A330s continues to be the largest volume aircraft type transitioned with 28% (14 a/c) of the market half-year total volume, with Rolls-Royce’s Trent 700 engine powering 79% (11 a/c) of these transitioned aircraft.

Rolls-Royce has supported 6 lessors, as well as 7 operators including further fleet growth in Turkish Airlines (2 ex-WOW Air aircraft in H1 2019) and European Air Transport (2 aircraft: 1 x ex-China Southern Airlines and 1 x ex-Etihad Airways), as well as Air Canada (2 ex-Singapore Airlines aircraft) – who are also the first Trent 700 operator to agree a TotalCare Flex offering. The agreement will provide the airline all the benefits of TotalCare (time on wing and maintenance cost risk transfer), as well as the ability to apply flexible end of life options, in order to reach the point of retirement with an agreed amount of life remaining.

Transition volumes of mature aircraft types, including Boeing 757s, 767s, and now seemingly 777s have reduced significantly year on year, down 56% with transition volumes falling from 21 at this point last year to 10 in H1 2019.

The total market volume of stored widebody aircraft has remained constant for the past year at 450 to 500 aircraft. However, there have been changes in the aircraft type stored distribution which has impacted the volume of available and desirable aircraft supply. For example, the volume of parked A330s has risen by 50% to around 75 aircraft in H1 2019, with close to a 50/50 mix of owned and leased aircraft. As the average time to transition remains around 12 months, it is likely that a corresponding increase in transition volumes will be seen this time next year.

In addition to a stable stored fleet, the volume of widebody aircraft retirements is consistent with the volumes and aircraft mix seen in 2018 (see table below). As expected, mature aircraft types continue to account for the majority of the 73 widebody retirements in H1 2019: 18 x 767s, 15 x 747s, and 13 x A340. The most significant change in retirement volumes is on the Boeing 757, with a total of 37 aircraft retired in 2018 and just 3 retired in H1 2019. With over 70 757 aircraft in storage the potential exists for further retirements in H2 2019 to support the significant in-service fleet of circa 650 aircraft, with greentime engines, serviceable used material and parts.

Widebody aircraft retirements in 2019. Data source: Cirium - September 2019

Widebody aircraft retirements in 2018. Data source: Cirium - September 2019

As predicted in our H1 2018 article, the growth of widebody transition volumes has been impacted by macro and micro challenges, including: the availability of the ‘right’ aircraft in terms of type, age, seating class configuration, and engine utilisation, all available at the ‘right’ lease rate. As well as macro-economic factors including the impact of a steady rise in the cost of fuel during 2018-19, the above average continuation in passenger and freight traffic and increase in new aircraft order deliveries.

Rolls-Royce continues to offer specifically designed CareServices which support both its lessor and operator customers through every stage of an aircraft’s and engine’s lifecycle, and the potential multiple transition phases – fleet exits, transition period, and entry into service; and continues its focus on supporting quick and efficient aircraft transitions. A fundamental part of this support is accessed via its latest CareService, LessorCare. Launched in January 2018, this lessor-specific service provides a lessor customer with quick and efficient access to all necessary lessor services, and now has 25 of the world’s leading operating lessors signed up, representing over 50% of the Trent leased fleet ownership.

Rolls-Royce is committed to helping and supporting operators and lessors to ‘keep the fleets flying’ and support the transitioning of aircraft to maximise the 2019 opportunities.