Aircraft transitions in 2019 – full year market commentary

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Aircraft transitions in 2019

Full year market commentary

Rolls-Royce Trent-powered widebody aircraft continue to be the preferred solution on the transitions market in 2019.

After four great years for widebody aircraft transitions (which averaged 156 aircraft per year), it comes as little surprise that 2019 was more subdued, with a total of 87 aircraft transitioned. The availability of popular aircraft was decreasing towards the end of 2018 and it takes on average a year for a widebody aircraft to transition to a new operation. In retrospect, the 2018 performance was remarkable with the level of airlines bankruptcies that forced aircraft into the market.

There have been a number of airline bankruptcies in 2019, with 23 carriers going out of service including widebody operators Thomas Cook, XL Airways, WOW Air, Avianca Brazil, and Jet Airways, resulting in an increased volume of unplanned lease returns / repossessions and parked / stored aircraft, thus creating increased supply and impacting on lease rates and returns.

While in 2018 the majority of aircraft made available due to airline bankruptcies were placed in just a few months, we expect the aircraft made available through 2019 to return to the typical interval of around ~1 year, driving higher transitions in 2020.

A330s continue to lead the transitions market

As in 2018, the Airbus A330 proved the most popular aircraft type to transition with 33 aircraft representing 38% of the total widebody transitions market; an increase of nearly 10% year on year.

Trent 700 powered Airbus A330

A330s continue to lead the transitions market

As in 2018, the Airbus A330 proved the most popular aircraft type to transition with 33 aircraft representing 38% of the total widebody transitions market; an increase of nearly 10% year on year.

Flexibility in mission capability, outstanding reliability and durability, and an increasingly competitive cost of ownership over the second and third leases continues to make the A330 a popular choice with operators considering a used widebody aircraft.

The Rolls-Royce Trent 700 engine was again the clear market leader (for the fourth year running) on transitioned A330s, taking nearly 80% market share with 26 aircraft. The majority of these aircraft joined existing operators’ fleets of Trent-powered A330s such as Turkish Airlines (3 a/c), Sichuan Airlines (3 a/c), and Thai AirAsia X (2 a/c).

It is also notable that Air Canada has continued to grow their fleet with five Trent 700-powered A330s (operating leases with Aircastle and AerCap), and the airline is the first Trent 700 engine fleet to be covered by a TotalCare Flex agreement, which provides all the time-on-wing and risk transfer benefits of a traditional TotalCare, but with additional focus on the end-of-life flexibility required as the asset matures and progresses towards a retirement scenario. DHL (European Air Transport) also continued to grow their fleet with the purchase of three further used aircraft taking their fleet to six Rolls-Royce powered A330 freighters.

Trent 800 on the Boeing 777

Although the second highest volume aircraft type to be transitioned in 2018 (34 aircraft), the number of Boeing 777 transitions reduced to just 12 aircraft in 2019, with a small number of airlines adding these legacy aircraft types to their fleets, including Cathay Pacific, Air Peace (Trent 800-powered), and Royal Flight, Azur Air Russia (GE90-powered). A similar reduction was seen in Boeing 767s which reduced from 34 aircraft last year to just 15 aircraft in 2019.

Boeing 747s Freighters continued to transition well, with 12 aircraft being leased or purchased in 2019, at an average age of over 21 years. Freight operators such as Atlas Air, National Airlines, and Cargolux are adding aircraft to their fleets.

RB211-524 powered Boeing 747

European operators continued to absorb the vast majority of used aircraft with 42 aircraft (nearly half the total transitions market volume). The Airbus A330 continued to be the significant aircraft volume in region, with two thirds of all A330 transitions being to European airlines, predominantly via operating lease rather than purchase, although this dynamic may change in the future as more operator-owned assets become available to purchase.

North America operators transitioned 22 aircraft, predominantly Boeing 767s and 747s freighters, while Asia Pacific airlines took just 13 aircraft, including five Trent 700-powered A330s. Latin America and the Middle East regions took single figures of used aircraft (6 and 2 aircraft respectively), as did Africa.

Rolls-Royce have 46% of the widebody aircraft transitions market.

Rolls-Royce is the clear leader among the engine OEMs

Among the engine OEMs, Rolls-Royce continued to be the clear market leader with 40 widebody aircraft transitions (46% of the market), with a market-leading position in both the Airbus A330 (26 aircraft) and Boeing 757 (6 aircraft) product types, and 15 further transitions (mainly through purchase) of the legacy Airbus A340, and Boeing 777s.

General Electric regained second position with 27 used aircraft transitions, spearheaded by the legacy aircraft types, particularly Boeing 767 (9 aircraft) and 747s (7 aircraft).

Pratt & Whitney have reverted to their ‘typical’ volume of used aircraft transitions with only 18 aircraft, a reduction of 32 aircraft year on year - a large volume of PW4000-powered Airbus A330 aircraft were re-homed in 2018 following the collapse of airberlin.

Stored aircraft volumes rising whilst aircraft retirements remain as expected

Stored widebody aircraft volumes grew throughout 2019 from 437 aircraft to 500 aircraft, with the stored numbers of Airbus A330s seeing the largest change (+40 aircraft spread across all three engine OEMs), driven in part by airline bankruptcies. Rolls-Royce through its Lessor and Airline customer teams continues to actively support the owners of these assets to transition the aircraft back into operation as quickly and efficiently as possible.

Widebody aircraft retirements continued as expected, with a change in the mix of aircraft retired in 2019. Retirement volumes across legacy Boeing aircraft types (747, 767, 757) in 2019 was 38 fewer aircraft than in 2018, with 62 aircraft being permanently withdrawn from use.

However, the volume of Airbus A330s withdrawn from service doubled, with 21 aircraft retired in 2019 that included 11 PW4000-powered vintages averaging nearly 22 years old. The eight Rolls-Royce-powered aircraft retired have been parted out and now support our large in-service customer base with serviceable used material and additional spare engine capacity.

Outlook for 2020

It is anticipated that with continued focus, effort and industry collaboration, transition volumes will recover back to levels seen over the past few years during 2020.

In 2020 we expect to see a pick-up in transitions as we place the aircraft that have been parked in 2019 due to these bankruptcies.

Rolls-Royce will continue to offer a choice of innovative and flexible CareServices that are key to supporting our lessor and airline customers. Services such as LessorCare enable leasing companies to access specific services, including LifeKey, during the periods which they are responsible for the aircraft, typically focused on preparing the aircraft to be remarketed, or ensuring a swift and efficient re-entry into service with the next operator.

There are now over 30 LessorCare customers covering over half of the leased Rolls-Royce widebody fleet, with new customers coming on board on a weekly basis. Rolls-Royce is fully aligned with both the airline and the lessor, in that all benefit when the aircraft is in service carrying passengers or freight around the world.

It will be another fascinating year working in this dynamic and considerably different area of the civil aerospace industry. We will continue to keep you informed on the market performance throughout 2020.