Airbus and Boeing managed to register record deliveries for 2018 but this has not adversely impacted values even though there was an opportunity for many new aircraft to act as replacements.
With traffic levels still above the long term trend of five percent, albeit slowing, this growth needs to be seen in the context of expansive growth over the last decade. This means that the manufacturers are still failing to meet demand and that new aircraft are not displacing older aircraft to such an extent that values are falling. Indeed, even with Airbus and Boeing delivering some 1,606 (including the A220) aircraft during 2018, a total of 1,640 net orders were recorded facilitating an extension to the backlog which now numbers some 13,500 aircraft. Little wonder that Airbus are exploring the possibility of increasing production to 100 narrowbodies per month.
The seemingly large number of deliveries needs to be placed into the context of a fleet that now numbers some 29,000 commercial jets and as such represents some five percent of the fleet. In 2009, there were 1,208 deliveries which represented 5.4 percent of the fleet; in 1999 there were 1,130 deliveries with a fleet of 15,000 representing 7.5 percent of the installed fleet. This demonstrates that the delivery rates are lower than historical trends which suggests that the retirement of older aircraft is not so prevalent. While there are age and environmental restrictions in some countries, in contrast to the 1990’s there is no enforced retirement such as Chapter 3 limits.
Older aircraft are not being replaced to the extent expected. The year 2017 saw a spike in retirements to 869 due to the scrapping of CRJ200s, DC9s and MD80s, none of which had meaningful asset values. In 2009 some 1.8 percent of the fleet was retired but for the first nine months of 2018 there were only 300 retirements which equates to 1.3 percent, this despite delivery rates increasing by more than 30 percent. Values, where they have declined, have been falling more in response to a lack of inflationary pressures and lower lease rentals.