Aircraft Market Monitor: Strong Order Surge and Value Recovery

The latest Aircraft Market Intelligence Reports (AMIRs) published by IBA underline the strengthening order position and positive underlying value trend in the commercial aircraft market.

The quarterly reports from the aviation market intelligence and consultancy company reveal that the Airbus A320neo family locked in the majority of the narrowbody orders at the 2023 Paris Air Show in June, with a record 500 aircraft order from IndiGo. Airlines also placed significant commitments for widebody aircraft at the show, including around 50 Airbus A350s and 30 Boeing 787s.

New narrowbodies
IBA’s data shows the Boeing 737 MAX 8 aircraft fleet is now accelerating, with over 1,100 deliveries. Parking and storage declined compared to previous quarters against a backdrop of strong demand and continued return-to-service following the earlier grounding of the type. Lease rates for the aircraft were in the mid-US$300,000 range per month in the second quarter, with similar lease rate performance exhibited by the Airbus A320neo.

Elevated new aircraft demand was evidenced by a strong spread of orders at the Paris Air Show, highlighting how operators looked to lock in future delivery positions for fleet growth and renewal. The Airbus A320neo family attracted the bulk of the narrowbody orders in Paris, which included a record order from IndiGo for 500 aircraft. Boeing also won new orders for its MAX family in the second quarter, with lessor Avolon placing an order for 40 737 MAX 8s at Paris. Additionally, Ryanair firmly committed to 150 Boeing MAX 10s, the largest variant of the MAX family, in May, plus options for a further 150.

Market values of the MAX 8 and A320neo continue to converge, a trend expected to continue through the third quarter. New examples of both aircraft types are exhibiting values in the US$51.5-53.0 million range during the second quarter, with a slight yet narrowing premium for the A320neo. IBA’s insights reveal that strong demand, escalation in new aircraft pricing and the continued high-interest rate environment will drive further increases in values and lease rates of this asset class through the third quarter of 2023.

Used narrowbodies
The positive trend of value recovery continues for the used narrowbody segment as well, with the market value of the popular Boeing 737-800 continuing to trend back towards the base value. The popularity of this aircraft, both in passenger markets and the freighter conversion space, has supported this movement, which is forecast to continue into the third quarter.

A similar trend has been seen with the competing Airbus A320ceo, and whilst the aircraft was lagging in value performance last year, the recovery relative to its peer reported in the first quarter has continued to manifest. The used narrowbody market is proving to be an important source of capacity for airlines to fill their Northern Hemisphere summer schedules, with deliveries of new aircraft remaining subdued.

Although A320ceo values are recovering, the B737-800 retains a premium, with a 10-year-old example of the former residing below US$20 million in the second quarter, compared to the B737-800, which exhibited values in the low US$20 million range.

Feedback from the market suggests a notable uptick in lease rates, supported by competition between airlines to take delivery of available assets. This can be a leading indicator of value performance, so IBA adopts a positive value outlook for this sector of the narrowbody market through 2023.

New widebodies
IBA’s data shows that new widebody aircraft, including the Airbus A350, Boeing 787 and Airbus A330neo, are benefitting from the recovering long-haul markets post-Covid, and the slow supply of new aircraft from the OEMs. To capitalise on this long-term recovery, airlines placed significant commitments for widebody aircraft at the Paris Air Show. Customers committed to around 50 Airbus A350s and 30 Boeing 787s, with the B787-9 and A350-1000 proving to be the most popular variants.

The B787-9 has received the strongest demand throughout the Boeing 787 Dreamliner programme, as the demand has shifted materially from the -8 to the -9 throughout. Likewise, the A350-900 has seen the most demand in its family, with orders approaching 800, and deliveries rising towards 500.

Recent order activity appears to be concentrated on the larger A350-1000 variant. While it is yet unclear whether this will develop into a longer-term trend, a strong operator base, attractive payload range capability and a large Boeing 777-300ER fleet of over 800 aircraft in need of longer-term replacement suggest it might. This is particularly true as the entry-into-service of the Boeing 777-9 is not due until 2025.

Data from IBA Insight shows the market values of the new widebody class continue to recover through the second quarter, with a positive outlook for the remainder of 2023. New Airbus A350-900 aircraft values in Q2 2023 were around US$150 million depending on specification, whilst the value of a new A350-1000 approached US$170 million. The Boeing 787-10 attracted values approaching US$160 million for a new aircraft, whilst the mid-size 787-9 was valued in the low-US$140 millions.

Used widebodies
The mid-life widebody market also benefited from the continued resurgence in long-haul travel. Whilst IBA has yet to see a full recovery in international traffic to pre-pandemic levels, supply chains and labour shortages have shifted a focus to retaining existing fleets, reactivating stored aircraft and bringing in previous-generation aircraft to add capacity. Although storage and parking levels of the Airbus A330ceo family appear relatively high at over 20% of the fleet, there is demand for aircraft in well-maintained condition.

Demand for A330-300 passenger-to-freighter conversions, combined with rebounding passenger demand, has improved the outlook for values and lease rates. A 10-year-old A330-300 aircraft in half-life condition attracted a market value approaching US$20 million in in the second quarter, and lease rates in the low-US$200,000 per month range.

The Boeing 777-300ER is a beneficiary of the recovery in traffic between Europe and Asia and the steady weekly growth in long-haul country pairs. Lease placements more than doubled in the second quarter, with flag carriers including Qatar Airways and Turkish Airlines taking aircraft on lease. Such improved demand, set against a backdrop of continued lease extensions amongst key operators, creates a promising outlook for values and lease rates through Q3 2023.

In the second quarter, a five-year-old Boeing 777-300ER was valued at around US$61 million in half-life condition, whilst a typical 10-year-old aircraft was in the low- to mid-US$30 million range. As well as this, Boeing 777-300ER lease rates were around US$350,000 per month. However, some lease extensions were observed at higher rates.

Freighters
The data in IBA’s AMIRs also reveal insights into the freighter market. IBA previously reported that the value performance of the Airbus A330‑300P2F has continued to show resilience, despite a softening cargo market. A backdrop of increasing feedstock pricing and declining supply is contributing to this trend. IBA continues to observe aircraft being acquired with conversion in mind, with a 2012 example acquired in the second quarter for conversion and operation with DHL.

A330-300 P2F aircraft in the 2007 to 2013 vintage range attracted a Market Value in the mid‑US$30 million to mid-US$40 million range in quarter two.

Despite the dwindling feedstock and strategic move towards the newer A330 conversion products by some of the major operators, including DHL and Amazon, conversions of passenger Boeing 767-300ER aircraft to freighters continued at IAI Bedek’s Tel Aviv conversion facility in the second quarter. Half-life market values in the mid-to high-US$20 million range could be achieved in quarter two for recently converted aircraft with mid-2000 vintages. Lease rates in the second quarter were broadly in the mid-to high-US$200,000 per month range.

In the factory freighter market, the Boeing 777F continues as the only OEM in-production option, and the aircraft is enjoying stable values and lease rate performance. New aircraft in quarter two attracted a market value in the high-US$150 million to low-US$160 million range. Monthly lease rates were between US$1.25 and US$1.35 million, depending on credit and lease terms.

Continued strengthening in the passenger B777-300ER market should keep feedstock in tight supply and limit the pace of conversion. With the A350F still four years away and the B777-8F longer still, the Boeing 777F should continue to enjoy a positive outlook over the coming years.