As second hand Airbus A380 aircraft start to flow into the market with the likes of Portuguese charter carrier Hi-Fly picking up two of the aircraft grounded by Singapore Airlines last month, asset management specialists see little opportunity in taking the aircraft off the hands of operators for teardown purposes, an ap&m summit panel heard.
Speaking at the summit in London on Tuesday (May 29), Jason Reed, president of Component Solutions Group at GA Telesis, says the company has already been offered two second hand A380s to part-out in recent times but declined the opportunity to do so.
Another is U.S. asset management specialist Werner Aero Services, which runs a teardown operation accounting for around 35% of its business output. According to its president and CEO Mike Cazaz, the company has declined offers to take four of the aircraft off the hands of operators.
“They were offered to us at what I consider to be teardown pricing and definitely not as flyers but instead to be taken out of service,” he says. “The aircraft are serviceable but the owners are so eager to sell them that prices are reduced, however for us it remains still too risky even at the lower price.”
Cazaz remains unsure about the long-term viability of a secondary market for A380s due to two reasons. “First there are relatively few of these aircraft in-service. Second, it’s a market that when the aircraft comes out of its lease-term, it is very challenging to place back into service with another operator mainly due to the cost of refurbishing the aircraft.”
He says with figures such as $30 million to $40 million estimated by some industry analysts for the refurbishment of an A380 cabin, many airlines remain sceptical due to the reconfiguration costs associated particularly with the older variants of the superjumbo which entered into service in 2007. “I believe that to some extent, some carriers have learnt their lesson,” Cazaz says.
“One major airline in Europe I spoke to which operates around a dozen A380s said that when a Boeing 777 goes down with maintenance problems, it can simply be replaced with another of the aircraft. But should one A380 go down, two aircraft are needed to replace it in the fleet due to its size which becomes very challenging and operators are realizing this isn’t an incentive to extend leases.”
Richard Brown, principal at analyst ICF International who chaired the panel discussion centered on global fleet, new generation and retirement forecasts, says airlines have suggested that reconfiguration costs should be closer to the $20 million to $30 million mark to be viable. “There are certainly operators interested in second hand A380s such as IAG but not at the current price of reconfiguration,” he says.
Aviation Week MRO Fleet & Forecast data says the A380 will generate an aftermarket demand of $28 billion from this year through to 2027. In the next 10 years, 252 aircraft are anticipated to be in service by the same data, with the majority of MRO spend $10 billion focused on its two engine types: the Rolls-Royce Trent 900 and the Engine Alliance GP7000.