IBA’s September Market Update predicted a number of trends relevant to the aircraft aftermarket. On the traffic- and MRO-driving GDP growth, IBA expects the advanced economics to slow from 1.9% growth in 2019 to 1.7% in 2020. But the emerging economies should accelerate from 4.1% in the current year to 4.7% next year, in IBA’s view.
Partly reflecting the U.S.-China trade conflict, IBA expects India’s economy to outperform China’s, growing at 7% in 2019 versus 7.2% in 2020, compared to 6.2% in 2019 and 6% in 2020 for China.
There are a number of downside risks, of course, to this forecast, including oil prices and the U.S.-Iran disagreement. IBA's head of valuations Mike Yeomanis notes the attack on Saudi Arabia’s oil facility caused spot prices to jump about 15%, from $60 to $69 per barrel. But medium-term oil prices still look low, relative to those of a few years ago.
Leasing continues to increase in importance, and lease duration will influence the volume of transition checks. Yeomanis says only about 500 narrowbody leases have ended annually in recent years, but IBA expects this pace to jump sharply, to more than 800 lease ends per year from 2019-22. If these leases are not extended, that would put pressure on MROs and airlines alike. “Return checks could face delays, and late redelivery penalties may become more common,” says Yeomanis. Another possible effect of the surge in lease ends: retirements could also rise as lessors cash out mid-age aircraft.
Widebodies should also see an increase in leases ending in the next year or two, but not as sharp or prolonged as the narrowbody increase, according to IBA’s forecast.
In addition to lease ends, airline bankruptcies can require transition checks as aircraft are moved to new operators. Yeomanis note that 75% of aircraft freed by bankruptcies are leased, not owned. And in recent years these have generally been quite mature aircraft. The average age of narrowbodies orphaned by airline bankruptcy has been 11 years, while turboprops averaged 15 years old and regional jets averaged 14 years of age. In what has generally been a low fuel-price environment, the fleets of shut-down airlines tend to be mostly narrowbodies, turboprops and RJs, Yeomanis notes.
Most IBA industry contacts expect progress on certification of the 737MAX in weeks, rather than months, and most expect EASA to take a further 1-2 months.