DUBLIN--()--Avolon, the international aircraft leasing company, today publishes a comprehensive review and analysis of commercial aircraft economic lives and retirement patterns. The purpose of this analysis is to test whether the current assumptions made by airlines, aviation investors and aircraft financiers, on the economic life of commercial jets - that aircraft should be depreciated over a useful life of approximately 25 years - remains valid.
The analysis, the first in a series that will deal with a range of aviation industry issues, considers how trends in aircraft retirement have changed over time and identifies key differences between the behaviour of specific aircraft types. The paper also considers the likely impact on retirement trends and aircraft economic values of the retirement of newer fleets, including current Airbus A320 and Boeing 737NG aircraft. Avolon will host a conference call and webcast to discuss the analysis and its findings at 3pm BST (4pm CET/10am ET) on 2 October, 2012.
The average retirement age for all commercial jet aircraft retired, since commercial jet aircraft began flying in the 1950s, is close to 26 years. Avolon expects 8,000 aircraft to be retired over the next ten years, more than all of the retirements that have taken place since the 1950s. Despite the increasing number of aircraft retirements, Avolon’s analysis confirms that in-service life and average retirement ages continue to support the global aviation industry’s widely used 25 year depreciation assumption. Avolon’s study supports the thesis that the in-service lives of core single and twin-aisle fleets are not experiencing material diminution and that the industry’s economic life assumptions and depreciation policies will remain valid over the next decade and beyond.
Dick Forsberg, author of the paper and Avolon’s Head of Strategy commented:
“The economic life of commercial jet aircraft is an issue of great debate in the aviation industry today. In times of economic uncertainty or around the introduction of new technology, questions are raised around aircraft economic life assumptions made by investors and financiers and whether a permanent shift is taking place in the long-term values ascribed to commercial jets. We are experiencing both of those factors today and we have completed a detailed review of the retirement outlook for the global aviation industry to assess whether a change in valuation and depreciation time horizons is required.”
“Whilst a small number of individual aircraft may suffer value impairment through early retirement, there is strong evidence that the broader patterns of fleet operation and ownership will continue to support current industry value retention assumptions and that that in-service life and average retirement ages continue to support the global aviation industry’s widely used 25 year depreciation assumption.”
A copy of the report is available on the Avolon website at: www.avolon.aero For details of the conference call and webcast, please contact FTI Consulting on the details set out below.
Headquartered in Ireland, with offices in Stamford CT, Hong Kong, Shanghai, Singapore and Dubai, Avolon provides aircraft leasing and lease management services. Avolon’s investors include three of the world’s leading private equity firms Cinven, CVC Capital Partners and Oak Hill Capital Partners and one of the world’s leading sovereign wealth funds, Government of Singapore Investment Corporation (GIC).
For more information, see www.avolon.aero