Smaller widebodies best bet for recovery: AFJ North America 2020
Smaller widebodies such as the Boeing 787 or Airbus A350 are much more likely to find new homes than larger 777 and A330 models as they are “too much plane” for airlines in current conditions, Split Rock Aviation partner Andy Mansell believes.
Speaking on a panel during the Airfinance Journal North America 2020 virtual conference on 28 July, he says that while A350 and 787 models may sit on the ground for “more than 12 months” as a result of the Covid-19 crisis, they look like the “right sized” types for the market.
But the owners of 777s and A330s face a tough challenge finding customers for their types, Mansell warns.
“The 777 looks like way too much plane in today’s market. It’s a fantastic aircraft, huge operator base, it was the darling of the investor world for a lot of years.
“But lessors had already experienced significant problems transitioning that aircraft from a flag carrier or a first-tier carrier to the secondary market, because it was too much plane for the secondary market, and now it’s too much plane for a flag carrier,” he adds.
Mansell says the worst prospects appear to be for owners of younger model 777s of about a five-year vintage, noting that "passing an impairment test on that is going to become increasingly challenging".
Ryan McKenna, chief executive officer, Griffin Global Asset Management, believes there are no safe haven aircraft types or profiles in this market.
“From my perspective it’s broad: it's new, it's old, it's narrowbody, it's widebody, it's regional, it’s kind of everything,” he says.
While older assets are likely to be retired earlier amid the crisis, McKenna notes that the industry has experienced “restructuring after restructuring” which has left even young aircraft sat on the ground.
As airlines in Norway, Colombia and Mexico have rejected aircraft it has become evident there are “no homes for these things”, McKenna argues.
He says that the airline, leasing and financial sectors must accept that a general shrinkage of the market is going to take place.