A combination of a large operator base and route flexibility relative to other widebody aircraft, means the Airbus A330 still has a long term future which is not reflected in current valuations, according to Baldur Vander, chief executive ofCrianza Aviation and managing director of EastMerchant Capital
“There is a lot of speculation at the moment about aircraft values and it seems we are observing a bidding way in reverse to see who can publish the lowest value even though there are no trades to support it. In fact a number of old 777s, have been retired recently and young A330 aircraft are well placed to take over from them.
The most important factor is the size of the operator base for the A330. With over 100 operators it is the most widely operated aircraft globally. It is also the most versatile widebody in terms of the routes it can serve. While the large number of A330 won’t all return to service immediately, it will happen, and aviation investors think in the long term.”
Vander was speaking on Airline Economics, Growth Frontiers Korea webinar this morning, sponsored by Crianza and IBA. Investors on the peninsular have invested heavily in the A330 aircraft which are now coming to the end of their five-year lease. Given the collapse of passenger demand due to COVID 19 some Korean investors have expressed concerns about their aviation portfolio.
Vander said that he was closely monitoring the A330 situation in Korea and that Crianza Aviation had developed a solution to help investors in the country, but he emphasised the long-term nature of the aviation sector. He said that even ahead of the crisis there had been a higher than usual number of A330 parked due to airline failures in 2019 such as Thomas Cook, and Etihad putting 23 its fleet on the market.
“Today around 60% of the global A330 fleet is parked and I expect a large number of these aircraft to remain operational. The younger aircraft have low capital, and trip costs, and are well placed for airlines when they rebuild international traffic. Soon there will be too much money chasing too few aircraft.”
Vander’s view was back by fellow panellist Mike Skinner, chief executive of UK remarketer AMS Aircraft Services, who said that it was premature to take investment decisions in the current climate. He also said that older aircraft, of all iterations, may be destined to become spare part feedstock, but that newer A330 still had a firm future.
“The A3330s that are less than 10 years old still have the same life in front of them in May 2020 as they did in January 2020, the majority of them will come back into service and their prices will rebound.”
Skinner said that pricing in general was also holding up more firmly than reports have suggested and that AMS had been involved in a 737-800 deal which straddled the COVID 19 pandemic and while the price had been renegotiated the difference was less than 10%.
The outlook for the A330 may be better than the market consensus but Vander said that the combination of airlines retiring older aircraft while keeping a close eye on costs in the post COVID 19 world was bad news for the spare parts sector.
“Current conditions will probably result in temporary collapse in the secondary market for older aircraft and a collapse in the price of spare parts for these aircraft. It will also lead to very difficult few years for the after-market MROs as airlines look to preserve cash by maintaining green time on engines, and de-stuffing spare part inventories.”