May 10, 2021, © Leeham News: The COVID-19 pandemic prompted airlines to ground more than 8,000 aircraft at the peak.
Among widebodies, no aircraft was hit harder than the Airbus A330ceo.
Traffic within China, the US and Asia recovers with narrowbody airplanes. European short- and medium-haul traffic is not recovering as quickly due to continued boarder closings. International traffic, for the same reason, remains awful.
But in chaos some see opportunities.
Jep Thornton, managing partner of the boutique lessor Aerolease, last week said the A330-300 could be a great trading opportunity.
At April 1, there were 267 -300s and 286 A330-200s (of all types) in storage, according to data reviewed by LNA.
This huge number of parked airplanes, of all ages, doesn’t mean some of these won’t return to service. But as LNA wrote previously, post-pandemic impacts dropped lease rates for aircraft returned to lessors to as low as $150,000 for 12-year olds—and there were no takers.
Pre-pandemic, Thornton said, values of A330-300s were $60m-$70m. Today, the airplane can be purchased for as low as $25m.
Thornton said a buyer with the ability to store the airplane for as much as 18 months might see the value rebound from today’s purchase price.
He compared the A330-300 with the McDonnell Douglas DC-10 in the 1980s. During recessions, values plummeted. In better times, values skyrocketed.
“The A330 reminds me of the DC-10,” Thornton said. “That was ice cold when it was cold and smoking hot when it was hot.”
Gerard Butler, chief marketing officer of Merx Aviation Finance, said “the jury is out for me for passenger widebodies for the next three years. You need international long haul and business travel to bounce back. Whether it’s in 2023, ’24 or even ‘25” if the unknown.
Butler and Thornton agree that vaccinations against COVID are the key. Too many borders remain closed or under arriving quarantines to promote cross-border travel, even within Europe. Thornton pointed to another problem as well. Clearing customs at London Heathrow Airport sometimes takes as long as seven hours, he said.
“If I take a seven hour flight [from the US] and have to wait seven hours to clear customers, I’m not going,” Thornton said.
“Outside of China, Asia and the US, there’s not a lot of positivity,” Butler said.
Butler sees a “further weeding out” of airlines yet to come.
Thornton wonders whether a lot of the Airbus A320ceos and Boeing 737 NGs will return to service, especially as fuel prices go up. (Butler noted that prices doubled since the start of the pandemic.) Aircraft that are 20 years or older may not return to service, he said.
Although 737-800s, and now A321ceos, are being converted to freighters, Thornton believes there may be a surplus developing. He’s also skeptical of P2F conversions for the widebodies, including emerging developments for the 777-300ER P2F. As widebody traffic recovers, Thornton said belly freight capacity will, too. This will depress demand for main-deck P2F conversions, he said.