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Chris Seymour, Head of Market Analysis
• Long term view of supply and demand in the commercial market – a
review of the 2015 Flightglobal Fleet Forecast
Rob Morris, Head of Consultancy
• The global aviation cycle – where are we today?
George Dimitroff, Head of Valuations
• Commercial Aircraft values and lease rate developments – the latest
comments from Ascend’s aircraft values review board
Your Questions
2
Chris Seymour, Head of Market Analysis
• Long term view of supply and demand in the commercial market
– a review of the 2015 Flightglobal Fleet Forecast
Rob Morris, Head of Consultancy
• The global aviation cycle – where are we today?
George Dimitroff, Head of Valuations
• Commercial Aircraft values and lease rate developments – the latest
comments from Ascend’s aircraft values review board
Your Questions
3
Historical & Forecast Passenger Capacity
5Source: 2015 Flightglobal Fleet Forecast
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
19
90
19
91
19
92
19
93
19
94
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95
19
96
19
97
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98
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99
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00
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01
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25
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27
20
28
20
29
20
30
20
31
20
32
20
33
ASK
(b
n)
Historical Forecast
End-2014 Passenger Jet Survivor Curve
Source: Ascend Fleets from Flightglobal. Usage = Pax/Combi/QC
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50
% o
f O
rigi
nal
De
live
rie
s R
em
ain
ing
in S
erv
ice
Aircraft Age (Years)
Turboprop
Regional Jet
Single-Aisle
Twin-Aisle
20-year passenger jet replacement & growth
7Source: 2015 Flightglobal Fleet Forecast
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2014 Fleet 2034 Fleet
No
of
air
cra
ft
Residual Fleet Replacement Growth
82% replaced
20-year forecast deliveries by value
8Source: 2015 Flightglobal Fleet Forecast
Turboprop, $60b
Regional Jet, $135b
Single-Aisle, $1293b
Twin-Aisle, $1220b
Freighter, $122b
20-year forecast for single-aisle jet deliveries
9Source: 2015 Flightglobal Fleet Forecast
110-seats1%
125-seats6%
150-seats63%
180+ seats30%
20-year forecast for twin-aisle jet deliveries
10Source: 2015 Flightglobal Fleet Forecast
0
500
1,000
1,500
2,000
2,500
3,000
3,500
200-seats 250-seats 300-seats 350-seats Large 450+ seats
No
of
air
cra
ft
20-year fleet forecast by region
11Source: 2015 Flightglobal Fleet Forecast
0 2,000 4,000 6,000 8,000 10,000 12,000
Middle East
Africa
Russia &CIS
LatinAmerica
China
Asia-Pacific
Europe
NorthAmerica
No of aircraft
2014 Fleet 2034 Fleet
Benchmark with OEM Published Forecasts
Flightglobal Fleet Forecast 2015-34
Boeing CMO 2015-2034
Airbus GMF 2015–2034 (excludes RJ)
Passenger Traffic 5.0% 4.9% 4.6%
Cargo Traffic 4.3% 4.7% 4.8%
Passenger Jet Fleet in 2034 40,940 40,630 35,750
Freighter Jet Fleet in 2034 2,880 2,930 2,690
Passenger Jet Deliveries 37,220 37,130 31,780
RJ Deliveries 4,365 2,490 No forecast
Single-Aisle Deliveries 25,350 26,730 (inc Large RJ) 22,930
Twin-Aisle Deliveries 7,510 7,910 8,870
New Freighter Deliveries 830 920 800
Passenger Jet Retirements 16,760 16,380 13,400
Forecast Delivery Value ($bn) 2,830* 5,570** 4,900**
* Based on Base Value ** Based on List Price
Chris Seymour, Head of Market Analysis
• Long term view of supply and demand in the commercial market – a
review of the 2015 Flightglobal Fleet Forecast
Rob Morris, Head of Consultancy
• The global aviation cycle – where are we today?
George Dimitroff, Head of Valuations
• Commercial Aircraft values and lease rate developments – the latest
comments from Ascend’s aircraft values review board
Your Questions
13
Global economic cycle
14
Indicator Current level Trend
GDP EIU forecast for 2015 is 2.4%, slightly down on 2014; 2016 forecast to be higher at 2.8%. Asia-Pacific leads at 4.3%, US 2.5%, W Europe 1.6% (best for several years), Latin America sees many countries in recession
Forecasts for global GDP for 2015 have declined since the start of the year, from 2.8% to 2.4%; US and Latin America primarily driving downgrade
OECD Leading Indicators OECD members fairly stable at ~100 index. Within this, N America ~100, but Euro Area above 100; major 5 Asian countries (including China) are below 100, as are many developing nations
Downward trend for Canada and China, as well as Latin America and some other major Asian economies; worst declines are China, Russia and Brazil; upward trend for Eurozoneand India
Purchasing ManagersIndices (PMI)
Global Composite PMI = 53.4, consistent with steady economic growth, manufacturing slowdown in Asia, but services still strong
Strengthening in Eurozone, stable in US, China manufacturing and Brazil in general the worst declines, Asian services stable
Steady performance – developed world still in recovery
Global passenger traffic growth remains robust
15Source: IATA
-15%
-10%
-5%
0%
5%
10%
15%
20%
Jul-0
8
Sep-0
8
No
v-0
8
Jan-0
9
Ma
r-0
9
Ma
y-0
9
Jul-0
9
Sep-0
9
No
v-0
9
Jan-1
0
Ma
r-1
0
Ma
y-1
0
Jul-1
0
Sep-1
0
No
v-1
0
Jan-1
1
Ma
r-1
1
Ma
y-1
1
Jul-1
1
Sep-1
1
No
v-1
1
Jan-1
2
Ma
r-1
2
Ma
y-1
2
Jul-1
2
Sep-1
2
No
v-1
2
Jan-1
3
Ma
r-1
3
Ma
y-1
3
Jul-1
3
Sep-1
3
No
v-1
3
Jan-1
4
Ma
r-1
4
Ma
y-1
4
Jul-1
4
Sep-1
4
No
v-1
4
Jan-1
5
Ma
r-1
5
Ma
y-1
5
Jul-1
5
Ye
ar-
on
-Ye
ar
Ch
an
ge
Traffic (RPK) Capacity (ASK)
IATA predicting 6.7% traffic
growth for 2015 (YTD =
6.5%)
Order volumes continue to be high
16Source: Ascend Fleets from Flightglobal
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015YTD
Co
mm
erc
ial je
t o
rde
rs
Jet Gross Orders Jet Net Orders
$71bn
$209bn
Order cancellations declining following increase
through late 2014
17Source: Ascend Fleets from Flightglobal
0
10
20
30
40
50
0
30
60
90
120
150
Ja
n-0
8
Apr-
08
Ju
l-0
8
Oct-
08
Ja
n-0
9
Apr-
09
Ju
l-0
9
Oct-
09
Ja
n-1
0
Apr-
10
Ju
l-1
0
Oct-
10
Ja
n-1
1
Apr-
11
Ju
l-1
1
Oct-
11
Ja
n-1
2
Apr-
12
Ju
l-1
2
Oct-
12
Ja
n-1
3
Apr-
13
Ju
l-1
3
Oct-
13
Ja
n-1
4
Apr-
14
Ju
l-1
4
Oct-
14
Ja
n-1
5
Apr-
15
Ju
l-1
5
Rolli
ng 1
2-M
on
th C
an
ce
llatio
ns
Mo
nth
ly C
an
ce
llatio
ns
Cancellations 12-Month Rolling Average
Delivery deferrals ticked up in June as result of
American A321neo deferrals
18Source: Ascend Fleets from Flightglobal
0
10
20
30
40
50
60
70
80
90
0
50
100
150
200
250
300
350
400
450
500
Ja
n-0
8
Apr-
08
Ju
l-0
8
Oct-
08
Ja
n-0
9
Apr-
09
Ju
l-0
9
Oct-
09
Ja
n-1
0
Apr-
10
Ju
l-1
0
Oct-
10
Ja
n-1
1
Apr-
11
Ju
l-1
1
Oct-
11
Ja
n-1
2
Apr-
12
Ju
l-1
2
Oct-
12
Ja
n-1
3
Apr-
13
Ju
l-1
3
Oct-
13
Ja
n-1
4
Apr-
14
Ju
l-1
4
Oct-
14
Ja
n-1
5
Apr-
15
Ju
l-1
5
Rolli
ng 1
2-M
on
th A
ve
rage
of D
efe
rra
ls
To
tal Y
ea
rs o
f D
eliv
ery
Defe
rra
l R
eco
rde
d
Years Deferred 12-Month Rolling Average
Aviation demand cycle
19
Indicator Current level Trend
Passenger traffic Above trend growth for sixth year running; N America & W Europe seeing strong growth; only weak area is Africa
Year-on-year growth rate has been above 6% for most of 2015; 7% in past two months
Freight traffic Traffic reached consistent 5% year-on-year growth in H1 2015 for first time since 2010, past few months has been around 2-3%
Growth recovery has slowed since Q1 2015;capacity exceeding demand; consistent with weak manufacturing data from China
Yields US yields are the only readily available monthly data point; these remain at historically high levels of >10c/RPK
Yields have been falling since December 2014; June down 6.6%; however, this is not a major concern yet, as costs are down by >10% as a result of falling oil prices
Load Factors Generally very high, exceeding 2008 levels. Asia much lower – emerging evidence of overcapacity in some areas?
Mixed picture; US stable, European airlines continuing to increase, Asian airlines falling in some cases
New aircraft orders Orders continue to be placed in high numbers; first half 2015 saw around 800 net orders for commercial jets driving book-to-bill to remain >1
Order intake has fallen sharply from the levels of 2011-2014. New programmes are sold out for several years, with limited slots now available, driving downward trend
Deferrals & cancellations Deferrals are at a low absolute level compared to ten year average, and cancellations around average – however, this is lower if taken as % of a growing fleet
Declining, after a large number of cancellations (~500 aircraft) in 2014
Most measures of demand are good, though some clouds forming?
50% of last 5 years deliveries have been for
replacement
20Source: Ascend Fleets from Flightglobal - deliveries into passenger airline service only
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
200
400
600
800
1000
1200
1400
1600
% o
f D
eliv
erie
s E
stim
ate
d fo
r R
ep
lace
me
nt
Pa
sse
nge
r A
irlin
er
De
live
rie
s
Deliveries % of Deliveries for Replacement
Risk of supply exceeding demand in single-aisle
market increasing towards end of decade
21Source: Ascend Fleets from Flightglobal, 2015 Flightglobal Fleet Forecast
0
200
400
600
800
1000
1200
1400
1600
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Aircra
ft D
eliv
erie
s
Airbus Backlog Boeing Backlog Others Backlog Forecast Deliveries Planned Production
Some element of production “surplus” has driven
increased retirements at reduced age in this cycle
22Source: Ascend Fleets from Flightglobal
0
5
10
15
20
25
30
35
40
0
100
200
300
400
500
600
700
800
Ave
rage
Age
at A
ircra
ft R
etire
me
nt
Aircra
ft R
etire
d
<15 Years Old at Retirement >15 Years Old at Retirement
Average Age at Retirement Average Age at Economic Retirement
Average annual utilisations recovered through 2011
and have been stable since
23Source: Ascend Online Fleets, all Airbus/Boeing/Douglas aircraft with data, all usages
2,500
2,700
2,900
3,100
3,300
3,500
3,700
3,900
4,100
4,300
200
7 Q
1
200
7 Q
2
200
7 Q
3
200
7 Q
4
200
8 Q
1
200
8 Q
2
200
8 Q
3
200
8 Q
4
200
9 Q
1
200
9 Q
2
200
9 Q
3
200
9 Q
4
201
0 Q
1
201
0 Q
2
201
0 Q
3
201
0 Q
4
201
1 Q
1
201
1 Q
2
201
1 Q
3
201
1 Q
4
201
2 Q
1
201
2 Q
2
201
2 Q
3
201
2 Q
4
201
3 Q
1
201
3 Q
2
201
3 Q
3
201
3 Q
4
201
4 Q
1
201
4 Q
2
201
4 Q
3
201
4 Q
4
201
5 Q
1
201
5 Q
2
201
5 Q
3
201
5 Q
4
Ave
rag
e a
nn
ual u
tili
sa
tio
n (
rollin
g 4
qu
art
ers
)
Narrowbody Widebody Total
Aviation supply cycle
24
Indicator Current level Trend
Aircraft deliveries 2014 had record commercial jet deliveries, 2015 expected to exceed; both SA and TA at record levels, RJs & TP rates stable
Production rates set to increase for A320, 737, 787 & A350, plus CSeries ramp-up; A330 reducing and 777 also to see cuts
Deliveries for replacement/growth
Past 5 years, deliveries for replacement made up around 50% of the total
Consistent decline since 2008; 2015 has seen share for replacement falling significantly, towards numbers consistent with peak years of cycles
Deliveries as percentage of fleet
7.3% in 2014, forecast of 7.2% in 2015. The average over the past 25 years has been 7%
Trend is to a higher percentage, with above 8% in 2016 – 2019; such levels could indicate global overcapacity based on past history
Stored aircraft Absolute level of stored commercial jets remains at historic high, though declining since the recession in terms of % of fleet
Single-aisle declining, small increase in twin-aisle, RJs increasing rapidly, driven by 50 seat jets ex-US market
Used aircraft availability Commercial aircraft offered for sale / lease currently at lowest point since 2010
Falling numbers of available twin-aisles, RJs stable - many stored 50 seat jets not actively being marketed
Aircraft economic life Average age at retirement is now <25 years, despite fall in fuel prices
Few very young aircraft continue to parted out, average continues to decline in 2015
Aircraft utilisation Single-aisle & twin-aisle utilisations are at or near historic highs
Fairly flat trend since recovering post-recession in 2010/11, twin-aisle ticked up in Q1, possibly as result of increase for freighters
Despite strong demand, several indicators amber or red
50% of today’s jet fleet has CMV > BV
25Source – Ascend Values
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
50% 60% 70% 80% 90% 100% 110% 120% 130% 140% 150%
Cu
mu
lati
ve %
of
Air
craf
t Ty
pe
/ V
aria
nts
/ V
inta
ges
CMV / BV
Today
Jul-08
Jul-10
The aircraft value cycle
26
Indicator Current level Trend
Current Market Value/Base Value
Continued improvement in market values since 2010, with 50% of fleet having CMV > BV and another 30% of fleet with CMV <5% below BV
Most recent adjustments to market values have typically been marginally downwards, reflecting some weakness for specific assets
Constant age values Pressure in many assets from last off line impact, inflated supply in some cases (A321)
Single-aisle still seeing increases but current generation twin-aisles seeing some pressure
Constant age lease rates A320 & 737-800 lease rates have been improving but are facing pressure from competition plus some recent supply issuesdrove recent marginal negative adjustments, also seeing some issues with ‘commodity’ twin-aisles – A330-300 / 777-300ER
Trend has been upwards in recent years but may be close to peak (or have already peaked) for current generation types; also slight reductions in first examples of next generation single-aisles, driven by market observation
Some concerns around specific assets, despite strong macro
demand
Summary
Mixed messages from the global economic cycle
• Asia-Pacific & China remain ones to watch
• Developing economies still recovering slowly
Aviation demand cycle remains strong for now
• Fuel prices are helping a lot on the cost / yield side
• Watching closely for signs of evolving capacity surplus in Asia-Pacific
Some amber / red indicators in aviation supply cycle
• Deliveries trending towards higher % of installed fleet
• Average age of retirement continues to decline
• Utilisations flattened since recovering post-2008
Aircraft value cycle appears close to balance but this may also be the
peak for this cycle?
27
Chris Seymour, Head of Market Analysis
• Long term view of supply and demand in the commercial market – a
review of the 2015 Flightglobal Fleet Forecast
Rob Morris, Head of Consultancy
• The global aviation cycle – where are we today?
George Dimitroff, Head of Valuations
• Commercial Aircraft values and lease rate developments – the
latest comments from Ascend’s aircraft values review board
Q & A
28
Market Overview
Smaller single-aisles such as A319, 717-200 and 737-700 have enjoyed
resurgence in demand, albeit from handful of operators
Supply of popular commodity types such as A321-200, A330-300HGW
and 737-800 has increased significantly in 2015, due to slowdowns in
several key markets. Softening expected
A330-200s remain popular – at the right price – whereas 777-200ER
secondary market is stalling
Mid-life assets such as 767-300ER enjoying a(nother) lease of life in
lower oil price environment. Less urgency to replace 747-400s, too
Notable Value changes in 2015
A330-200 / 300HGW
717-200
737-800
747-400 / 400 Freighters
757-200
777-300ER
Dash 8-Q400
ERJ-135 / 145
GE90-94B series
PW4000 – 94” fan
Notable Lease Rate changes in 2015
A320neo – Down 3-4% based on more speculative order placements
A330-200 / 300HGW
737-800 / 900ER
747-400 / 400 Freighters
777-300ER
ERJ-135 / 145
A330 CMV changes
$0.00m
$20.00m
$40.00m
$60.00m
$80.00m
$100.00m
$120.00m
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Year of Build
A330-200 OLD A330-200 NEW A330-300HGW OLD A330-300HGW NEW
Source: Ascend Values from Flightglobal
A330 MLR changes
$0.000m
$0.100m
$0.200m
$0.300m
$0.400m
$0.500m
$0.600m
$0.700m
$0.800m
$0.900m
$1.000m
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Year of Build
A330-200 OLD A330-200 NEW A330-300HGW OLD A330-300HGW NEW
Source: Ascend Values from Flightglobal
737-800 / 900ER MLR changes
$0.000m
$0.050m
$0.100m
$0.150m
$0.200m
$0.250m
$0.300m
$0.350m
$0.400m
$0.450m
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Year of Build
737-800 OLD 737-800 NEW 737-900ER OLD 737-900ER NEW
Source: Ascend Values from Flightglobal
777-300ER CMV changes
$0.00m
$20.00m
$40.00m
$60.00m
$80.00m
$100.00m
$120.00m
$140.00m
$160.00m
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Year of Build
OLD NEW
Source: Ascend Values from Flightglobal
777-300ER MLR changes
$0.000m
$0.200m
$0.400m
$0.600m
$0.800m
$1.000m
$1.200m
$1.400m
$1.600m
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Year of Build
OLD NEW
Source: Ascend Values from Flightglobal
Considerations for remainder of 2015 / 2016
Values and lease rate decreases outnumbering increases in
recent months; has the market peaked?
Are lease rate reductions an early warning of further value
reductions to come?
Are production rate increases going to put pressure on
values and lease rates, especially if there is a global
slowdown?
Chris Seymour, Head of Market Analysis
• Long term view of supply and demand in the commercial market – a
review of the 2015 Flightglobal Fleet Forecast
Rob Morris, Head of Consultancy
• The global aviation cycle – where are we today?
George Dimitroff, Head of Valuations
• Commercial Aircraft values and lease rate developments – the latest
comments from Ascend’s aircraft values review board
Your Questions
38
The information contained in our databases and used in this presentation has been assembled from many sources, and whilst reasonable care has been taken to ensure accuracy, the information issupplied on the understanding that no legal liability whatsoever shall attach to Ascend Flighglobal Consultancy, its offices, or employees in respect of any error or omission that may have occurred.
Ascend – Aviation 100 Appraiser of the Year 2011, 2013,
2014, 2015
Chris SeymourHead of Market Analysis
+44 (0)20 8564 6702+44 (0) 7545 716 443chris.seymour@ascendworldwide.com
George DimitroffHead of Valuations
+1 646 746 6846+1 917 628 4231george.dimitroff@ascendworldwide.com
39
Rob MorrisHead of Consultancy
+44 (0)20 8564 6735+44 (0)7730 213 189rob.morris@ascendworldwide.com
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