IATA Maintenance Cost Conference 2016 – © SGI Aviation
Aircraft retirements and part-outEffective use of existing trends and opportunities
in the market
15 September 2016
Bangkok
1IATA Maintenance Cost Conference 2016 – © SGI Aviation
Index
SGI Aviation
Introduction
Retirement
- Historical trends
- Retirements by age, type and region
- Storage and disassembly locations
Retirement drivers
- Economy and oil prices
- Introduction of new aircraft
- Components value and demand
Conclusion
2IATA Maintenance Cost Conference 2016 – © SGI Aviation
Group overview
Our locations and services
SGI SingaporeAircraft & Engine
technical services
Business jets
SGI AmsterdamAsset management
Aircraft & Engine technical services
Business jets
Consulting
Regulatory services
SGI AmericasTechnical services
Engine services
4SGI has offices located in
Amsterdam, Singapore,
Guernsey and New York.
45+Over 45 experts, located on
almost all continents
15Local experts in 15 countries
who speak the language &
know the culture
100+ More than 100 inspections
performed, including 45
aircraft redeliveries in 2015
150Over 150 engines
inspections, including
management of 20 shop visits
7,500More than 7,500 inspection
days performed in 2015
63% Lessors
& financiers
37% Airlines
150+Technical services
Engine management
Asset management
Consulting services
30+ aircraft under
management
Services
Client base
Management 2015 Engagements
45
60
35
41
Valuation
Annual
Redeliveries
Pre purchase
3IATA Maintenance Cost Conference 2016 – © SGI Aviation
Index
SGI Aviation
Introduction
Retirement
- Historical trends
- Retirements by age, type and region
- Storage and disassembly locations
Retirement drivers
- Economy and oil prices
- Introduction of new aircraft
- Components value and demand
Conclusion
4IATA Maintenance Cost Conference 2016 – © SGI Aviation
0
100
200
300
400
500
600
700
0
36000
24000
42000
12000
48000
6000
18000
30000
72000
114000
108000
102000
96000
90000
84000
120000
78000
66000
60000
54000
# of aircraft
FH
0
100
200
300
400
# of aircraft
FH
96000
90000
72000
66000
78000
60000
54000
84000
100000
24000
36000
120000
30000
42000
18000
6000
48000
Source: FAA AC120-14 and EASA AMC20-20, various Airbus & Boeing publications and Ascend Fleet Database (Aug, 2016).
Note: Retired aircraft have an assumed annual utilization of 3,000 FH.
Introduction
Technical life ≠ Economic life
In-service: 6%
Retired: 66%
DSG ESG
A320
737CL
DSO ESO
In-service: 47%
Retired: 96%
Retired
In-service Design Service Goal or Design Service
Objective (DSG/DSO) is the period of time
during which the principal structure will be
reasonably free from significant cracking
- This is established at design or certification
- The DSG/DSO is expressed in Flight Hours or
Flight Cycles
Limit of validity (LOV) is the period of time
up to which it has been demonstrated that
widespread fatigue is unlikely to occur in an
airplane’s structure
- This is by virtue of its design and required
maintenance actions
- The LOV is also expressed in Flight Hours or
Flight Cycles
Operation beyond the DSG/DSO requires an
extensive inspection program
Retired
In-service
5IATA Maintenance Cost Conference 2016 – © SGI Aviation
Index
SGI Aviation
Introduction
Retirement
- Historical trends
- Retirements by age, type and region
- Storage and disassembly locations
Retirement drivers
- Economy and oil prices
- Introduction of new aircraft
- Components value and demand
Conclusion
6IATA Maintenance Cost Conference 2016 – © SGI Aviation
6
8
10
12
14
5,000
25,000
20,000
15,000
10,000
0
30,000
1985
2000
1980
2005
2010
2015
1990
1995
Aircraft retirements and retirement age (1980-2015)
The number of commercial aircraft in service has increased from approximately 12,000 in 1980 to more than 27,000 by the end of
2015
From 1980 to 2015, more than 15,000 commercial aircraft have been retired world wide
- The compound annual growth rate was more than 4%
The average age of aircraft in service has been relatively stable in the last 15 years, albeit with a decreasing trend in the last 5
years;
As a result of the growing young world fleet, there will be increasing amount of aircraft removed from service and subsequently
retirements over the upcoming years;
Historical trends
The increasing world fleet will result in an increase of aircraft retirements over the next decades
Number of aircraft in service and average age (1980-2015)
668762
10
15
20
25
30
1,000
2,000
4,000
0
5,000
3,000
3,484
2,059
1990-
1994
2000-
2004
2,437
1995-
1999
1,405
1985-
1989
1980-
1984
4,719
2005-
2009
2010-
2015
Average retirement age
Aircraft retirements# of aircraft
Average age
Source: SGI Aviation analysis, internal databases and Ascend database
7IATA Maintenance Cost Conference 2016 – © SGI Aviation
Index
SGI Aviation
Introduction
Retirement
- Historical trends
- Retirements by age, type and region
- Storage and disassembly locations
Retirement drivers
- Economy and oil prices
- Introduction of new aircraft
- Components value and demand
Conclusion
8IATA Maintenance Cost Conference 2016 – © SGI Aviation
The average retirement age for commercial
aircraft over the last 36 years was 26.5 years;
More than half of the aircraft are retired between
the age of 20 and 30 years;
About 10% of the aircraft were retired before the
age of 15 during the analysed term;
Another some 10% of the aircraft went out of
service after the age of 37;
More than 50% of the aircraft are still in operation
at the age of 25 years;
Retirement age distribution (1/4)
More than 50% of the aircraft are still in operation at the age of 25 years
0
150
300
450
600
750
900
444642 485014121086 40383634323028262422201816
10 155 20 4535 4030
0%
25
25%
75%
50%
100%
52%
Aircraft retirement age distribution (1980-2015)
10%
90%
50%
% of retired fleet by ages (1980-2015)
Source: SGI Aviation analysis, internal databases and Ascend database
9IATA Maintenance Cost Conference 2016 – © SGI Aviation
Retirement age distribution (2/4)
Freighters tend to be retired later than passenger aircraft
0
50
100
150
10
15
20
25
20
14
20
12
20
10
20
00
20
02
19
96
19
94
20
08
19
88
19
90
19
84
20
06
19
86
19
98
19
82
19
80
19
92
20
04
Average age at conversion
Converted freighters
Converted freighters (1980-2015)
0
200
400
600
800
86 36 4414 2818 481210 3422 262016 424038323024 5046
Freighter
Passenger
Retirement age distribution by aircraft usage (1980-2015)
Total retirement:
- Passenger aircraft: 82%
- Freight aircraft: 17%
- 39% (1,046 aircraft) were converted freighters.
Significant differences between passenger and
freight aircraft retirement:
- Average retirement age: freighters (32.5),
passenger aircraft (25.1);
- Surviving rate at age 33: freighters (50%),
passenger aircraft (13%);
Freighter conversion:
- Average conversion age: 18
- 10 to 20 years of extended life
- Low utilisation
Source: SGI Aviation analysis, internal databases and Ascend database
10IATA Maintenance Cost Conference 2016 – © SGI Aviation
Retirement age distribution (3/4)
There are differences in retirement age of narrow body, wide body and small aircraft
Retirement age distribution of small aircraft (1980-2015)
0
100
200
300
40 4838 46444234 36326 8 10 12 14 16 18 20 2422 26 3028
Retirement share: 39%
Average retirement age: 25.6
Note: Aircraft with 100 seats or less are classified as small aircraft & aircraft with 100 to 200 seats are classified as narrow body aircraft
Source: SGI Aviation analysis, internal databases and Ascend database
0
100
200
300
400
500
4832 38 42403428 30 44 46368 106 1412 261816 2420 22
Retirement share: 47%
Average retirement age: 27.4
Retirement age distribution of narrow body aircraft (1980-2015)
11IATA Maintenance Cost Conference 2016 – © SGI Aviation
Retirement age distribution (3/4)
There are differences in retirement age of narrow body, wide body and small aircraft
Note: Wide body aircraft are classified as aircraft with 200 seats or more
Source: SGI Aviation analysis, internal databases and Ascend database
0
40
80
120
160
146 168 1210 2018 2422 2826 484642403836343230 44
Retirement age distribution of wide body aircraft (1980-2015)
Retirement share: 14%
Average retirement age: 25.5
0%
20%
40%
60%
80%
100%
4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50
% of retired fleet by ages and aircraft types (1980-2015)
Regional
WB
NB
12IATA Maintenance Cost Conference 2016 – © SGI Aviation
Manufacturer’s locations of retired aircraft (1980-2015)
Retired types of aircraft (1/2)
The aircraft types of which a medium portion has been retired will drive the retirement in the short-term future
Top 20 aircraft retired (till 31/12/2015)
Aircraft type # retired % retiredAverage
retirement age
727 1492 84% 31.4
737-100/-200 810 75% 30.3
An-24 760 69% 30.3
DC-9 725 78% 35.2
747 714 48% 27.1
737 CL 670 34% 22.7
Tu-154 648 78% 22.9
Yak-40 629 67% 25.9
MD-80 490 41% 24.0
707 456 63% 24.5
Tu-134 453 82% 25.4
L-410 Turbolet 453 61% 16.8
Il-18 440 83% 24.1
DC-8 430 78% 31.7
A300 276 49% 24.5
Viscount 273 62% 21.7
DC-10 268 71% 30.3
A320 266 6% 20.1
F.27 253 57% 32.2
L-1011 TriStar 221 89% 26.8
13IATA Maintenance Cost Conference 2016 – © SGI Aviation
Retirement rate by manufacturer’s locations (till 31/12/2015)
Retired types of aircraft (2/2)
America and Europe built aircraft with low retirement rate are projected to shape the long-term market
Top 20 aircraft delivered (till 31/12/2015)
Asia-Pacific
596 47%70%
28,674
Europe
16,520
6,134
USSR/CIS
23%
Americas
29%
Aircraft type # delivered # retired % retiredAv. retirement
age
737 NG 5478 54 1% 12.6
A320 4115 266 6% 20.1
737 CL 1979 670 34% 22.7
727 1775 1492 84% 31.4
747 1492 714 48% 27.1
A319 1382 23 2% 14.0
777 1355 20 1% 16.8
A330 1222 21 2% 16.9
A321 1210 18 1% 19.1
MD-80 1190 490 41% 24.0
Dash 8 1123 69 6% 17.9
An-24 1100 760 69% 30.3
737-100/-200 1078 810 75% 30.3
767 1064 160 15% 24.5
757 1039 101 10% 24.3
CRJ RJ 1021 146 14% 14.2
Yak-40 942 629 67% 25.9
DC-9 931 725 78% 35.2
Tu-154 834 648 78% 22.9
ATR 72 814 31 4% 19.6
% of aircraft retired
# of aircraft manufactured
Manufacturer’s location
Source: SGI Aviation analysis, internal databases, Ascend database
14IATA Maintenance Cost Conference 2016 – © SGI Aviation
Last operating country (1980-2015)
Retirement regions
The aircraft were largely on an US registration at the moment of decommissioning
Top 20 countries/regions of retired aircraft (1980-2015)
Country/Region # of RetiredAverage
Retirement Age
United States 5,555 26.6
USSR/CIS 3,620 24.9
United Kingdom 488 25.2
Indonesia 302 26.9
Canada 295 27.6
France 234 23.6
China 213 17.6
Mexico 194 33.7
Nigeria 190 29.1
Venezuela 173 31.8
Congo (Democratic Republic) 167 32.8
Ireland 164 25.2
South Africa 161 31.5
Brazil 161 30.2
Germany 151 23.7
Australia 144 24.9
Colombia 113 29.5
Spain 102 27.0
Philippines 99 30.8
Netherlands 93 22.5
15IATA Maintenance Cost Conference 2016 – © SGI Aviation
Index
Introduction
Retirement
- Historical trends
- Retirements by age, type and region
- Storage and disassembly locations
Retirement drivers
- Economy and oil prices
- Introduction of new aircraft
- Components value and demand
Conclusion
16IATA Maintenance Cost Conference 2016 – © SGI Aviation
Major disassembly locations
Major disassembly areas are mainly situated in the southern parts of the USA
ArizonaPhoenix, Marana and Kingman
NevadaLas Vegas
CaliforniaVictorville
New MexicoRoswell
TexasHondo
MinnesotaBurnsville
IllinoisWooddale
ArkansasStuttgart
TennesseeMemphis
SpainZaragoza
AustraliaAlice Springs
KoreaMuan
NetherlandsWoensdrecht
UKKemble, Slinfold, Newquay,
St. Athan, Leicestershire, Norwich,
Norfolk and DurhamGermanyMoenchengladblach
FranceTarbes and Châteauroux
VirginiaFredericksburg
FloridaMiami, Wellington, Boca Raton
and Fort Lauderdale
South AfricaJohannesburg
17IATA Maintenance Cost Conference 2016 – © SGI Aviation
Top 20 storage airport locations
More than 33% of the stored aircraft are located in the USA
ArizonaKingman, Marana
Phoenix and Tucson
CaliforniaVictorville
New MexicoRoswell
TexasSan Angelo
CanadaCalgary
SpainTeruel
FranceTarbes and Toulouse
MissouriKansas City
VenezuelaCaracas
South AfricaJohannesburg
IranTehran
UAEFujairah
RussiaZhukovsky, Moscow (Vnukovo
and Domodedovo)
ArkansasBlytheville
18IATA Maintenance Cost Conference 2016 – © SGI Aviation
Index
SGI Aviation
Introduction
Retirement
- Historical trends
- Retirements by age, type and region
- Storage and disassembly locations
Retirement drivers
- Economy and oil prices
- Introduction of new aircraft
- Components value and demand
Conclusion
19IATA Maintenance Cost Conference 2016 – © SGI Aviation
Fin
an
cia
l C
risis
Oil
price d
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9/1
1
Dis
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of th
e S
ovie
t U
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199
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Economy and oil prices
Aircraft retirement trends are influenced by several macro economic factors
World GDP growth (%)
% of retirements in total fleet
Crude Oil Price ($/Barrel)
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015*
Source: Worldbank, SGI Aviation Analysis and various other sources
80
40
5.0%
4.0%
3.0%
2.0%
140
60
120
0
1.0%
0.0%
6.0% 160
20
-5.0%
100
20IATA Maintenance Cost Conference 2016 – © SGI Aviation
Index
SGI Aviation
Introduction
Retirement
- Historical trends
- Retirements by age, type and region
- Storage and disassembly locations
Retirement drivers
- Economy and oil prices
- Introduction of new aircraft
- Components value and demand
Conclusion
21IATA Maintenance Cost Conference 2016 – © SGI Aviation
Introduction of new aircraft
Technical development is an important aircraft retirement driver
0
150
300
450
0%
20%
40%
60%
80%
100%
2005 201020001975 199519901980 19851970 2015*
A330
A300/A310
0
500
1,000
1,500
0%
20%
40%
60%
80%
100%
200019801975 20051985 2015*20101970 19951990
737NG
737CL
737-100/200
737 family in service rate & total retirement (till 31/12/2015)
A300 and A330 family in service rate & total retirement (till 31/12/2015)
22IATA Maintenance Cost Conference 2016 – © SGI Aviation
Index
SGI Aviation
Introduction
Retirement
- Historical trends
- Retirements by age, type and region
- Storage and disassembly locations
Retirement drivers
- Economy and oil prices
- Introduction of new aircraft
- Components value and demand
Conclusion
23IATA Maintenance Cost Conference 2016 – © SGI Aviation
Components value and demand
Supply and demand in the component market also influence the retirement curve
OTHERSNAVIGATION
FLIGHT
CONTROLS
ELECTRICAL
POWERAPU
LANDING
GEARS
AIRFRAMEENGINESTOTAL
Indicative breakdown of individual component values
Source: SGI Aviation proprietary databases
24IATA Maintenance Cost Conference 2016 – © SGI Aviation
Index
SGI Aviation
Introduction
Retirement
- Historical trends
- Retirements by age, type and region
- Storage and disassembly locations
Retirement drivers
- Economy and oil prices
- Introduction of new aircraft
- Components value and demand
Conclusion
25IATA Maintenance Cost Conference 2016 – © SGI Aviation
Over 15,000 aircraft retired in last 36 years
Average retirement age around 27 years
Freighter conversion adds about 10 to 20 years of life
Conclusion
World growth and price of oil is one of the main
drivers
Geopolitical events and regulatory restrictions also
heavily influence retirements
Parts value is heavily dependent on actual condition
Main value is in the engines
Airframe has limited value and some structural parts
are difficult to sell
26IATA Maintenance Cost Conference 2016 – © SGI Aviation
Questions?
Joost Groenenboom – Executive Director
T +31 20 880 4238 M +31 65 0736001
Email: [email protected] │Web: http://www.sgiaviation.com