PREPARED FOR

The COVID-19 Crisis

Outlook For Parked Aircraft Fleet

Dr Kevin Michaels

Managing Director

20 April 2020

2

A demographic-driven retirement tsunami was on the way before COVID-19…

Sources: Source: Alton Aviation, AeroDynamic Advisory, CAPA, InsideMRO

OUTLOOK FOR PARKED AIRCRAFT FLEET

Global Jetliner Fleet Age Distribution (Passenger only)

0

200

400

600

800

1,000

1,200

2017A 2022E 2027E

Other

737 NG

A320

2017 – 2027 Air Transport Retirements

0

200

400

600

800

1000

1200

1400

1600

1800

<1 1 2 3 4 5 6 7 8 9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50+

In Service Parked

3

….and now there are ~15,000 parked aircraft thanks to COVID-19, including nearly 6,000 that are more than 15 or more years old

Source: CAPA, AeroDynamic Analysis; data current as of 18 April 2020

OUTLOOK FOR PARKED AIRCRAFT FLEET

Parked and In-Service Passenger Aircraft by Age (18 April 2020)

5,854 are 15+ years old

15-19: 2,467

20-24: 2,167

25+: 1,220

0

1000

2000

3000

4000

5000

6000

Europe North America Asia Pacific -Other

China Middle East Latin America Africa Unknown

4

One-third of the parked fleet is European and 3,400 are in North America

Source: CAPA, AeroDynamic Analysis; data current as of 18 April 2020

OUTLOOK FOR PARKED AIRCRAFT FLEET

Parked Passenger Jetliners by Region

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

A380 A340 A330 A320ceo 787 A320neo A220 777 A350 E-Jet 737NG 757 CRJ E-Jet E2 747 767

5

Large Airbus twin-aisles have the highest percentage of parked aircraft; regional jets benefit from downgauging

Source: CAPA, AeroDynamic Analysis; data current as of 18 April 2020

OUTLOOK FOR PARKED AIRCRAFT FLEET

Parked Passenger Aircraft by Model

93% of active 747s and 62% of 767s are freighters

COVID-19 kills four engine pax aircraft

0

0.5

1

1.5

2

2.5

2019 actual 2020 (F) 2021 (F)

6

The recovery of traffic and load factors will determine the required fleet

Source: IATA (actual), AeroDynamic Analysis (future)

OUTLOOK FOR PARKED AIRCRAFT FLEET

4Q Global RKPs (Billion)

26,200 Jetliners

82% Avg Load Factor

Billions of RPKs

Quarterly

High

Low

High

Low

Avg Load Factor Req. Aircraft

40% 25,576

50% 20,461

60% 17,051

Midpoint

Midpoint

Avg Load Factor Req. Aircraft

60% 30,691

70% 26,307

80% 23,019

7

Even with some recovery there will be thousands of excess aircraft at the end of 2020…

Source: AeroDynamic Advisory analysis

OUTLOOK FOR PARKED AIRCRAFT FLEET

Number Of Excess Jetliners – End of 2020*

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2020 Production Stored MAXs Excess

40% load factor

50% load factor

▪ There are thousands of excess aircraft under any scenario

▪ Generally airlines need at least a 70% load factor for breakeven

▪ Sanitation and physical distancing will limit load factors until a vaccine is found

▪ There is extreme pressure to downgauge an operate aircraft with low trip costs

* Based on 1 billion RPKs in 4Q 2020

8

….and looking ahead to 2021, there are still thousands of excess aircraft

Source: AeroDynamic Advisory analysis

OUTLOOK FOR PARKED AIRCRAFT FLEET

Number Of Excess Jetliners – End of 2021*

0

1,000

2,000

3,000

4,000

5,000

6,000

2020 Production Stored MAXs 2021 production Excess

70% load factor

80% load factor▪ Assuming that traffic

recovers to 1.8 B RPKs by the end of 2021, there are still thousands of excess aircraft at break-even load factors

▪ This implies the need to retire thousands of aircraft

* Based on 1.8 billion RPKs in 4Q 2021

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

A320ceo 737NG A330 777 E-Jet A320neo 787 CRJ 757 A380 767 A350 747 A340 A220 E-Jet E2

9

A320ceos will lead an unprecedented wave of retirements – with major stakeholder implications

Source: CAPA, AeroDynamic Analysis

OUTLOOK FOR PARKED AIRCRAFT FLEET

Risk Of Premature Aircraft Retirement

Extreme

Significant

Moderate

Low

Risk of premature retirement

In demand for downgauging; risk increases after crisis

OEMs

• Downward pressure on production rates

• Massive decline in aftermarket revenues – especially engines and

components. Parts revenues particularly impacted

MROs

• Significant decrease in demand due to aircraft part-outs, green time

management

• Massive build-up of used & serviceable material creates MRO demand

headwind for several years and demand for asset-driven value props

AIRLINES

• In cash conservation mode – slashed spending on parts & external

services; will deploy green time management at whole new level

• Will use their technicians to part out aircraft

Finance / Lessors

• Short-medium term decline in residual values

• May lead to exit of peripheral players

Stakeholder Implications

121 W Washington Street, Suite 400Ann Arbor, MI 48104

www.aerodynamicadvisory.com

Kevin Michaels

Managing Director

kmichaels@aerodynamicadvisory.com

+1 734 717 5011

AeroDynamic2019 Winner of Choice

Outstanding Academic

Title Award

11

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