The official publication of the International Society of Transport Aircraft Trading

SPRING 2015

Q&A: AWARD WINNER

ISTAT Holiday Parties Around the World

The Sweet Sound of the Drone

Also Inside:

The Year Ahead in

FINANCE & LEASING

2015 POISED TO BE STRONG YEAR FOR GLOBAL LEASING

B737-800 Oliver Stuart-Menteth ISTAT Senior Certified Appraiser Managing Director Fintech Aviation Services Sarl Tel: + 41 22 548 1707 oliverstuart@fintech.aero www.fintech.aero

Balekgreund The 737-800 was Launched i n 1993 on

the back o f orders from Hapag Lloyd Flug, and since the f i rst deliveries i n 1998, the variant has accumulated 4,540 orders with 3,485 deliveries. The 737-800 is the most popular variant of the 737NG family with operators and financiers, accounting for 70 percent o f a l l MG orders. The aircraft continues t o offer competitive operating economics with adaptable seating solutions allowing it t o service both the Low-cost and main-line carriers. A long-range ver- sion is no t available; however the incor- poration o f optional Air Partners APB or Blended Winglets increases fuel efficiency and provides additionaltake-off and range performance enhancements. Such are the benefits o f th is option tha t 98 percent o f a l l -800s delivered from 2012 t o 2014 incorporated this modification.

The Leasing and finance sector owns over 60 percent o f the installed fleet, and remains a core asset for the sector. Dispersed amongst 167 operators, the 16 Largest account for over 50 percent of the current fleet, with Ryanair the Largest a t 302 units. Backlog currently stands at 1,055 w i th 40 aircraft i n storage and 3 ex-Jet Airways i n a state of part-out. The average age o f the fleet stands at only 6.4 years and is unlikely t o waiver significantly i n the

near- t o medium-term as Boeing recently announced their intention t o raise model production rates yet again to 52 per month i n 2018.

400

2W 3izS P m e M Eump nurY. M i u u r l esir Ardco

Source: ATDB

Current and Future Outlook Since 2008, values for the 737-800 have

recovered well and market values are cur- rently a t or near t o base values. The ability o f Lessors t o continue t o place the new 737-800s on Lease for 12 years a t f i rm market rates clearly indicates the value o f the aircraft t o both operators and the finance industry alike. Reliance on a single powerplant supplier may reduce negotiat- ing Leverage o f some purchasers but the used market benefits from a homogenous product with excellent liquidity.

As o f the start o f 2015 Air Fax were report ing 16 737-800 aircraft for sale or Lease (an increase o f two units from January 2014). Given the f inancial and

pol i t ical turmoi l i n Russia and Ukraine, some lessors who have significant 737-800 exposure are assessing their options and it is likely that availability w i l l increase i n the short term. I n addition, as a result o f production rate increases i n 2005 and 2006, we also expect further availability as in i t ia l 10 year Lease terms are completed. Offers from part-out companies currently remain below Current Market Values but the Launch of Aeronautical Engineer's -800 freighter programme w i l l offer fur ther residual-value support.

There is, understandably, considerable focus on forecasted values of the 737-800 over the next 10 years given the planned introduction o f the 737-8MAX i n 2017 and Boeing's reluctance t o confirm the estimated NG termination date. Fintech does not foresee any immediate impact i n residual values of the model as a whole and we share the common conception that residuals w i l l become impacted once the MAX assumes 40-45 percent of the NG mar- ket. We also believe the magnitude and timing of any shif t w i l l also partly depend upon o i l price trends. Given that the main attribute of the 737MAX is the provision o f a more fuel-efficient engine some operators and investors wi l l be re-assessing purchase pricing levels i n Light of the recent pricing collapse of j e t fuel. A

I Boeing 737-800 Values as of January 2015

Aircroft specifiction assumes MTOW 174,100 lbs, CFM56-7827E engines and Blended Winglets Future Values assume maintenance status returning to half life a t 4 years of age.