MIAMI – Recent data collected by the independent aviation consultancy, IBA suggests that overall aircraft values are on the decline, due to the COVID-19 crisis.
In a recent report states that aircraft base values, defined by IBA as “the underlying economic value of an aircraft in an open, unrestricted, stable market with a reasonable balance of supply and demand”, are becoming further and further distant from their respective, declining market values.
As has been the pattern with many carriers around the world, airlines have been forced to reduce schedules and also ground many aircraft as a result of a decline in passenger demand. This leads to many aircraft not producing revenue. The combination of zero revenue with the ever present storage and maintenance costs, among others, create a falling market value.
In another report by Aircraft Monitor, having lower current market values than base values mean that the market conditions are tending to support lower prices. This results in lower trading prices for aircraft.
The same report points out that aircraft a policy to identify those popular aircraft that are capable of retaining their value over time should be a core investor strategy under normal circumstances. With aircraft market values on the decline with no end in sight, this puts those targets at risk.
What Does This Mean for the Industry
In an area that has already been hit hard financially by the pandemic, lower market value costs while the demand for new products remains low is not ideal.
Lower market values mean trading and selling values are lower, making it harder for airlines looking to recover losses from downsized fleets. This in turn could cause further disruption and cuts in other areas, such as services, and staff numbers.
VICTORVILLE, CA – MARCH 24: Delta Air Lines jets are parked in growing numbers at Southern California Logistics Airport (SCLA) on March 24, 2020, in Victorville, California. As the coronavirus pandemic grows, exponentially increasing travel restrictions and the numbers of people in quarantine, airlines around the world are scrambling to find places to park a majority of their fleet as they wait to see how the situation will play out. (Photo by David McNew/Getty Images)