Air Transport World

Have we hit bottom? With aircraft values and lease rates depressed and US airlines still parking airplanes, financiers and lessors wonder whether the worst is over, or yet to come. (Asset Management).

More than a year after the airline industry began its swift plunge into the financial abyss, the number of parked aircraft remains at a near-historic high, with orders and trading activity for all types severely depressed and in some cases effectively suspended. Airbus and Boeing reported orders for 334 commercial transports in the first nine months of 2002 versus 522 in the year-ago period. The slowdown in the regional jet market has been even mote dramatic, with just 66 firm commitments booked by Embraer and Bombardier through June 30 versus 175 in the first half of 2001.

To be sure, a significant deceleration in ordering activity had been predicted for the last few years in view of the large number placed between 1998 and 2001--a total of 5,800, according to The Airline Monitor.

Even as new orders have stalled, however, there has been little movement in the number of aircraft in storage since several hundred entered the desert following 9/11. According to Airclaims, 2,034 commercial transports were parked as of early October. This was down 5% from the peak of 2,145 in May but well above the 1,206 in mothballs at the end of August 2001. Moreover, the decline does not mean that all of these airplanes were returned to active duty. "Some of the old planes got parted out, so they are no longer parked, they are in beer cans," observes Fred Klein, president of Herndon, Va.-based Aviation Specialists Group.

"There has been an increase in the amount of open market activity, but it's people selling the aircraft to the breakers," agrees Airclaims Director-Consultancy and Information Services Edward Pieniazek. According to Airclaims, some 188 aircraft were "permanently retired" in the first nine months of 2002, up 20% over the equivalent period in 2001.

As Ansett Worldwide VP-Marketing Harry Forsythe points our, a distinction needs to be made between those airplanes that were headed for the boneyard in any case and those that are there owing to current market conditions. US airlines in particular have been phasing our older equipment for the past several years. The downturn has to a certain extent simply hastened that inevitable transition. …

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