Originally posted by Anzac
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Feedstock is key to any conversion program and that is driven by the market value of the aircraft. Many people wondered why it took Airbus so long to bring the A320neo family to the market when it was clear from the C-Series that the new PW engines offered such a fuel burn improvement. Well in addition to relatively low fuel prices the other main factor was protecting the value of aircraft the customer already had. When Boeing introduced the NG to replace the Classic the value of the Classic aircraft drop by halve within a period of 18 months. Naturally the airlines and lessors that had Classics were not too happy.
People had looked at A320 conversions before. There was a big effort about 12 yrs ago but it came to nothing as the feedstock costs were too high. Fast forward a few years and just like what happened with Boeing, Airbus introduces a new generation of A320, and although better planned for, we again see a dramatic drop in the market value of A320's. Also we start to see a lot of earlier aircraft enter the second hand market. And one thing that most overlook is that the biggest customers of single aisle aircraft B737/A320 are lessors and their business case is very different from a traditional aircraft. They constantly look how to maximize their return of investment, so they look at how much they earn by leasing or by parting out the aircraft (turning it into spares). Now as aircraft get older they need more care and their performance compared to the latest generation can be 20-30% worse. So now we see 8, 10, 12, 15yr old B373 & A320 being scrapped. (It is not just the big boys like the A380)
With regard to the 737-800 feedstock, that would be coming online if Boeing did not have had a few little issues with the 737MAX. As the numbers of MAX aircraft entered the market it would have driven down the -800 market value rapidly. But now we have Coronavirus and the forecast from IATA are not good.
covid-19-outlook-for-air-travel-in-the-next-5-years (2).pdf
They expect a 40% reduction is the amount of travel for aircraft like the B737 & A320 and that the market will take at least 2 years to recover. That means not only will the be less new aircraft manufactured but there will be a lot of people sitting with aircraft, costing them money for a long period of time. This will have a massive effect on the market value of potential feedstock. Some will be parted out to reduce the cost of new spares for those aircraft still flying, others will just be scrapped as they were nearing the end anyway but a lot will still remain and as it costs money to park an aircraft companies will be doing a lot to reduce those costs. Thus if you are in the market for a B373-800, A320 or A321 P2F conversion there has never been a better time than now.
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