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By Michael Graham, Valuations manager at Ascend by Cirium
In April 2021, Ascend by Cirium launched the Commercial Aircraft Market Sentiment Index (CAMSI). The monthly Index tracks market sentiment and trends of values and lease rates through a survey of key market stakeholders, including lessors, banks, OEMs, part-out shops, airlines and brokers.
Within CAMSI, we utilise a NPS Index methodology – calculated as the number of respondents replying ’too high’ or ‘trending up’ minus those replying ‘too low’ or ‘trending down’, divided by the total sample response to that question. Scores in the 40% to -40% range broadly indicate stability, those below -40% can be considered to indicate a negative sentiment and those above 40% indicate a positive sentiment.
What a difference a year makes – one year of CAMSI
Cast your mind back to April 2021. The world was just over one year into a pandemic which had already claimed millions of lives, paralyzed the global economy and brought the commercial aviation sector to its knees. While vaccines for Covid-19 were already being rolled out across many developed economies, we would still have to navigate months of rising and falling cases as well as the Omicron and other more contagious variants, before society would finally come to grips with Covid-19.
In such a challenging environment, gauging the health of the global commercial aviation sector is especially difficult and measuring market sentiment from key industry participants can be a useful leading indicator of where things may be heading in terms of aircraft values and lease rates. It was for this and other reasons that we launched CASMI in April 2021 and with 12 months of responses now analysed, some interesting trends have emerged.
The overall trend is positive, with the combined average NPS score for the 10 aircraft types on which we survey our respondents, rising strongly over 12 months. This is indicative of a general recovery, albeit with sentiment regarding Market Value trends lagging that of lease rates.
However, these lines merely represent the average and if one delves behind the headlines, the picture from CAMSI has been much more complex over the past 12 months. Firstly, there has been a notable gulf between the performance of single-aisle and twin-aisle aircraft, with the sentiment towards the former aircraft class running consistently ahead of the latter. This is perhaps unsurprising, given that short-haul and domestic routes have generally reopened ahead of most long-haul markets, resulting in greater demand for smaller aircraft. That said, with more and more countries relaxing travel restrictions, most notably across the Atlantic, we are finally beginning to see the emergence of some positive sentiment towards twin-aisles.
Of potentially more interest are the performances of new-build and 10-year-old aircraft over the past 12 months. Sentiment towards new-build aircraft, specifically the Airbus A220, A350-900, A320neo and A321neo, as well as the Boeing 737 Max 8 and 787-9 has run consistently ahead of that of 10-year-old vintages of the Airbus A320ceo, A330-300, Boeing 737-800NG and 777-300ER.
There may be several reasons for these divergent performances, many of which relate to the relative supply and demand balances of the aircraft types in question and sentiment towards them. Firstly, with operators keen to minimise costs wherever possible during the pandemic and faced with depressed load-factors, flying newer, more fuel-efficient aircraft with lower overall trip costs made commercial sense. This resulted in lower overall storage rates for many new-generation types compared with their older peers.
Capital costs may also have been another factor in that most operators and lessors will be keen to utilise aircraft which have only recently been acquired in order to generate returns on investment. Conversely, they may be more willing to store or even retire older aircraft, where costs have already been largely amortised, resulting in an increase in the supply of aircraft and downward pressure on Market Values and Lease Rates. ESG considerations may also be another factor behind stronger sentiment towards newer types, with many banks, lessors and other financial institutions keen to move away from older, higher-emission aircraft in order to help meet ‘net-zero’ emissions targets. With Covid-19 beginning to recede and with fuel prices rocketing in the wake of the Russian invasion of Ukraine, sentiment towards more fuel-efficient aircraft is likely to remain strong.
Therefore, while the overall story of CAMSI over its first 12 months has been recovery, the rising tide of sentiment has not lifted all types equally. Looking ahead, with renewed geopolitical instability, rocketing inflation and the continuing need to be mindful of Covid-19, the trajectory over the next 12 months remains far from certain.
We are always looking for further respondents to reflect all aspects of the market, who can then benefit from receiving the full set of results (above is only a top line summary). The CAMSI survey takes only 3 minutes to complete, yet provides respondents with the most comprehensive picture of the aircraft value market trends available. If you would like to participate, please contact michael.graham@cirium.com. Participants will receive a complete and detailed analysis of the survey results, with ten or more graphics included.
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