Check in with the CEO

The first half of 2023 is now behind us, as is the Paris Air Show. Both good triggers for some reflection on what’s happening in the industry this year.

If I start with the Air Show, confidence seems to be the word that best describes the mood. Indigo’s record-breaking purchase of 500 aircraft was a huge vote of confidence for the industry, and I am sure for the Indigo team a very pleasing moment that saw them just nudge ahead of rival Air India’s purchase of 470 aircraft earlier this year.

In addition, Boeing’s forecast at Le Bourget was another great vote of confidence in aviation, with their 2023 Commercial Market Outlook showing a global demand for 42,595 commercial airplanes by 2042. The CMO foresees airlines replacing around half the global fleet with new more efficient models. Hence, plenty of confidence in the future coming out of the Air Show, although ‘the future’ still seems a little way off.

As we enter the second half of 2023 it has been encouraging to see passenger demand come back strongly and hence the aircraft buyer’s market is heating up, but as ever, that doesn’t paint the whole picture or support the here and now. Alike to 2022 the talk of the shows, exhibitions and conferences is OEM deliveries, with Boeing and Airbus continuing to make positive noises about the rates at which they can produce. However, further down the supply chain, feelings are less bullish about this as evidenced within a Reuters article I read earlier this month. Entitled ‘Behind aviation recovery’; the article highlights how suppliers are struggling to keep up whilst showcasing some great insights into the sentiment of the third-tier suppliers and the potential for further rounds of consolidation.

All of this means fleets are growing older, as we await new aircraft to become available, and it is making some parts of the sector [as one lessor recently said to me] “enter a super cycle”! Lessors are extending leases to fill the gaps created by the OEM, meaning stock aircraft targeted by parts companies for purchase are less readily available and escalating in price. This is leading to used serviceable material (USM) price points rising and MRO spend is going up with it. Running parallel to this is the unsurprising rise – by and large – of passenger aircraft lease rate, especially for narrow bodies.

In conclusion, for aviation 2023 certainly seems to be a big improvement compared to 2022. Confidence is on the up, especially when looking much further forward, but these next six months are going to be complicated.

Brgds,

Lee McConnellogue