Jetrader - Fall 2014 - 32

Aircraft

Recyclers

Debate the
Coming 'Tsunami' of
Retired Aircraft
Mix of low interest rates, high fuel prices and new aircraft
models equals uncertain outlook

By James Careless
"The aviation industry is facing an aircraft
retirement tsunami," said ICF International
Principal Richard Brown at the 2014 Aircraft
Fleet Recycling Association's (AFRA) Annual
Meeting on 18 June 2014. He told AFRA delegates that the rate of aircraft retirements
will reach an astounding 1,000 aircraft a
year by 2024. Based on current data, AFRA
expects between 1,200-1,800 aircraft to be
dismantled and torn down over the next
three years.
Julie Felgar, Boeing Commercial
Airplanes's managing director of environment strategy, agreed. She told AFRA delegates that a "wave of aircraft retirements
is coming" driven by the availability of new
fuel-efficient aircraft, with 41 percent of
today's fleet leaving service in the next two
decades. As a result, "there is a significant
opportunity for companies to dismantle
and recycle these retired airplanes to the
highest standard rather than parking them
in the desert," Felgar said.
However, not everyone in the aircraft
recycling industry agrees with these dire
predictions. "It's clear that there are more

aircraft due to retire, but this will vary year
on year," said Bradley Gregory. He is the commercial director at Air Salvage International
(ASI) and an AFRA board member who has
carefully studied aircraft retirement trends
during ASI's 18 years of operation.
"Although there are lots of aircraft
expected to be dismantled in the next
few years, the beginning of 2014 has been
very quiet in Europe with very few aircraft
being disposed of," added Kevin O'Hare,
CEO of Sycamore Aviation at Durham Tees
Valley Airport, UK. "Some of this has been
due to aircraft leases being extended
over the summer period as utilization has
increased," he said. "Also, a big factor in
the short-term shortage of aircraft is the
EU261 ruling, which allows passengers to
claim a large amount of compensation for
three-hour delays to flights. Because of
this, we are aware that some European airlines are holding on to some older aircraft
as standby aircraft, to support the fleet
during the peak season."
Whether or not a "retirement tsunami"
is on the way is of great importance to

32 The official publication of the International Society of Transport Aircraft Trading

aircraft recyclers. A big influx of retired
aircraft could drive prices down for recycled
parts on the global market. At the same
time, such a glut could reduce the prices
aircraft owners are asking for their surplus
equipment, allowing aircraft recyclers to
pay less and potentially earn more on the
parts they extract and eventually sell.

Arguments for the Tsunami
According to AFRA, many factors are
creating the approaching tsunami of retired
aircraft. "The combination of demographics
as aircraft reach the end of their economic
life, low interest rates, relatively high fuel
prices and the introduction of new models
is causing the retirement of unprecedented
numbers of aircraft, while new technology
and OEM production rates are also exacerbating aircraft retirements," Brown said.
Tim Zemanovic is CEO of Aircraft
Demolition, LLC of Burnsville, Minnesota.
Like Sycamore Aviation, Aircraft Demolition
is a dual-accredited AFRA member (for aircraft disassembly and parts recycling). He
takes the tsunami threat very seriously.

Jetrader - Fall 2014

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