Jetrader -May/June 2013 - 21

Defining Airplane
Economic Life
Research indicates that common measures show stability over the past 15 years

Depending on where you sit in the industry,
your view of what’s meant by the term “aircraft economic life,” “aircraft useful life”
or an airplane’s “service life” can vary. It
has a lot to do with whether your interest
is in support of ﬂeet planning, lease pricing or aircraft appraisal, to mention a few.
Across the industry in recent months
were heard rumbles that the economic
life of commercial airplanes was shortening, a situation, which if true, could
have signiﬁcant and long-term impacts to
industry players. The speculation continued
as recently as the ISTAT Americas 2013
conference in Orlando, Fla., in mid-March.
Media played a role in the buzz by quoting various industry sources who opined
that economic life may be shortening,
citing, for example, cases of relatively new
narrowbodies being scrapped.
The reports were viewed with concern
by Boeing, which follows aircraft economic
life closely as the manufacturer with the
largest installed base of airplanes—more
than 12,500—and which hadn’t observed
shifts in its monitoring of the issue.
In response to those positing a shift of
aircraft economic life to the left, Boeing
challenged that the debate should be
fueled by “facts and data” and not mere
speculation. It launched a review of its
own in the latter part of 2012.
The task fell to the market analysis and
research team within Boeing Commercial
Airplanes marketing at its headquarters
near Seattle.
The lead for the effort was Helen Jiang,
a MIT-trained aerospace engineer and MBA
graduate who worked in the industry, and for
Boeing’s competitor, in China before coming
to the company. An aircraft system analyst
who contributes to Boeing’s well-regarded
Current Market Outlook, Jiang has particular

expertise in survival analysis and holds a
patent for ﬂeet retirement forecasting. She is
also one of the company’s Associate Technical
Fellows, an honored engineering distinction.
Jiang cites an experience as the team
set out that informed their direction and
later proved a key to their research—even
the experts are hard-pressed to define
exactly what’s meant when referring to
aircraft economic life.
“In a casual survey, I started calling
several colleagues around the industry
and asked, ‘What do think of when we
say aircraft economic life?’ None of them
said the same thing,” Jiang explained. “We
thought everyone understood. But when we
started to analyze it, we found that there
wasn’t an explicit formula or matrix that
can quantify it.”
In a formal search, the closest thing
the team’s research could turn up was the
description of aircraft economic life in the
ISTAT appraiser’s handbook (see excerpt
on page 22).
“And that still is just a concept. What
we found is that the concept appears to
be contextually deﬁned and is based on
multiple parameters speciﬁc to the entity
making the assessment. It’s an easy-tocommunicate concept, but it’s not easy
to quantify. There’s no widely acceptable
standard of how to do that,” Jiang said.
She explained that analysts use a variety of surrogate measures as the basis for
quantifying aircraft economic life, which
leaves the door open to considerable data
confusion and misinterpretation.
She cites the average age of airplanes
at the time they’re withdrawn from service
and the average age of in-service airplanes
at the point where half of an original cohort
of planes has been retired as the two most
common examples of those surrogates.

Measuring a Massive
Data Collection
In pursuing the study, the data involved
was extensive to say the least. It included
all commercial jets—more than 31,000—
that were built and delivered by Western
manufacturers since the start of the jet age.
“We started in 1952 with the Comet, and
then on to everything else, and we tracked
the status of each and every aircraft tail
number annually from the date of its
delivery until year end 2012,” Jiang said.
For its data source, Boeing used raw data
available from FlightGlobal Ascent. “It was
something on the order of 610,000 entries.
My colleagues joked that whenever I turned
my computer on to run the program, the
lights in the building dimmed,” Jiang said.
Even considering the massive database,
Jiang started out thinking the exercise
would be relatively straightforward.
“But what I quickly found was that the
deﬁnitions are critical to this analysis.
Depending on how you deﬁne your ﬂeet,
you will cast the data differently,” she said.
She provides the example to illustrate
the challenge she faced in her analysis as
framed by the ISTAT handbook’s deﬁnition
of aircraft economic life.
After their exhaustive round of data
crunching, Jiang and her colleagues took
away two key observations from the effort to
deﬁne and calculate airplane economic life:
1. Its deﬁnition must be deduced in the
context of the report or analysis at hand;
and
2. Either the average age of airplanes
when they’re permanently withdrawn
from service, and the interval of time
between delivery of a cohort and the
date when 50 percent (or some other
fraction of) the cohort has been retired,
can be used to quantify the concept.
Jetrader 21

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Jetrader -May/June 2013

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