Jon Sindreau of The Wall Street Journal reports that endless manufacturing defects affecting newer planes are increasing the value of older models. He writes:
Anyone who has walked into a used-car dealership knows about the risks of being sold a lemon. When it comes to aircraft, however, it is the newer models that seem more likely to leave owners stranded. The value of 10-year-old planes has jumped in recent weeks, according to appraisal data from aviation-analytics firm Ishka. The price tag for the Airbus A320-200—the backbone of the world’s short-haul fleet—has risen 10% since August, and has now almost fully recovered from the Covid-19 crisis. Rates to rent the jet were up 6%.
The popularity of trusty clunkers is rising because of issues affecting the newer version of the plane, the A320neo, introduced in 2016. In July, U.S. engine maker Pratt & Whitney, a division of RTX (formerly Raytheon), warned that contaminants had been found in powdered metal used in some of its Geared Turbofan, or GTF, engines, which power roughly 40% of the A320neo fleet. Last month, the company said the issue could affect about 700 engines and require 300 days to repair each one. Hundreds of planes are set to be grounded through 2026.
Other popular older models have also rebounded in value, though wide-body jets such as the Airbus A330-300 and the Boeing 777-300ER are still only worth about half what they were at the start of 2020. […]
By contrast, aircraft asset-backed securities, or ABS, have an average jet age of 13 years, according to S&P Global Ratings. This market has been mostly frozen after a series of setbacks. Airlines delayed payments during the pandemic and many aircraft got stuck in Russia following the war in Ukraine. Then came this year’s credit downgrades and rise in interest rates. Now the stage may be set for a thaw.
They just don’t build planes like they used to.
Read more here.
