It’s Dublin week.

For those of you not in Dublin this week, allow me to explain: Once a year, the Airline Economics conference gives the aviation finance community a reason to gather in Dublin. As a test of loyalty to the profession, that week (almost) always falls in January.

While we just enjoyed a record day of beautiful January Irish weather, the meetings and dinners (and pub visits) are endless. What this means is a lack of time to dive deep into analysis for the newsletter.

Instead, we offer research published last summer about the aircraft market. At the time, discussion was making rounds about how it was impossible to have an aircraft shortage while record numbers of aircraft remained stored.

Indeed, it does appear to be a bit of a paradox that aircraft are both needed and available. Of course, a little nuance offers a clearer picture.

Today, there is little dispute that the industry is suffering from a narrowbody shortage. Yet, the stored fleet remains high. The same dynamics apply.

As we return to our regularly scheduled Guinnesses, we offer a peak into our premium research product with analysis published in 2024:

Stored narrowbody fleet size not indicative of market conditions

Why it matters:

Long a metric of aircraft market health, the percentage of the fleet stored is no longer connected to historical patterns. As of July 2024, the percentage of the global fleet in storage still exceeds the peak levels seen during the 9/11 and Great Financial Crisis downturns. Still, 12.5% of the global fleet remains inactive, compared to peaks of 10.7% in 2003 and 9.7% in 2010.

By this metric, the market is still in a historically oversupplied position. Yet, new aircraft backlogs are full, airlines are complaining of a lack of supply, and aircraft values and lease rates are on a near-universal rise. However, when we consider the aircraft parked which are counted in the overall percentage, a scenario emerges very different from the recovery from the prior downturns. Considering the age of aircraft stored, peaks appear around COVID, but also around ages where first and second lease returns are most expected. Beyond this, a large portion of the stored fleet is competing against cargo conversion or part-out.

The edge:

While attention has been on the size of the stored fleet, we find strong indications of the market by considering the length of time the fleet has been in storage. 56% of the global parked narrowbody fleet has been in storage longer than three years. Since the difficulty and cost of returning a stored aircraft to service increases over time, the likelihood of the aging fleet yet to return to service continues to reduce. We believe this is being influenced by a hesitancy to consider old aircraft in deep, long-term storage as “retired” rather than just “stored” by the owners.

Similarly, recent challenges with GTF engine inspections have increased the stored fleet. It should be noted that this stored fleet has increased against market demand, further adding to the disconnect between the percentage of stored fleet and market conditions. It is estimated that GTF inspections account for one percentage point of the 12.5% stored fleet metric.

Finally, in a paradoxical way, the reduced availability of new aircraft is helping to keep stored fleet percentages high. Since the majority of the parked fleet either faces questionable returns or eagerly awaits engine inspections, the lower number of new aircraft deliveries is making the stored percentage artificially high. The end result is a market still in a shortage, even though a traditional metric suggests otherwise. What has changed is not the fleet but rather the validity of the metric.

Our latest research

A bit of a wild not on FTAI Aviation, down 24% as of market close today:

Muddy Waters is a research organization that released a report yesterday disclosing their short position in FTAI. Several claims are made as to why their position is short. You can read their document here: FTAI Aviation.

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