AEROSPACE & DEFENSE : Retirements Likely Accelerate; Trimming AM Price Targets

研报英文原文证据摘录

AEROSPACE & DEFENSE : Retirements Likely Accelerate; Trimming AM Price Targets

Refinitiv

Executive Summary

Key takeaway: We think much higher retirements are needed to balance aircraft supply

and demand at planned build rates. We forecast retirements more than doubling over the

next few years. While this is negative for the aftermarket in general, we see most

pressure for GE in our coverage.

See retirements moving growing to 4% of fleet

Our passenger aircraft supply-demand analysis considers the balance of supply

(commercial aircraft seats at normalized utilization) with demand (passenger traffic). We

believe retirements need to increase from their recent level at 1.5-2% of the fleet to 4%+

later this decade in order to balance supply and demand. This is not a call on high fuel

prices due to recent geopolitical disruptions. Instead, we see this as triggered by higher

supply from new Boeing/Airbus deliveries, GTFs returning to service post powder metal

recall, and improved LEAP/GTF availability as durability enhancements kick in, which we

think gives operators incentive to finally retire aircraft they have flown longer than they

would have liked to.

Figure 1: We think retirements need to move much higher to balance supply and

demand

Aircraft Retirements as % of the Fleet on a Seats Basis

Source: Cirium and BNP Paribas Equity Research estimates

“Tight supply” narrative isn’t the full story

Airlines are eager to get new planes as fast as possible from Boeing and Airbus.

However, this doesn’t mean they will continue to hold older aircraft forever. Planes flying

today are full, however each seat carries ~5% less traffic on average today than prior to

COVID as utilization remains depressed, particularly on older equipment. Roughly 1,000

excess aircraft remain in storage.