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The narrowbody market recovery closer to reaching pre-pandemic levels

As per the data released by IBA recently, the market values of Airbus A320neo and Boeing 737MAX are both recovering quickly, and are now at 96.5% and 94.4% respectively of their pre-pandemic base values.
The higher value of the Boeing 737-800 as compared to the A320ceo is due to stronger demand for P2F (passenger to freighter) conversions of the aircraft, and a lower level of fleet dispersion.

The most popular segment of aircraft – the narrowbody is found to recover much faster than its wide-body counterparts. As per the data released by IBA recently, the market values of Airbus A320neo and Boeing 737MAX are both recovering quickly, and are now at 96.5% and 94.4% respectively of their pre-pandemic base values. The market value of the 737MAX has bounced back further, and from a greater divergence with its base value, following its re-certification in most global markets.

By comparison, the market values of new generation widebodies still have a greater scope for recovery to pre-pandemic levels. The cost of the four-year-old Airbus A350-900, four years back was USD 102 million whereas the cost of the same aircraft in January 2020 was USD 115 million. On the other hand, a four-year-old Boeing 787-9 would amount to USD 93 today as against USD 108 million a couple of years back, IBA estimates.

The values of previous generation narrowbodies have recovered partially, with market distortions due to the grounding of the 737 MAX. IBA currently values a ten-year-old Airbus A320ceo at USD17.5 million, compared to USD23 million in January 2020, and a ten-year-old Boeing 737-800 at USD21.25 million currently, compared to USD25.7 million two years ago.

The higher value of the Boeing 737-800 as compared to the A320ceo is due to stronger demand for P2F (passenger to freighter) conversions of the aircraft, and a lower level of fleet dispersion due to a slower pace of 737MAX replacement. Once the MAX is globally certified and as deliveries continue to ramp up, IBA expects the value gap between the A320ceo and 737-800 to narrow.

These value changes come as the recovery of international air traffic stalled in late 2021 due to the Omicron variant of Covid-19. From December 2021 to January 2022, total air traffic across the globe remained static at 74% of pre-pandemic levels.

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Air traffic levels in Asia-Pacific have dropped in the first quarter of 2022, whilst those in Europe are expected to bounce back through the spring and into summer 2022. However, this might be impacted by the situation in Ukraine, which is already driving oil prices (Brent Crude) above USD100 per barrel for the first time since 2014, with an adverse effect on the ATF prices.