It is clear that the significant reduction in global and regional capacity as a consequence of Covid-19 is expected to have a fundamental impact on aircraft demand. The real unknown at the moment is just how long it will last, and that could be the critical factor determining what impact there will be on aircraft values. In prior downturns such impact did result in reductions in lease rates and values, based on observation of both market transactions and macro industry conditions at those points in time.
We have not made any changes to values yet, but they are under review. Our Fleets database has a bit of a lag in reflecting parked aircraft as the data team is working hard to keep up with the high numbers; MSN by MSN. However, its key to remember that most of them are currently temporarily parked, not permanently. At the moment many airlines' expectations are that at least a portion of these aircraft will return to service within a few months, or in a worse scenario, before year end.
We are watching the market closely for transactions and their associated price points, but we will also be considering other data, such as surplus aircraft (stored/available fleet), premature lease returns, airline failures, demand for each type from airlines looking to grow their fleets (if any), return to service of Max - (both date and ramp-up speed), and others.
We have developed an aircraft scorecard that keeps track of all these metrics for key aircraft types and we will update it regularly. Our Values Review Board meets fortnightly, and we'll report changes to values and lease rates in a timely manner after they are made. However we must be very careful not to lead the market. There is a fine line between leading the market and reducing values with limited transactional evidence, but with strong evidence from other leading indicators, so we are navigating that right now as we gather information.
Our conversations with the market and early signs of bidding activity suggest that people are still looking to trade aircraft with leases attached, as well as to do SLBs. Also, bids that are being received for aircraft that are for sale, are not immediately as bad as you would think, in fact one or two have been surprisingly good. However, we have seen a reduction in the number of bidders, and also the key question that buyers are asking, (for aircraft being sold with lease attached), is whether the airline is still current on rent and reserves, or whether they have sought any concessions. If they have sought concessions it becomes a lot harder to sell the asset. Having said that, the situation is evolving weekly if not daily, and what was the case last week may not be the case next week.
In summary - we are currently gathering information as we want any changes to be well supported by evidence.