EquityResearch28December2018COREBarclaysCapitalInc.and/oroneofitsaffiliatesdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.PLEASESEEANALYSTCERTIFICATION(S)ANDIMPORTANTDISCLOSURESBEGINNINGONPAGE25.Parked&ScrappedAircraftMonitorScrapsSteadySoFarDespiteDropinOilPriceWetrackcommercialaircraftretirements(parksplusscraps)toestimatereplacementdemandaspartofoursupply-demandanalysisandtomonitorfleetdynamicsthataffecttheaftermarket.Parks17%lowerYOY:Wecount1,981parkedcommercialaircraftinNovember,1%higherfromOctober,but17%lowerYOYincluding18%lowerforparkednarrowbodies,15%lowerforwidebodies,and16%lowerforregionaljets(allYOY).Weestimatethat~7%oftheinstalledbaseisnowparked,muchlowerthanthelastseveralyearsasaircrafthavecontinuedtoreturnfromtheparkamidfleetgrowth.Mid-lifeaircraft(aged11-20yearsold)inparticularhavebeenrecentlyreturningfromtheparkandaccountfor~1/2ofthedrawdown.Historically,periodsthathaveseenadrawdowninmid-lifeaircraftfromstoragehavecorrelatedwithstrongaftermarketgrowth.FewerparkedRR787s:ParkedRolls-RoyceTrent1000-powered787sincreasedsignificantlyafteranairworthinessdirectiverelatingtocompressorbladeswasissuedinApril.Wecount~30parkedTrent787s(~10%ofthefleet),~15lessthanOctober.TheseaircraftarepresumablyparkedpendinginspectionbyRolls-Royce.Scrapsinlinewithhistoricalaverage,forecastingslightincrease:Wecount669scrappedcommercialaircraftoverthelast12months,9%higherfromtheprior12monthsandequivalentto2.4%oftheinstalledbase.Weestimateadjustedscrapsarerunningat~2.7%(adjustedhigherforexpectedscrapsreportedafterthefact),roughlyinlinewiththehistoricalaverage.Ashighlevelsofaircraftproducedinthelate1990s/early2000sbegintoageintoretirement,weforecastscrapsincreasingto~3%(onunits)overthenextseveralyears,includingwidebodiesat3-4%andnarrowbodiesat2-3%.Widebodynetretirements...
