AVITAS Chart of the Month – May 2015 – Retirement of commercial jet aircraft

The retirement of commercial jet aircraft are driven by many things. Chief among them and on a macro-basis are age and technological changes which motivates airlines to re-fleet and retire aircraft.  But, a more penetrating look indicates that Oil Price and Interest Rates have played an important role over the long-term.

The scatter-plot on the two charts show oil price and interest rates vs. the % of retirements of the commercial aircraft jet fleet over the last 25-years and the relationship between these variables (the individual data points) and the fitted trend line.  Thus, as oil price has gone up, retirements also have gone up.  As interest rates increase, retirement proportions decline.

As a result, as oil prices have declined recently and with the expectation that interest rates will increase in a recovering economy, then it follows that future retirements (as a % of the commercial aircraft fleet) will also decline. Does this mean that future new aircraft deliveries will slow and be delayed or postponed?  More on that in future posts.

What Drives Retirements?