What will happen to Thomas Cook's airplanes?

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(CNN) — On any other day, they’d be crossing continents and pulling up at gates in all corners of the world.

But as of September 23, the 34 planes dressed in Thomas Cook livery were grounded at UK airports because of the travel company’s abrupt demise.

The planes have been “stored” in aviation terminology.

That means they’re being held — normally at the airport at which they last landed — until their owners can move them to a different spot.

The UK government has launched its largest ever peace time repatriation effort to bring home British citizens stranded by the Thomas Cook collapse, with the country’s Civil Aviation Authority securing a fleet of aircraft, some from as far away as Malaysia, for the operation.

But while passengers are asking why the empty Thomas Cook planes can’t be used to bring them home, the simple answer is that the majority of them do not belong to the airline.

All but three of Thomas Cook’s current 34-strong fleet are privately owned and leased out to the airline.

“Many will be leased from head lessors, who own the aircraft, while Thomas Cook effectively pays a mortgage on them,” explains Mark Payne, leasing director at aircraft charter specialists Chapman Freeborn.

“When they stop making payments, the aircraft are repossessed. They go back to the owners and the head lessors, who then need to find someone else to take them on. It’s a bit like someone defaulting on a mortgage — the house is repossessed and they need to find someone else to live in it as soon as possible.”

Paul Welch, founder and CEO of private jet broker Million Plus, agrees: “Most companies will have lots of aircraft leased so those companies will automatically have made arrangements to requisition the aircraft. Those owned by Thomas Cook will be automatically covered by liquidation or bankruptcy procedures.”

Airplanes detained

The tour operator and airline will have many creditors

Tolga Akmen/AFP/Getty Images

Although in this case, the owners may have a fight to get their hands on the aircraft. Last night, a photo emerged that purported to be a repossession order on a Thomas Cook-branded plane at Manchester Airport, supposedly for default on payment of airport charges.

Manchester Airport declined to comment.

Glasgow Airport confirmed to CNN that the four Thomas Cook planes which landed on its property yesterday have been “detained on behalf of the airport.” And Bristol Airport confirmed it has two grounded planes onsite.

“There are often claims based on fees for slots due to the airport, and various entities — including the airports — will look to repossess aircraft in lieu of payments,” one leasing industry insider, who spoke on condition of anonymity, told CNN.

“But ultimately whoever owns it has the right to own it. The fees are the responsibility of the airline. So unless that aircraft was owned by Thomas Cook, they won’t get to keep it.”

What happens to an airline’s planes when it goes out of business depends on whether or not it owns them.

If it does, they become assets that are due to the airline’s creditors. But if it has leased them, they return to the owner via the head lessor.

When Monarch Airlines collapsed in October 2017, it had 35 aircraft to its name. All were reclaimed by the owners and were re-leased to the likes of easyJet, Aegean Air — and Thomas Cook, which took four.

“Well looked after planes eventually filter their way back into the market,” says Payne. “They’re painted up, checks are done, and they come back — usually to a smaller airline.

“They drop down the tiers — so they might start with British Airways, then fly for Thomas Cook for a bit, then filter down the system.”

On the move

Monarch Airlines collapsed in 2017

AFP Contributor/AFP/Getty Images

While the bidding begins, the aircraft will need to be moved into storage — preferably to a cheaper facility.

Five Monarch planes, for example, were stored for nine months at Newquay Airport in Cornwall by Apple Aviation, which handles aircraft maintenance, parking and recycling. Some of those planes went on to be rebranded for Thomas Cook.

And Apple’s Newquay hangar should receive some Thomas Cook aircraft next, according to Ryan Winfield, sales and marketing director.

“The leasing company takes the plane back for the owner, and makes sure it is maintained and stored. We park it until they find a new lessee. It could be seven or eight months.” Apple also stored planes from Primera Air, which went bust in October 2018, for eight months.

When deciding where to send them, the anonymous leasing insider says that the priority is to move the plane only once. “Ferrying it is extremely expensive, so you try to reposition them to a technical facility that doesn’t just store it, but will be able to outfit it for a new operator.”

A glut of planes?

Primera Air, which collapsed in 2018, saw planes stored at Newquay Cornwall Airport

London Stansted Airport

Mark Payne says that the demise of Thomas Cook will have a knock-on effect for the aviation market in 2020. Not least because Thomas Cook had ongoing “wet lease” contracts — whereby the airplane’s crew, maintenance and insurance are included in the package with leasing airlines — including Lithuania-based Avion Express and Latvian SmartLynx, whose own fleets will now be up for grabs.

“There will be a lot of aircraft available, and carriers that flew predominantly for Thomas Cook will need to find another home for their planes next summer. There will be more capacity in the market, and other airlines might feel the pinch because they might not be able to place theirs.

The Boeing 737 MAX — taken out of service globally because of safety concerns — is also expected to re-enter the market towards the end of this 2019, meaning that the extra planes airlines have rostered will also be going spare.

“It won’t affect things at the moment, because the European market is incredibly seasonal and we’re coming out of the summer season. But there will potentially be a lot of unemployed aircraft come Christmas, and next April there may well be a surplus, with aircraft sitting around, which this year was unheard of,” says Payne.

Don’t get too excited, though — this doesn’t necessarily mean cheaper fares.

“The people suffering will be the aircraft owners,” he says. “Airlines might be able to get a slightly better deal and in theory greater availability means potentially cheaper prices, but it’s too early to say what the effect on the consumer would be.”

Other tour operators including Tui, easyJet and Jet2 will do well from Thomas Cook’s demise, he says. And he predicts airlines including Norwegian will snap up the “valuable” slots at London Gatwick and Manchester.

The leasing insider has a rosier vision for the Thomas Cook fleet. “They’re mainly Airbus narrowbodies and there’s a demand for aircraft right now, so larger lessors shouldn’t have difficulty repossessing the aircraft,” they say.

‘”There’ll likely be a short period before you find an operator wanting to use them, and then it’ll take time to repaint and update the cabin before they go back into service.”

Paul Welch agrees: “This won’t lead to over-supply of aircraft — the demand today and next year is greater than the supply.”

Worst case scenario, there’s always scrapping.

Aircraft, like cars, lose value quite quickly, says Payne. “There’s a depreciation process, and the maintenance requirements become more intense the older they get. Sometimes they’re scrapped — there’s a whole industry in spares and parts where the parts are worth more than the aircraft itself.”

This article was originally published by Cnn.com. Read the original article here.