Aengus Kelly: It should be no surprise that Targa yields are down. They were stratospherically high during COVID. And it got to the situation where for some low value products, like a pair of sneakers, the cost of transporting them from Vietnam to the States or Europe, was getting close to the cost of the sneakers. So that was an unsustainable situation. So there’s no surprise there that it’s come down. A lot of demand was pulled forward, of course in COVID, when people were at home buying stuff online. That being said, however, what we do believe that the cargo market is a lot more stable now than it has been in the past. If you wind back 10, 12 years, the cargo business was dominated by the major carriers like the FedEx, UPS, DHL, and a few large Asian airlines that have big freighter fleet.
And it was focused on moving food, flowers, fish, drill bits around the world. Now, of course, the e-commerce is supplanted thus and we have a much more stable demand and wider and broader demand for cargo. So I would say that demand is still pretty good relative to where it was before COVID. It’s very good relative to where it was in COVID. Of course, it’s down and that should be no surprise. As it’s two specific aircraft types, you have the 737, 800 freighter is the workhorse of the narrow body side. The 767, they are just running out of feedstock. That is just an aging platform. So we’re going to see that being retired and that will be replaced over time by a combination of the A330 converted freighter. But importantly, I would say the 777-300 ERS we seen very strong demand for that product.
We had 20 slots, we’ve already leased 18 of them, which is a very, very strong uptake, because that aircraft has got so much volume, which is what you need for e-commerce where the weight is not as important as the volume, the space on the aircraft the volume of it. So, look, I don’t think anyone should be in any surprise that freight rates came down, and the amount of tonnage being moved came down, that doesn’t surprise us at all and something we fully expected.
Unidentified Analyst: Okay, thank you.
Operator: We will take our next question from Ron Epstein from Bank of America. Please go ahead.
Ron Epstein: Good, Good morning, guys. Just a quick one, Gus. We — when you look at other leasing businesses, no cars, other equipment, as assets have become more scarce, it’s caused them to retain more value, or given the tightness of the aircraft market are you guys contemplating at all changing your depreciation rates on aircraft, or are they just too long lived assets to consider doing that?
Aengus Kelly: Yes, that’s just an accounting policy Ron but we said and it’s over a 25-year period and it served as well, to be honest, and I don’t see us changing it. There’s never been a concept of marking to market the depreciation or the values.
Peter Juhas: But Ron, I would say, it’s Peter here. Certainly we should see with higher inflation that should have a positive impact on the residual values of our fleet. Because they are hard assets as you say. So I think longer-term obviously we’ll have to see how persistent that is but we’re strong believers obviously in our book values today but I think this even gives should give people more confidence as time progresses.
Ron Epstein: Yes, for sure Pete. Got it. Got it and maybe a follow up, are you guys getting any kind of inflationary adjustments in the maintenance reserves that you get from your customers?
