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A318 Values Continue to Fall

May 14, 2018

The market for the A318 remains difficult as the type fails to meet the needs of many operators.

There are some 11 Avianca A318s in storage with another 11 ex-Frontier already scrapped. There are still some leased by GECAS amongst others and a renewal of the lease with an existing operator will be the preferred option. The last A318 has long since been delivered and as a commercial aircraft, the type has a very limited role. Even the departure of the B737-600 and B717 from the competition ring did not lead to improved market conditions for the A318. With the final order tally numbering 79 the type is marginalized though as the A318Elite the type still has validity. The last decade has been fraught with sustained difficulty for the A318 such that the order book continued to contract rather than expand.

Launched in April 1999 on the basis of 109 orders and commitments, the A318 was due to enter service in late 2002 but was delayed as a consequence of the setback suffered by Pratt & Whitney with the development of the all new PW6000. Despite being the original lead engine supplier on the A318, Pratt & Whitney lost most of its custom. LAN Airlines, in placing an order for 20 A318s, selected the PW6000 ensuring that the manufacturer had one customer on its books. The lack of orders for the PW6000 are perhaps more a consequence of the difficulties of this market segment rather than due to deficiencies associated with the design of the powerplant. Most of the PW6000 powered A318s have now been scrapped.

The A318 can accommodate up to 129 passengers, only slightly more than the E195, with 107 used as the baseline capacity, making it a competitor to the B717 and the B737–600. In common with other members of the A320 family, differing markedly from the Boeing philosophy on narrowbody engine choice, the A318 features a choice of engines. The choice though is not the same as on other members of the A320 family which feature either the V2500 or CFM56. Initially the A318 was to be offered with just the Pratt & Whitney PW6000, a new engine offering the prospect of improved fuel efficiency.

However, customers already using the CFM56 on other A320 family members pressed for the CFM56 to be also included. August 1999 saw the CFM56 added although service entry of the airframe/engine combination was slated for the second half of 2003, then more than six months behind the PW6000. Problems with the PW6000 resulted in a major redesign pushing back service entry of the airframe/engine combination to 2005. This left the CFM56 as the lead powerplant. The CFM powered A318 entered service in low numbers but at least became the baseline powerplant.

A318 Vital Statistics
LAUNCH 04/1999 STANDARD MTOW 130,070 LIST PRICE 2012 $67.7m
FIRST FLIGHT 01/2002 OPTIONAL MTOW 149,910 TYPICAL DISCOUNT 55%
SERVICE ENTRY 06/2003 FUEL CAPACITY 6,300 USG VALUE Y2003 $5.0m
ORDERS 80 FUEL – OPTIONAL N/A
DELIVERIES 80 RANGE–TYP PAX 3,000NM VALUE TREND STABLE
BACKLOG 0 RUNWAY LENGTH 2020 F/V – Y2003 $4.0m
CUSTOMERS 6 CARGO 749 cu ft
ENGINE TYPES PW6000/ CFM56 PAYLOAD (MAX) 24,400 LBS LEASE RATE– DoM 2003 $65,000PM
VARIANTS N/A MZFW- STD 116,840 lbs RENTAL TREND FALLING
6/12y CHECK $1.2m MLW-STD 123,460 lbs 2020 LEASE RATE –DoM2003 $55,000PM
ENG O/H COST $1.0-3.0m CABIN WIDTH 145 inches AIRCRAFT RATING D–

The MTOW of the A318 ranges between 130,070lbs through to 149,910lbs. The higher MTOW sees the range increase from a basic 1,500 nautical miles through to 3,250 nautical miles. Originally the MTOW was set at around 145,000lbs producing a range of 2,850 nautical miles. However, the extension to the range places the A318 on a par to other members of the A320 family and increases the opportunities for corporate versions to emerge. The higher gross weight examples should be the more popular and enjoy stronger residual values though both “popular” and “stronger” have become increasingly relative terms. With ever increasing emphasis on weight related navigation and landing charges, lower weights may be viewed with just as much enthusiasm.

The issue of weight is significant. Although the capacity of the A318 is similar to the B717, the two aircraft seek to serve different markets. The operating empty weight of the A318 is much higher at 86,060 lbs compared to the 67,124 lbs of the B717. Similarly, the OWE of the B737-600 is 80,340 lbs versus the 69,800 lbs of the B737-500. For smaller carriers, seeking to use aircraft up to 110 seats, the OWE will play a vital role in determining operating economics, particularly in Europe. For larger carriers, the commonality of the A318 with the rest of the A320 family should easily outweigh the weight issue.

Orders totaled only 80 before production ceased, significantly lower than the order book of newarly 20 years ago. The approximate 160 orders recorded at its peak had been placed by mainly larger operators, the operators with the then perceived route structure able to use the type. The combination of adverse market conditions and the delay in certification of the PW6000 engine prompted either cancellation or switches to A318 orders. The B737-600 suffered a similar fate having secured only 69 orders, down from the 100+ previously registered and the B717 cancelled after securing 155 orders.

The support of the lessors for another new Airbus program represented considerable expectation of success. However, such anticipation was lost along with orders. ILFC changed all its orders to other variants, the GATX order was no longer evident, the 25 of TWA were naturally cancelled while the 10 of BA, the five of EgyptAir and the eight of Air China also disappeared. Customers comprised Air France, BA, Frontier, GECAS, LAN, and Tarom. There have also been 23 orders for the A318 Elite.

Late service entry usually provides the competition with an important marketing advantage but apparently not on this occasion. With such competition from not only Boeing with the B737-600 but also the new generation of larger regional jets, sale prices had to be below $30 million. Even at that level, there was little interest. The average $67.7 million (2102) list price tag bore no resemblance to the net selling price. The cost of producing the A318 is only slight less than the cost of producing the A319 – apart from slightly less aluminum, lower thrust engines, and slightly fewer seats, everything else remains the same. Inevitably in comparing operating costs, different assumptions adopted by manufacturers produces different results. Airbus show that while the B717 has slightly lower trip costs, the cost per seat is just over three percent higher. The trip costs of the B737-600 are shown to be four percent higher by Airbus though each manufacturer provides differing assumptions.

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