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A330ceo Values Under Pressure But Used Transitions Continue

September 4, 2017

Difficulty in Placing Trent Powered A330s Overstated?

The A330ceo is experiencing a transition to the A330neo and this is inevitably contributing to the fall in values of the former but there continue to be placement of used aircraft demonstrating that the type is still very much liquid.

The arrival of any new aircraft in most cases has an adverse effect on the incumbent type and the A330ceo is no exception. The net value of new A330-300s has been falling in the last few years after previously enjoying an improvement that saw a peak of $108 million in 2015 for a new example although there were suggestions that prices in excess of $115 million were being paid. Today, the value of a new A330-300 is just under $100 million having fallen by another $2 million over the last year with indications that this will fall further. The fall in the value of new aircraft inevitably has an impact on used aircraft. Assuming an average annual decline in used values of eight percent based on a two percent rise in the value of new aircraft, a fall of three percent in net pricing of new aircraft would increase the decline in used values by 11 percent per annum. Furthermore, the transition of the A330 from the ceo to the neo means that the annual rate of decline is already above eight percent. Consequently, used values of the A330-300 have experienced a fall nearer 15 percent over the course of the last 12 months with declines of similar magnitude expected in the coming years.

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Yet, the demand for used A330-300s is still relatively strong perhaps because of the lower lease rentals and ready availability. TAP has acquired a Trent powered ex-SIA -300 and Hong Kong Airlines has leased a Trent powered -300 that was previously operated by TransAsia. VIM Airlines is leasing an ex-EVA Air A330-200 with CF6s from not surprisingly, GECAS. The ability to place Trent powered A330ceos seems to be odds with accepted convention. The TotalCare programs and restricted opportunities for overhauling and selling Trent engines has been supposed to have caused considerable problems for lessors. Rolls-Royce however, has been active in offering a more flexible TotalCare package that allows easier movement of aircraft. While some challenges remain A330ceos powered by Trent engines can be placed particularly by more experienced lessors.

The launch of the A330neo at the 2014 Farnborough Air Show reflects the new dilemma of the manufacturers in seeking to meet the needs of operators. The A350 and B787, while offering efficiency and considerable range, are relatively expensive and offer too much performance for some routes.

There exist a myriad of routes of around the world that do not require the absolute payload/range capability of the A350 or the B787. Yet to achieve the efficiencies of the new aircraft in terms of fuel saving, use on longer sectors is necessary. Only with longer flights can the higher capital cost of new aircraft be mitigated when compared to the cost of existing equipment. With sustained traffic growth and new route structures, there exists considerable demand for mid sized widebodies that offer capacity rather than range. In view of the shorter sector lengths the ability to extract revenue from higher yielding business traffic is more limited this making it more of an imperative to use an aircraft that has lower capital cost. There exist a great many regional and intercontinental routes around the world that still require the capacity of the A330-200 and A330-300 but not the range or cost of the B787 or A350.

The launch of the A330neo – the A330-800 and A330-900 reflecting the A330-200 and A330-300 – were on the basis of 121 commitments mostly from leasing companies. Air Lease Corporation ordered 25, Avolon 15 and CIT 15 while AirAsia X ordered 50 and Transaero 12. In a twist, lessors that had argued for the A350 have now ordered the A330neo. Leasing companies can more easily place orders because there is no need to undertake detailed route planning analysis. Airlines must review new aircraft in the context of their own network to determine its viability. The launch of the A330neo effectively heralded the demise of the A350-800 and Airbus has persuaded customers to convert existing orders to the A350-900 or the A330neo.

The growing preference for the larger -300 has also been a consequence of the desire of operators to reduce unit costs and the higher seat count of the -300 is one of the easiest ways of achieving this. In contrast to the past, operators prefer to increase capacity rather than frequency. Asian routes require both capacity and range including the ability to offer a viable business class product. The A330-300 is also acting as replacement capacity as such aircraft as the B767-300ER age. There exists some concern that the A330-300 is acting as stop gap measure until the arrival of new products. All aircraft in some sense act as a stop gap measure with the length of the gap becoming of crucial importance.

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