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A350-900 Lease Rentals Hold Steady

May 14, 2018

The lease rentals of the A350-900 have been able to achieve a measure of stability despite the slow production ramp up and some quality issues.

The lease rentals for the first A350-900s produced in 2014 according to Aircraft Values Pro – www.aircraftvalues.net – amounted to $1.1 million per month. This lease rental reflected an average credit on an average lease term of 10-12 years. Any maintenance reserves or full life return conditions are not included in the lease rental. Lease end compensation for half to full life is likely to amount to some $18 million based on OEM list prices. Most operators will likely have taken out a Rolls-Royce TotalCare package. Rolls-Royce have introduced more flexible TotalCare packages for lessors that eases the transition between lessees. Three months of lease payments acting as a security deposit are also assumed to be in place. A lease to a strong credit will likely see a lower rental and to a weaker, a higher level. If more than one aircraft is being leased to the same lessee by the same lessor then a discount may also apply.

The lease rental of a 2014 built A350-900 today is expected to approximate $940,000 per month based on the same term as above. This compares with a lease rental of a just $1.2 million per month for a new A350-900 delivered in 2018, a modest increase in just over three years. In terms of the future lease rental for a 2014 built aircraft by 2022, this is expected to fall to approximately $800,000 but this depends on whether there any significant improvements made to the existing aircraft. The A350-900 is proving itself in service and the Aircraft Rating is still a B++ indicating that the type is a good risk. As a comparison, the B787-9 built in 2014 had a lease rental of $1.05 million on service entry versus $925,000 of today for the same aircraft representing a slightly shallower profile.

The development of the A350 did see some delays but not of the scale associated with the A380 or the B787-8. The production rates took time to increase not least because of delays to the delivery of the interior by suppliers and in meeting the needs of customers in providing a defect free product. The interiors of the newer widebodies have become the battle ground for operators and an A350 interior can cost more than $12 million representing nearly ten percent of the aircraft price.

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