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A380 New Net Pricing Sees Stability then Rapid Decline

August 5, 2019

The net pricing of a new A380 continues to face reality and as such are experiencing a significant fall, a trend that is expected to continue.

The new net value of the aircraft refers to the value of the aircraft – based on the sale of a single unit the day after it has been delivered to the original customer and for which the owner is the seller. The new net value does not relate to the estimated purchase price paid by the customer to the manufacturer. Inevitably with the A380 the majority of – if not all – customers more than one aircraft was ordered and as such some quantity discount will likely have applied with regard to airframe, engine and other original equipment manufacturers. The new net price therefore needs to include an assessment of the market value based on a single unit.

The values of the A380 originally saw a modest (data based on 568 tonne aircraft) decline because of the Great Recession, a factor that affected all aircraft types to a greater or lesser extent. The A380 at that time was still just entering service because of the delays that beset the program. The high price of fuel made the seat mile costs of the A380 attractive and the values of the type fell by a lesser amount that many other types.

As the type started to prove itself in service and was able to extract a premium from passengers, the value of a new example started to climb. There were attempts to attract values of nearer $300 million predicated on the basis of an extensive interior that could easily cost in excess of $30 million. However, by 2015 the market for the A380 had failed to advance and it became increasingly apparent that further order placements were difficult to secure with some existing customers opting to defer, change or cancel orders. Attributing a value of $300 million to a new A380 therefore become ever more unrealistic. With the announcement in early 2019 that the production of the A380 was to cease as of 2021, it became inevitable that the new net price of the A380 would fall in line with a very weak used market. Consequently, the value of a new A380 tumbled by more than 15 percent, with further falls to be expected through to the cessation of production.

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