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Aircraft Market Assessment

May 13, 2019

The B757-300

Market Presence. The final sales tally of the –300 at 55 represented a disappointment for Boeing but it is interesting that the B797 is now targeting a portion of this seating capacity. The limited number of deliveries needs to be placed into the context of an overall successful B757 program. With amortized development costs for the B757-200 no longer an issue, the potential profit margin for Boeing increased such that the manufacturer was able to extract between $2-8m profit from sales. Assuming that the cost of developing the –300 was only around $100-150m, then only between 40-50 sales were required to breakeven. Sales of the –300 at around 55 were limited but eliminated a significant portion of the development cost (notwithstanding launch customer discounts). The lack of orders from the operating lessors (GECAS however tends to order aircraft powered by GE engines) underlined the difficulties of the -300.

Market Outlook. Strong residual values depend on being able to remarket an aircraft to the widest range of operators, both current and potential. Charter operators may consider a short term lease for a -300 as a means of meeting unexpected demand. The larger -300 also proves problematical and costly in seeking a reconfiguration. While the B757-300 allows considerable interior flexibility, extra seats may be a costly issue. The behavoir of B757-300 values has been disappointing and it is considered that values will continue to be lack luster but relatively stable. There may be a temptation to consider that the willingness of a few or single operator to acquire the aircraft should be used as the basis for the value but such a premium needs to be seen in the context of then seeking to sell the same aircraft to another operator – something that will be challenging.

 

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