Despite Strong Traffic Widebody Values Weaken

March 5, 2018

As the product line transitions to new types, operators are disposing of their older equipment and the problem is that some of the capacity being released is too large for second tier operators – unless the price is sufficiently low.

The fall in widebody values continues to equate to around 7-10 percent although the decline affecting some types will be higher, notably those no longer in production and which are seeing relatively high levels of availability.

Values and Ratings courtesy of The Aircraft Value Analysis Company, The Aircraft Value Analysis Rating (AVAR) reflects the considered suitability for asset based financing over a seven year period. Ratings range from the best A++ to the worst E–.

In Production Passenger Widebody Current Values – March 2018Values in millions of US dollars.
Aircraft AVAR Age Value Trend Analysis
A300-600R E 19871993 1.42.7 The values of the -600R continue to decline as the market increasingly moves to newer types. The -600R provided a number of operators with greater capacity for medium haul sectors but always struggled against the B767-300ER. There have already been over 100 retirements of the -600 and -600R and a few have been converted to freighters. There are many medium haul routes that require capacity – the U.S. to South America for example. Availability is an issue and values continue to descend. The Aircraft Rating has also fallen to E denoting little or no asset value and considerable difficulty in placing the aircraft.
A330-200 C–C+ 1998200220062008201020132018 The A330-200 is still in the process of being successfully remarketed but values are falling. The newer A330-200ceos are facing considerable downward pressure even though there still exists a question mark over whether further orders for the A330-800 will be forthcoming. Hawaiian has recently reaffirmed its commitment to the A330-800 but this remains question market. There are over 20 listed as being in storage. The 238 tonne version warrants a $0.75 million premium. The 242 tonne version offers even greater versatility but this has not prevented a slippage in values.
A330-300 D-(LGW)B–(HGW En) 1994199820042008201020122015 6.510.535.0En54. The Aircraft Rating for the -300 has fallen again and values have experienced a considerable decline. While the backlog remains reasonable the move to the -900 is something that cannot be ignored. The market for the -300 is therefore perhaps more fragile than the orderbook suggests. Used aircraft are still being placed. However, the concern over rentals being paid is now an issue which is further impacting values as the service entry of the A330-900 approaches. A new -300 has a value of less than $100 million which compares with $108 million a few years ago. Such a fall in new net pricing has to have an effect on used values. There have been some 50 retirements of A330s but there are only approximately ten in storage.
A340-200 E++ 1993 3.9 There are only 16 in commercial service and four operators so seeking to remarket is likely to be a difficult task. The values are now at scrap levels and escaping from such a black hole is impossible.
A340-300H E++(HGW)E++(En) 1996199920022007 7.08.510.018.0En The values of the earliest A340-300s in particular continue to fall such that over the last decade they have lost much of their asset attraction. The four engines for such a small aircraft have long since lost their relevance. Placing these aircraft is still possible but difficult. The youngest examples of the type are facing the most pressure as value convergence takes on new significance. Surprisingly the last -300 delivered was as recent as 2008. The type has seemingly been in the doldrums much longer than ten years.
A340-500L D– 2003 12.0 There is little to commend the -500 and to all intents and purposes, values of the aircraft have all but collapsed in the last few years falling by a significant degree compared to the original values of more than $110 million. There were only ever 34 deliveries with the last taking place in 2012 after being parked for some years. The values of the aircraft are barely any higher than those for the -300. While ultra long haul is coming back into vogue once more with Qantas flying direct from the UK to Australia with a B787-9, for the four engined -500 this proved to be uneconomical with its four engines. The market for the aircraft is limited with ad hoc charters perhaps being more credible.
A340-600L D- 2002 11.0 The market for the -600 seems just as difficult despite the attempts of the OEMs to bolster the market by offering greater capacity options and overhaul costs. The last delivery was in 2010. The weights of the -600 increased over time. With comparatively low fuel prices the type has some economy. While the -600 is not suited to all routes it can be viable on selected routes where the four engines can be a positive rather than a negative – flying over mountains for example or eliminating the need for ETOPs. Eventually less than 100 aircraft were delivered making it marginalized.
A350-900 B++ 2014 115.0 The Aircraft Rating has moved down slightly to B++ now that the aircraft has been in service for a surprising number of years albeit in more limited numbers that operators would wish. The values of the aircraft are likely to fall further rather than remain stable but those for newly delivered examples are still rising by a modest amount.
A380-800I C- 20072009201120132016 97.0120.0142.0168.0202.00 Even though the Emirates order has been placed, the used market still needs to be viewed with realism in terms of who will actually take the aircraft. The ex-SIA aircraft are still be marketed in various configurations although BA may yet opt for the aircraft. Already production is to fall to less than one per month and will perhaps be six per year. The move to improve the fortunes of the type by offering greater seating density and other improvements have yet to translate into additional orders.
B747-400 D– 198919982002 4.09.512.5 The market for the -400 has all but disappeared in recent years and values have been declining a rapid rate. Operators have been less enthusiastic in carrying marginal economy passengers and have instead been seeking to improve yields aboard more efficient twins. The values of the -400 will continue to fall. Age and efficiency are against the type but the move to convert the aircraft to freighter may be on the cards – again. The number of -400s in service is nearly half of those originally delivered signaling a large number of retirements in recent years. There are still many in storage but for which there is only fate. Aircraft are being parted out in a number of locations.
B747-8I D++ 2011 95.0 There are now no -8Is on backlog leaving the B747-8 dependent on the freighter. With only 47 orders and deliveries the type is particularly marginalized. There must be a concern as to where the aircraft will go when they come onto the used market. Conversion to freighter is the obvious solution. There have eight -8Is built as VVIP aircraft. Values are declining.
B767-200ERH E+ 19861990 1.62.5 The market for used -200ERs continues to contract and with it values are falling. The values of the type were previously reasonable but as soon as production finished then values tumbled.
B767-300 E+ 198619911998 In common with the A300-600, the -300 offered good capacity but not the range. The operator base was similarly restricted and remarketing has proved difficult. The values of the -300 may have benefitted from the Ripple Effect during the good times of a decade ago but the type was always marginalized with little potential for residual value strength. As a D check approaches this may the point at which the operator says enough is enough.
B767-300ERH D 1988199319992002 3.87.312.015.5 The -300ER LGW has more limited payload/range but in comparison with the cost of newer aircraft, it offers considerable advantages. The restarting of production will likely see values only slightly higher than those presents when production previously ceased. The lower net cost of the A330-200 represents competition as will any restarting of production. The net price of the A330-200 is lower and this will have an effect but the -300ER continues to be in demand. The -300ER continues to be very much part of the worlds fleet and allows operators to carry passengers over a large number of routes at low capital cost. The 407,000lb or even the 412,000lb versions of the -300ER have of course been much more popular as the payload range is better.
B767-400 E++ 2000 10.0 The type is not seen is desirable. The indicated value of the -400 is perhaps low but then so too were the number of orders.
B777-200 D– 19951999 6.59.5 The B777-200 is ever more vulnerable to the replacement process and values are falling at a greater than average rate. The type is facing pressure not least from the A330-300. The age profile shows that most were delivered before 2000 which increases the potential for retirement when they enter the market. The -200 managed to hold onto the coat tails of the -200ER for some years but its lack of range finally forced the grip to be released and values have failed to impress for nearly a decade.
B777-200ER D– 19961999200220062009 Boeing is citing the cheapness of used A330-300s for the fall in demand and drop in values for the -200ER. Yet, the writing has been on the wall for many years. The A330-300 on the used market is a factor though it could equally be argued that it is the low cost of -200ERs that has prompted lower -300 values. The weights can vary and engine type plays a significant role. There has been concern that the Trent powered aircraft may be less liquid but transactions still take place for the specific airframe/engine combination. The majority have a weight in excess of 632,000lbs.
B777-200LR D++ 20052011 34.050.0 The market for the -200LR is limited and values are facing downward pressures. The long range capability is now being supplanted by B787-9 and the A350-900 and eventually the B777-8. For too long the premium applied to the -200LR has been too high and values are now at a more appropriate level relative to the -200ER. With 59 delivered and non on backlog, the type has limited appeal.
B777-300 D– 19982002 11.520.0 Membership of the “B Group” – B757-300, B767-300, B767-400, B777-200, B747-8I – is not something that should be sought after given that it represents a marginalized aircraft which features higher than average residual value deterioration. Those -300s on the market are reportedly being offered at low lease rentals which in turn is impacting other types.
B777-300ER B– 2003200620092015 The values of the -300ER are in decline even if transaction data has yet to provide evidence of impending weakness. The values of the B777-300ER are falling as the introduction of the B777X nears but also because of the age profile of the -300ER. The values of new examples are now fortunate to be more than $160 million and those built a decade ago are now worth less than half that amount. The 775,000lb version is by far the most popular weight selection and there is an Enhanced version that was introduced in 2016.
B787-8 B- 20112015 73.0101.0 The values of the B787-8 are -8 are declining. The type has been in service for a number of years and the market has turned its attention to the -9. The number of new order placements is limited and some can be expected to enter the used market in the near future. Lease rentals on new aircraft can be below $700,000 for the right lessee. The B787-8 is losing some of its popularity at least in terms of the order backlog.
B787-9 A– 2014 107.0 The -9 has become the most popular widebody and values are managing to remain stable with those for newly delivered examples increasing. The greater capacity and range is hard to resist particularly as reliability has much improved. The Trent engines are providing something of a headache for some operators.
The commentary highlights the change in fortunes since the last update of November 2017. Values are for indicative purposes and should be used for guidance only. En = Enhanced
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