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The Last Decade Has Not Favored B777-200ER Values

November 12, 2018

The last decade has not been kind to the -200ER and values have experienced a particularly significant fall in the last five years.

When the B777-200ER entered service as the B777-200B and then the B777-200IGW in the mid 1990s, the value of a new example amount to approximately $110 million. The market for the type continued to improve such that a new aircraft attracted a value of $130 million in 2007 when demand was strong although in the interim, post 2001, values fell to below $110 million for a short time. Values managed to resist any sizeable fall for most of the 1990s and 2000s but with the rapid decline in the backlog and arrival of new types, values have since dropped. When the market finally realized that there were none left to be delivered values moved a step closer to the abyss. Today, values for the younger examples are falling at a rapid pace, intent on catching up with the oldest. In just ten years a -200ER delivered in 2007 and attracting a value of $130 million has seen values plummet to only $30 million or less representing a fall of nearly 80 percent. This contrasts sharply with EETCs that project that theoretical base values fall by only three percent per annum.

The values of the oldest -200ERs are now fortunate to realize double figures with a value of perhaps $5 million or less more realistic for those with minimum time remaining. The issue for the values of the oldest -200ERs lies the estimation of green time remaining on the engines. To ensure that there exists some correlation between various values, apart from the early years of service, half life is generally assumed. However, as aircraft age and ending of service nudges ever closer, the majority of aircraft will have less than half life remaining on the life limited parts (LLPs) on the engines. Instead of 10,000 cycles, widebody engines in the last five years of service may be run down to less than 2,000 cycles which still represents at least 3-4 years service given an hour to cycle ratio of more than 5:1. Even at 2,000 cycles, the value can still be misrepresented. All too often the strict definitions offered by ISTAT in appraisal examinations, requires a simple arithmetic calculation. The time left on the LLPs is multiplied by the cycle rate as dictated by the engine manufacturers LLP list prices sometimes taking into account the time defined in the time limit manual, stub life and handling. This can result in a very high value being attributed to the time remaining on the engines. In reality, there will be no buyers willing to pay such a price for old engines. The ISTAT definition may see a value of $10-15 million being estimated for a 1996 vintage -200ER based on 3,000 cycles remaining on the engines but in reality, the market price will be less than $6 million, particularly if the engine manufacturer controls the used market for spares and overhauls.

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