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Values of Mid Life Widebodies Face Pressure

April 15, 2019

While the enthusiasm for the A350-900 and B787-9 continues the fortunes of the mid life aircraft of those models coming to the end of production – the A330ceo and the B777-300ER for example – remain under pressure.

The arrival of new products and the divesting of older types is contributing to the lack luster nature of the widebody market. The virtual wholesale replacement of the widebody product line up over this decades has caused problems for outgoing types. 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 www.aircraftvalues.net, www.aircraftvalues.com. 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 – April 2019Values in millions of US dollars.
Aircraft AVAR Age Value Trend Analysis
A300-600R E 19871993 1.12.1 The fall in the value of the -600R continues as the market has moved to alternative types. The aircraft has failed to move in recent years and the value equates to the scrap value. The “value” of the remaining green time on the engines is of little consolidation when the engines have little value. There have been conversions to freighters but not enough to prevent values from slipping into the abyss many years ago. The -600R provided a number of operators with greater capacity for medium haul sectors but always struggled against the B767-300ER. While a number are parked there are actually relatively few that are actually on the market at any one time.
A330-200 C–C+ 1998200220062008201020132018 9.015.031.0En38.0En46.0En59.0En77.0En The -200 has been in production for over 20 years and is far from being the new aircraft on the block having been replaced by the A33-800. The values have dipped again as is to be expected although it continues to be placed. The older examples are particularly vulnerable to parting out because of the cost of undertaking significant maintenance. Overhauling the engines will cost in excess of $10 million. There are a few in storage and there are always some being advertised for sale or lease. 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)C++(HGW En) 1994199820042008201020122015 6.010.030.0En48.0En56.0En65.0En79.0En The values of the oldest -300s may seem low but these values reflect aircraft that have perhaps only 25 percent life remaining instead of the usual and largely theoretical half life values. The newer -300s are much more sought after than those built in the 1990s which may see lower weights and higher maintenance costs. The interiors may also see older vintage IFEs. The value of a new -300 has continued to fall as the end of production nears and this is inevitably affecting used values. The Aircraft Rating is now a C++ having declined from the more attractive B–.
A340-200 E 1993 3.0 There are few advantages to operating the -200 in an era of twin engined aircraft except of course that the aircraft can be acquired for so little cash. Placing the aircraft is very difficult which suggests that when the time comes, scrapping will be the preferred option.
A340-300H E(HGW)E(En) 1996199920022007 5.07.07.512.0En Age is no longer so relevant when considering such elderly aircraft. The value differential usually attributed to age has long since been lost and value convergence is all too evident with the values of the youngest converging on the oldest. The Aircraft Rating has also continued to fall such that an E rating indicates very difficult placement and little relevance for asset based lending.
A340-500L E++ 2003 8.0 There is little appetite for the -500 given the much greater availability of twin engined aircraft. Whereas SIA had to stop operating the -500 on very long routes because it couldn’t make any money, the same cannot be said for the replacement A350-900. The -500 may have some relevance for ad hoc charters and to fill gaps for some operators but there is no long term relevance to the type. There is limited demand for the Rolls engine and calculating the green time based on OEM LLP list prices is not only a fools errand but also highlights the inadequacy of some appraisal methodologies which belong to a previous era.
A340-600L D– 2002 7.0 The economics of the -600 still have relevance even today but not for many when compared to the B777-300ER. The market remains very difficult and values are virtually the same as those for the -300. The Aircraft Rating at D—highlights the problems. To some extent values have remained stable but only by virtue of having fallen so far in a very short space of time. 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++ 20142018 103.0144.0 A good aircraft that is making considerable inroads into the widebody arena but more by stealth than fanfare. The aircraft is proving popular with operators and passengers and the economics are proving that the investment was worth it. There may have been quality issues with regard to the interior but these are being dealt with. The aircraft is providing comparable reliability. Values are falling but in line with expectations.
A350-1000 B 2018 162.0 A number have been delivered and the operators are pleased with its performance thus far. The -1000 is more of a direct replacement for the B777-300ER in terms of capacity and therefore is smaller than the B777-9 but some operators may feel that carrying ever more marginal economy passengers is not necessarily desirable. The aircraft therefore has potential. Values have not fallen by much and perhaps not to the degree that was imagined. There is still a question mark over whether the -1000 should be stretched but this would serve to dilute the model, thereby impacting values in the same way as the B737-10 affected the B737-9.
A380-800I D- 20072009201120132016 68.088.0105.0125.0155.00 Values have plummeted as a result of the cancellation of the program. To cite the decision as “cessation” is perhaps too kind given the cancellation of the Emirates and Amedeo orders. Only some 270 will now be built. The values of the aircraft have fallen by at least 15 percent as a result and residual values have moved much closer to the worst case scenario. The $80 million being suggested as a part out value will only apply to the first few aircraft with $40 million being a more realistic figure. Yet the A380 is one most enjoyable of aircraft to fly on and it is expected that existing operators will continue to use the aircraft well into the 2030s. The 575 tonne version offers operators greater versatility particularly in the context of filling the lower hold with cargo as more passengers use the overhead bins for luggage.
B747-400 E++ 198919982002 2.87.09.0 The values of the -400 have continued to decline as the type loses its relevance to the wider market. The aircraft has had its peaks and troughs in the 30 years since it was introduced. When it was first introduced some passengers bought round the world tickets to be able to travel on it for 24 hours. The same cannot be said today as passengers seek to fly on more modern aircraft. Airlines have been less enthusiastic in carrying marginal economy passengers and have instead been seeking to improve yields. Aircraft are being parted out in a number of locations.
B747-8I D++ 20112017 80.0127.0 The fall in values of the -8I has not been so notable as that of the A380 but the decline is all too evident. The type is in service with only a handful of operators which suggests that remarketing will be an uphill struggle. Any potential buyer will be taking advantage of the situation and be seeking a substantive discount. There may be an opportunity to sell the aircraft for VVIP use but demand for such aircraft is very sporadic and limited. There must be a concern as to where the aircraft will go when they come onto the used market.
B767-200ERH E+ 19861990 1.52.1 The values are at scrap levels whether the engine have half time or not. The type has long since lost its relevance even if there has been no direct replacement. The -200ER is now some 30 years of age and retirement has been beckoning for some years.
B767-300 E+ 198619911998 1.21.93.0 The limited range of the -300 is the cause for such low values. For many years the B767-300 managed to hang onto the coat tails of the -300ER before losing its grip and for values to enter into freefall. As a D check approaches this may the point at which the operator says enough is enough.
B767-300ERH D- 1988199319992002 3.37.312.015.5 There has not been much movement in terms of values and to some extent the quoted values are perhaps too low given that there is still demand for feedstock for the freighter conversion segment of the market. Operators still favor the aircraft has the economics on medium haul routes work as the fuel component of direct operating costs is of a lesser proportion than when being used at the extremity of its range potential. In terms of IFE and passenger preference there may be some negativity.
B767-400 E+ 2000 8.7 The aircraft is far from popular and was always a compromise seeking to meets the needs of a few operators. Values are low for such a size of aircraft but then demand is also limited and this will continue.
B777-200 E++ 19951999 4.06.5 The values of the -200 have also been the subject of some debate but the last decade has revealed just how little enthusiasm there is for the type. The aircraft is fading from the market and values continue to fall albeit by a modest amount. The type enjoyed the Ripple Effect for perhaps too many years but eventually the whirlpool dragged down values to a more appropriate level.
B777-200ER D– 19961999200220062009 6.010.014.320.024.0 Even at these low levels values still seem to be too high. While some examples will continue to be operated by existing operators infinitum, others seeking to sell their surplus aircraft will be disappointed in the offer prices even with reasonable time remaining on the engines. The type has long since lost its favor and while remarketing still takes place, there exists a need for sellers to be appreciate the importance of compromise. For those -200ERs with a MTOW of 590,000lbs the market prospects are particularly difficult.
B777-200LR D 20052011 22.033.0 The Aircraft Rating for the -200LR has fallen as it becomes apparent that operators are preferring more modern equipment. Placing the aircraft has been possible but at a lower price. Fortunately the book value of owners can be comparatively low allowing facilitating such a sale.
B777-300 D– 19982002 10.017.5 Again the green time on the engines can be an illusion when considering the half life value. The market conditions for the -300 need to appreciate the little attraction that the type possesses. 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.
B777-300ER C++ 2003200620092015 45.063.083.0122.0 Values of the -300ER may be falling but not as much as those of the A380. The ending of production is nigh at least as a passenger aircraft and values are declining in line with expectations. The type is facing the issue of being too large for the majority of second tier operators as well as having low book values for some owner/operators. The arrival of the B777-9 may now be delayed but the replacement with the new aircraft cannot be ignored when competition is so intense that operating the most efficient of widebodies is of such importance. The values of new examples are now fortunate to be more than $155 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 late 2016.
B787-8 B– 20112015 65.095.0 The Aircraft Rating of the -8 is still just in B territory but not for long. Boeing has been anxious to rekindle the -8 but with only limited success not least because it makes more money from the larger variants. When entering service lease rentals were in excess of $1.1 million per month but today $800,000 per month will be seen as good.
B787-9 A– 20142018 100.0139.0 Despite the problems with the Rolls-Royce Trent engines, the aircraft is considered to be among the top most attractive widebodies. The versatility of the aircraft has ensured that it is used on a variety of routes and not just on the extremity of its range capability. The values have eased back slightly but values of new aircraft continue to rise which is a positive when so many are falling.
B787-10 B+ 2018 151.0 There have been reports of engine issues but it is to be noted that too all intents and purposes the -10 is essentially a -9 but only larger. Boeing wished to ensure that there few changes and as such the range is more constrained as no extra fuel was added to compensate for the higher empty weight. The aircraft perhaps will struggle against the Airbus A350.
The commentary highlights the change in fortunes since the last update of January 2019. Values are for indicative purposes and should be used for guidance only. En = Enhanced

 

 

 

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