The 2019-1 EETC (Enhanced Equipment Trust Certificate) issued by Delta shows strong values for aircraft that are at the end of their product life cycle as well as considerable variation for a type that has yet to mature.
* The appraised value of each Aircraft set forth above is the lesser of the average and median appraised values of each such Aircraft.
The fourteen aircraft that are included in the 2019-1 EETC of Delta comprise two A220s, six A321-200s, four B737-900ERs and two A350-900s. This is the first time that the A220 has been part of the EETC process. The fourteen aircraft are all less than a year old. The A321-200s comprise the lower gross weight version but which are still, nonetheless, very versatile. The engine though is the CFM56-5B3/3 which is less popular on the A321 than the V2533. The CFM56 is installed on some 300 fewer A321s than the 1,000 A321s which are powered by the V2533. For the B737-900ER it is noted that there is some variation in the MTOW which should have a modest impact on the value although some appraisers do not consider this an issue. The A350-900s feature a higher MTOW than the usual 590,000lbs and again attract a premium of a few percent.
The total for the EETC using the lesser of the average and median is $868 million. Moodys has estimated that the market value is $856 million while AVAC cites a market value of $816 million. Values are provided by three ISTAT Certificated appraisers, the same ones that are usually selected for EETC transactions. For comparative purposes the above table also includes the Current Market Values from AVAC who have published their 56th edition of the semi-annual The Aircraft Value Reference as of April 30th 2019 (www.aircraftvalues.net). The provided appraisals reflect Base Values but given the strength of the market it would be expected that the Market Values would be higher than Base Values. The values also reflect the current maintenance standard in that all the aircraft possess nearly 100 percent life. The values assigned to the A220 show considerable variation with the lowest being $31.52 million and the highest $38.390 million – a near 20 percent differential. Naturally with such an untried market for the A220 there would be expected to be some variation. The AVAC market value compares with the lowest of the three appraised values. Delta actually bought the aircraft for just under $20 million each so for the value to be nearly $40 million, this represents a significant cash windfall for Delta. The A321-200 values are more consistent among the three appraisers although there continues to be some variation when compared to the market value but of a reasonable level. The values for the B737-900ER among the three designated appraisers once again show considerable variation with the highest being nearly $54 million with the lowest being nearer $47 million while the market value is less than $45 million. Indeed, the values being provided by Appraiser B are higher than those for the A321 which seems to contradict the other two appraisers and the market which clearly favors the Airbus product. The values being assigned to the B737-900ER need to be placed into the context of limited orders and a very restricted operator base. The values for the A350-900 are again consistent among the three appraisers as well as those of AVAC. The A350-900 continues to enjoy good residuals.
In terms of residual values, the EETC continues to cite a three percent fall per annum, a level which has rarely been achieved. The average annual fall is between 8-10 percent per annum but more modern and popular aircraft will feature a lesser rate of decline. Moodys has a different approach “Moody’s reduced market values starting in year 2 by 5% for each model. Moody’s reduces values of all aircraft by 7.5% in year 1 and its reductions are on a straight-line basis from delivery date value and are offset by an assumed 1% annual inflation rate.”.