January 26, 2015

Vol. XXIV No. 2

www.aviationtoday.com

Airbus List Prices for 2015 Rise by 3.3%

Difficulty Lies in Translating Rise into Net Pricing

Airbus list prices for 2015 show Airbus
2015
2014
2015
a rise of nearly 3.3 percent across all
2012
2013
2014
2015
Est.
Est.
2014-15 List/Net
aircraft types but the difficulty will be in
AV
AV
AV
AV
Value Value % RISE
Disc
translating this rise into net base pricing
(New) (New)
67.7
70.1
71.9
74.3
26.2
26.5
3.3
64
for new orders and in achieving an A318
A319
80.7
83.6
85.8
88.6
35.7
35.7
3.3
60
increase in profitability.
88.8
92.0
94.4
97.5
40.5
40.8
3.3
58
The rise in list prices quoted by A319NEO*
88.3
91.5
93.9
97.0
41.1
42.2
3.3
56
Airbus are largely an arithmetic exercise A320
96.7
100.2 102.8 106.2
48.5
50.5
3.3
52
reflecting the rise in labor, material and A320NEO*
A321
103.6
107.3
110.1
113.7
48.3
49.7
3.3
56
energy costs. With both material and
A321NEO*
113.3
117.4
120.5
124.4
56.3
57.9
3.2
53
energy costs on the slide, the rise for
A380
389.9
403.9
414.4
428.0
218.0
222.0
3.3
48
2016 may be less significant. A significant
211.5 219.1 224.8 232.2
97.2
93.1
3.3
60
change for Airbus however, lies with the A330-200F
A330-200
208.6 216.1 221.7 229.0
93.9
93.7
3.3
59
weaker Euro compared to the dollar. In
A330-800NEO
249.6
101.2
February 2014 the Euro:Dollar exchange
231.1 239.4 245.6 253.7 109.0
108.8
3.3
57
rate amounted to approximately 1.35:1 A330-300
A330-900NEO
284.6
118.9
but as of January 2015 this had fallen to
A350-1000
332.1 340.7 351.9
175.5
3.3
50
only 1.12:1 representing an approximate A350-800
245.5 254.3 260.9 269.5 129.0
N/A
3.3
20 percent decline. While Airbus acquires A350-900
277.7 287.7 295.2 304.8 136.0
140.1
3.3
54
some of its components and subassemblies in dollars, with the actual selling price of the aircraft in dollars, the impact on profit is significant if the
exchange rate is adverse for too long. Hedging will go some way to mitigating such a risk. The production of the A320
family in the U.S. will also go some way to improving the situation. Nonetheless, Airbus may have to seek to firm up
net base pricing which may result in lesser number of aircraft being sold though given the extensive backlog, deliveries
for any orders placed during 2015 will not take place for a number of years.
With values of newly delivered aircraft increasing by less than 3.3 percent, then the level of discounting has
increased such that this is now in excess of 50 percent for virtually all aircraft types. The net value of a new A321 has
increased by some three percent but the value of a new A330-200F has fallen over the last year. List prices are quoted
for the A330-900neo for the first time which show a $30 million premium over the A330-300 while the net value
differential is some $10 million.
The value of a new A380 has increased by less than two percent between 2014 and 2015 which reflects the
lack of airline orders during 2014 though 20 were secured from Doric with seven being cancelled resulting in a net
orderbook for the A380 of 13. Airbus are indicating that 2015 may be a better year for airline orders and may even
progress the -900 and re-engining. The values of the A350-900 reflect the lack of problems for the type having been
delivered to Qatar and starting service. The absence of high profile issues with the development of the A350 contrasts

Backlog & Lower Fuel Price Keep Values & Lease Rentals on Even Keel. . . . . . . . . . . . . . . . Page 2

Mid Life Aircraft Demand Seen As Stabilizing Values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 3

Aircraft Value Review The B737-800. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 6

B747-8F Values Continue to Decline As Fuel Prices Tumble . . . . . . . . . . . . . . . . . . . . . . . . . . Page 8

2015 Access Intelligence, LLC. Federal copyright law prohibits unauthorized reproduction by any means and imposes fines of up to $150,000 for violations.

Page 2

AIRCRAFT VALUE NEWS, January 26, 2015

with the problems that beset the B787-8 and A380. There remains a question mark over the A350-1000 given the lower
capacity compared to the B777X but Airbus maintain that there has been little demand for extra capacity. Indeed, the
airlines are focusing on improving yields and carrying a few more marginal economy passengers may not be seen as
attractive, hence the predilection for acquiring the smaller B777-300ER to replace the once ubiquitous B747-400.
*A320neo family values reflect 2016 deliveries; A350-1000 values reflect 2017 deliveries; A330neo values reflect
2017/2018 deliveries. n

Backlog & Lower Fuel Price Keep Values & Lease Rentals on Even Keel
The prospects for values and lease rentals for 2015 remain stable though any further significant strengthening is
unlikely with the Mid Life Aircraft (MLA) perhaps offering some opportunities.
The year 2014 continued to see strong demand with both Airbus and Boeing yet again recording orders that
were more double their output, a trend that continues to encourage an increase in production. Airbus recorded orders
for 1,796 aircraft but after 340 cancellations net orders amounted to 1,456. The cancellations involved 138 A320ceos,
21 A319ceos, 35 A321ceos, 30 A321neos. Another 20 A330-300s were cancelled along with 18 A350-800s, 51 A350900s, 20 A350-1000s and seven A380s. The orders for Airbus widebodies were significantly below those placed for
Boeing widebodies. Boeing had 1,550 gross orders and 1,432 net orders, Airbus surpassing A320neo family orders
compared to those placed for the B737MAX.
Airbus delivered 629 aircraft in 2014 compared to 723 for Boeing, the difference being accounted for by the
99 deliveries for the B777 whereas delivery rates for the A330 and B787 were similar at 108 and 114 respectively.
The Airbus backlog now numbers nearly 6,400 and Boeing 5,789. The delivery rates for the narrowbodies are set to
increase in the coming year despite the transition to newer types. The net effect of such an extensive backlog is to
ensure that there remains an imbalance between supply and demand. This will keep the pressure on values of newer
aircraft as operators scramble for limited availability.
However, the lower fuel price, if sustained through 2015, will constrain net delivery pricing due to lower
escalation. Stable new net prices will in turn prevent used values from increasing. The lower price of fuel will improve
airline profitability and allow the expansion of the low cost airlines. Conversely, the legacy carriers in the US, Europe
and Asia will likely seek to improve yields from existing traffic rather than seek to expand services that may dilute
yields. The stimulation of the world economy through lower fuel prices should generate additional traffic particularly
if accompanied by lower ticket pricing from expanding carriers.
While fuel prices may have fallen the strengthening of the dollar compared to a range of other currencies over
the last year, not least the Euro and Ruble, will limit the beneficial effect of lower pricing on airline economics. The
price of fuel may have fallen by some 50 percent but with a 20 percent increase in the U.S. dollar and 100 percent with
respect to the Ruble, then the benefit of lower fuel prices will be less significant. The cost of new aircraft will also
rise in comparison. The US airlines will be the main beneficiaries of lower fuel prices though airlines such as British
Airways who derive income from US ticket sales will gain some advantage. Hedging against currency fluctuations
may only go some way to easing the burden with smaller airlines particularly vulnerable.
Operators outside of the US will also suffer from the adverse exchange rates when paying lease rentals. This
will make it even more of an imperative for operators to seek lower rentals. With lower fuel prices comes lower
inflation, thus helping to determine interest rates. Lessors can actually benefit from higher inflation but with still low
interest rates, there is not expected to be much improvement in 2015. n

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AIRCRAFT VALUE NEWS, January 26, 2015

Page 3

Mid Life Aircraft Demand Seen As Stabilizing Values

The values of Mid Life Aircraft (MLA) such as the A319 and even B737 Classics may enjoy a measure
of stability as the lower price of fuel makes it less of an imperative to seek replacement for 10-14 year old
equipment.
Notwithstanding the detrimental effect of a stronger dollar and thereby relatively higher lease rentals,
the 50 percent reduction in the price of fuel makes it possible to contemplate retaining MLA aircraft for longer.
Lease extension options may be exercised in the short term rather than seek an expensive replacement. The
fuel component of direct operating costs of narrowbodies in particular represents a lesser proportion than for
widebodies. For example the fuel component in operating a B757 may represent some 50 percent of total operating
costs when based on $3 a gallon. For a B777-200ER, the fuel cost may represent 70 percent of the total operating
cost. A 15 percent fuel efficiency gain achieved by operating a newer aircraft will therefore result in a significant
cash reduction.
However, with a fuel price of less than $1.50 a gallon then the 15 percent efficiency improvement is less
significant when also compared to comparatively higher lease or finance payments. This makes it possible to
more efficiently operate less fuel efficient aircraft. The MLA including such types as the A340-600 may be
seen as more attractive to second tier operators. Yet, operators would unlikely to be willing to make long term
fleet decisions based on short term fluctuations on the oil price. Saudi Arabia and OPEC only need to reduce
production for oil prices to rise gain though this will stimulate the production of shale oil and the pursuit of
alternative energy once more.
The values of the B737 Classic have been particularly exposed to the replacement process in recent years
and have therefore fallen by a significant amount. The fall in the price of fuel combined with rentals well below
$100,000 per month has more recently seen renewed interest in acquiring such MLA, at least those in good
condition. The MLA such as A320s and B737-800s built in the late 1990s are also being more sought after
given the potential for greater margins compared to new aircraft and facilitate early asset release. A higher
rental, combined with maintenance reserves, to a more fragile carrier over a shorter term with parting out
thereafter can generate enough revenue to cover the capital cost and generate a sizeable profit. Aergen of Ireland
has just been formed to take advantage of the lack of appetite among mainstream lessors to acquire MLAs.
Operators unable to wait three years for new equipment will acquire MLA. Not only will second tier operators
be interested in MLA aircraft British Airways has just leased a 2002 A320 from AerCap that was previously
operated by Wizz Air.
The last few years has seen Russia take a number of such as the A319. However, the dramatic decline in the
Ruble combined with the loss of revenue due to the decline in oil prices as well as sanctions has seen traffic and yields
fall. This makes it more difficult for Russian airlines to contemplate acquiring Western equipment, even MLA types.
The limited demand from this segment of the market represents a minor blow for some lessors. n

B757 Values Face Tough Times as Allegiant Halves Book Value

The values of the B757 have been deteriorating in recent years as the type has lost its relevance in a changing
market structure and as maintenance issues have taken their toll.
Allegiant Air announced in late December 2014 that it was taking a $43.2 million noncash impairment charge
on its six winglet equipped B757s which are used for Hawaii operations and which are approximately 21 years of age.
Allegiant has arrived at the $43.2 million impairment as a result of an assessment of how the aircraft will fit into
the fleet in the coming years. Instead of assuming that the aircraft will be retired around 2021 Allegiant will seek to
dispose of the aircraft sooner. In this context of disposal before 2021 the airline has determined that the residual
value of its B757aircraft need to be reduced from $6 million to $3 million. Such value perhaps reflects the parting out
value. Allegiant has seen a permanent decline in the B757 market.
Current values of 20 year old B757-200ERs approximate $6-7 million with the residual value of such aircraft in
2020 forecast to be fortunate to exceed $3 million. If Allegiant had previously expected values in 2021 to be $7 million
then the readjustment to $3 million is understandable. Seven Five Partners has just acquired 18 ex United B757s to
either remarket or part out.
The market for the B757 has been deteriorating as Airbus in particular has been increasing the range and
capacity of the A321 to make it more of a direct B757 replacement. A 97 tonne version of the A321neo has just
been launched based on a large commitment from ALC. The maintenance issues surrounding the B757 have been
increasing and the overhaul of a RB211 engine, excluding Life Limited Parts, can exceed $4 million. This compares to
$2-2.5 million for an engine overhaul which powers the A321. n

Page 4

AIRCRAFT VALUE NEWS, January 26, 2015

Lease Rentals Start to Strengthen

Freighter Lease Rates

The airfreight market has shown some consistent improvement over

the course of the last few months and this, combined with lower fuel prices, is
allowing some measure of stability for lease rentals.
IATA reports that the freight traffic for November 2014 increased by 4.2 percent compared to a year ago. This
follows October which saw a 5.3 percent rise. While load factors may seem low at just over 45 percent, this needs to be
seen in the context of a similar level in 2007 at the peak of the previous cycle.
The air freight upturn has not been evenly spread, with over 90% of Novembers 4.2% year-on-year growth
carried by airlines in just two regions: Asia Pacific (55% of the growth) and the Middle East (38%). African airlines
experienced the second strongest year-on-year growth rate in November, but carry only a small part of the worlds air
freight and moreover their growth has been slowing.
Freight
Market
Analysis
The fall in the price of fuel, if sustained, provides a measure of relief forAir
airfreight
operators
and should
allow
November
2014
the removal of fuel surcharges. While traffic is improving, particularly in the context of Middle
East transit activity,
this needs to be seen in the context of still parked B747-400Fs and under-utilization of other equipment. The growth
of belly hold traffic continues apace
with the delivery of so many new
examples. Combined with the delivery
of new dedicated freighters, there has
been little incentive to reintroduce
used freighters still languishing in the
parking lot. Finnair for example has
announced its intent to stop offering
a dedicated freighter service and will
instead rely more on the A350 which
are due for delivery this year.
The larger freighters, notably the
B747-400F, require long haul routes
with dense traffic patterns, preferably
with bi-directional capability whereby
the aircraft can be at least partially
filled on the return trip. With lower
fuel prices comes the ability to carry
less valuable cargo which otherwise
may have travelled by surface
transportation. The lack luster Chinese
market is partly responsible for subdued appetite for large freighters but so too is the increased emphasis on on-shoring
manufacturing whereby production is focused on the markets where they goods are being sold rather than seeking offshore facilities which offer the lowest labor costs.
The following lease rentals reflect average lease terms to a medium credit. Rentals provided by The Aircraft Value Analysis
Company Limited www.aircraftvalues.net, www.aircraftvalues.com. n

Freighter Lease Rates (Dry) US$ 000s pm January 2015

Aircraft
A300F4

Age
1976-79

Rental
70-90

1980-84

80-100

A300-600RF

1994-98
1999-06

90-200
155-325

A310-300F

1985-97

80-115

rd

Trend Analysis

The lease rentals of the A300F4-200 are not expected to show any
improvement except in the context of placement with more fragile operators.
The type is being replaced. The 1990s saw a flurry of activity when a large
number of A300B4s were converted partly because the price of feedstock fell
to levels that made it possible for conversions to be economic.
The regional airfreight market is showing some signs of improvement and the
-600RF is well placed to take advantage of the traffic along with the B767F.
The demand for new and converted medium sized freighters remains limited but
the -600RF is replacing earlier medium sized widebodies. The focus is more on
dedicated freighters as passenger narrowbodies have very limited cargo capability.
As lease terms gets shorter, lease rentals can rise but then so too do the risks.
The market for the aircraft is dwindling as operating the type requires longer
and thinner routes which are increasingly moving towards larger equipment.
With no new production aircraft of this size, the type can be categorized as
being more of a niche rather than marginalized aircraft.

ere only the 3 fastest growing region in the FTKs they carried in November, but that
still represented over 55% of the total expansion in the market. This is the most important
mostly because a large part of the worlds manufacturing takes place in this region but

AIRCRAFT VALUE NEWS, January 26, 2015

Page 5

A330-200F

2009-15

395-830

With the fall in the price of fuel and the availability of other equipment there
is lesser enthusiasm for the aircraft. Rates have declined slightly. The aircraft
arrived just at the wrong time and as such has found the market difficult
with the contraction of orders all too evident. The lease rentals for the older
aircraft still have the capability to fall further.

B727-100C

1965-71

15-30

With so many scrapped and in storage there is no upside for lease rentals.
There are only some 26 -100s and -100CHs left in service with airlines.

B727-100CH

1965-71

20-35

The aircraft can be bought for small change but maintenance and operating
takes rather deeper pockets.

B727-200FADV

1972-78

20-45

1979-83

20-45

1972-78

25-40

1979-83

40-50

B737-300SF/QC

1986-91
1992-97

70-90
85-120

B737-400SF

1988-97

80-130

B747-100SF

1969-76

N/A

B747-200SF

1971-78

65-90

1979-84

70-100

B727-200FHA

A great aircraft still in terms of the ability to perform a variety of services to

a range of operators. The leasing of the aircraft still takes place given that it
is an inexpensive alternative to the B757 and other younger freighters, not that
the B757F is that young given that production ended more than a decade ago.
The lease rentals have long been at levels that make the type suited to low
utilization operations or as back up aircraft for when the primary aircraft is
unserviceable. The hushkits were previously a necessity but have been of little
relevance for many years. Rates higher than those quoted are possible.
Still a good aircraft in the freighter role and very much in demand with
conversions taking place as long as the right feedstock can be obtained. Lease
rentals are holding steady though there has to be some realism regarding the
length of lease terms. The later aircraft will be more desirable for conversion
given the lower number of hours and cycles. The rates represent a sizeable
premium over the passenger version that goes beyond the cost of conversion.
Winglets can be economic on both types as long as utilization is sufficiently
high. The -400SF is more desirable given the grater capacity.
There is no place for the -100F in todays market.
The lower price of fuel may on the surface indicate renewed interest but there
are more capable 400Fs laying idle. The power by the hour arrangements
are perhaps more relevant for the aircraft that was first converted some 40
years ago. The lease rentals are largely whatever a lessee is willing to pay. For
those that spent $20m+ on conversion a decade ago or even more recent
the returns have been dismal.

B747-400F

1993-98
1999-09

140-170
285-585

While the market for the -400F may be improving once more due to the lower
price of fuel there has been some deterioration at the upper end of the indicated
ranges. Rates have to be realistic to achieve placement. The rise of the Middle
Eastern carriers has an impact on the need for large dedicated freighters. More
examples need to be placed back into service before rates rise.

B747-8F

2011-15

1600-1900

The lease rentals of the -8F are under pressure as the fuel efficiency of the
type loses its significance. However, the payload and volume of the aircraft is
still significant. Rates are becoming more realistic. Boeing is probably having
to offer incentives to secure orders.

B757SF

1986-93

90-120

1994-98

105-150

1981-92

90-120

B767-300F

1995-99
2000-07

170-285
240-380

B777-200F

2009-15

695-1550

B767-200SF

The conversion of the B757 continues and demand remains strong. Lease
rentals are stable which is expected to continue into the short term. The
small package operators are playing a major role which in time will see the
opposite effect. Identifying B757 candidates that offer a long term future as a
freighter has become more difficult.
The -200SF is a specialist aircraft suited to a limited number of routes and
operations. However, as there is nothing to replace it then demand will remain
in place with lease rentals also consistent.
Rates at the upper end of the scale are considered to have eased down slightly as
convergence takes place between the newer and older. There must be an expectation
that more -300ERs will be converted in the coming years but the question is whether
there will be demand from beyond the small package operators.
The aircraft has been in service for some years and the time is drawing close
when conversion of passenger B777s will take place. The B777F still very
much a desirable aircraft even if there are relatively few carriers with the
density of traffic to make it pay.

Page 6

AIRCRAFT VALUE NEWS, January 26, 2015

BAe146QT

1984-89

50-65

MD11F

1990-93

100-165

1994-99

120-220

There are some 30 in service as freighters which is a reasonable number but

placing the type may be a drawn out process requiring persistence.
There are a myriad of MD11 freighters in the parking lot and the number
is set to increase. Many of these will not return to service. Lease rentals
however have reached a level which makes sense.

Commentary reflects change from the last update to Freighter Rentals of October 2014

Price of Stage 2 Aircraft Irrelevant

Chapter 2 Narrowbody
Current Values

Placing a value on an asset suggests that it has some appeal beyond that of
an existing operator or owner but unfortunately in the case of Chapter 2 aircraft
interest is so limited as to make most types unsuitable for asset based financing.
The Aircraft Rating (Value Rating courtesy of The Aircraft Value Analysis Company Limited www.
aircraftvalues.net; www.aircraftvalues.com) reflects the considered suitability for asset based financing over a five to seven
year period. Ratings range from A++ to E--. n

Chapter 2 Passenger Narrowbody Current Values January 2015

(Values in millions of US dollars)

Aircraft

A/C
Rtg

Age

Value

Trend Analysis

B727-100

E--

1965
1971

0.1-0.3
0.1-0.3

B727-200
HADV

E-

1972
1978

0.1-0.2
0.1-0.7

There is little relevance to the -100 as the market has long since moved to newer
and more economic types. Not since the 1990s has there been any attraction.
The cost of the hushkit in the 1990s seemed to offer a much extended service
life but in reality provided for only an extra five to seven years instead of the
expected 10-15 years. This experience should be applied to types currently
held in high regard but which may require modification the coming years to
remain compliant, notably the avionics for RNP approaches.

B737-200H

E-E-

BAC1-11-400

E--

F28-1000

E--

0.1-0.1
0.1-0.2
0.1-0.3
0.1-0.3
0.1-0.1
0.1-0.1
0.1-0.1

Placing a value on the aircraft has no relevance.

B737-200
HADV

1968
1971
1977
1983
1966
1968
1974

F28-4000

E--

1976
1980
1986

0.1-0.2
0.1-0.2
0.1-0.2

Fokker managed to continue to build the Chapter 2 -4000 through to the late 1980s
by which time the Spey engine was facing criticism due to noise. The type has some
utility but not much in the context of new generation regional jets.

DC9-10

E--

1968

0.1-0.1

DC9-30H

E-

DC9-40
DC9-50

E-E--

1967
1975
1970
1977

0.1-0.2
0.1-0.3
0.1-0.2
0.1-0.2

A good aircraft but not the type of choice today given advancing years,
higher maintenance costs and greater fuel cost. Noise though is of minor
importance when compared to operating costs and reliability.
The figures still relate to the price to be paid by the seller rather than the buyer.
The aircraft had its supporters for many years but these have gradually
faded with the passing of time.

The DC9-10 has no virtue and like the B737-200 features in history books
rather than be viewed as part of todays fleet.
The parting out of the DC9 is progressing given that the type has little
attraction to operators.
A fleet of nearly 30 -40s are in service albeit with only a few operators.
Values are at scrap levels.

The commentary highlights the change in fortunes since the last update of October 2014.
Values are for indicative purposes and should be used for guidance only.

AIRCRAFT VALUE
REVIEW - B737-800

B737-800 Values Attract Premium Over A320

The B737-800 may have been in service for some 17 years but on a comparable
year basis values of the -800 are still showing a premium over a similar aged A320.
The B737-800 has managed to retain the crown for so many years and still achieves top billing but as the
product life cycle extends and newer versions edge ever nearer values and lease rentals have begun to slip. In late
2007, a 1998 B737-800LGW was worth nearly $33 million. Today the value more approximates less than $14 million,
representing a major fall within eight years.
The B737-800 has now been in service for some 17 years and there exists an extensive difference in terms of
performance between those produced in the early years of the program and those being delivered today. With the
likely increase in availability of used aircraft and the limited appetite for financing such aircraft, values of the older
aircraft have inevitably fallen.

AIRCRAFT VALUE NEWS, January 26, 2015

Page 7

Despite the extensive number of deliveries the type continues to be viewed with considerable enthusiasm by
operators and investors alike. This is due to demand from a myriad of operators worldwide rather than a few mega
carriers located in a single region. The -800 has succeeded despite the comparative lack of orders from the U.S. legacy
carriers. The reason for the popularity of the B737-800 is due to a number of factors. The passenger capacity is much
increased compared to its predecessor the B737-400. Instead of the 169 passengers of the 400, the 800 can carry
a maximum of 189. The payload/range capability of the compromised B737-400 was inadequate on a number of
routes. The 800 offers much improved range, around 3,000 nautical miles, thereby matching that of the A320 family
and allowing far greater point to point service. The -800 features higher weights and winglets both of which provide
operators with range and efficiency.
The payload capability can however, be more important to operators. Absolute ranges are something of an
irrelevance on all but a handful of routes. The ability to carry a full passenger load, complete with baggage and even
some cargo, over a more modest distance may be more vital. The increase in the average passenger weight used to
calculate payload has already had an effect on payload/range capability of earlier aircraft. Compared to the B737400, the 800 can fly many more passengers the same distance.
B737-800 Vital Statistics
LAUNCH

09/1994

STANDARD MTOW

155,500lbs

LIST PRICE 2014

$93.3m

FIRST FLIGHT

07/1997

OPTIONAL MTOW

174,200lbs

TYPICAL DISCOUNT

50.5%

SERVICE ENTRY

04/1998

FUEL CAPACITY

6878usg

VALUE Y1998

$14.3m

ORDERS (all 800)

4,768

FUEL OPTIONAL

N/A

VALUE Y2005

$24.2m

DELIVERIES

3,468

RANGETYP PAX

2925nm

VALUE TREND

Decline

BACKLOG

1,282

RUNWAY LENGTH

7,450ft

2018 F/V Y1998

$9.0m

CUSTOMERS

98

CARGO CAPACITY

1591cf

2018 F/V Y2005

$16.7m

ENGINE TYPES

CFM56-7 /3

PAYLOAD (MAX)

45,000lbs

LEASE RATE 1999

$160,000pm

AVAILABILITY

30 (<1%)

MZFW- STD

136,000lbs

RENTAL TREND

Stable

D CHECK COST

$1.40m

MLW-STD

144,000lbs

2018 LEASE RATE DoM1999

$140,000

ENG O/H COST

$0.8-2.8m

CABIN WIDTH

138inches

Aircraft Rating

B- (LGW)

The B737-800 also offers improved performance in terms of maintenance intervals on the engine and airframe.
Though the CFM56 was upgraded to meet the needs of the B737NG, constant use of engines at maximum power will
inevitably see a quicker deterioration in performance. Hot and high operations also increase engine temperatures and
higher temperatures usually result in wear and tear. However, the latest /E engines offers longer on wing time.
Boeing paid close attention to improving serviceability on virtually all areas of the B737NG, further
differentiating the B737-800 from its predecessors and encouraging replacement. Most aircraft types are produced
with a variety of MTOWs and the B737-800 is no exception.
Some operators require capacity but not range while others need both. The MTOW ranges between 155,500lbs,
which offers a range of 2,000nm with a payload of 162 passengers through to 174,200lbs serving to increase the range
to around 3,000nm with the same number of passengers. The B737-800 does not need extra fuel tanks to be installed
to achieve the longer range. The highest MTOW of the 800 also allows operators to carry a maximum payload of
some 45,000lbs over 2,000nm versus less than 1,200nm for the lowest gross weight version.
Performance and fuel efficiency has been enhanced as a result of the incorporation of winglets making it the
option of choice. Costing around $900,000 per aircraft, the winglets can be fitted during or after production. The
improvement in fuel burn may be relatively minor but payback can be achieved in less than four years though this is
dependent on the price of fuel. In todays environment, the payback can be substantially reduced. Aircraft fitted with
winglets are considered the baseline fit. The current value of a new B737-800 with a reasonably high specification
is around $47 million. However, opinions can differ markedly even for such a popular model. The creation of new
financial instruments to finance aircraft has been partially responsible for this wide variation in values.
The design of the B737-800 still owes much to the original B737 of the 1960s. While Boeing has made
considerable improvements to the basic design, the result is more of a comparable, rather than a more advanced
product when compared to the A320 family. For once Boeing failed to leapfrog the competition in terms of overall
performance capability and operating economics. However, Boeing was constrained by issues of commonality.
Either operators can have a material improvement in performance or a measure of commonality can be maintained.
Rarely can both demands be accommodated. The B737-800 overcomes the lack luster performance of the 400 by
offering much improved range and payload capability. The longer range of the 800 more matches the A320 family
without incurring the need for extra fuel tanks. The low and high MTOWs, as well as different engines, still represent

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AIRCRAFT VALUE NEWS, January 26, 2015

a significant difference in terms of payload range capability. Unlike the B737-400, it appears that increasing the
MTOW of the 800 at a later date will represent a paper rather than structural change. The launch of the B737MAX
represents a significant improvement in performance and just as values of the early A320s are facing weakness, so too
are -800s. Previous popularity should not be automatically extrapolated for the future. n

Aircraft Asset Assessment

B737-800
Market Presence. In the context of re-engining from both manufacturers, the effect on residual values of the
A320 and B737 could be relatively modest in terms of deviation from existing projections. While re-engining offers
improvement, it is more incremental than evolutionary. If the difference between the existing model and the intended
replacement was more significant, then there would be less incentive to order both the existing A320 and the A320neo
so close together in terms of delivery dates. Whereas the move from the B737-200 to the B737-300 represented
a significant change, the re-engining can be more likened to the change from the CF6-80A powered B767 to one
powered by the CF6-80C2B1F. While Boeing will still have to discount the B737-800 to maintain production through
to the service entry of the B737MAX, the pressure to do so may be less muted than if an all new aircraft was under
development.
Market Outlook. Once the A320neo and B737MAX enter service, the values of these products will likely
remain stable in the short term due to limited availability. Aircraft being delivered will likely be used just as much as
replacement as growth capacity and will therefore displace existing equipment. A higher price of fuel will accelerate
this replacement process thereby causing values of existing products to fall that much faster. The expected future
decline in values of existing products needs to be seen in the context of prevailing forecasts. Many future value
projections will have already compensated for the introduction of a re-engined aircraft. The launch of the B737MAX
represents a significant improvement in performance and just as values of the early A320s are facing weakness, so too
are -800s. Previous popularity should not be automatically extrapolated for the future. n

B747-8F Values Continue to Decline As Fuel Prices Tumble

Even the potential order for three more B747-8Fs from Silk Way Airlines cannot disguise the difficulties facing
the B747-8.
Production rates of the B747-8 have fallen to virtually uneconomic levels. In 2014 only 19 were delivered,
representing less than two per month. Suppliers of components for the B747-8 cannot be expected to be offering
discounted prices unless offset against orders for other Boeing equipment. Of the 19 deliveries in 2014 ten were for
the passenger variant. Orders for the B747-8F now total 68 of which 56 have been delivered leaving a backlog of 12;
there have been 51 orders for the B747-8 of which 27 have been delivered leaving a backlog 24. The total backlog
is therefore 36 units allowing production to continue through to June next year based on 2014 production rates.
However, there is ever likelihood that production rates will fall further.
The problem in seeking customers for the B747-8/-8F lay in the more efficient A380 and B777-300ER and
now the fall in the price of fuel. The airfreight market remains fragile and while Cargolux has recently reported a
significant improvement, the fall in the price of fuel makes the use of expensive B747-8Fs less economic. The B747400Fs that remain idle or under-utilized make better freighters when the price of fuel is so low.
The list price of the B747-8F in 2014 may have been $368.4 million but values have long failed to exceed $200
million. Instead values have approximated $180 million but investors may feel more comfortable with $165 million
and even then requiring a 75 percent loan to value debt level. With the prospect of B777-300ER conversions taking
place early in the next decade, residual values of new -8Fs have to be realistic such that by 2022 uninflated values of
a 2015 aircraft may be less than $100 million representing a 40 percent fall in only seven years. In the event B747-8
production deteriorates further or the line is mothballed, then the values of both variants may be further impacted.
However, it remains possible that the stimulation of the economy will lead to a shortage of high volume capacity in
the coming years and combined with higher fuel prices, that the -8F will be in short supply allowing values to recover
just as they did for the B747-400F in 2006-2007. n

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