The MD11 passenger aircraft may be in the minority but the type, through continued interest in the freighter program, continues to see relatively stable values. The international scheduled market is seeing sustained improvement and there has been an under-ordering of replacement capacity. Unfortunately, the...

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The MD11 passenger aircraft may be in the minority but the type, through continued interest in the freighter program, continues to see relatively stable values.

The international scheduled market is seeing sustained improvement and there has been an under-ordering of replacement capacity. Unfortunately, the MD11 has not been viewed as a prime solution to the needs of operators for nearly a decade. In an era dominated by the economics of fleet rationalization, the MD11 has instead been a prime target for replacement. There, however, exists a reverse linkage between values of the passenger and freighter variants. Whereas traditionally freighter values have been dependent to a greater or lesser extent on the performance of passenger values such, has been the interest in the freighter conversions that passenger values have enjoyed the benefits of such shortage.

 

MD11 Vital Statistics
LAUNCH	12/1986
FIRST FLIGHT	Jan-90
SERVICE ENTRY	Nov-90
ORDERS	200
DELIVERIES	200 (147CF/F)
AVAILABILITY	1
OPERATORS	18 (all)
ENGINE TYPES	CF6, PW4000
VARIANTS	Pax, ER, Combi, Freighter
D CHECK COST	$2.8m
ENG O/H COST	$1.3-2.7m
STANDARD MTOW	602,500lbs
OPTIONAL MTOW	630,500lbs
FUEL CAPACITY	38,615 usg
FUEL - OPTIONAL	42,563 usg
RANGE-TYP PAX	6,820nm
RUNWAY LENGTH	10,220 feet
CARGO	6,850 cu ft
PAX (MAX)	410
MZFW-STD	400,000lbs
MLW-STD	430,000lbs
CABIN WIDTH	225 in
LIST PRICE	N/A
TYPICAL DISCOUNT	N/A
VALUE Y1990	$27.0m
VALUE Y1999	$43.0m
VALUE TREND	Slght Decline
2009 F/V - Y1990	$23.00
2009 F/V - Y1999	$38.0m
LEASE - DoM 1993	$355,000pm
RENTAL TREND	Steady
2009 LEASE -DoM1993	$335,000pm
AIRCRAFT RATING	D+

If a new trend in future value forecasting has emerged over the last decade it is that widebody values are particularly vulnerable to the vagaries of the market and that the MD11 has been more vulnerable than most. Even though MD11s were introduced into service when widebody values were still perceived to be invulnerable due to excessive demand created by a period of strong economic growth, it quickly became apparent in the aftermath of the Gulf Crisis, that the fortunes of the type were likely to face particularly tough times. The combination of initial range limitations of the MD11, emergence of Airbus as a competitive force, a changing market structure, and a three-engine derivative configuration quickly took their toll on McDonnell Douglas (MDC) and the MD11.

The tri-jet configurations of the DC10 and L1011 were conceived when high bypass turbofans were still in their infancy and lacked the reliability necessary for overwater flights. Despite the subsequent introduction of the twin engined A300/A310 and B767-200/-300 families, McDonnell Douglas continued to pursue the tri-jet configuration when considering the follow-on MD11. McDonnell reviewed and dismissed a virtually all new four-engine MD12 model. The pursuit of the lower cost option, a trend that was to ultimately to cost the company more than had the MD12 been developed, was deemed the more appropriate.

By bridging the gap between the DC10 and a new generation and family of widebodies, the MD11 failed to extract the potential rewards offered to low cost derivatives, serving to consolidate an existing operator base. Instead the decision has resulted in a more costly exercise that caused considerable problems and resulted in extensive losses for operators and investors alike, although the recovery of values over the last two years has provided some solace.

If the MD11 had been launched at the beginning of the 1980's rather than being distracted by military and a handful of commercial orders until 1986, then it could have capitalized on an even earlier availability. A more modest derivative than the current MD11 may have been sufficient but by the early 1990's it would have been possible for McDonnell Douglas to consider an all new aircraft, more targeted against the core competitors of the B777 and the A330/A340. While three engines allayed the safety fears of some operators, the configuration was quickly compromised by the twin B777 and four-engined A340, both launched in the years immediately following the service entry of the MD11. To a large extent, McDonnell Douglas underestimated the threat posed by Airbus. Believing that even an upgrade to the DC10 would secure sufficient orders in the hitherto traditional two horse race among U.S. manufacturers, the MD11 was quickly affected by the all new A340.

The adverse perceptions surrounding the MD11 were not aided by the early years of production. Even in 1988, the development of the MD11 was facing problems which resulted in the roll out of the aircraft being delayed by nearly six months. Apart from the usual developmental problems, something which Boeing spent a great deal of time, and money, avoiding in the development of the B777 but suffered with on the B747-400, McDonnell Douglas (MDC) experienced supplier and manpower difficulties.

While it is essential for any manufacturer to meet the needs of its customers, MDC found itself attempting to develop a range of aircraft all at the same time rather than concentrating on a single type to be expanded after the service entry of the core product. The passenger, freighter and combi versions were developed alongside one another, with three airframe/engine combinations and a wide range of customer options. Labor disputes and the lack of experienced manpower did little to assist the crucial development of the MD11. One of the key issues in opting to develop a derivative of the DC10 was the ability to produce it quickly and capitalize on the surge of replacement and growth orders arising from much improved economic performance after the collapse of oil prices in 1986. By 1989 the problems resulted in a restructuring of the company, which although resulting in further delays, for a time provided the company with much firmer foundations before suffering the "merger" with Boeing.

The MD11 was finally certificated in November 1989 and the first aircraft was delivered to Finnair. Finnair's experience with its first MD11 showed that the nominal drag factor was one percent greater than expected and that the combination of drag and engine performance resulted in an increase of 5.3 percent in fuel burn. The airframe was also 4,000 pounds heavier than expected and the combination of all three factors resulted in an eight percent greater fuel burn on a typical Helsinki-New York flight.

With the difficulty that MDC and the engine manufacturers faced in overcoming the range limitations, the concern over the MD11 increased and, combined with a generally deteriorating market, values also began to be affected. With cancellations and a limited number of new orders, the situation was exacerbated even though new financings appeared to continue to be made on the basis of $110m. The changing operator base, occurring so early in the program, also caused values to be closely reviewed. In the early 1990s it was also realized that widebodies as a group could not justify above average residual performance; indeed with a much more limited operator base than the narrowbody sector, it was finally appreciated that ease of remarketing for widebodies per se was not necessarily assured.

By the beginning of 1996 MDC had realized the necessity of making a fresh start and consider a clearly defined alternative to the MD11. As a means of continuing to ensure that the existing product had a future, MDC turned to growth in the freighter sector and the suitability of the MD11 as a cargo aircraft.