B777-200LRF Residuals Continue to Improve

The placement of an order for three additional B777-200LRF by Guggenheim Aviation Partners, previously unidentified by Boeing, nonetheless underlines the popularity of the type and the potential for the strongest of residual values. A total of 82 orders have been placed for the B777-200LRF by 10 customers...

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The placement of an order for three additional B777-200LRF by Guggenheim Aviation Partners, previously unidentified by Boeing, nonetheless underlines the popularity of the type and the potential for the strongest of residual values.

A total of 82 orders have been placed for the B777-200LRF by 10 customers. The three latest orders from Guggenheim takes their tally to six. FedEx, seeking to replace capacity resulting from the cancellation of its A380 freighter order, has placed 15 orders, the largest of any customer. GE Capital Corporation has placed 14 orders suggesting, alongside those of Guggenheim, that there will be considerable leasing opportunities for the aircraft. Other orders have come from Air France (5), Avion Aircraft Trading (6), Emirates (8), Korean Air (5), Oak Hill (6), Qatar Airways (2), Unidentified (13). The lack of orders from International Lease Finance Corporation (ILFC) is notable. However, neither ILFC, nor GE, have placed orders for the B747-8F.

The 82 orders compares with 126 orders for the B747-400F and a further 40 for the B747-400ERF though the B747-400F has been in production for over 14 years while the B777- 200LRF is not due to enter service for another year. A total of 63 orders have been placed for the B747-8F.

The B777-200LRF is able to carry some 104 tonnes of payload, only six tonnes less than the B747-400, 16 tonnes less than the B747-400ERF or 30 tonnes less than the B747-8F. With two engines, the B777-200LRF, therefore, offers considerable operating economics. The current high price of fuel, though attracting a fuel surcharge from freight forwarders, is likely to favor the B777-200LRF in the coming years such that the orderbook can be expected to increase. With respect to residual values, the short term will attract attention from a range of scheduled carriers such that lease rentals will likely be very attractive for lessors. In the longer term, though, there may be competition from a B777-300ERF, the payload and range of the B777-20LRF should ensure a widespread operator base. While lease terms can sometimes be shorter than those for passenger aircraft, the ability of the - 200LRF to act as both replacement and growth capacity will ensure demand from a disparate group of operators.

The list price of the B777-200LRF in 2007 ranges between $246-254 million. With a typical discount of the 40 percent, the net cost of the -200LRF could be $145 million or lower depending on the quantity involved. Medium- to long-term residuals will outperform the passenger version.