Values Remain At Scrap Levels

The combination of age, reliability and high fuel prices have continued to ensure that the DC10-30 has been displaced to the sidelines. The current fortunes of the B767-300ER hark back to the late 1980s when the rapid expansion of the international market, eagerness to participate in aircraft financing and...

For immediate service; more information; and multi-user access (site license), non-profit organization, educational institute pricing, contact Karen Garner kgarner@accessintel.com at (301) 354-1612.

This story is only available to paid subscribers. Please login below with your username and password if you are a subscriber.

Username:
Password:
	What is my password?

Subscribe     Trial

The combination of age, reliability and high fuel prices have continued to ensure that the DC10-30 has been displaced to the sidelines.

The current fortunes of the B767-300ER hark back to the late 1980s when the rapid expansion of the international market, eagerness to participate in aircraft financing and delay in new product cause values of the DC10-30 to almost double to nearly $40 million. As the market shows signs of becoming overheated again, the values of the B767-300ER could suffer the same fate as the DC10-30 and face a rapid decline.

The revival in the fortunes of the DC10-30 came and went in the latter years of the 1990s, never to return. The type has been experiencing an ever-increasing number of permanent retirements for the last seven years. Even Northwest has accelerated the retirement of DC10s. At its peak in the late 1980s there were some 235 DC10-30/-40s in airline service. By the mid 1990s, this had declined to 215 but by the end of September 2007, the figure had reduced to only 33 units, exclusive of freighters. Retirements have numbered at least 20 per annum for the last six years. At current rates there could be no DC10s in service by the end of this decade.

While a number have been converted to freighters, there has been less enthusiasm than originally anticipated, increasing the weakness in passenger values. Even the appetite for the DC10-30 freighter has waned. There are now 14 -30s in storage and one being advertised for sale or lease.

Approaching scrap values, there remain a few loyal supporters though most original operators have long since moved to newer and more versatile types.

 

DC10-30 Vital Statistics
LAUNCH	02/1968
FIRST FLIGHT	Jun-72
SERVICE ENTRY	Nov-72
ORDERS	163
IN SERVICE	33
AVAILABILITY	1 (-30) 4 (-30F)
OPERATORS	6
ENGINE TYPES	CF6-50C/C2
VARIANTS	PAX / CARGO
D CHECK COST	$3.25
ENG O/H COST	$1.5-3.0m
STANDARD MTOW	555,000lbs
OPTIONAL MTOW	580,000lbs
FUEL CAPACITY	37,200usg
FUEL - OPTIONAL	37,200usg
RANGE-MAX PAYLD	4,600nm
RANGE- MAX FUEL	7,400nm
CARGO	3,655ft3
PAYLOAD	97,000lbs
MZFW-STD	368,000lbs
MLW-STD	411,000lbs
CABIN WIDTH	225inches
LIST PRICE	N/A
TYPICAL DISCOUNT	N/A
VALUE Y1972	$0.5m
VALUE Y1988	$4.2m
VALUE TREND	DECLINING
2010 F/V - Y1980	$1.3m
2012 F/V - Y1980	N/A
LEASE RATE - Y1980	$110,000 per month
RENTAL TREND	STABLE
2010 LEASE RATE -Y1980	$50,000 per month
AIRCRAFT RATING	E-

Manufacturing of the DC10 began in January 1969 and assembly of the first aircraft commenced only six months later. By roll-out the number of orders and options for the DC10 amounted to 237. This belated success contrasted sharply with the fortunes of the Tristar which suffered from a paucity of orders during 1970. The range of 5,900 miles soon made the -30 the most popular DC10 variant, proving much more attractive to a wide range of international operators seeking equipment for use on routes which were unable to support the B747. The development of the -30 was undertaken at the same time as the -10 and marketing centered on the European carriers. The competition between the L1011 and DC10 in the late 1960's and early 1970's was intense with the members of the KSSU (KLM, Swissair, SAS, UTA) and ATLAS (Air France, Lufthansa, Alitalia, Sabena) pressured. The Paris Air Show of 1969 saw the KSSU members placing orders for 14 -30's with another 22 on option. The DC10 primarily won on the basis of the three variants on offer versus the single L1011 model. The ATLAS group also selected the DC10 but with the emergence of the Airbus product, Air France bought neither the DC10 nor the L1011.

The -30 has the same external dimensions of the -10 but the improved CF6-50A engines enabled the MTOW to be increased substantially to 550,000 lbs which enabled a payload of 104,000 lbs to be carried 5,500 miles. The underfloor galley was not a feature with the space being returned to cargo use. The first -30 was rolled out in 1972 with the first flight taking place in June. The aircraft entered commercial service with Swissair in December of 1972.

The -30ER is a development of the -30, providing even further range. The aircraft is powered by CF6-50C2B engines producing 54,000 lbs of thrust. Fuel capacity is also increased to allow a range of 5,730 miles. Swissair was the launch customer in July 1980 and these were delivered in 1982. The airline also ordered kits to convert two of its existing -30's to the same status. This was the principal civil variant built during the 1980's although there was a gap between 1983-1985 when no civil DC10's were built.

The last 20 years has seen considerable fluctuation in values with the same example attracting a value of $40+ million to less than $2 million. The late 1980s, fuelled by the then sustained economic growth, the rapid expansion of international travel, pursuit of market share by the airlines at the expense of yields, availability of plentiful and cheap funding, sale and leaseback transactions, and late service entry of new equipment caused a shortage of capacity.

Then, the DC10-30 offered excellent range and capacity, and still relatively youthful, enjoyed considerable demand. Pricing, an entirely different concept to that of value, of 10- to 15-year-old DC10-30s had jumped to over $40 million by 1990 compared to the $30 million experienced in 1987-1988. The inflated pricing of 1990 helped to ensure a collapse within three years.

The burden of this change in fortunes was largely felt by the financial institutions rather than the airlines. In the late 1980's and even the early 1990's, still owning their DC10's, airlines were able to secure favorable sale and leaseback terms. With prices of $40+m being paid for their aircraft, albeit in return for high lease rentals for a few years, few airlines could refuse. Some of the participating financial institutions will have expected that the lease agreements with the airlines would be renewed. But with a rapidly changing market, the airlines soon took advantage of the opportunity of turning the aircraft back to lessors.

While the loss of triple A credits as lessees represented a setback for the lessors and their creditors, many were still heavily reliant on the optimistic residual values provided only a few years earlier. Not only were front line carriers no longer interested in the type, but the fledging secondary market could not cope with the significant influx of used equipment. Lease rentals and values inevitably plummeted. Instead of over $40 million being paid for the -30s, figures of $10-15 million representing asking prices with offer prices even lower, became the norm. Achieving anything more than a distressed sale was virtually impossible at this time, making it necessary for aircraft to be placed into storage or leased at rates of less than $220,000 per month, a far cry from the $500,000 per month secured only a few years earlier. McDonnell Douglas, having offered first loss guarantees found itself particularly exposed to the rapid change in market prices.

In the mid to late 1990s, values and lease rentals improved with sales becoming possible once again. Values, however, did not experience a return to their pre-recession levels, managing to edge just above $20 million as the operator base shifted away from front-line flag carriers to charter and second tier operators.

The principal reason for the collapse in DC10-30 values in the early 1990s was owing to the rapid rise in pricing in the preceding years, behavior that has not occurred since, making it less likely that a significant fall will be experienced by the current generation of widebodies in the coming years. In the late 1990s, the DC10-30 seemed to be in demand once again, mainly from second tier carriers seeking ETOPs free service from the tri-jet configuration. The enthusiasm for the type was short-lived, not least because of the arrival of the B777 in numbers along with the A330 and A340.

Values of DC10-30s are once again at rock bottom. Scrapping has become virtually the only option though the price of spare parts is barely justifying the expense of parting out. While there exists little prospect of any improvement in terms of values, the DC10-30 still manages to offer some operators valuable capacity. ETOPs is not an issue; capital cost is extremely low; maintenance is a known quantity; and range is suited to a wide variety of operations. In 2005, Northwest acquired two 1988 vintage DC10-30s for $5.7 million each but has since accelerated retirement such that none are now in service with the airline.