Freighter Values Retain Stability

The cargo market is showing some signs of weakness although the run up to the end of the year usually provides for peak demands on capacity. A slowdown in the cargo market has historically been symptomatic of wider problems for the industry. While air freight traffic is increasingly competing against...

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The cargo market is showing some signs of weakness although the run up to the end of the year usually provides for peak demands on capacity.

A slowdown in the cargo market has historically been symptomatic of wider problems for the industry. While air freight traffic is increasingly competing against containerization, the demand for cargo space may be a result of reduced economic growth. The weakness of the dollar may make U.S. goods cheaper but it also makes imports more expensive. Despite the cut in interest rates the housing market in the U.S. remains problematic and disposable income is under threat from higher gasoline prices. With widebody production accelerating, cargo space in the lower holds is increasing, impacting dedicated freighters.

Fortunately any slowdown in airfreight demand is being offset by the limited availability of conversion slots which is ensuring that capacity growth is constrained. The high price of fuel is also forcing operators to focus more on newer aircraft at the expense of the old. With lower utilization of ageing equipment, any excess of capacity is being partially negated. The concern remains that any slowdown in the cargo sector could be harbinger of more widespread difficulties.

The Aircraft Rating (Aircraft Value Analysis Rating http://www.aircraftvalues.net) reflects the considered suitability for asset based financing over a five to seven year period. Ratings range from A++ to E--.

Freighter Current Values US$ millions -December 2007
Aircraft	Rt	Age	Value	Trend Analysis
A300F4-200	C--	1976-79 1980-84	6.3-7.4 7.1-8.1	The age profile of the A300F4-200 is now extending such the majority are approaching at least 25 years of age. While freighters in general are considered to have lives in excess of 30 years, there exists considerable pressure on operating modern and efficient equipment. Values of the A300F4-200 are remaining stable though the arrival of the B767-300 will likely alter the dynamics of this sector.
A300-600RF	C+	1994-98 1999-06	33.0-43.0 47.0-65.0	The A30-600RF may have medium-haul range capability but there exist many routes which require capacity. The type is therefore well placed to take advantage of this segment of the market and values remain on an even keel though those built at the end of the program may face some weakness.
A310-300F	C	1985-90 1991-97	11.0-17.2 16.0-21.0	There are an increasing number of -300s being converted to freighters - for good reason. The type is relatively new and has the ability to serve longer sectors. The capacity is also suited to a variety of tasks. Values are remaining steady though again some erosion of the youngest may be expected.
B707-320CH	E--	1965-72	0.1-0.3	The B707 has little relevance to the market and is suffering from the Museum Effect.
B727-100C B727-100CH	E-- E-	1965-71 1965-71	0.2-0.3 0.2-0.5	The market for the B727-100 freighter has long since dissipated in favor of the -200. Pricing is likely to remain at or near scrap levels.
B727-200FA B727-200FHA	E E+	1972-78 1979-83 1972-78 1979-83	0.2-0.4 0.4-0.8 0.3-1.0 1.0-1.2	The market is moving away from these previous stalwart types because of efficiency and environmental issues. Yet the number remaining in service is formidable and for those with experience, trading can still be profitable. Values are not expected to see any significant movement though there remains considerable variation owing to specification and condition.
B737-300SF	C	1986-91 1992-97	7.5-11.2 11.0-14.7	With TNT seeking to replace the B737-300 with A320 family members it might be supposed that values of the B737 may be under pressure. However, the conversion program for the -300 has itself yet to get into full swing. Values remain stable.
B747-100SF	E-	1969-76	0.8-1.6	There can be no escaping the pressure on the -100SF values. Scrap levels have been in evidence for some time.
B747-200SF	E+	1974-78 1979-84	3.0-4.9 4.4-8.4	Values of the -200SF are falling slightly as the market continues to move to newer types. Not so many years ago values of younger -200SFs were in excess of $40 million. With the arrival of the -400F in quantity and the change in market structure, the -200F has lost much of its attraction. The only way for the -200SF values is unfortunately down.
B747-400F	B++	1993-07	80.5-145.0	Values of the -400F show no signs of abating such is its popularity. While there is inevitably some concern about ordering new examples in view of the B747-8F, the -400F will remain the freighter of choice for the time being. The potential delay in the service entry of the -F can only benefit the -400F.
B757PF B757SF	C++ B--	1987-93 1994-98 1982-87 1988-93	15.0-23.5 24.5 -30.0 8.4-16.3 15.1-25.1	Despite the continued demand for the B757 as a passenger aircraft, a steady stream of conversions are being undertaken not least because of the appetite from FedEx. The conversion program may have taken time to gain momentum but the performance of the type is such that it should continue to be the target for conversions in the coming years.
BAe146QT	C-	1984-89	1.7-3.9	The re-igniting of the BAe146 conversion program provides a measure of support for those already in service. Two BAe146-200s in the portfolio of BAE Systems are being used for the first conversions and will be placed onto the market in 2008.
L1011-200F	E--	1975-81	0.2-1.0	Some Tristar cargo capacity continues to be offered but the type has never been viable in the wider market.
DC8-61F DC8-63F	E E+	1968-71 1968-71	0.6-0.7 0.7-0.8	The values of the DC8 continue to languish as the market turns its back on the type.
DC8-71F DC8-73F	D- D-	1968-71 1968-71	2.5-3.5 4.0-5.0	The aircraft still has later CFM56-2 engines to commend it but the airframe, at 40 years, is clearly showing its age. The type needs to be in good condition if a sale is sought.
DC10-30F	D--	1971-78 1979-84	3.2-6.1 5.6-6.8	The values of the DC10-30F continue to struggle in what is a very competitive market with new types emerging all the type to increase the pressure. The arrival of the A330-200F will not aid the plight of the type.
MD11SF	B+	1991-93 1994-99	37.1-42.2 44.0-55.0	The MD11SF may be facing a number of pressures as new types emerge but for the time being the type is at the forefront of the freighter market. The values of the youngest may be slightly exposed as new types emerge.

 

Commentary reflects change from the last update to Freighter Rentals of July 2007.