B757 Values Remain Stable, Defying Odds

While the wider market may be set for a period of fluctuating fortunes, the prospects for the B757 seem more settled.

Values of the youngest examples may have been under pressure over the course of the last year but for the majority of those B757s in service, the market has been remarkably stable, contrasting with the negativity surrounding the type earlier in this decade. Some current values of the youngest B757s continue to nudge $40 million, though a figure of nearer $30 million is perhaps more realistic.

From 2001, when National collapsed, through to 2004, values of the B757 experienced a sharp decline. Values of newer examples at $35 million changed to nearer $20 million while those older aircraft fell to significantly less than $10 million. One of the causes of the rapid fall in values, particularly for the -200ER, was due to the extensive number of aircraft on lease. The combination of excess and a weak market led lessors to scramble to place aircraft, sometimes at rates of less than $100,000 per month, contrasting with previous levels of $200,000+. Given the relationship between lease rentals and values, the latter soon fell, a salutary lesson perhaps for the current B767-300ER. The cost of overhauling the B757 engines, at nearly $4 million per unit, failed to endear the type to a market that was increasingly conscious of draining cash reserves.

The fall in value, and the expectation of sustained lack of appeal, perhaps ignored the attributes of the type. The B757 has always been viewed as an efficient aircraft. Even today the type is considered to be efficient, offering not only mature engines but also sufficiently sophisticated avionics to maximize operations. Crucially, the B757 still has no direct replacement in terms of capacity or performance. Continental has developed an international strategy based on operating the B757 to smaller airports. Delta, while contracting the fleet, still intends to take 22 ex-TWA B757s to expand international operations. The revival in the fortunes of the B757 are therefore due to sound reasons rather than speculation and a delay in the service entry of replacement products. The values of the B757 have improved over the course of the last few years as a consequence of retention and acquisition.

While values have not recovered to pre-2001 levels, they are considerably higher than their previous lows. The recovery has been aided but not facilitated by the need of FedEx to acquire nearly a 100 to replace its tired B727 fleet. While there are more than 900 B757s in service, there are only some 18 being advertised for sale or lease.

However, with the oldest B757s approaching 25 years of age there is a need for a sense of realism. The product life cycle of the B757 extended for many years with no significant upgrade in the intervening period, unlike the A320. With production having ended and no maintenance holiday, operators will be loath to pay a significant premium for younger examples as the performance will be similar. The differential in value between the oldest and youngest tends to contract once production ends and the B757 is no exception. In an era of uncertainty, the B757 may yet provide a safe haven.