Values of MD90s Continue to Decline

With a number of MD90s already having been parted out and speculation that those operated by Delta may be axed, the prospects for the MD90 are far from promising, despite the shortage of capacity. The MD90 represented the final version of a product that can be traced back to the early 1960s when the DC9 was...

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With a number of MD90s already having been parted out and speculation that those operated by Delta may be axed, the prospects for the MD90 are far from promising, despite the shortage of capacity.

The MD90 represented the final version of a product that can be traced back to the early 1960s when the DC9 was first created. The introduction of the MD80 in the late 1970s inevitably made it necessary for a replacement to emerge by the early 1990s. In the 1980's both Boeing and Airbus had developed new models - the B737-300/400 and A320. A response from McDonnell Douglas (MDC) was vital if the company was to remain competitive. The MD90 was launched in late 1989.

 

MD90 Vital Statistics
LAUNCH	11/1989
FIRST FLIGHT	Feb-93
SERVICE ENTRY	Apr-95
ORDERS	114
IN SERVICE	110
AVAILABILITY	0
OPERATORS	13
ENGINE TYPES	V2500-D5
VARIANTS	-30, -30ER
D CHECK COST	$1.2m
ENG O/H COST	$0.7-2.1m
STANDARD MTOW	156,000
OPTIONAL MTOW	165,000
FUEL CAPACITY	5,840usg
FUEL - OPTIONAL	6,405usg
RANGE-TYPE PAX	2,085nm
RUNWAY LENGTH	7,105 ft
CARGO	1,300cu ft
PAYLOAD (MAX)	38,250
MZFW-STD	130,000
MLW-STD	142,000
CABIN WIDTH	124inches
LIST PRICE 1999	$49-56.5m
TYPICAL DISCOUNT 1999	35%
VALUE Y1994	$6.5m
VALUE Y1999	$8.5m
VALUE TREND	FallIng
2012 F/V - Y1994	$3.5m
2012 F/V - Y1999	$4.9m
LEASE RATE - DoM1995	$105,000
RENTAL TREND	Decline
2012 LEASE RATE -DoM1995	$70,000
AIRCRAFT RATING	D--

There was much talk of modifying the basic model to encompass a family of aircraft thus enabling the MD90 to more adequately compete with the competition but such were the finances of the company and the weak market conditions of the early 1990s, that no other variants made it beyond the CAD/CAM monitor.

McDonnell Douglas, was number two in the terms of Western aircraft manufacturing at the time of the launch, of the MD90 with an MD80 operator base exceeding 1,000 units. The success of a follow on product for the MD80 seemed assured. In contrast, the A320 had no operator base and initially seemed destined to be operated by a few major European airlines for politico-economic reasons. Within five years, the fortunes of Airbus and McDonnell were reversed.

Instead of designing an all new aircraft, McDonnell Douglas relied heavily upon upgrading the proven MD80. The airframe, originating from the DC9 of the 1960s and retained for the MD80, had proved to have the best structural integrity and MDC saw little reason to change a winning formula, particularly when pressed for cash. The MD90 airframe had a design life of 90,000 hours or 60,000 cycles. New engines and avionics were selected and systems improved. The International Aero Engine (IAE) V2500-D5 engines offered the latest environmental compliance and efficiency though the avionics failed to match the sophistication of those offered on the A320 or the B737NG that entered service only four years later.

The launch of the MD90 coincided with the peak of the boom period of the late 1980s. A launch order from Delta offered the promise of long-term viability. By July 1992, nearly two years before service entry, seven customers had made commitments for 249 aircraft. McDonnell Douglas also hoped to capitalize on its association with China. An agreement was signed in 1992 to produce MD82, MD82T and MD90Ts in China. This was renegotiated in 1994 and 1995. The agreement settled on the construction of 20 MD90Ts.

The Gulf Crisis and subsequent recession took its toll on orders in the early 1990s. In service problems experienced with the other major MDC product of the time, the MD11, increased uncertainty as to future of the two programs. An upgrade to the existing MD80 program was also mooted further clouding the future of the MD90. The success of the A320 family program and the launch of the B737NG justifiably raised concerns that the market was unlikely to be able to support three competing aircraft, a lesson for the regional jet market of today. The absence of an MD90 family also started to adversely impact perceptions.

The "merger" of Boeing and McDonnell Douglas soon raised concerns that the MD90 would be axed. There was little rationale in producing two competing aircraft, particularly with one suffering from a lack luster order book. The MD90 was cancelled with 117 orders logged including three -90ERs and a single -90IGW.

Operators of the MD90 number only 13. Saudi Arabian Airlines has the largest fleet comprising some 29 units. The Saudi aircraft however feature a unique specification due to avionic selection. China Southern operates 13 and China Eastern nine while there are 16 in service with Delta. JAL still has 16. There is evidence that the MD90 still has limited relevance for those operators unable to secure alternative lift. In 1999 Boeing was still quoting a list price for the MD90 that ranged between $49 million and $56.5 million. Realistic delivery prices were more nudging $30 million. The limited order book for the MD90 inevitably caused values to quickly fall, accelerated by the decision of Boeing to avoid a competitor with the B737-800. Sales literature produced in the early 1990s indicated that McDonnell Douglas expected the MD90 to have "a higher investment asset value over the life if the airplane" and that "people who finance like the MD90". Also McDonnell Douglas stated "Douglas products have higher residual value than Boeing and Airbus". Such assertions have inevitably failed to match reality.