Values Remain At Scrap Level

In the late 1980s, all the conferences resounded to talk of Chapter 2 aircraft and hushkits. Today, Chapter 2 aircraft have become largely an irrelevance in the context of asset- based financing and values have long since been at scrap levels. Despite the lack of new products, the combination of fuel costs...

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In the late 1980s, all the conferences resounded to talk of Chapter 2 aircraft and hushkits. Today, Chapter 2 aircraft have become largely an irrelevance in the context of asset- based financing and values have long since been at scrap levels.

Despite the lack of new products, the combination of fuel costs, maintenance issues and reliability have all conspired to make such types even more undesirable. Even scrapping the aircraft will not necessarily yield much revenue such is the supply of spares from aircraft already having been or in the process of being parted out.

There continue to be a large number of older aircraft being advertised for sale or lease though this remains a fraction of those that are actually lying idle. As each month in storage progresses there is even less chance of such aircraft being returned to service. Tax issues may prevent final parting out of some aircraft while the lack of demand prevents the final demise of others. Because of poor condition, many of those will not even be placed onto the short list of prospective buyers. For those marketing older quality aircraft which have a good pedigree, there will be considerably more interest from those who still have an interest or little option but to consider a relic.

The Aircraft Rating (Value Rating courtesy of The Aircraft Value Analysis Company 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--.

Chapter 2 Passenger Narrowbody Current Values - April 2008 (Values in millions of US dollars)
Aircraft	A/C Rtg	Age	Value	Trend Analysis
B727-100	E--	1965 1971	0.1-0.3 0.1-0.3	The values of the -100 continue to be battered by the high price of fuel. With three JT8D engines, the cost of operating the aircraft is considerable. The age of the aircraft are such that they have little attraction in many regions. Values have been an irrelevance for some years.
B727-200 HADV	E-	1972 1978	0.1-0.2 0.1-0.8	Ten years ago the B727-200HADV was still viewed as very much a capable aircraft. The incorporation of so many hushkits seemed to indicate that at least the U.S. operators would retain the type for years to come. However, the introduction of much more efficient equipment and the need to reduce costs amidst a changing structure inevitably resulted in the rapid demise of the type. Though a significant number remain in service, for many this is not a matter of choice. Values have suffered again.
B737-200H	E--	1968	0.1-0.1	The -200H is now some 40 years of age and is representative of the first generation of jet aircraft. The type may have enjoyed a revival in the mid 1990s but it experienced no such comeback in recent years.
B737-200 HADV	E-	1971 1977 1983	0.1-0.2 0.2-0.3 0.2-0.8	Though it is tempting to cling to the belief that the -200HADV still has attraction for asset based financing due to past service, there can be no escaping the fact that the type is far removed from the modern arena. The age and fuel efficiency are severely lacking and an increasing number wait in the desert for final parting out. The type still has merit if utilization is low and the condition is good but for the majority of those that remain in service, placing the aircraft is very difficult.
BAC1-11-400	E--	1966	0.1-0.1	The figures still relate to the price to be paid by the seller rather than the buyer!
F28-1000	E--	1968 1974	0.1-.01 0.1-0.1	A great aircraft that served a wide range of operators well for a number of years. Unfortunately for more than 10 years the type has struggled to find favor and values have long since lingered at scrap levels. Belonging to the first generation of jets, the type is in service with only a handful of operators. The Spey engines, while providing good service, are nonetheless not the most environmentally friendly.
F28-4000	E--	1976 1980 1986	0.1-0.2 0.1-0.2 0.1-0.2	For a time the -4000 seemed to be on the verge of a comeback but with a powerplant that failed to meet the latest regulations, problems were always likely to be experienced. The type though is still in service with a few operators.
DC9-10	E--	1968	0.1-0.1	The DC9-10 has no virtue and like the B737-200 is destined to feature in history books rather than be part of todays fleet.
DC9-30H	E-	1967 1975	0.1-0.2 0.1-0.4	With the merger between Delta and Northwest, perhaps the -30 fleet is no longer so secure. Northwest may actually be in the market for the new CSeries. Operators continue to pefer to operate the aircraft into retirement rather than seek to sell such is the lack of attraction.
DC9-40	E--	1970	0.1-0.2	A fleet of nearly 30 -40s are in service albeit with only a few operators.
DC9-50	E--	1977	0.1-0.3	The DC9-50 remains in service with a few operators with the majority having been hushkitted. Values are at scrap levels. Good condition engines and a long period through to the next D check will count for something.
The commentary highlights the change in fortunes since the last update of November 2007. Values are for indicative purposes and should be used for guidance only.