Customers seeking to acquire new B767-300ERs as a means of bridging the gap until B787s are actually delivered will likely be disappointed with associated residual values. With yet another delay to the B787 comes the reality of a shortfall in widebody capacity for many customers. Airlines such as Air Canada...
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Customers seeking to acquire new B767-300ERs as a means of bridging the gap until B787s are actually delivered will likely be disappointed with associated residual values.
With yet another delay to the B787 comes the reality of a shortfall in widebody capacity for many customers. Airlines such as Air Canada, Qatar Airways, LAN are reportedly being advised by Boeing that aircraft will not be delivered until two or more years after the original delivery date. Such a wait compares with the delay in the A380 but is more embarrassing for Boeing because of previous confidence amidst the Airbus debacle. Just as demand for the large capacity widebodies increased as operators sought to retain or acquire equipment to compensate for the delay to the A380, then so too are operators having to seek alternatives. In contrast to the A380, which involved only a few aircraft, the dozens of B787s that were to be produced in the first two years of production represents a much more significant shortfall in capacity.
Those aircraft which are the middle of their product life, the A330-200 for example, will represent the best alternatives. Such interim demand will aid values both now and in the medium term. Airbus is contemplating increasing production of the A330 to perhaps eleven per month by 2012 but is already set to increase to nine. In the context of economic weakness, customers such as Aircastle and Guggenheim with freighters on order, may find it more profitable to switch orders to the passenger version, safe in the knowledge that they have early delivery slots and demand will likely remain strong as operators continue to dump older equipment as fuel prices continue to rise.
Other operators with commonality issues will view Boeing equipment with greater relish. ANA and JAL are long standing Boeing operators and are keen to add new B767-300ERs. However, adding new B767-300ERs will see problems for residual values. The B787 is the replacement for the B767-300ER clearly indicating that the latter is past its best. Those aircraft produced in the twilight years of production have traditionally faced steep depreciation curves. Suggestions of values being in excess of $85 million for examples built in the next few years would seem optimistic as within ten years both the A350 and B787 will be available in large numbers. Boeing is keen to build more B767s as it represents important revenue for a type that no longer has any associated development costs to recover. The revenue will be welcome at a time when spending on the B787 is considerable. With the supply chain continuing to supply components and sub-assemblies in anticipation of full scale production, the imbalance between expense and revenue on the project would cause severe difficulties for any lesser manufacturer. Further, with compensation being paid to B787 customers, Boeing will be anxious that such payments are not being used to fund Airbus production. The principal means of acquiring new B767s may therefore focus on a lease with the aircraft perhaps being placed into the Boeing Capital portfolio. In the event investors are sought based on an $85 million price tag, the loan to value ratio should be lower than for other types.
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