Freighter Values Remain Stable

The strength of the cargo sector is such that values of most freighters have remained unchanged or even experienced a slight improvement over the course of the last quarter. The traditionally lean first quarter has been replaced with sustained growth largely because of demand from China and a generally...

For immediate service; more information; and multi-user access (site license), non-profit organization, educational institute pricing, contact Karen Garner kgarner@accessintel.com at (301) 354-1612.

This story is only available to paid subscribers. Please login below with your username and password if you are a subscriber.

Username:
Password:
	What is my password?

Subscribe     Trial

The strength of the cargo sector is such that values of most freighters have remained unchanged or even experienced a slight improvement over the course of the last quarter.

The traditionally lean first quarter has been replaced with sustained growth largely because of demand from China and a generally improving global economy. The Tsunami had some impact on traffic flows but this was outweighed by growth in other areas. The demand for cargo space has increased the emphasis on freighter conversions for both narrow and widebodies. Russia is also set to restart production of the voluminous AN124.

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

Freighter Current Values US$ millions - April 2005
Aircraft	Rt	Age	Value	Trend Analysis
A300F4-200	C-	1976-79, 1980-84	7.0-8.4, 8.7-10.1	The values of the A300F4-200 have experienced a 50 percent fall over the course of the last six years. However, values are now at a level that allows a measure of stability. While problems with availability still persist, the demand for intra-regional capacity remains strong, and the aircraft has displaced a number of B727s. Expect little change over the next quarter, however, the age profile of the A300 is not the most attractive.
A310-300F	C	1985-90, 1991-97	11.8-20.0, 18.8-27.0	Though some aircraft types are experiencing a measure of disconnect between passenger and converted freighter examples, the same cannot be said of the A310-300. While the majority of -200s have been converted to freighters by FedEx, most -300s are operating in the passenger role. Values of passenger -300s have continued to experience weakness and this has served to drag down values of the freighter version. The values of the youngest examples are still the most vulnerable to further falls. This adverse trend belies the greater attraction of the A310-300F both now and in the future. Capacity is constantly being sought after, as is operational flexibility for regional operations. The B767-200/-200ER is receiving similar attention because of its suitability to a changing market structure, one that favors the carriage of more perishables, which tend to volume out before weighing out.
B707-320CH	E--	1965-72	0.1-0.4	The B707 still manages to resist the scrap heap largely because it is being used on a very infrequent basis and on sectors that do not necessarily require punctuality.
B727-100C, B727-100CH	E, E++	1965-71, 1965-71	0.3-0.6, 0.6-0.9	The freighter versions of the B727-100 are increasingly being replaced by alternative types. Even the arrival of more versatile turboprop freighters can the cause for replacement. The adverse operating economics, high maintenance costs and three-person cockpit are all taking their toll on demand for what can now be a 40-year-old aircraft. The hushkits do little to improve marketability for this aging type. The era of the B727-100F has passed.
B727-200FA, B727-200FHA	D--, D-	1972-78, 1979-83, 1972-78, 1979-83	0.4-0.8, 0.8-1.4, 0.7-1.6, 1.6-2.0	The arrival of newly converted narrowbodies in the form of the B737-300 and B737-400 would seem to suggest that the time of the B727 has passed. While essentially correct, the B727 freighter still retains considerable merit. The three-engine configuration may make it more onerous to operate but in the right circumstances, the aircraft can be ferried on two engines. The low capital cost of the B727 compared to the alternatives also makes for a powerful argument. Values can therefore be expected to continue declining to a level that makes the retain/scrap decision that much more difficult.
B737-300QC	C+	1986-91, 1992-97	7.7-11.9, 12.4-16.2	Values of the -300QC are managing to achieve a reasonable degree of stability due to the increase in demand for narrowbody capacity. The arrival of the -300F in numbers may make the QC less attractive as it has to incorporate some passenger-related equipment if used in its intended dual role. The premium applied to QC capability has been eroded as few operators can manage to maximize both roles to make alternate use between day and night practical.
B747-100SF	E	1969-76	1.0-3.2	How the -100SF manages to keep going remains a mystery. The aircraft has long passed its retirement date. Perhaps much lower utilization keeps the ultimate decision at arms length for a few more months or years.
B747-200SF	D	1974-78, 1979-84	4.9-7.8, 7.8-12.0	In the context of high fuel prices, rising maintenance costs and changing cargo patterns, the B747-200SF is increasingly losing its relevance, and with it, value retention. However, in the absence of B747-400SF availability, the market is having to turn to the -200SF by default, always an indication of short-term demand. Lease rentals are likely to be the principal beneficiary for such an improvement, a contrast to still declining values.
B747-400F	B+	1993-03	73.0-132.0	Values of the -400F are at last managing to achieve a measure of stability. The demand for the nose-loading freighter is particularly strong in the absence of either the -400SF or the A380F. Boeing may now be seeking to keep the B747 in production by offering even greater discounts on new examples, always a recipe for a subsequent deterioration in values. The values of those -400Fs last off the production line are likely to be among the most vulnerable to heavy discounting in the early years if too much emphasis is placed on single unit values. Passenger examples may be in the process of being acquired for a reasonable $40 million, but conversion will cost another $20 million. Atlas has cancelled the last of its -400Fs.
B757PF, B757SF	B--, B--	1987-93, 1994-98, 1982-87, 1988-93	16.0-24.5, 25.8 -32.5, 8.9-17.2, 16.1-27.5	Values of the B757 freighters in the form of the PF and SF are managing to resist some, though not all, of the falls being felt by the passenger versions. The number of B757s being converted are fewer than might be imagined. The SF has considerable credibility for the regional market. The improvement in the fortunes of the passenger version, however, means that there are fewer units to convert and less appetite among lessors to undertake such a task.
BAe146QT	C+	1984-89	2.0-4.9	The age profile of the BAe 146 may now be reaching some 20 years but the operating characteristics of the aircraft still make it suited to regional operations. The existing fleet may see further additions although the acquisition of a number of additional BAe 146s by Lufthansa shows that the passenger example still has some supporters.
L1011-200F	E--	1975-81	0.9-2.8	There is little to commend the L1011.
DC8-61F, DC8-63F	E++, D-	1968-71, 1968-71	1.1-1.3, 1.3-1.5	With values of the original JT8D-powered DC8s so low, there is little opportunity for further significant declines to emerge. With nearly 40 years service, few can contest the longevity of the design.
DC8-71F, DC8-73F	D++, C-	1968-71, 1968-71	4.8-5.8, 6.3-7.4	The cargo market may be experiencing further growth, but any increase in demand for capacity is increasingly passing the DC8-70 series by. The market structure has undergone a fundamental shift and the traditional market for the aircraft -- the U.S. -- has increasingly turned its attention to alternative types.
DC10-30F	C--	1971-78, 1979-84	5.1-9.0, 9.0-10.5	The DC10-30F is managing to retain some credibility in the current market. Values are only marginally down over the last quarter. With some units still set for conversion, this would suggest that the aircraft is still suited to the needs of a variety of carriers.
MD11SF	C+	1991-93, 1994-99	35.0-42.0, 40.0-55.0	The demand for cargo space is such that values of the MD11SF are not considered to have changed much over the last quarter. A significant number are still to be converted, allowing for an element of disconnect to emerge between passenger and freighter units. Not all operators require the capacity or the expense of operating the B747-400F -- Lufthansa, for example.
Commentary reflects change from the last update to Freighter Rentals of December 2004.