Values of the Fokker 100 are being stimulated by the placement of surplus units, resulting in one of the few first-generation Chapter 3 type aircraft to experience an improvement. The market remains extremely tough for the Fokker 100, but the combination of support packages and attractive pricing has helped...
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Values of the Fokker 100 are being stimulated by the placement of surplus units, resulting in one of the few first-generation Chapter 3 type aircraft to experience an improvement.
The market remains extremely tough for the Fokker 100, but the combination of support packages and attractive pricing has helped halt the slide of values into the abyss. Values of the Fokker 100 have been foundering ever since the Dutch manufacturer lost the financial support of parent Daimler-Benz Aerospace (DASA) in early 1996. Despite several receiver-led rescue attempts in 1996 and interest from such companies as Samsung of South Korea, Yakovlev of Russia and Hindustan Aeronautics of India, Fokker finally left the manufacturing scene in 1997.
There have been efforts more recently to revive the program but all have come to naught. The arrival of a new generation of regional jets using much more efficient airframes and engines promises to quickly marginalize any revamped Tay-powered Fokker 100 program.
Despite the commitment to product support through Stork Aerospace, Fokker's exit from manufacturing resulted in Fokker 100s falling in value by an average of 15 to 20 percent. Values had already taken a battering as sales fell by 60 percent in 1994-1995 compared to the order for 30 new units received in 1993. Whitetails had also made it necessary for Fokker to offer attractive pricing in the final years of the program. The examples built in the final years suffered the most because of the company's final demise. The Fokker 100 carried a list price of around $28 million by the time production ceased in 1996 (the last Fokker 70s were delivered in 1997) but values of the last units to roll off the line were closer to $20 million.
The terrorist attacks of Sept. 11, 2001, caused US Airways [UAIRQ] to embark on a prompt rationalization of its fleet. This involved the parking of 40 Fokker 100s and 30 MD-80s. American Airlines [AMR], amidst plans to defer and cancel orders with Boeing, announced its intention to retire all 74 of its Fokker 100s beginning in the third quarter of 2003.
The effect of such a large number of Fokker 100s being placed onto the market in a short space of time compounded the already massive problems facing the aircraft. The 40 aircraft of US Airways and the 74 of American represented more than 40 percent of the Fokker 100 fleet. A surplus of supply for an aircraft out of production is considered to emerge when available exceeds 10 percent of the total; at more than 40 percent, the market was literally awash with aircraft. The situation could have been worse if GE Capital Aviation Services (GECAS) had not persuaded Brazilian carrier, TAM, to re-lease a number of Fokker 100s. The aircraft were retained after GECAS reportedly offered a significant discount on existing rentals, perhaps less than $50,000 a month.
Even before Fokker collapsed in 1996, values of the Fokker 100 were under pressure. The disposal of the American fleet was always a probability, although the timing was always the unknown. Pricing of European Fokker 100s prior to Sept. 11, 2001, may have been in excess of $10 million. In the month after Sept. 11, values of the Fokker 100 fell by some 20 percent despite the apparent strength of the regional jet market. In the following years, values of the Fokker 100 continued to decline in line with the rise in the level of availability.
Subsequent to the American Airlines announcement in 2003, the value of the oldest Fokker 100s amounted to around $2 million to $3 million. The consequences of fleet concentration are all too apparent. Residual value projections need to accurately reflect the potential risk of en masse disposal by a single operator rather than focus purely on the number in service. The difficulty for the appraisal community lies in establishing when disposal of a concentration of units is likely to occur and for the effects to be accurately reflected. However, most residual value projections reflect base values where equilibrium between supply and demand is also assumed to exist. For aircraft out of production, such equilibrium is a rare luxury. Availability is still a major and seemingly intractable issue for substantive value recovery.
BACK Associates cited about 46 Fokker 100s as being available for sale or lease in August 2004, virtually unchanged over the last few months. The number actually in storage is likely to be nudging 100 due in most part to those from American Airlines that have been withdrawn from service over the course of the last year. The effect of such a large number of Fokker 100s on the market undermines its values. While at least 50 Fokker 100s remain on the market, a greater number have been placed over the last year.
Germania took 19, albeit perhaps at a heavily discounted price; Austrian Arrows has taken nine; Jetsco,18; Helvetic,five. Skyways of Sweden has become the latest carrier to select the Fokker 100, taking an initial two units. The low capital cost of the Fokker 100, refurbishment, support packages and ready availability of sisterships means that a number of carriers are able to use the aircraft on thinner routes.
The ongoing placement of surplus Fokker 100s to not only second-tier carriers but also those located in Europe offers the prospect of further improvement in values. The previous level of $2 million now appears to have been the low point for the aircraft, reflecting the considerable excess of lackluster condition of many. The essential support of Fokker Services and Rolls-Royce in providing manufacturers' maintenance and operating packages has been crucial in allowing the aircraft to regain a presence in the market.
In percentage terms, the Fokker 100 has perhaps recorded the most significant recovery in value over the course of the last 12 months, increasing by perhaps 20 percent to 30 percent compared to the 10 percent of the A320 and B737NG families, albeit at the expense of extensive refurbishment. Values of the DC9 also benefited from increased demand in the mid 1990s and notable enhancements, only to face a rapid decline some four years later.
The values of the Fokker 100 may fare slightly better. The Fokker 100 is that much younger than the DC9 and noise compliance is not yet an issue. There also are a number of operators not willing to contemplate spending some $25 million on new regional jets for what remains a fragile and fluid market.
Aircraft Asset Assessment -- The Fokker 100
Market Presence. The total of 278 deliveries for the Fokker 100 represented something of a success for a European manufacturer, even though the number pales against the deliveries made by U.S. manufacturers and more recently by Embraer [ERJ] and Bombardier [BBD].
The orders secured from American Airlines [AMR] and the then US Airways [UAIRQ] represented important successes in the key U.S. market, but also increased the likelihood of future value deterioration associated with a concentration of units within a single region and among a few operators.
While Fokker at one time contemplated adding a U.S. based production line, further larger orders from other carriers failed to materialize and Fokker was left with a high cost structure and waning order backlog.
The severe market conditions of the early 1990s led to a paucity of orders. At that time, Fokker sought to market the Fokker 100 on the basis of a quality product built to last. Unfortunately, operators were becoming increasingly focused on efficiency in the short term and saw little value in terms of paying a premium when changing market conditions were unlikely to support use beyond a five- to 10-year horizon.
Just as the existing B737-600, A319 and B717 straddle two market segments and face considerable problems in eliciting orders, so too did the Fokker 100, satisfying neither group. The aircraft was too large for the emerging commuter carriers and too small for the cost-conscious larger operators. However, even with these sizeable orders, ongoing success and containment of costs proved elusive.
Market Outlook. The aircraft may well be viewed as an inexpensive alternative to the new breed of larger regional jets for the next few years. Further units will therefore be dissipated among the both the mainline and the secondary carriers, in some cases acting as replacements for the F28.
The Fokker 100 has passed its low point and values are experiencing a sizeable rise in percentage if not dollar terms. With the 30-40 percent availability, disposal remains difficult, but at least recent deals indicate that placement is possible and in sufficient numbers as to erode the number in storage.
A sustained rise in values is unlikely. If the experience of other aircraft types is an indicator, then values of the Fokker 100 are likely to experience a further modest increase in the short term before reaching a plateau for the medium term.
| LAUNCH |
11/1983 |
| FIRST FLIGHT |
11/1986 |
| SERVICE ENTRY |
02/1988 |
| ORDERS |
278 |
| DELIVERIES |
278 |
| AVAILABILITY |
46 |
| OPERATORS |
31 |
| STORED |
95 |
| VARIANTS |
F100/F70 |
| D CHECK COST |
$1.00m |
| ENG O/H COST |
$0.70m |
| STANDARD MTOW |
95,000 lbs |
| OPTIONAL MTOW |
101,000 lbs |
| FUEL CAPACITY |
2,548 usg |
| FUEL - OPTIONAL |
3,531 usg |
| RANGE NM-TYP PAX |
1,290-1,680 |
| RUNWAY LENGTH |
6,000 ft |
| CARGO |
591 cu ft |
| PAYLOAD (MAX) |
26,442 lbs |
| MZFW-STD |
78,990 lbs |
| MLW-STD |
85,500 lbs |
| CABIN WIDTH |
122 inches |
| LIST PRICE |
N/A |
| TYPICAL DISCOUNT |
N/A |
| VALUE Y1987 |
$2.5m |
| VALUE Y1996 |
$5.1m |
| VALUE TREND |
Slight Rise |
| 2007 F/V - Y1988 |
$2.0m |
| 2007 F/V - Y1996 |
$4.0m |
| LEASE RATE-DoM1991 |
$60,000 |
| RENTAL TREND |
Easing |
| 2007 LEASE RATE -DoM1991 |
$54,000 |
| AIRCRAFT RATING |
E+ |
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