Values Of A318 Decline Despite Market Strength

The market for mainline 100 seaters such as the A318 continue to decline despite the lack of supply for other members of the B737NG and a320 families. The cancellation of the B717 program by Boeing pointed to continued difficulties for the 100-seat market. Even the departure of the B717 from the competition...

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The market for mainline 100 seaters such as the A318 continue to decline despite the lack of supply for other members of the B737NG and a320 families.

The cancellation of the B717 program by Boeing pointed to continued difficulties for the 100-seat market. Even the departure of the B717 from the competition did not lead to improved market conditions for the A318. With a virtually static order book numbering less than a 100, the type is facing marginalization, saved by virtue of its association with the more successful A319, A320 and increasingly, the A321.

The last five years have been fraught with sustained difficulty for the A318 such that the order book has continued to actually contract rather than expand. Launched in April 1999 on the basis of 109 orders and commitments, the A318 was due to enter service in late 2002 but was delayed as a consequence of the setback suffered by Pratt & Whitney with the development of the all new PW6000. Despite being the original lead engine supplier on the A318, Pratt & Whitney has since lost most of its custom. LAN Airlines, in placing an order for 20 A318s, selected the PW6000 ensuring that the manufacturer had at least one customer on its books. The lack of orders for the PW6000 are perhaps more a consequence of the difficulties of this market segment rather than due to deficiencies associated with the design of the powerplant.

The A318 can accommodate up to 129 passengers with 107 used as the baseline capacity, making it a competitor to the B717 and the B737-600. In common with other members of the A320 family, differing markedly from the Boeing philosophy on narrowbody engine choice, the A318 features a choice of engines. The choice though is not the same as on other members of the A320 family which feature either the V2500 or CFM56. Initially, the A318 was to be offered with just the Pratt & Whitney PW6000, a new engine offering the prospect of improved fuel efficiency. However, customers already using the CFM56 on other A320 family members pressed for the CFM56 to be also included. August 1999 saw the CFM56 added, although service entry of the airframe/engine combination was slated for the second half of 2003, then more than six months behind the PW6000.

Problems with the PW6000 resulted in a major redesign pushing back service entry of the airframe/engine combination to 2005. This left the CFM56 as the lead powerplant. The CFM powered A318 has entered service in low numbers. The PW6000 offers the potential for lower maintenance costs - $223 per trip - even though fuel consumption is expected to be higher than the CFM56 at $858 versus $820 per trip.

 

A318 Vital Statistics
LAUNCH	Apr-99
FIRST FLIGHT	N/A
SERVICE ENTRY	Jun-03
ORDERS	90
DELIVERIES	31
BACKLOG	59
CUSTOMERS	12
ENGINE TYPES	PW6000/ CFM56
VARIANTS	N/A
D CHECK COST	$1.0m
ENG O/H COST	$0.6-2.0m
STANDARD MTOW	130,070
OPTIONAL MTOW	149,910
FUEL CAPACITY	6,300 USG
FUEL - OPTIONAL	N/A
RANGE-TYP PAX	3,000NM
RUNWAY LENGTH	TBA
CARGO	749 cu ft
PAYLOAD (MAX)	24,400 LBS
MZFW- STD	116,840 lbs
MLW-STD	123,460 lbs
CABIN WIDTH	145 inches
LIST PRICE 2006	$52.8m
TYPICAL DISCOUNT	45%
VALUE Y2003	$22.0m
VALUE TREND	DECLINE
2010 F/V - Y2003	$15.9m
LEASE RATE- DoM2003	$195,000PM
RENTAL TREND	STABLE
2010 LEASE RATE -DoM2003	$180,000PM
AIRCRAFT RATING	C

 

The MTOW of the A318 ranges between 130,070lbs through to 149,910lbs. The higher MTOW sees the range increase from a basic 1,500 nautical miles through to 3,250 nautical miles. Originally the MTOW was set at around 145,000lbs producing a range of 2,850 nautical miles. However, the extension to the range places the A318 on a par to other members of the A320 family and increases the opportunities for corporate versions to emerge. The higher gross weight examples should be the more popular and enjoy stronger residual values. With ever increasing emphasis on weight-related navigation and landing charges, lower weights may be viewed with just as much enthusiasm.

The issue of weight is significant. Although the capacity of the A318 is similar to the B717, the two aircraft seek to serve different markets. The operating empty weight of the A318 is much higher at 86,060 lbs compared to the 67,124 lbs of the B717. Similarly the OWE of the B737-600 is 80,340 lbs versus the 69,800 lbs of the B737-500. For smaller carriers, seeking to use aircraft up to 110 seats, the OWE will play a vital role in determining operating economics, particularly in Europe. For larger carriers, the commonality of the A318 with the rest of the A320 family should easily outweigh the weight issue.

To date, orders total only 90, 50 percent higher than two years ago but still significantly lower than the order book of four years ago. The approximate 160 orders recorded four years ago had been placed by mainly larger operators, the operators with the then perceived route structure able to use the type. The combination of adverse market conditions and the delay in certification of the PW6000 engine prompted either cancellation or switches to A318 orders. The B737-600 has suffered a similar fate having secured only 69 orders, down from the 100+ previously registered and the B717 is now cancelled after securing 155 orders.

Airline customers previously comprised Air China (8), Air France (15), America West (15), British Airways (12), Egyptair (5), Frontier (5) and TWA (25). The lessors had been particularly active in placing still largely speculative orders. GATX had ordered 12, ILFC 30, GECAS 30, and CIT Aerospace 4. Of the previous 161 orders nearly 50 percent were destined for the lessors. The support of the lessors for another new Airbus program represented considerable faith. However, such belief has been lost along with orders. The order book now stands at only 90. ILFC has changed all its orders to other variants, the GATX order is no longer evident, the 25 of TWA have naturally been cancelled while the 12 of BA, the five of EgyptAir and the eight of Air China have also disappeared. The GATX order is also no longer recorded. Customers now comprise Air France, Frontier, GECAS, LAN, Tarom and USAirways East.

Late service entry usually provides the competition with an important marketing advantage but apparently not on this occasion. With such competition from not only Boeing with the B737-600 but also the new generation of larger regional jets, sale prices have to be below $30 million. Even at that level, there appears to be little interest. The average $52 million price tag compares with the $51 million of the B737-600. The cost of producing the A318 is only slightly less than the cost of producing the A319 - apart from slightly less aluminum, lower-thrust engines, and slightly fewer seats, everything else remains the same. Inevitably in comparing operating costs, different assumptions adopted by manufacturers produces different results. Airbus show that while the B717 has slightly lower trip costs, the cost per seat is just over three percent higher. The trip costs of the B737-600 are shown to be four percent higher by Airbus though each manufacturer provides differing assumptions.