The near six percent rise in Airbus list prices between 2008 and 2010 contrasts sharply with low rates of consumer inflation and further distances list prices from net prices.

After hiking list prices between 2007 and 2008 by nearly five percent in response to higher commodity and power prices, Airbus kept list prices the same in 2009, despite the fall in commodity and power prices. The latest rise in list prices sees an average of 5.8 percent for most aircraft with a near eight percent rise in the price of the A350-800. The cause of the rise in list prices at a time when traffic is only just beginning to recover is, according to Airbus, due to the increased cost of materials and the exchange rate with the dollar.

Airbus indicates that the price rises were calculated according to the Airbus standard escalation formula over the January 2008 to January 2010 period. List prices can also increase as a result of more equipment being included as standard rather than options. Escalation is also applied to the delivery of new aircraft though customers are increasingly seeking a discount on such escalation, something which the manufacturers are resisting.

The table reflects the list prices quoted by Airbus. Airbus has traditionally indicated a high and low figure to reflect design weights, engines choices and the level of selected customization. Where appropriate, these have been averaged. The 2008-2010 percentage rise compares the latest list prices with those of 2008. The list prices are compared with The Aircraft Value Analysis Company’s values for new aircraft.

The list prices of the narrowbody range now range between $62.5 million and nearly $100 million. At $100 million this nearly equates to the value of a new B787-8. In the six years since 2004, the list price of the A380 has increased by nearly 25 percent.

This rise in list prices is causing a further disconnect with values of new aircraft. The value of a new aircraft has fallen, in some cases such as with the A320, by more than ten percent over the same two-year period. The effect of the rise in list prices and the fall in values is for discount levels to reach nearly 50 percent. The 50 percent discount level reflects a single digit order. For those customers ordering a larger quantity, the discounts will be considerable such that levels of 60 percent or more will be applicable.

However, as illustrated by the recent decision by Ryanair to halt negotiations with Boeing, the manufacturers are not willing to give way to all the demands made by customers. Both Airbus and Boeing need to generate revenue to pay for the cost overrun of existing programs and for those aircraft being developed. In the future, net pricing will likely see a rise, particularly if inflationary pressures take hold.

In the late 1980s, there was a reasonable correlation between list and net prices. The regional jet manufacturers also used to have a measure of realism between list prices and values but in recent years, this has been lost. The list prices of the turboprop and corporate jet manufacturers correlate more closely with values. List prices rise inexorably due to the use of an escalation formulae that do not take into account leaner manufacturing, the elimination of the amortization of development costs, or market forces.

While the market may be suffering, list prices continue to rise. While Airbus may not have published a rise in list prices in 2009, the six percent rise over the 2008-2010 represents a significant increase. In the U.S. the Consumer Price Index – not the measurement used by either Airbus or Boeing - fell in 2009 while rising by under four percent in 2008 – a net rise of only 3.5 percent in two years. Such is the discrepancy between list prices and values, that the relevance of the former has been in question for over 15 years.

Paul Leighton (pleighton@aircraftvalues.net) is also founder and managing director of the Aircraft Value Analysis Company, a UK-based company that specializes in future value forecasting. AVAC was specifically formed in 1991 to provide independent advice regarding current and future aircraft values, and the factors that affect them, to the air transport community.

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