A market glut has seriously dropped the residual values for two large first-generation regional aircraft, although new support programs are helping soften the blow to asset managers.

The two-decades old BAE Systems BAe 146 and its Avro RJ derivatives have plunged in value following decisions by various operators to dispose of their BAe 146/Avro RJ fleets. Fokker 100s have also dropped in value following a flood of those aircraft into the marketplace, although a new support program developed by Fokker Services and Rolls-Royce has pushed the value back up to some extent. Rolls-Royce manufactures the RR Tay 650 that powers the F100. A similar program developed in the early 1990s helped improve the value of the BAe 146.

Availability of the BAe 146 is growing, with Ryanair removing eight BAe 146-300s from service that it inherited from its planned takeover of KLM's low fare airline Buzz. Two 146s remain with Buzz, and may or may not be taken out of service, depending on Ryanair's decision on whether Buzz will remain a viable entity. The Buzz - 300s will be added to 15 already parked that represent 25 percent of the -300 fleet.

Paul Leighton, managing director of Aircraft Value Analysis Company and editor of Aircraft Value News, noted that if the Buzz -300s are added to those already parked, it will equal well over a third of the -300 fleet. "Such a proportion in storage has traditionally been justification for further discounting of values." He also noted that a total of 34 BAe 146s and Avro RJs are listed as being in storage and that some 50 are being advertised for sale or lease, "representing in excess of 13 percent of the world's fleet."

One bright note for BAe 146 values is that recent reports in the European press that SN Brussels, the reincarnation of Belgium airline Sabena, was planning to divest itself of its 32 BAe 146s and Avro RJs is in error, according to SN Brussels' communications chief Cedric Leurquin. Leurquin told C/R News that it has no plans to get rid of those aircraft, but that it was adding an Airbus A319 to its fleet.

Leighton said that both the BAe 146 and Avro RJ have received renewed interest from European and Australian operators since the mid-1990s, and that the aircraft are found "in considerable numbers" with European operators providing feeder traffic for major operators and taking over short-haul low fare routes. The BAe 146/Avro RJ aircraft in all series account for 164 aircraft among European Region Airlines Association (ERA) members, representing 12.3 percent of the total ERA fleet.

Leighton also noted the age of the aircraft, with the early model BAe 146s going back almost 20 years. And while the Avro RJs are relatively new aircraft, the cancellation of the Avro RJX, the next generation Avro RJ, in 2001 just prior to its certification "underscores the increasing age profile of both the original BAe 146 and Avro RJ," he said.

The increased availability of the two aircraft "should not be viewed as surprising" in light of the age profile of the type, a changing market structure and increased competition from both old and new aircraft, he said. While the support programs designed to keep operating costs of the four-engine aircraft low have kept the aircraft type viable against new generation RJs that have greater efficiencies but higher acquisition costs, the new Total Care program developed for Fokker aircraft "will inevitably serve to offer competition to the BAe 146/Avro RJ," Leighton said.

Although values of the Fokker 100 have dropped significantly over past year and a half, the new joint Fokker/RR support program should help stabilize the market for the aircraft, despite a sudden surge in availability. Total worldwide fleet is 270 aircraft, of which roughly 30 percent is already in storage and a similar amount scheduled to be grounded in the coming months. Biggest hit on the Fokker 100 was the parking of the US Airways 70 aircraft fleet and planned retirement of American Airlines' fleet. However, Irish lessor Pembroke purchased the aircraft from German financial institution KfW and has leased 17 to Berlin, Germany-based charter operator Germania Fluggesellschaft. Fokker Services is planning to reconfigure and perform maintenance on the 17 Fokker 100s at around $1 million per aircraft. Pembroke is jointly owned by Rolls-Royce and GATX Capital.

The new Fokker/RR program, designated "Future 100," is supported by Messier Dowty, Honeywell and Rockwell Collins. It will provide a minimum 10-year Total Care program in an effort to reduce operating costs. It is also being marketed to Fokker 100 lessors faced with considerable placement difficulties caused by the availability of new generation regional jets and falling BAe 146 prices, Leighton said. He noted that when BAE Systems introduced its total support program in the early 1990s, the combination of the support program, proactive remarketing, leasing to better quality lessees with less potential for premature return and longer lease terms made the BAe 146 suitable for asset- based financing. However, it was only after the number of BAe 146s parked at various UK regional airports diminished that values improved.

Resale value of the Fokker 100 is now below $5 million, compared to the $10 million and up for the aircraft just a few years ago. Lease rates have also been halved so that rates of $50,000 per month may still be viewed as high by some, Leighton said. However, they still compare favorably with the minimum $150,000 monthly lease rate of a new regional jet.

>>Contact: Paul Leighton, telephone: 44-1789-730283/730284; e-mail pleighton@aircraftvalues.net<<