The values of all aircraft have experienced a substantive fall during the course of 2009 and there continues to be an expectation that 2010 will see further declines as the aviation market struggles to emerge from recession.

Values of all aircraft have been affected by a greater or lesser extent over the last twelve months with most seeing the largest falls in the shortest period for many decades - even greater than the declines of 2001-2002. The peak of the cycle occurred in late 2007 such that the falls that have occurred over the last twelve months have compounded earlier declines.

The more modern aircraft have been impacted far more than in the past because of their position on the product life cycle. There are a great many more in service and production has matured. The older aircraft are always vulnerable during a downturn and this cycle has been no different. The B737-300 has faced considerable difficulties with availability rising as the market seeks more efficient equipment which are now more readily available.

Values of the B737-300 have fallen by nearly 30 percent during 2009 adding to the 15 percent fall of 2008. A 1991 example was worth approximately $9 million in late 2007, $7.6 million in late 2008 and now the value is less than $5.6 million. Two years has seen a 40 percent fall. Forecasts that were made 2007 were likely to be projecting a fall of nearer 20 percent which then seemed unduly pessimistic in view of the enormous backlog then held by the manufacturers. Some forecasts indicated that a value of $5.6 million for a 1991 vintage B737-300 would not occur until 2016 while even the more conservative suggested 2011. The Great Recession has greater accelerated the rate of fall. The other members of the B737-300 family have experienced similar falls. A 1991 B737-400 had a value of $9.6 million in late 2007; this had fallen to $8.4 million a year later. By the end of this year the value was only $6.2 million a 35 percent fall over two years and a 25 percent decline over the last twelve months. The next year is still expected to see another 15 percent fall.

The experience of the MD82, a similar first generation Chapter 3 model, is something of an irrelevance in view of the problems facing the type over the last decade. In late 2007 the value of a 1991 vintage MD82 was already have that of a B737-400 at $4.3 million. In late 2008 this had fallen to only $3 million and latest figures indicated only $2 million. Values have therefore fallen by more than 50 percent over only two years. Even $2 million seems high.

The more modern narrowbodies – the members of the A320 and B737NG families – should have fared better during this downturn. The B737NG in particularly managed to sidestep the problems of 2001-2003 but largely because of its recent service entry. Since 2001 thousands of B737NGs have been delivered. In late 2007 a 2001 B737-800 had a value of approximately $39 million. A year later the value had fallen to $35.2 million – a 10 percent fall. As of December 2009, the value was $28 million, representing a 20 percent fall. Values of the B737-800 have therefore fallen by more than 25 percent over the course of two years. The next year is still projected to see another ten percent fall from current levels. Lease rentals of the type have also suffered with $325,000 in late 2008 versus less than $270,000 of today. A 2001 B737-700 attracted perhaps a value of $30 million at the peak of the market in late 2007, falling to $28 million a year later and $22 million of today. This represents more than 25 percent fall over only two years and nearly 20 percent over the last twelve months. Such falls seems to be odds with near record delivery rates. The expansion of the operator and customer base over the last decade, coupled with incentives from the manufacturers, can allow production to be maintained but straight sales of used aircraft for cash has become that much more difficult. Selling used aircraft is therefore that much more difficult than a year ago not least because of the lack of interest from now cash strapped financial institutions and greater conservatism when valuing assets.

The A320 is experiencing significant falls. A 1998 A320 had a value of nearly $29 million in late 2007. A year later the value had fallen by 10 percent and in late 2009, the value was less than $21.5 million. Values of the A320 are expected to fall by more than 10 percent over the next twelve months. A 1994 vintage B757 had a value of $19 million in late 2007 falling to only $17.5 million a year later. Today the value is less than $13.5 million. The B757 may still be in the fleets of the legacy carriers but alternatives are now being sought. Values of the B757 have therefore experienced a nearly 30 percent fall in two years and more than 20 percent in the last year.

The widebody sector has seen equally significant swings in values over the last two years. The older widebodies have proved to be particularly vulnerable to the changing market. The 1991 A310-300 had a value of $11.5 million in 2007, which fell to $9.5 million a year later. Values are now fortunate to exceed $7 million. Values have therefore fallen by some 40 percent in only two years with more than 25 percent fall being recorded in the last twelve months.

The B767-300ER, which exhibited such a remarkable recovery post 2001, has not escaped from the wider downturn, even if the first flight of the B787 has been continually delayed. The value of a high gross weight B767-300ER built in 1996 was $43 million in late 2007. This had fallen by less than ten percent a year later. Today the value is fortunate to be $30 million. The fall in B767-300ER values over the last twelve months has been more than 25 percent. Lease rentals over the last year have fallen by just over 20 percent, largely because of the B787 delays.

The B747-400 has seen considerable changes. A 1997 vintage B747-400 had a value of $75 million when the market was at its peak in late 2007, buoyed by the demand for freighter conversion candidates. A year later, values had fallen by more than ten percent to $65 million. Today, the value is fortunate to be in excess of $43 million. The last year has seen a fall of more than 30 percent in the value of the B747-400. A number have been placed into storage and operators have instead turned to such aircraft as the B777-300ER.
The B777-200ER may seem to be a desirable aircraft as operators seek smaller capacity to more match reduced demand but the lack of orders for the type highlight the maturity of the program. A 2001 B777-200ER attracted a value of just under $100 million in 2007. This had fallen nearly ten percent to nearer $90 million a year later. Today the value of the aircraft is nearer $70 million, representing over a 20 percent decline in a year and 30 percent in two years.

With falls in excess of 20 percent occurring over twelve months, the year has been one of the worst. Fortunately, for those that have experienced downturns before, there will be a recovery. A hasty sale at the depth of the recession after having acquired at the peak is not something that many will contemplate. While the values of those no longer in production are not expected to register any meaningful recovery even when traffic rises, those still in production will likely see some improvement as of 2011.

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.