The delivery of the last B747-400 – a -400ERF – in late 2009 signals the end of an era as well as highlighting a considerable deterioration in the value of both the passenger and freighter versions over the course of the last two years.

The fate of the last two -400ERFs, and therefore last B747-400s, is still reportedly undecided. Both aircraft flew in early 2009 only to be officially handed over to customer LoadAir of Kuwait, in November. Both aircraft appear to have flown immediately to desert storage though service entry may still be effected during the course of 2010. The values of the B747-400F and –400ERF, as well as post production conversions, have suffered considerable problems over the course of the last eighteen months as cargo traffic has collapsed. There are a number of -400 freighters in storage including those converted from passenger aircraft. A total of 166 -400Fs (126) and -400ERFs (40) were delivered before production ceased last year. Jet Information Services quotes at least 16 -400Fs as being parked. This compares with none at the end of 2007. Another 30 -200Fs were also lying idle as of the end of September 2009. Operators have been quick to adjust capacity to meet demand, thereby enabling freighter rates to remain comparatively high.

Despite a list price of in excess of $250 million, values are fortunate to exceed $120 million such is the depressed nature of the cargo market. Two years ago the value of a new -400ERF was likely to be in excess of $150 million. A comparatively early vintage B747-400 converted freighter previously commanded a value in excess of $55 million. Today an early 1990s -400 BCF has a value of only some $30 million. A near 50 percent decline highlights the difficulties of the cargo market. Seeking to sell -400 freighters in todays environment is fraught with difficulty and essentially requires distressed pricing even to elicit any interest. Leasing the aircraft is still a more viable option.

IATA has reported that freight traffic is improving once more with a near ten percent rise in November 2009. Cargo traffic is usually the first indicator that the market is coming out of a downturn. During a downturn conversions are usually delayed which can easily lead to a shortage of capacity when the market sees an improvement. However, with the arrival of the B747-8F as well as dozens of -400Fs in storage, any improvement in -400F values will be slow. Fortunately, the excess capacity in the form of the -200F is unlikely to see a return to service which will allow passenger -400s to once again be favored as from the middle of next year. While a recovery will take time, perhaps by 2013 values of freighters will have staged a credible recovery. The oldest -400BCFs and -400Fs will be some 20 years of age by then though there remains an expectation that such aircraft could still see another ten years useful service in much the same way as the -200Fs, even if lower utilization becomes the norm.

The last passenger -400 was delivered in 2005 after 442 deliveries were made. The -400 remains the archetypal intercontinental widebody, even with the arrival of the A380, as it served to transform international services by avoiding the need for the technical stops that plagued the -200. Values of the -400 have also failed to impress over the course of the last two years. There are more than 20 parked with further units likely to be added in the coming months as airline continue to experience difficulties. The fleet of -400s operated by Japan Airlines is large and will likely be cut as restructuring begins in earnest. The values of the passenger -400s have suffered just as much as their freighter counterparts in this recession. During 2002-2003 values of early -400s fell well below $30 million which prompted a number of acquisitions by new expanding leasing companies such as Aircastle, precipitated by the hasty decision of some German institutions to divest themselves of seemingly weak assets. By 2007 values had increased to more than $40 million, despite the ending of production, as international traffic expanded and more feedstock was sought. Today, values of the same early -400s are now experiencing values of less than $20 million. A 1996 B747-400 is being offered at a price of $32 million while a 1992 example is optimistically priced at $33 million. A 1999 -400 in VIP configuration is being offered for $130 million with a comment that some $120 million has been spent on the interior. The recovery in -400 values may be more swift that might be imagined due to the delays being experienced with the A380 and the potential for improved international travel. While the B777-300ER is seen as a natural successor, it remains a costly aircraft. Operators may therefore seek to acquire interim capacity and the B747-400 provides the necessary volume. Demand from the freight sector will increase again even if alternatives, in the form of the B777-200BCF for example, become available. The dismissal of the B747-400 seems premature as most aircraft that are no longer production have at least one opportunity for a temporary recovery.

Values of those aircraft built in the final years of a program traditionally experience the most severe falls and the -400 is no exception. The -400Fs that were perhaps attracting $150 million during the cargo boom of 2007-2008 have experienced considerable discounting. With the arrival of the -8F, even a recovery is unlikely to see any improvement in values for the youngest examples with the values of the oldest converging on the youngest. The delivery of the last B747-400 has passed by without fanfare and values are likely to experience the same lack of interest, at least for the present.

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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