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Monday, September 17, 2007

Values of Regional Jets On Even Keel

The market for used 50-seat regional jets has far from disappeared and has been sufficient to absorb most of the remaining excess emanating from disposals from carriers such as Independence.

The older CRJ100s as well as the smaller regional jets such as the ERJ135 and 328JET (except in a corporate role) are perhaps harder to place. The absence of new production units is to the benefit of used examples.

The emphasis of new orders is clearly on the larger aircraft. The economics offered by the larger types as well as passenger comfort has continued to attract new custom. The values of the 70- to 100-seat regional jets have continued to remain stable even though this remains a largely theoretical exercise owing to their relative recent service entry.

With respect to residual values, the rise of the alternative programs from China, Russia and Japan are finally gaining a measure of credibility. Such alternative sources of supply have long been muted but have rarely come to fruition. Now, with renewed emphasis on working with Western partners and able to draw upon outside investment, there is renewed emphasis on building aircraft capable of offering advanced economics as well as meeting the airworthiness requirements of the FAA and EASA. While short-term progress will be slow, within 10-15 years the dominance of the Western manufacturers will have been partially eroded, presenting residual value calculations with a new fresh challenge.

Values are in Millions of US Dollars and are based on The Aircraft Value Reference published by The Aircraft Value Analysis Company http://www.aircraftvalues.net.

An Aircraft Rating has been included for the first time for regional jets reflecting the suitability of the type for asset-based financing over the medium term with a range of A++ (best) through to E--(worst).

 

 Regional Jet Current Values US$m - September 2007

Aircraft

Age

Value

Rtg

Trend Analysis
BAe146-100
1983 1988
1.2 2.3
D--
 Values of used aircraft no longer in production tend to be impacted when approximately 10 percent of the fleet is on the market. Some 20 percent of the fleet of 18 -100s have been on the market for some time, rising to 30 percent on occasion. Values have continued to decline. However, the type is still viewed as marketable which is something of a surprise in view of the majority being more than 20 years of age. The type has found utility in the non commercial role and there may yet be other corporate shuttle opportunities. At current values the -100 still represents a bargain particularly as operating costs can be largely contained through fixed cost arrangements - except of course for fuel.
BAe146-200
1985 1993
1.5 4.2
D-
 There are some 75 -200s operating in a commercial role with only a few having been converted to a non commercial configuration. The type has inevitably lost much of its attraction as the Avro RJ and other even more modern types have entered the market. The level of availability has seen a notable decline such that less than ten percent are now on the market. The conversion of the type to a freighter is restarting again which will further contain availability. Values for the moment have not changed although this could change should some of the key operators seek replacements.
BAe146-300
1988 1993
3.1 4.5
D-
 There are only 46 -300s in service and, unfortunately, the level of availability has remained stubbornly high at over 20 percent of the fleet for a considerable length of time. At one time the -300 seemingly enjoyed a considerable premium over the -200 but the differential is much more modest. The type still has some merit not least because it offers a cost effective alternative to other types. The alternative modern regional jets cost more than six times as much though a lesser multiplier when considering lease rentals. The ability to see lease extensions and new operators is as much a result of the efforts of the BAE Systems asset management team as it is to intrinsic attraction of the type.
Avro RJ70
1993 1996
4.3 6.0
D
 With only a handful in operation in any case, any level of availability can be a concern. Up until recently nearly half the fleet was being offered for sale or lease but this has since declined to a single unit. Unfortunately, this has not prevented values from exhibiting a slight fall, a trend that may continue.
Avro RJ85
1993 1998
5.4 8.0
D++
 The Avro RJ85 should have a tough time competing against the new generation of regional jets. Indeed, the type is facing direct competition. However, acting as a replacement for the BAe146-200 and offering lower capital costs has provided a measure of respite for the type. Availability of some 15-20 percent is a distraction and has been partially responsible for allowing values to fall by a modest amount. Whereas the BAe146-200 is currently viewed as suited to freighter conversion, the RJ85 in the future will also likely fulfill this role helping to prevent more rapid depreciation.
Avro RJ100
1993 1998
6.0 8.7
D++
 There are now only four RJ100s being advertised for sale or lease which is less than 10 percent of the fleet of 62 which remain in commercial service. The launch of the CRJ1000 will present the RJ100 with fresh challenges. Values have declined and this is expected to remain a feature of the type.
CRJ100ER
1993 1998
5.6 8.6
D-
 It would be tempting to allow values of the CRJ100 a measure of improvement such has been the continued demand for 50 seaters. However, the CRJ100, at some 14 years of age, is showing its heritage though not to the same extent as the BAe146. The market for the CRJ100ER can perhaps be described as difficult and sporadic and will present difficulties for those seeking to remarket.
CRJ200ER (U.S.)
1996 1999 2001 2003 2005
8.1 10.5 12.2 13.7 15.3
C--
 The values of the youngest examples have perhaps exhibited a slight decline while those for the oldest have enjoyed a slight improvement. There has been considerable and perhaps surprising success in finding homes for those on the market but the demand is all too evident. Nonetheless, the type is all but concentrated in a single market and there should be recognition of the vulnerability of the type to events in this market.
CRJ700 (U.S.)
2000 2003 2005
14.7 18.8 21.3
B--
 There has been little change to values over the course of the last quarter after seeing a slight fall in the previous period. The type is already an established player in the market which may result in an increase in the level of availability as operators seek alternative types. With over 250 in service availability of a few units is not an issue.
CRJ900 (U.S.)
2002 2005
19.5 24.8
B-
 The larger regional jets are continuing to enjoy considerable stability such is the demand for more versatility and lower seat-mile costs. Despite the competitive imperatives that now surround operators in the U.S., there continues to be restrictions on the size and number of larger regional jets than can be flown. As such agreements are renegotiated in the coming years, the demand for such aircraft as the CRJ900 can be expected to increase.
ERJ135ER (U.S.)
1999 2001
6.8 8.0
D+
 The high price of fuel is doing the smaller regional jets no favors. Making money with the ERJ135 is not that easy even with higher load factors. There are, however, very few on the market even though there are some 100 in service. Values are considered to have declined but only a marginal amount. The corporate version is faring much better.
ERJ145ER (U.S.)
1996 2001 2003 2005
7.3 11.1 12.5 14.3
C--
 The level of ERJ145 availability is virtually non existent. However, in common with the CRJ200ER values of the younger ERJ145s have experienced a slight fall while those of the oldest have increased. The type continues to be assembled in China but production in Brazil has all but ceased. The Aircraft Rating has not changed as yet and is unlikely to do so over the next quarter.
Embraer 170Std
2003 2005
19.3 21.9
B--
 Values of the Embraer 170 are all but holding steady. The type has an element of concentration given that a third of the fleet is operated by Shuttle America. Despite the introduction of larger models, the Embraer 170 is expected to continue to remain favored as it represents a logical progression from the 50 seaters.
Embraer 190
2005
26.3
B-
 The Aircraft Rating of B- is slightly lower than the B++ attributed to the 195AR but nonetheless represents credible score in what is still a fluid segment of the market. the Embraer 195 is considered to be more attractive but both offer mainline standards of comfort.
328JET
1999 2001
3.5 3.9
E-
 The values of the 328JET have not fared well but such has been the magnitude of the falls in previous years that values are now holding steady. A number have been converted for corporate use and as such values of more than $7 million are possible.
Fokker 70
1995
3.2
E+
 There is little expectation of a material improvement in values of the Fokker 70. At current levels the Fokker 70 represents a viable product, at least when compared to the cost of the more modern competition.
Fokker 100
1987 1993
2.5 3.6
E+
 The values of the Fokker 100 have experienced a recovery but at current levels these are perhaps the most that can be hoped for. The type has the operating capabilities to meet the needs of a number of operators and even availability has fallen to more manageable levels.
Commentary reflects changes from last update of May 2007 

 

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