Jetrader - Summer 2018 - 54

Gueric DeChavanne
ISTAT Certified Senior Appraiser
Vice President
Collateral Verifications, LLC
Tel: 1-203-461-1966
gueric@cvllc.net
www.cvllc.net

Background
The 777 program was officially launched
in 1990 to bring twin-engine efficiency and
reliability at a scale larger than the 767
and the A300. The first 777-200 entered
service in 1995 with United Airlines. The
777 family is available in six models: the
777-200; 777-200ER, a larger 777-300, two
newer longer-range models: the 777-300ER,
and 777-200LR, and the 777F. Only the
777-300ER and the freighter currently have
orders. The 777-300ER, the largest and most
popular variant of the family, first entered
service with Air France in 2004. It is powered by the GE GE90-115B engine, enabling
the aircraft to carry 365 passengers up
to 7,930 nautical miles. As of April 2018,
763 777-300ERs have been delivered with
59 remaining on order. Today, CV is aware
of only 2 777-300ERs listed as available
for sale and/or lease. We are also aware
of 15  aircraft currently stored, which is
considered average for a fleet of over 762
aircraft in service.
In the past 12 months, CV has seen a
modest decline in 777-300ER values of
around five percent, with monthly lease
rates dropping by five-to-ten percent

Manufacturer
Boeing
Boeing
Boeing
Boeing
Boeing
Boeing
Boeing
Boeing
Boeing
Boeing
Boeing
Boeing
Boeing
Boeing
Boeing
Boeing

ACTYPE
777-300ER
777-300ER
777-300ER
777-300ER
777-300ER
777-300ER
777-300ER
777-300ER
777-300ER
777-300ER
777-300ER
777-300ER
777-300ER
777-300ER
777-300ER
777-300ER

YOM
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018

Current
Lease Rate
2018
$525,000
$550,000
$575,000
$600,000
$625,000
$650,000
$700,000
$750,000
$800,000
$850,000
$900,000
$950,000
$1,000,000
$1,050,000
$1,100,000
$1,150,000

depending on vintage, but we are starting to see some incremental softness in
the market as there are almost 40 aircraft
potentially coming off lease in the next
24 months and coming to the secondary
market. It is our understanding, however,
that a few of the lessors who recently had
leases expiring were able to extend them
with existing operators at reasonable rates.
Going forward, the lack of a strong secondary market for the 777-300ER raises some
concerns as to the potential impact on
residual values and lease rates. As experienced with the 777-200ER, the reconfiguration and maintenance costs for this aircraft
type can be quite substantial, which makes
it challenging for new secondary operators to incorporate these aircraft into their
fleets economically. Our understanding is
that cabin reconfiguration costs for this
aircraft can be in the $15-20 million range
with engine overhaul costs being in the
$13 million neighborhood per engine, not
including the replacement of any life-limited parts. For potential second-tier operators, this would be a significant investment
in addition to the acquisition cost of the
aircraft. We believe this has slowed the
development of the secondary market for
the 777-300ER.
Demand for the 777-300ER, as reflected
in the current order book, has been dwindling despite Boeing's efforts to secure
more orders, which raises future residual
value concerns. At the current production
rate of 3.5 aircraft per month, the current
order book will keep the aircraft in production until late 2019 which is just shy

CMV
2018
$52.47
$55.23
$58.07
$64.12
$71.34
$76.08
$80.99
$87.38
$92.62
$99.28
$106.07
$113.81
$123.91
$133.84
$138.68
$155.47

CBV
2018
$61.73
$64.98
$68.32
$78.19
$87.00
$92.79
$98.77
$105.28
$110.26
$116.80
$123.34
$130.81
$139.22
$147.07
$152.39
$170.85

FV
2019
$55.41
$61.64
$64.81
$74.17
$82.53
$88.02
$93.69
$99.87
$104.59
$110.80
$117.00
$124.09
$132.07
$139.51
$144.56
$162.07

FV
2020
$49.73
$55.33
$61.48
$70.36
$78.29
$83.49
$88.88
$94.74
$99.21
$105.10
$110.99
$117.71
$125.28
$132.34
$137.13
$153.74

FV
2021
$44.64
$49.66
$55.18
$66.74
$74.26
$79.20
$84.31
$89.87
$94.12
$99.70
$105.28
$111.66
$118.84
$125.54
$130.08
$145.84

FV
2022
$40.07
$44.58
$49.53
$59.91
$70.45
$75.13
$79.98
$85.25
$89.28
$94.57
$99.87
$105.92
$112.73
$119.09
$123.39
$138.34

Notes: Aircraft values and lease rates assume a high MTOW and high engine thrust configuration.
The future values are inflated at 2% per annum.
Except for New Aircraft, values reflect a half-time condition.
Values Assume a MTOW of 775,000lbs with GE90-115BL Engines.

54 The official publication of the International Society of Transport Aircraft Trading

VYTAUTAS KIELAITIS/SHUTTERSTOCK.COM

appraisal

Boeing 777-300ER

of Boeing's targeted entry into service for
the 777-9. This will most likely add some
additional near-term pressure on values
due to some airline campaigns Boeing is
pursuing. However, the aggressive pricing
offered to airlines may not directly impact
current values, which will reflect what the
market is willing to pay to invest in these
aircraft with leases attached. Another concern is the Airbus A350-1000, which entered
service with Qatar in February. With the
improved economics of the A350, which
Airbus claims to be 25 percent more efficient than the 777-300ER, this may further
slow orders for the 777-300ER. Additionally,
once the 777-8 and -9, start to deliver in
large numbers in the 2020s, 777-300ER
values will be impacted, but it is too early
to tell as to when this will take place and
how significant the impact will be. For the
time being, we believe that the 777-300ER
will continue to be a desirable and viable
option for many current and near-term
operators. Longer term, a freighter conversion program may be possible, combining
the popular Boeing widebody volume with
long range and complementing the factory
built 777F.

FV
2023
$35.97
$40.01
$44.46
$53.77
$63.23
$71.27
$75.87
$80.87
$84.69
$89.71
$94.74
$100.48
$106.94
$112.97
$117.05
$131.23

FV
FV
FV
FV
FV
2024
2025
2026
2027
2028
$32.28 $28.98 $26.01 $23.35 $20.96
$35.91 $32.24 $28.94 $25.97 $23.31
$39.91 $35.82 $32.15 $28.86 $25.90
$48.27 $43.33 $38.89 $34.91 $31.33
$56.76 $50.94 $45.73 $41.05 $36.84
$63.97 $57.42 $51.54 $46.26 $41.53
$71.97 $64.60 $57.98 $52.05 $46.72
$76.71 $72.77 $65.31 $58.63 $52.62
$80.34 $76.21 $72.29 $64.89 $58.24
$85.10 $80.73 $76.58 $72.64 $65.20
$89.87 $85.25 $80.87 $76.71 $72.77
$95.31 $90.41 $85.77 $81.36 $77.18
$101.44 $96.23 $91.28 $86.59 $82.14
$107.16 $101.65 $96.43 $91.47 $86.77
$111.04 $105.33 $99.91 $94.78 $89.91
$124.48 $118.09 $112.02 $106.26 $100.80
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Jetrader - Summer 2018

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