Jetrader - Autumn 2018 - 59

Mark Halsor
ISTAT Certified Appraiser
President
Aircraft Information Services Inc. (AISI) and
Aviation Asset Management Inc. (AAMI)
1-603-379-2084
mhalsor@aisi.aero
www.aisi.aero
www.aami.cc

KARLIS DAMBRANS/SHUTTERSTOCK.COM

appraisal

Airbus A220-300

Background
To become a strong seller in the 140-
160-seat passenger aircraft market segment, it appears all that was needed of
the A220-300, formerly the Bombardier
CS300, was to come under the umbrella of
one of the industry's largest players. Airbus
recently acquired a controlling interest in the
clean-sheet technology CSeries program (with
the option to acquire the entire program starting in 2026), which immediately addresses
the lack of A319neo sales while potentially
easing international trade tensions, as the
aircraft will be built in Mobile, Alabama, in
addition to Montréal, Canada.
The Airbus acquisition of the CSeries
family (CS300 and CS100) prompted a strategic response from Boeing, which was
obviously not keen on ceding this market
segment. The Embraer E-Jets family and,
more importantly, the Embraer E-Jets E-2
family, will now also join one of the industry's largest players, should the Boeing
transaction to acquire an 80 percent stake
in Embraer's commercial aircraft business
close. We expect the E-Jets E-2 family to
fiercely compete with the A220-300 and
its smaller sister aircraft, the 116-135-seat
A220-100 (formerly CS100).
What may be more surprising than these
industry alliances is the intent of new customers of the A220-300 to potentially use
the aircraft's impressive 3,200nm range in the
trans-Atlantic market. The Pratt & Whitney
PW1500G geared turbofan engine powering the aircraft was recently cleared by U.S.
regulators for ETOPS of up to 180 minutes.
This is quite remarkable for the 100-150-seat

market, and it appears that the A220-300
will be used on new, long-range narrowbody
routes like those recently opened by the
737 MAX 8 and the A320neo.
The A220-300's impressive performance
capabilities stem largely from the aircraft's
advanced aerodynamics, combined with the
PW1500G geared turbofan engines, which
deliver 20 percent lower fuel burn per seat
than previous generation aircraft in this size
category. Due to the A220 family's superior
takeoff thrust and low-noise characteristics,
the A220-100 has been cleared to operate
into the small and environmentally sensitive
London City Airport. But most importantly,
the PW1100G performance and availability
problems experienced by the A320neo and
A321neo programs have not affected the
PW1500G-powered A220 in-service fleet.
We predict that the A220-300 will eventually replace the heavier and less-efficient
A319neo, especially if Airbus decides to
stretch the A220-300 into the A220-500
version that Bombardier had hinted was
in its long-term fleet plan. Indications
of this up-gauging sales strategy are evident in the latest 60-aircraft A220-300
letter of intent from JetBlue Airways Inc.
(with options for an additional 60), which
included a conversion of 25 A320neos into
A321neos. In theory, this could open up
a slot in the post-2025 JetBlue fleet for
an A220-500 sized aircraft, which would
almost certainly trigger an equivalent
E-2 response.

With Airbus's near tripling of the
on-order book for the A220-300 over a
very short period of time, valuing the
aircraft should become less opaque from
an appraiser's perspective. The A220-300
and its main competitors and their respective market positions are shown in the
chart below:
Aircraft

In Service

On Order

A319-100

1,444

19

A319neo

-

56

B737-700

1,041

2

B737-MAX 7

-

55

A220-100

8

115

A220-300

31

248

E190

551

36

E190-E2

6

47

E195

166

6

E195-E2

-

80

Source: Air Finance, Airbus, Embraer

It is our opinion that the most-recent
A220-300 orders were aggressively priced
by Airbus in its effort to immediately
impact the 130-160-seat market. Large
future-delivery orders can make the valuing
of a single, non-lease encumbered aircraft
difficult to determine. But with competing
sales of the E195 E-2 and lease rates in the
$200K-$250K per month range adding to
the value picture, our opinion of A220-300
values are as follows:

A220-300 Values as of 01 July 2018, Million USD
Full Life Future Base Values at 2% Inflation
YOB

BV

CMV

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2018

$36.2

$35.8

$32.2

$30.6

$29.0

$27.5

$26.1

$24.9

$23.7

$22.5

$21.5

$20.5

$19.6

$18.8

Aircraft Specification: PW1524G, 148,800 lbs. MTOW
Maintenance Assumption: Aircraft base and current market values are "new" in 2018

Jetrader * Autumn 2018 59
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Jetrader - Autumn 2018

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