March Aircraft Report: The Boeing 767-300ER

London
Source: Flightglobal.com
This story is sourced from Flightglobal.com

The Boeing 767 aircraft was developed at the same time as the 757 model and was first offered for sale in July 1978 with a 30-aircraft order from United Airlines. The flight decks of the Boeing 757 and 767 are very similar and after a conversion course, pilots rated in the 757 become qualified to fly the 767 and vice versa.

The Boeing 767 was designed using the Boeing 747 engines =with enough range to fly across the Atlantic and across North America.

Although Boeing has had success with the passenger version, the main sale activity has been on the freighter side. Over the past five years, the manufacturer has amassed 62 aircraft orders for the freighter version.

In early 2007, UPS and DHL prolonged the 767's production with freighter orders but more recently 'future 787 operators' have committed to the passenger model as a result of the 787 delays. Last year Boeing recorded an order for 27 767-300ERFs from FedEx.

Market

According to Flightglobal's Ascend Online database, there are 596 767-300ER passenger and freighter aircraft in service with another 27 in storage. Backlog consists of 66 aircraft with 18 to be delivered throughout the end of this year.

Azerbaijan Airlines and Mongolian Airlines have one CF6-powered passenger aircraft each on backlog, LAN Airlines has 13 aircraft scheduled for delivery through 2015. Another two Pratt & Whitney-powered aircraft are due for delivery to Uzbekistan Airways in 2013.

Ascend says the GE-powered 767-300ER fleet totals 14 aircraft in storage and 318 units in service. The Pratt & Whitney-powered fleet totals 11 aircraft in storage and 169 units in service. The Rolls-Royce fleet accounts for 31 aircraft.

 

Historically the 767-300ER fleet has been concentrated in the US with few operators. Over the years more aircraft have found new applications in other regions, however.

Of the 520 767-300ER passenger aircraft in service, 204 (or 40%) are still in the North America region. American Airlines is now the largest 767-300ER operator with 58 aircraft closely followed by Delta Air Lines with 57 units. Delta is adding aircraft from GOL Linhas Aereas. United Airlines operates 35 aircraft, while Japan Airlines has 32 aircraft.

There are 124 767-300ERs are in the Asia Pacific region. Japan Airlines is the lead operator with 32 aircraft.

Europe represents 121 aircraft or 23% of the fleet in service, down 3% from two years ago. British Airways is the lead operator with 21 aircraft.

Africa and the Middle East represent 32 aircraft or 6% of the total fleet in service with seven operators.

A total of 39 aircraft are in service in Latin America with LAN Airlines operating 31 units.

Availability is the 767-300ER passenger model accounts for 24 aircraft, or 89% of the whole 767-300ER/300ERF variants. About 20 stored aircraft were built between 1988 and 1994 with an equal share between the GE-powered and Pratt & Whitney-powered aircraft.

Recently Atlas Air purchased a GECAS-owned aircraft, previously on lease to Air Canada. Delta Air Lines and SBA Airlines are adding two aircraft each, Aerosur and Condor one aircraft each.

Freighter conversion

Boeing launched its 767-300ER Boeing Converted Freighter (BCF) programme and uses Singapore Technologies. Israel Aerospace Industries' Bedek division, which is partnered with Japan's Mitsui, received certification of its Bedek Special Freighter (BDSF) at the end of 2009.

The cargo market is struggling and there are limited takers for the -BCF and -BDSF conversions.

About 15 conversions have been completed, according to Ascend. Cargo Aircraft Management has another five ex-Qantas passenger aircraft in the pipeline.

A 767-300ER freighter conversion cost is estimated between $13 million and $15 million and buyers are targeting assets in the $10 million to $15 million range depending on the age of the aircraft.

Investors are looking at $375,000 per month range lease rates, according to a leasing source.

"Low conversion activity is not helping the pricing," he says. According to him, Early GE-powered aircraft are expected to sell in the "low" $10 million range. Later models (i.e. post 1998-vintage aircraft) are in the "high" $10 million.

Pricing has also been impacted by the rising in the part-out activity over the past few years.

The tear-down candidates are essentially 1988 to 1990-vintage models and bids are expected in the $8 million to $10 million range. "Those vintage are lower weight aircraft and age is an issue," comments a trading source.

The 767-300ER market continues to be a leasing market with the continued delays and slow deliveries of the Boeing 787 programme. Over the years many 767 operators have looked again to the Boeing 767 to fill the growth in the passenger demand from the market.

Lease rates are in the region of $180,000 to $225,000 per month for early models depending upon credit and the length of the lease.

A leasing source says $180,000 a month would probably be the case of a longer lease term placement. "I don't think $225,000 per month can be done for more than 2-3 years."

The 767-300R market is an interesting space right now, argues another leasing source.

"Not many takers but some aircraft are heading to Russia." According to him, lease rates are between $180,000 and $280,000 a month.

"I think that there's a significant distinction between high gross weight and later model aircraft versus early 1990s and lower specs aircraft," he comments.

A 1991/92 version expects to sell for between $10 million and $11 million, according to another source. "No financing is available so only parties with cash can buy - and for freighter conversion," he comments. He argues that the disparity between General Electric and Pratt & Whitney engine models has gone now that there are more aircraft available.

Flightglobal Finance is aware of 1992 to 1994-vintage aircraft on offer at up to $17 million per aircraft while bids are likely to be made in the $11 million to $14 million range.

Values and lease rates

Oldest aircraft lease between $180,000 and $225,000 per month for Avitas. Collateral Verifications is at the lower end with $180,000 a month while MBA says a 22-year old vintage can lease for $237,000 a month. IBA Group says monthly lease rate is around $230,000 a month while Ascend indicates $225,000 a month.

Avitas says a 1995-vintage built aircraft leases between $225,000 and $280,000 a month. Collateral Verifications is at the lower end with $225,000 while IBA Group and MBA are at the upper end with $280,000 a month. Ascend's monthly lease rate estimation is $255,000.

IBA Group is the highest appraiser on a 2000-vintage built aircraft with a $360,000 monthly lease rate. MBA and Ascend expect the lease at $330,000 and $305,000 a month, respectively. Avitas' range is $280,000 to $335,000 a month. A 12 year old aircraft would lease for $275,000 a month for Collateral Verifications.

Monthly lease rates are for a 2005-vintage aircraft are $389,000 a month for MBA, $350,000 for Ascend and $325,000 for Collateral Verifications. IBA Group's estimate is $440,000 a month while Avitas says the aircraft leases between $370,000 and $435,000 a month.

MBA says 2010 and 2012 deliveries monthly lease rentals are $459,000 and $501,000. Collateral Verifications says the aircraft lease for $375,000 and $400,000 a month, respectively. IBA Group says 2010 and 2012 vintage aircraft lease rentals are $470,000 and $480,000 a month. Ascned indicates $450,000 and $540,000 a month. Avitas' range for a two-year old aircraft is between $515,000 and $600,000 a month, while a new delivery would lease between $600,000 and $690,000 per month.

Collateral Verifications' estimates a 1990-vintage delivery at $10.4 million current market value. Avitas and Ascend value the aircraft at $10.8 million, IBA Group at $11.3 million while MBA says its market value is $13.7 million.

A 1995-vintage built aircraft has a current market value of $20.5 million for MBA, $15.8 million for IBA Group. Ascend expects a half life market value of $17.2 million. Avitas and Collateral Verifications value the aircraft at $17.4 million and $17 million, respectively.

IBA Group is the lowest appraiser on a 2000-vintage aircraft with a $23.7 million current market value. Avitas and Ascend valuations are $25.9 million and $26.2 million, respectively. Collateral Verifications' estimates a 12-year old aircraft at $27 million, while MBA says its market value is $29.4 million.

MBA is the highest appraiser on a seven-year old aircraft with a $42 million current market value. Avitas value the aircraft at $37.8 million, Ascend at $37.7 million. IBA values the aircraft at $34.7 million, Collateral Verifications at $34.6 million.

MBA's Tom Burke comments: "This aircraft has really been doing well in the values area for the past few years, most liked buoyed by the delays in production of the 787. With large fleet size and large number of operators MBA is of the opinion that values will hold very well for the next few years and there should be a good demand for older aircraft as the current fleet is replaced by the 787."

Appraisers have different opinions on a two-year old aircraft. Collateral Verifications is the lowest of the appraisers with a $48.1 million current market value. Avitas estimates the 2010-vintage built aircraft at $58.4 million, while MBA says its market value is $63.5 million. Ascend and IBA Group quotes are $52.1 million and $51 million, respectively

On a 2012 delivery, Avitas is the highest with a $76.7 million current market value. MBA values the aircraft at $73.8 million. IBA Group and Ascend valuations are $61.5 million and $61.1 million, respectively, while Collateral Verifications is the lowest at $55.3 million.

Collateral Verification's vice president Commercial Aviation Services Gueric Dechavanne says: "In the last 12 months, values had remained stable for the type which showed the desirability of the aircraft in the current environment. However lease rentals, which had stabilized and even strengthened a bit, have now softened due to some immediately available aircraft looking to find homes at lower than expected lease rentals. With the potential industry recovery under way, we feel that this trend is only temporary and that the recovery will bring further stability to the type with a potential rebound in values and lease rates over the next 12 months."