March Aircraft Report: the Boeing 777-300ER

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

The first Boeing 777 entered commercial service in June 1995. Boeing launched its next-generation 777 twinjet, initially called 777-200X/300X in February 2000 to complete the 777 family and compete with Airbus' A340-500/600HGW models.

Development of the long-range models was slowed by the airline industry downturn and the first model to emerge, the 777-300ER, was launched with an order for 10 firm aircraft from Air France.

The 777 family, which sits 301 to 368 passengers, comprises six models: the standard 777-200, 777-200ER, a larger 777-300, two new longer-range models, the 777-300ER and 777-200LR and the Boeing 777 Freighter.

The 777-300ER is the B-market version of the -300. It features 6.5-foot raked and extended wingtips to reduce takeoff field length, increase climb performance and reduce fuel burn. Because of its longer length, the 777-300ER uses a new semi-levered gear, which allows it to take off from fields with limited runway length.

The standard General Electric's GE90-115B turbofans feature a maximum thrust of 115,300 lbf (513 kN). The maximum range with 365 passengers is 7,930 nautical miles (14,690 km), and it is made possible due to a higher maximum take-off weight along with the increased fuel capacity.

Following flight testing, the implementation of engine, wing, and weight modifications produced an added 1.4% reduction in fuel consumption. Boeing says the -300ER can fly approximately 34% farther than the -300 with a full load of passengers and cargo.

Market

When it launched the 777X, Boeing forecasted about 2,000 sales for the 777 family, of which a quarter could be new series. At the time, Boeing had racked 462 sales but GE Aircraft Engines president and CEO Jim McNerney estimated 450-500 sales for the 777X models, based on very conservative estimates.

The -300ER, which combined the -300's added capacity with the -200ER's range, rapidly became a popular model, gaining orders as airlines replaced four-engine models with twinjets.

As at September 2010, the -300ER sales surpassed those of the -200ER variant and became best-selling 777 model.

Boeing says the 777-300ER launch has been a primary driver of the twinjet's sales past the rival A340 but a fair number of airlines have also acquired the -300ER model as a 747-400 replacement. According to Boeing, the 777-300ER is 19% lighter than its closest competitor, greatly reducing its fuel requirement and costs 20% less to operate per seat. Boeing also says the -300ER has a reduced 20% fuel burn advantage over the 747-400.

As of 28 February 2011, there were 263 aircraft in operation with 25 customers, according to Flighglobal's ACAS database. An estimated 125 aircraft were under operating leases, another seven on wetlease while 131 777-300ERs were owned by operators. Average fleet age was 2.97 years. Backlog was estimated at 190 orders.

Emirates Airline is the largest operator with 53 aircraft, while launch customer Air France operates a 31-aircraft fleet. Singapore Airlines is the third largest airline operator with 19 aircraft.

Europe represents 48 aircraft in service with four operators Air France, British Airways, KLM and Turkish Airlines. At 28 February, backlog with these four carriers is estimated at 20 aircraft, or 10.5% of total backlog.

Africa and the Middle East account for 80 aircraft with Austral, Egyptair, Emirates, Etihad and Qatar Airways. Backlog is estimated at 78 aircraft, or 41% of total backlog. Among new operators emerging from Africa and the Middle East are Arik Air, Saudi Arabian Airlines and TAAG Angolan Airlines.

Asia-Pacific represents 119 aircraft in service with four operators Air India, Air New Zealand, All Nippon Airways, Cathay Pacific Airways, Eva Air, Japan Airlines, Jet Airways, Korean Airlines, Philippine Airlines, Pakistan International Airlines, Singapore Airlines, Thai Airways International and V Australia. Backlog is estimated at 78 aircraft, or 41% of total backlog. Among new operators emerging from Asia-Pacific are Air China, Biman Bangladesh Airlines and Garuda Indonesia Airways.

Air Canada and TAM are the only North and South American operators, but American Airlines placed an order for two aircraft earlier this year. Backlog is estimated at eight aircraft.

According to ACAS, a total of six orders were undisclosed as at 28 February.

The GE-90-115B version powers 26 aircraft. Typical maximum take off weight is 759,492 lbs for the earlier version to 775,000 lbs.

The GE-90-115BL2 version equips the other 237 aircraft. Typical maximum take off weight is 759,492 lbs for the earlier version to 775,000 lbs. One carrier's fleet, TAM Linhas Aéreas has a 763,998 lbs maximum take off weight.

Emirates ordered 30 additional 777-300ERs last year provide a "safety net" against possible A350 delays but said that if the A350s end up arriving on time the carrier will have enough markets to take in both types. The original thinking behind the carrier's 120 A350 aircraft order at the 2007 Dubai air show was to replace 777-200s, 777-300s A330-200s and A340-300s. At the time, Emirates Airline president Tim Clark said 58 of the 70 firm A350 orders were replacements but added that the A350-900 does not address the retirement of the carrier's 777-300ERs post-2016. "We continue to press Boeing for a replacement for those aircraft, despite the A350 order," he commented at the time.

Boeing announced a total of 76 777 orders last year but reported 46 net orders. It delivered 74 777s in total. The 777 production rate will rise from five to seven per month in mid-2011 and grow to 8.3 per month in the first quarter of 2013.

So far this year, Boeing has signed firm orders for two aircraft with TAM Linhas Aereas and six aircraft with Aeroflot Russian Airlines, while Cathay Pacific and GECAS placed order for 10 aircraft each, earlier this month. The major announcement was American Airlines ordering two aircraft of the type and becoming the first carrier in the United States to order the 777-300ER model.

With an additional 10 777-300ERs, GECAS has now ordered 41 aircraft of the type.

The operating leasing and fund communities currently own 76 aircraft, or 29% of the active fleet. Emirates Airline has 34 aircraft out of 53 under leasing operating contracts. Air France has now 12 aircraft on operating leases, after Air Lease Corporation acquired a 2008-vintage aircraft on an eight-year leaseback in March.

CMVs and LRs

The only movements in the 777-300ER market have been around the Indian carriers fleets.

In 2009, Jet Airways wet-leased four 2007-built aircraft to Turkish Airlines for six months. Once the wet-lease period ended, the aircraft were placed under a dry lease contract through the end of 2011. Another three aircraft were subleased to Thai Airways International last year.

Gulf Air briefly introduced the 777-300ER model to its fleet in 2009 as it began to roll over its ageing A340-300s. The Bahrain-based carrier signed a six-month wet-lease contract with Jet Airways covering four aircraft and was looking at converting the transaction into a dry lease. However it reversed plans to retain its aircraft through a dry lease, after opting not to pursue such an arrangement once the wet-lease expired.

Last December Air India shelved plans to lease out part of its Boeing 777 fleet because it was not getting offers which were actually offsetting the financing cost of the aircraft, according to the carrier. Air India approached the market in May 2010 with a tender to sublease six 777-300ER/200LRs as part of a cost reduction plan. Air India was negotiating deals with Air Canada, Austral, Garuda Indonesia and Thai Airways International who had expressed an interest.

Activity on the purchase and leaseback side, has been buoyant as operating lessors recognize the merits of the 777-300ER.

Last August Air France agreed a sale and leaseback with Air Lease Corporation for a total of six aircraft, including a 777-300ER on eight-year operating leases. The lessor has acquired another aircraft, a 2008-vintage model from the French carrier.

During the first quarter of this year, Air France also sold and purchased back one aircraft to Avolon and another with Jackson Square Aviation on six years terms.

BOC Aviation signed a purchase and leaseback transaction with Cathay Pacific Airways for six aircraft of the type. The aircraft were initially scheduled to be delivered from the fourth quarter of 2009 until the second quarter of 2011.

The lessor also placed direct orders for a total of eight aircraft for forward lease to Thai International Airways. Three aircraft are scheduled for delivery in 2012 while the remaining five are planned for 2013.

Earlier this month BBAM acquired a new 777-300ER from Air New Zealand through a purchase and leaseback transaction.

MBA says current market values (CMV) equate the base values (BV). According to the appraiser, a 2004-vintage has a $105 million CMV. Collateral Verifications says the aircraft is valued at $85.8 million. IBA says the CMV is $96 million while its BV is $99.9 million.

A 2006-built aircraft has a $116.6 million CMV for MBA. IBA's CMV is $107 million while Collateral Verifications is the lowest of the three appraisers with a $10.3.3 million CMV.

A 2008-vintage is valued at $129.6 million for MBA while Collateral Verifications' CMV is $122.6 million and IBA is the lowest at $121 million.

Collateral Verifications estimates the monthly lease rates for 2010-vintage at $1.25 million, or 0.9% of the current value of the aircraft. IBA says monthly lease rates range from $1.1 million to $1.20 million.

A three-year old aircraft would lease for $1.15 million a month for Collateral Verifications, while IBA lease rates are in the $1.05-1.12 million a month bracket. A seven years old aircraft would have monthly lease rates in the $950,000 region for Collateral Verifications while IBA's range is between $900,000 and $950,000 a month.

Collateral Verifications' Gueric Dechavanne says that values have remained fairly stable in the last 12 months. According to him, values have dropped less than 5% but lease rentals have stayed at the same levels. "With the industry recovery under way, we feel that this will continue to bring further stability to the type with a potential rebound in value over the next six to 12 months if not earlier."

IBA sees the strong value profile of the 777-300ER continuing with some rises likely as the long-haul market recovers. "The 777-300ER has a predominantly strong operator profile and remains one of the preferred asset types from an investor's point of view," comments IBA senior analyst Alice Gondry.