November's Aircraft Report: The Airbus A340-300

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

Airbus announced the end of the Airbus A340 production earlier this month, after acknowledging zero prospect of more sales.

When it launched the A340 back in the late 1980s, Airbus made one fatal error. Having beaten Boeing to market with its A340 and its medium-range twinjet sister, the A330, it took the view that Boeing - burdened by the difficult birth of the 747-400 and a likely need to respond to the A320 with an all-new single-aisle - did not have the resources to commit to an all-new widebody. Perhaps Boeing even helped Airbus apply this logic by codenaming its studies "767-X".

The A340's launch was more a stutter. After initially being powered by the spectacular IAE V2500 "Superfan", Airbus was forced to bring in CFM International when IAE was scared off by the technical risks.

However, real problems started when Boeing launched the all-new 777 in 1990 and its salesmen systematically went through Airbus's hard-fought A340 customer base. So by the time the 777 made its debut in 1995, Airbus was already looking for ways to develop the A340 into a new niche through a stretch and new engines. Airbus spent $2 billion developing the A340-500/600 series, which was briefly the world's longest airliner and, significantly, a serious rival to the 747-400. Boeing was bound to be reluctant to want to compete with its "queen of the skies" and, in any case, faced a huge technical hurdle convincing an engine maker to create a suitable engine.

As A340 production peaked in 2003, just after the new model's introduction with 33 deliveries, this looked like a smart move. But once again history shows that Airbus called it wrong, for with General Electric's help, Boeing created the 777-300ER which alone has now sold 545 units, compared with only 379 for the entire A340 production run.

Description

The A340 seats between 261 and 380 passengers and was designed in parallel with the A330: both aircraft share the same wing, same systems, same flightdeck including sidestick controllers and EFIS and a similar fuselage structure.

The A340-300 model flies 295 passengers in a typical three-class cabin layout over 6,700 nautical miles. This initial version entered service with Air France and Lufthansa in March 1993. It is powered by four CFM56-5C engines, similar to the -200 variant.

The A340-313 Enhanced variant is a heavyweight version of the A340, and was first delivered to Singapore Airlines in April 1996, though Singapore Airlines no longer operates this model.

The A340-313 X version is the latest version of the type and was first delivered to South African Airways in August 2003. It has a maximum takeoff weight of 276.5 tonnes with typical range with 295 passengers of between 7,200 and 7,400 nautical miles. It is powered by the more powerful 34,000 lbs thrust. The previous version offered thrust between 31,200 lbs and 32,500 lbs.

Market

The A340-300 created a niche in the 300-seat long-range market and recorded 218 sales. But it suffered strong competition from the twin-engine 777-200ER, which has 413 aircraft in service and remains in production. According to Flightglobal's Ascend Online database, the 777-200ER has a backlog of 13 aircraft along with four options and letter of intent on another 31.

"Conceived at a time when overwater operations by long-range twins were much more restricted, Airbus believed that the four-engined A340 family would enjoy much more success in the market than it eventually did," commented Avitas' director asset valuation Martin O'Hanrahan.

Ascend records 209 A340-300s in service, of which 12 are in storage. The final airline delivery was to Finnair in July 2008.

Two A340-300s have been written off. In July 2001, the Liberation Tigers of Tamil Eelam launched a suicide attack at Colombo-Bandaranaike airport destroying an aircraft belonging to SriLankan Airlines. In August 2005, an Air France's A340-300 aircraft service between Paris and Toronto, failed to stop on the runway and plunged into a nearby shallow ravine.

Seven aircraft have been retired from service by AerCap, Apollo Aviation Group, Magellan Group while GECAS Asset Management purchased one aircraft earlier this year for parting out.

The largest operator of this type is Lufthansa with 26 aircraft but the German carrier has reduced its fleet with the sale of some aircraft to the German Air Force. Subsidiary Swiss also operates 15 aircraft of the type.

 

Source: Flightglobal's Ascend Online database

Europe represents about 57% of the A340-300 market share with Europe mainline carriers such as Lufthansa, Air France, Cathay, Iberia and Swiss, accounting for more than 40% of the fleet. The European fleet accounts for 126 aircraft two years ago. Today there are 115 aircraft with 12 operators.

Asian Pacific carriers operate a 49-aircraft fleet but Cathay Pacific also is releasing aircraft while China Eastern is disposing of five A340-300s as part of the 15 A330-300 deal signed with Airbus last month.

 

Source: Flightglobal's Ascend Online database

Africa and Middle East's seven operators have a 34-aircraft combined fleet, or 16% of the market share.

The presence of the A340 in the Americas is limited to LAN Airlines, Surinam Airways while Aerolineas Argentinas is in the process of withdrawing its last three Boeing 747-400s in exchange for five A340s. Aerolineas' widebody fleet will grow to 14 in 2012 with the majority of A340s being sourced from Cathay Pacific.

The second-hand market for the type has proved dynamic over the years. The Singapore Airlines's fleet ended up with customers like Cathay Pacific, Emirates Airline, Etihad Airlines and Gulf Air.

The Air Canada's fleet found new homes with AirAsia X, Aerolineas Argentinas, Gestair Airlines, LAN Airlines and Swiss International Airlines.

Iberia, which is the largest A340-600 operator, has transferred aircraft to wet-lease, charter operator Gestair Airlines.

Part of the Virgin Atlantic's fleet found new homes at Air Comet, Finnair and Caribbean Airlines and Flightglobal recently learned that a 1993-vintage aircraft is now in the process of being sold to a start-up airline in Bangladesh.

Four A340-300s last operated by Olympic Airlines were offered for sale in March and Flightglobal understands the aircraft are being acquired by Willis Lease Finance Corp.

Hellenic Imperial Airways agreed to sublease two 1998-vintage aircraft from Gulf Air in the summer, but sources said the transaction was called off.

"Market prospects are difficult to assess, although there are few positives. Younger vintage aircraft are of particular concern over residual value performance while older models will become more expensive to maintain and have no obvious future as freighters. The type may continue to suit some operators because of its capacity or hot-and-high performance, but four-engined widebodies will continue to be at a strong disadvantage in times of uncertainty over fuel costs," said O'Hanrahan.

CMV and lease rates

Data shows that part-out candidates are likely to sell in the $10 million to $15 million range while early vintage aircraft can sell in the $15-20 million bracket, depending on the condition. There seems to be a wrong perception on the A340-300 model as offers tend to be well below the asking price. Flightglobal is aware of one transaction where bids were 40-50% lower than the final agreed price.

Availability has passed the 5% mark and given the limited opportunities in the market place, will probably increase. Flag carriers continue to sell to second-tier operators but more aircraft are also heading for parts.

Collateral Verifications says values and lease rates have dropped by about 15% to 20%, depending on the vintage, over the past 12 months. "We see this trend continuing over the next 12-18 months, especially with the introduction of the Airbus A350 in the not so distant future which will most likely be used to replace the Airbus A340 on many routes," commented Dechavanne.

According to him, a 1993-vintage aircraft with a 573,200 lbs. maximum take off weight (MTOW) has a current market value (CMV) of $12 million.

O'Hanrahan values the same vintage, with a slightly different MTOW of 597,500 lbs, at $14.2 million, while a 10-year old aircraft has a CMV of $26 million.

A 2005-vintage aircraft with a 597,500 lbs. MTOW has a $36.4 million CMV says Avitas, while Collateral Verifications values the 573,200 lbs. version at $60 million.

Collateral Verifications values a 2008-vintage aircraft at $70 million, while AVITAS has a $45.6 million CMV.

Current market lease rates are in the $220,000 to $260,000 bracket for Avitas at the lower end, while Collateral Verifications says a 1993-vintage would lease for $235,000 a month.

A 10-year vintage command monthly lease rates in the $340,000 to $390,000 range for Avitas. Collateral Verifications says a 2001-vintage would lease for $385,000 a month.

A 2005-vintage aircraft has monthly lease rates in the $460,000 to $520,000 range for Avitas. Collateral Verifications says a six year old aircraft would lease for $465,000 a month.

Lease rates are $525,000 a month for a 2008-vintage for Collateral Verifications and between $550,000 to $625,000 for Avitas.