Multiple engine options on an end-of-life aircraft programme can cause difficulties for remarketing and impact current market values, appraisers warned at the ISTAT Europe conference in Prague today.
Appraisers were asked to give their view on the Boeing 777-200ER model, which was manufactured with three different engine options.
ICF International principal Stuart Rubin agrees that engine selection impacts current market values, adding that a variety of considerations must be taken into account.
"The less popular engine selection will always be penalised in terms of values because of the remarketing of a population of aircraft," says Rubin.
Avitas's senior vice-president of valuation Doug Kelly observes that, like the Airbus A330, the 777-200ER has one of its power options Rolls-Royce engines under maintenance programmes.
"Airlines prefer maintenance programmes in the first two phases of an aircraft life, because it helps them with operations. But the problem comes at the end of an aircraft life.
"Now we have a problem with the -200ER model because the operating base is fragmented with three types. We only have a 12 to 16 aircraft operating base. per engine type."
In a scenario where the -200ERs come out in large numbers, demand may not support the offer, he says. "This could lead to a part-out situation in which you don't want an engine programme," he says.
"Part-out traditionally [finds] value in the engines and when Rolls-Royce controls and dominates the aftermarket, who would you sell the engine?"
IBA Group intelligence chief Stuart Hatcher says secondary market values are currently driven by the OEMs under their own terms.
"The market is going to be driven that way. There is a lack of freedom that can cause some problems," says Hatcher.
Tony Brooks, a senior aviation analyst with Flightglobal's Ascend consultancy, does not see similar situations in general aviation.
"In general aviation, the market is vastly controlled by the original engine equipment companies," he says.
He cites Gulfstream G550/560 products powered by one engine provider. "At least 80% of the fleet is under Rolls Royce's CorporateCare programmes," he says.
Brooks also points out that there isn't such a strong secondary market for used engines.
Source: Cirium Dashboard
