When Delta Air Lines Inc. (NYSE: DAL) CEO Richard Anderson said a couple of weeks ago that his airline may be interested in acquiring used rather than new airplanes, shares of both Boeing Co. (NYSE: BA) and Airbus dumped around 4%. The more striking part of Anderson’s comment was that a 10-year-old 777 could be purchased for $10 million, compared with a new 777-200ER carrying a list price of $277.3 million and a likely purchase price of about $194 million, assuming a 30% discount.
The day Anderson made his comments, we found an eight-year-old 777-200ER on offer for $68 million, a far cry from $10 million. Monday morning we found a 777-200ER that entered service in 2002 for sale for just under $20 million. Two more 777s, built in 1997 and 1998, were listed for sale but no price was mentioned.
In a presentation last year, Ascend Advisory, a division of Flightglobal and a leading appraiser of used aircraft, put a value of about $65 million on a seven-year-old 777-300ER (a larger version of the 200ER with a longer range). The list price for a new 777-300ER is $330 million. It trails only a 747-8 as the most expensive plane Boeing builds and sells today.
We found six 777-300ERs that are coming off lease and are for sale in the United Kingdom. No prices were listed, but one is a 2007 model with 34,000 hours of flight time and 4,600 take-off and landing cycles. A used price for that plane is probably somewhere between $55 million and $60 million today.
In remarks cited by TheStreet.com, a JPMorgan analyst said:
The health of the used market clearly warrants debate but Delta’s comments were taken out of context, in our view, though had directional merit given appraisals that increasingly appear too robust.
A significant number of wide-body planes like the 777 and the Airbus 330 are coming off leases in the next few years. According to a press release last week from Delta, “A large number of leased widebody aircraft are being returned to lessors and manufacturers, causing a glut in the market.” A Delta executive expands:
One factor driving the large number of leased aircraft now being sold is the nearly four-year delay in deliveries of Boeing’s 787 jet … . The delay caused many airlines to lease Airbus A330 and Boeing 777 aircraft (left) to bridge the gap while waiting for their orders to be fulfilled. Many of those aircraft are now nearing the end of their leases and being returned.
Where’s the truth? Probably somewhere between $10 million and $60 million for a used 777-200ER. The low end is probably too low, just as the high end is — or soon will be — too high. JPMorgan’s analyst thinks a 10-year-old 777 is more accurately priced at around $43 million.
It’s also worth noting that Boeing and Delta have an uneasy relationship. The two companies have been at loggerheads over the U.S. Export-Import Bank (Boeing in favor, Delta against) and Delta buys a lot of Airbus planes, recently ordering 50 new A330s and A350s.
Boeing shares traded up about 0.4% on Monday morning at $147.29 in a 52-week range of $115.14 to $158.83.
Delta’s stock was inactive Monday morning, having closed at $51.00 on Friday after posting a new 52-week high of $51.66. The 52-week low is $34.61.