Ever since Delta Air Lines CEO Richard Anderson said last October that his airline could buy a used 777-200ER for $10 million, Boeing Co. (NYSE: BA) has felt some heat. After all, a new 777-200ER lists for $277.3 million.
In December, Anderson said Delta had just signed a letter of intent to buy a used 777 for $7.7 million and Boeing’s stock dropped nearly $5 a share.
At the annual general meeting of the International Society of Transport Aircraft Trading (ISTAT) in Phoenix on Monday, four appraisers said a used 777-200ER is worth between $37 million and $47 million. Planes that include the GE or Pratt & Whitney engines command a $7 million premium to planes powered by the Rolls-Royce Trent engines, according to a report at Leeham News.
An aircraft leasing firm is selling used 777-200ERs with leases attached for more than $50 million, according to one appraiser. Another noted that values for the Airbus A330-300, which range from $41 million to $55 million today, will drop by $10 million next week when the new valuation book is updated.
Some 40 to 50 wide-body planes will be coming off lease in each of the next three years, putting more pressure on prices for both used and new versions of the plane. And the more it costs to reconfigure the plane for the new owner, the less value the used plane has.
The 777 is not the only Boeing plane to see some price pressure due to used aircraft becoming available. A 787-9 Dreamliner that lists for $264.6 million has a beginning valuation in the used market of $139 million, according to one appraiser. Leeham News reports prices as low of $125 million. One appraisal firm predicted the value of a 787-9 at $83.3 million in 2021.
The price for a used 787 has a large influence on the actual price Boeing charges customers for a new plane and, consequently, on whether or not the 787 program ever makes a profit. Right now the deferred production costs on the plane total about $30 billion, with Boeing nearly breaking even on new sales last quarter.
Those deferred production costs are also being challenged in a lawsuit brought by the U.S. Securities and Exchange Commission that accuses Boeing of fiddling its program accounting method by overestimating 787 sales. Unless there’s a smoking gun, it’s hard to see how Boeing can be hammered in court for having a cloudy crystal ball.
Boeing’s stock traded up 0.7% in the mid-afternoon Monday, at $118.93 in a 52-week range of $102.10 to $156.91.