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B777-300 Values Fail to Inspire

October 21, 2013

The limited operator base, a consequence of limited performance due to the arrival of the -300ER, continues to plague values of the type and cause a constant decline.

The -300 has been under pressure for a number of years, even before the onset of the recession. The limited range of the -300 has been a major problem for the aircraft, hence only 60 orders being placed. Operators with a need for higher capacity equipment usually also require good payload/range capability something which the Virtually all -300s remain with their original customers which makes for difficult determination of market values though Cathay has placed some of the market in recent months.

Orders for the B777-300 total only 60, down from eight years ago when 62 were on order. The last order to be placed was nearly eleven years ago when Singapore Airlines placed an additional order for a single unit. With no order remaining to be fulfilled, the prospects for the future continue to be negative. There have to be approximately 100 orders if a widebody is to avoid residual value problems. Values of both the B747SP and B747-300 failed to inspire with similar final order quantities. Even as a member of the B777 family however, the prospects are still not promising.

ILFC, usually a keen spotter of medium term residual value strength, ordered eight units, though the last was in 2000. Lessors do however sometimes order aircraft based on customer relationships rather than perceived residual value strength. All eight -300s have been delivered. A list price for the -300 failed to be presented for 2007 at which point Boeing no longer offered the type.

In common with most new Boeing aircraft, the B777 was developed with the potential for a stretched version at some later date. The -300 was initially revealed at the Paris Air Show in 1995 and launched in the weeks following based on commitments for 36 aircraft. The first flight took place in 1997 and delivery was effected to Cathay in 1998. 180 minute ETOPs approval was granted in the months before service entry partially based on experience with the B777-200ER.

The B777-300 was developed as a replacement for the B747-100 and -200. The B777-300 is able to carry the same number of passengers as the B747-200 but uses 30 percent less fuel and offers a 40 percent reduction in initial maintenance costs. In a three class layout the B777-300 can carry between 368 and 394 passengers though, in a single high density layout, up to 550 can be carried. The B777-300 has a range of some 5,720 nautical miles, slightly less than the 6,150nm range of the high gross weight B747-200B and much shorter than the 7,000nm+ range of the B777-200ER. The B747-200B has increasingly been withdrawn from service since the early 1990s because of the greater range and lower seat mile costs offered by the replacement B747-400 and other widebodies. This trend suggests that demand for a similar capacity aircraft offering shorter range may be limited.

Orders for the B777-300 were slow in forthcoming. The order book for 60 is reasonable but in the context of a replacement for the B747-200 represents a limited number. The 60 orders however, are better than the 55 for the beleaguered B757-300 and much better than the 38 for the B767-400 and the 52 for the B737-900, all representing stretches to the basic model without the range something which may be of relevance for the B787-10. Boeing has traditionally sought to offer a larger but limited range version before developing a longer range variant. With the B777 representing the cutting edge in terms of engine power and demand for reliability to achieve “out of the box” ETOPs certification, incremental improvement has been necessary. Only as the engine manufacturers have been able to push the thrust rating of the new high thrust turbofans has Boeing been able to offer greater MTOWs and therefore longer range capability. Increasing thrust levels takes time to develop and certificate. Using a similar powerplant on the B777-300 and B777-200ER therefore provided for earlier service entry. For some operators the sub-6,000nm range still provided sufficient payload/range capability for high density, intra regional services.

B777-300 Vital Statistics
LAUNCH 06/1995 STANDARD MTOW 660,000lbs LIST PRICE (2006) $210-234m
FIRST FLIGHT 10/1997 OPTIONAL MTOW N/A TYPICAL DISCOUNT 40%
SERVICE ENTRY 05/1998 FUEL CAPACITY 45,220 usg VALUE Y1998 $28m
ORDERS 60 FUEL – OPTIONAL N/A VALUE Y2004 $50m
DELIVERIES 60 RANGE–TYP PAX 5,720nm VALUE TREND Declining
BACKLOG 0 RUNWAY LENGTH 11,000 feet 2016 F/V – Y1998 $22m
OPERATORS 8 CARGO 7,080 cu ft 2016 F/V – Y2004 $40m
ENGINE TYPES Trent, PW4000 PAX (MAX) 550 LEASE RATE– DoM 1998 $360,000pm
VARIANTS Pax. MZFW-STD 495,000lbs RENTAL TREND Falling
D CHECK COST $3.5m. MLW-STD 524,000lbs 2016 LEASE RATE –DoM1998 $310,000pm
ENG O/H COST $2.0-5.5m CABIN WIDTH 231 in AIRCRAFT RATING D-

The Asian Crisis of the late 1990s, the worsening economic situation during the turn of the millennium, the events of September 11th 2001, the impact of SARS and the Iraq War previously conspired to reduce the appetite of target customers for large scale purchases. Customers for the B777-300s were expected to center on Asian carriers but attention switched to the A340-600 and then the B777-300ER. When launched in 1997 (though ANA placed the first order in 1995), the Asian market was viewed with particular enthusiasm where sustained economic growth in the then Tiger economies was expected to generate significant demand for high capacity widebodies for intra-regional services. Unfortunately, the second South Sea Bubble burst and demand for the more limited range, high capacity failed to materialize as envisaged. The latest recession has added to the problems for the type.

The relatively limited payload/range capability and the higher seating capacity of the B777-300 have therefore been contributing factors to the limited order book. The arrival of the much more versatile -300ER further prevented placement of -300 orders in the same manner as the -200ER prevented placement of -200 orders.

Of the 60 deliveries to date, all have been to either Middle Eastern or Asian operators. Six of the eight operators are located in Asia, underlining the importance of the region to the higher capacity widebodies. Emirates are the only non Asian operator. The largest operators are Cathay Pacific and Emirates, both with 12 each. Singapore Airlines, while still operating seven have sold four to Transaero. All Nippon, Japan Airlines, Korean and Thai all reflect the type of carriers that Boeing needed to secure. With Emirates possessing a hub in the Middle East, long range capability is not necessary, at least for European and Far East services. The sub-6,000nm range of the B777-300 has proved to be of lesser interest to European and U.S. operators. European intercontinental operators require long range capability for services to and from the Far East and either smaller or larger capacity for transatlantic services. Abuse of performance capability has been preferable to a proliferation in types within a fleet.

The limited range of the B777-300 inevitably stimulated far greater interest in the longer range -300ER version. The B777-300ER was launched alongside the B777-200LR in early 2000 and features a range in excess of 7,000nm providing an opportunity to serve longer sectors. The interest in the -300ER is much more significant than that enjoyed by the -300. The -300ER is powered by only the GE90 whereas the -300 features the option to select all three engine manufacturers though the -300 is powered by either the PW4000 or Trent. No -300 customer opted for the GE90. With only 60 orders placed among theoretically three engine manufacturers, there exists some potential for marginalization of one or even two engine/airframe combinations, particularly as the GE90 is to be used exclusively on the -300ER. To date, with 42 orders for the Rolls-Royce engine, the PW4000 is clearly in second place.

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