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Value Added Options Continue to Require Percentage Adjustment

May 27, 2019

The MTOW has an important effect on the value as operational flexibility, in terms of the range of the aircraft and how many passengers/cargo can be carried, offers operators the opportunity to generate more revenue. Customers for aircraft usually have to pay more a higher MTOW. For example for each additional pound of weight the list price charged by either Airbus or Boeing will likely be around $100. Consequently, the list price of increasing the weight from 155,000lbs to 174,200lbs on the B737-8 will have attracted a list price addition of nearly $2 million. However, the list price charged for value added options – options that are deemed sufficiently attractive to the majority of subsequent buyers as to add to the value - needs to be seen in the in the context of the discounts that the customer receives in the first place. Consequently, the list price of $2 million for the weight may actually warrant a $1 million addition. This “$1 million” also needs to be viewed in relation to a new aircraft. For a new B737-8 the $1m will represent two percent of the value and as such this percentage adjustment needs to be continued when assessing the used value as well. To use the dollar adjustment of $1 million for both new and used -8s will inevitably lead to a distortion in the value of used aircraft. Some options can be selected after production such as the upgrade to the weight but the manufacturers will likely apply a discount to the cost of the upgrade to compensate for the lesser life remaining on the aircraft and therefore the lesser time that the value of the increased weight can generate a return. This can see the list price of a post production upgrade being discounted by some five percent for each year.

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