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Values of A380 Experience Dramatic Fall – & Will Continue to Do So

January 20, 2020

The announcement that production of the A380 would cease in 2021 was made nearly a year ago and inevitably had a significant effect on values.

Even before announcement, the values of the A380 had been experiencing an accelerated decline in recent years such that the annual decline has been greater than the average of 8 percent. After the interminable delays to service entry were resolved, the values initially followed the traditional path of remaining relatively stable in the early years as operators and passengers favored the type. But by 2013 the preference for the B777-300ER, coupled with the limited orders for the B747-8 and A380 demonstrated that the market structure was changing. The difficulties of operating such large aircraft were all too apparent, particularly if load factors were comparatively low. The values started to experience a more discernible decline from 2015. The announcement in 2019 that production would cease as of 2021 came after speculation that a larger model would be developed or that re-engining may be possible. The effect of curtailment on the values of the A380 was immediate and long lasting. Values fell by nearly twenty percent immediately and thereafter have kept on declining.

The age profile of the A380 is such that those aircraft that were leased on 10-12 year terms are now due to expire. Despite the expansion of international traffic, fresh orders for the A380 have not been forthcoming. Indeed, there were as many cancellations as orders in recent years. The airports have still not become so congested as to force the use of larger aircraft although many operators have moved from the B777-200ER to the B777-300ER. The growth of mega-cities has also seen only modest demand for more A380s. The decision by Singapore Airlines not to extend an existing lease on five of its first A380s proved to be a disappointment for the lessor and the wider market. MAS also sought to dispose of underutilized A380s but could not find a willing taker. The Skymark aircraft that were some way down the production line were sold to Emirates. While there were a number of options being discussed with regard to the off-coming aircraft, some of the aircraft are now being parted out. The parting out value of a ten year old A380 could still approximate $40 million for a third or fourth part out though much depends on the status of the aircraft. This compares with values of approximately $80 million for the oldest example, a gulf of perhaps some $40 million. This may not appear to be such a problem for the existing owners as the initial 12 year term may have generated sufficient revenues as to cover much of the expense. The parting out value could even be viewed as profit for the owner.

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