Boeing 777 Exit And Redeployment
Given the ownership structure of the fleet (10 per cent lessors and 90 per cent owner operators), the fleet remains stable, mostly with its first tier operator. It is a chain reaction that can be summarised as follows: the ageing of the aircraft requires reinvestment in the cabin and in maintenance, which in turn makes it more difficult to sell the aircraft. This therefore naturally extends the operation of the aircraft, with the original operator bringing more aircraft to an age beyond which it is impossible for the aircraft to change jurisdiction, owing to arbitrary limits on the age at which an aircraft can be registered, or beyond which the aircraft cannot be registered in a different jurisdiction (see map).
Boeing 777s have also been disassembled bringing an unusual revenue profile with over 80 per cent coming from the sale of airframe parts and components and 20 per cent from the engines; mostly fan blades and Quick Exchange Components. As the retirement of more 777s takes place, the expected revenue excluding engine parts has dropped by 50 per cent to less than $10m net over 24 months.
It is also an unusual situation when the wide-body engine core trade at 80 per cent of the value of a narrow body engine core - that is if and when the core engine trades. The PW4077 and PW4090 have been trading, mostly acquired by its OEM but the TRENT 800 has not been trading making it difficult to understand what residual value these engines may have. In essence, if the assets trade, it allows liquidity which validates and generates investment. Without trading, the investment in the aircraft becomes highly speculative.
Designing an investment strategy requires an extensive understanding of the 777 as a whole and in parts, as well as the economics of the 777 generating revenue as a flyer and the luxury of time to plan ahead. Taking advantage of distressed situations from which to make acquisitions (such as the 777 previously operated by Transaero) may present an investment opportunity. It is beneficial to adopt a dynamic acquisition policy for the major components of the 777 in order to minimise maintenance and associated costs. This enables asset owners to make use of green time engine lease opportunities until there are re-investment solutions to match the shorter lease terms and the creditworthiness of the operators.