MD11 Disposal Spells Further Problems for Values -- Values of the beleaguered MD11 are set to face new trials and

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Story Filed: Monday, November 04, 2002 4:50 PM EST

Nov 04, 2002 (Aircraft Value News/PBI Media via COMTEX) -- tribulations as Delta announces its intention to ground all 15 examples of the type that it operates from next year through to 2004.

The move comes as the operator seeks to more match capacity with demand. Most of the 15 MD11s will be replaced by the smaller B767-300ER, though a few will see replacement by the B777 in 2004. Values of the MD11 have under severe strain for perhaps over a decade, ever since service entry was effected and a serious shortfall in range capability experienced. The cessation of production at only 200 units soon created the prospect of weak residuals and events of the last year have clearly sealed the fate for values. The problems of Swissair left the disposal of its MD11s and conversion by FedEx in limbo.

Other users have increasingly sought to divest themselves of the passenger version, though the freighter is still held in high regard. The 15 MD11s being made available by Delta will likely increase the likelihood of further weakness in values. The problems in the airfreight sector will make conversion to freighter less appealing, though perhaps in some two to three years there will be renewed enthusiastic for the conversion of such aircraft.

Service entry of the MD11 in 1990 saw values of around $95 million, comparing favorably with the $125-130 million for the B747-400. Some financing of new MD11s saw values in excess of $110 million with even higher purchase prices being indicated. The technical and market problems facing the type soon saw values of the early versions declining, precipitated further by a decision by McDonnell Douglas prior to acquisition by Boeing, to write off in excess of $1 billion against the program, thus allowing much keener new pricing to emerge. By 2000, values of the initial versions have fallen to around $50 million representing a near 50 percent depreciation in 10 of the expected 30-year life span. Worse has followed, with the same aircraft now fortunate to attract a value in excess of $30 million, a fall of nearly 70 percent. At $30 million, values of the first MD11s have experienced one of the more significant declines of widebodies in the modern era.
Aircraft Value News, Vol. 11, No. 22