This can't be good - A380
Two points I found interesting - one, the owners of the leased aircraft apparently already made their investment back (with a profit) during the lease period. What happens to the aircraft afterwards is all gravy - they can sell the A380's engines, chop the rest up for scrap, and still have made plenty of money.
The second point, the biggest issue regarding profitability in the secondary market of the super jumbo is the enormous cost of an interior refit - $30-40 million US, which is outside of the range that airlines are willing to pay, so this fact, along with the limited demand for such a large, complex aircraft factors into the limited desirability.
The second point, the biggest issue regarding profitability in the secondary market of the super jumbo is the enormous cost of an interior refit - $30-40 million US, which is outside of the range that airlines are willing to pay, so this fact, along with the limited demand for such a large, complex aircraft factors into the limited desirability.
The purchase price by the lessors is reported to be $198.6 million with a lease rate of $1.7 million a month, for what’s know as a lease-rate factor of 0.85%.
If you apply a 4% interest expense to purchase which is probably low for 2008 you could apply around 8.5 million a year against the note with a 10 year payoff around 85 million against the note.
Last edited by Sailvi767; 9th Jun 2018 at 14:40.
that lease factor is quite high for the A380; it's typically 0.68%-0.7% for most other aircraft, so you're getting well paid for taking some aircraft type risk. for anyone interested there's plenty of data out there in the public domain (including purchase prices and lease rates): look at dpaircraft.com/investors/financial_statements.htm for 787s leased to Thai/Norwegian and dnairone.com/investors/financial-statements.html for an A380 to Emirates
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Here are what are believed to be the best lease terms available.
The purchase price by the lessors is reported to be $198.6 million with a lease rate of $1.7 million a month, for what’s know as a lease-rate factor of 0.85%.
If you apply a 4% interest expense to purchase which is probably low for 2008 you could apply around 8.5 million a year against the note with a 10 year payoff around 85 million against the note.
If you apply a 4% interest expense to purchase which is probably low for 2008 you could apply around 8.5 million a year against the note with a 10 year payoff around 85 million against the note.
So crunching the numbers:
1.7 x 12 x 10 = 204 million in lease fees received
198.6 million = cost of purchase
204 - 198.6 = 5.4 million "profit" over 10 years. (which equals 2.72% rate of return over 10 years)
198.6 x .04 = 7.9 million (earnings if the same amount was invested in mutual funds at a lousy 4% rate. You can buy an annuity that yields 4% with zero risk!)
Bottom line: Lousy investment with low returns yet relatively high risk.
It makes sense that they're breaking up the aircraft for parts so they can squeeze out as much return on their investment as possible.
What's sad is that they can apparently get more money by breaking up the aircraft than by leasing it at a discounted rate. Like the thread title says, this can't be good news.
1.7 x 12 x 10 = 204 million in lease fees received
198.6 million = cost of purchase
204 - 198.6 = 5.4 million "profit" over 10 years. (which equals 2.72% rate of return over 10 years)
198.6 x .04 = 7.9 million (earnings if the same amount was invested in mutual funds at a lousy 4% rate. You can buy an annuity that yields 4% with zero risk!)
Bottom line: Lousy investment with low returns yet relatively high risk.
It makes sense that they're breaking up the aircraft for parts so they can squeeze out as much return on their investment as possible.
What's sad is that they can apparently get more money by breaking up the aircraft than by leasing it at a discounted rate. Like the thread title says, this can't be good news.
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Aren't these the frames that had massive reworking of the electrical systems because of the different versions of CATIA (v4 and v5) being used at various Airbus offices at the time? So not only are the aircraft non standard, they would also be a nightmare to refit. IIRC it took them to the 15th or 16th aircraft off the line to have "production" standard wiring.
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because of the different versions of CATIA (v4 and v5) being used at various Airbus offices
Anyway, early airframes of almost any type have teething issues, so it is normal that they are not that popular on the used aircraft market. For a cheap small aircraft an airline may take a risk, for a massiv investment of that size, the airlines think twice.
Bottom line: Lousy investment with low returns yet relatively high risk.
There are only a few, which make good money in aviation.
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So crunching the numbers:
1.7 x 12 x 10 = 204 million in lease fees received
198.6 million = cost of purchase
204 - 198.6 = 5.4 million "profit" over 10 years. (which equals 2.72% rate of return over 10 years)
198.6 x .04 = 7.9 million (earnings if the same amount was invested in mutual funds at a lousy 4% rate. You can buy an annuity that yields 4% with zero risk!)
1.7 x 12 x 10 = 204 million in lease fees received
198.6 million = cost of purchase
204 - 198.6 = 5.4 million "profit" over 10 years. (which equals 2.72% rate of return over 10 years)
198.6 x .04 = 7.9 million (earnings if the same amount was invested in mutual funds at a lousy 4% rate. You can buy an annuity that yields 4% with zero risk!)
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Between MSN 001 and MSN 004 there were over 20,000 production modifications. An object lesson in the pitfalls of concurrent engineering and the procurement lead design freeze requirements.
MSN 004was a basket case, originally used as an engine test platform and was scheduled for modification as a VVIP platform, however, any form of continued airworthiness would have required an entire specialized dept to support that particular white elephant.
The early production models and the aircraft taken as post flight test aircraft on lease by SIA were in this batch. SIA and the leasing company both generated a profit. Ipso facto, applying the 20 year design life and in service rule to these early aircraft implies that the airfames and processes were mature at the inception of the entry into service, which is not the case. Also, it was over two years late for entry into service. I still have my SIA ‘A380 EIS 2006’ coffee mug. Ironic maybe, but by this stage, the panic button in Aibus central had been hammered into the table and the launch customer was having a sense of humour failure.
There is a secondary market for A380’s, provided they’re not early production mod’ standard airframes, expensive refits notwithstanding, the low cost mass transport options and hadj options are already on the table.
To paraphrase Mark Twain: ‘The reports of my death are greatly exaggerated’
MSN 004was a basket case, originally used as an engine test platform and was scheduled for modification as a VVIP platform, however, any form of continued airworthiness would have required an entire specialized dept to support that particular white elephant.
The early production models and the aircraft taken as post flight test aircraft on lease by SIA were in this batch. SIA and the leasing company both generated a profit. Ipso facto, applying the 20 year design life and in service rule to these early aircraft implies that the airfames and processes were mature at the inception of the entry into service, which is not the case. Also, it was over two years late for entry into service. I still have my SIA ‘A380 EIS 2006’ coffee mug. Ironic maybe, but by this stage, the panic button in Aibus central had been hammered into the table and the launch customer was having a sense of humour failure.
There is a secondary market for A380’s, provided they’re not early production mod’ standard airframes, expensive refits notwithstanding, the low cost mass transport options and hadj options are already on the table.
To paraphrase Mark Twain: ‘The reports of my death are greatly exaggerated’
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