Air Capital Insider

There’s still value in that 10-year-old Boeing 777, analyst says

Spirit AeroSystems workers gather for the 1,000th Boeing 777 forward fuselage section rollout ceremony at Spirit in December 2011.
Spirit AeroSystems workers gather for the 1,000th Boeing 777 forward fuselage section rollout ceremony at Spirit in December 2011. File photo

There’s a lot of chatter lately about Boeing’s 777 widebody airliner, major parts of which are manufactured by Spirit AeroSystems.

Most recently it has centered around orders for Boeing’s largest twin-jet as the company transitions to production of the new 777X.

Analysts increasingly think that production rates on the first generation 777 will slide lower later this decade as orders favor the next generation of the airplane.

At the same time, fears about plunging 777 values have risen, stoked largely by remarks from Delta Air Lines CEO Richard Anderson a couple of weeks ago.

On Friday, RBC Capital Markets analyst Jason Arnold said 777 valuation worries are “overblown.”

“Investor fears around the valuations of the Boeing 777 family aircraft continue to percolate after the Malaysian Airlines 777-200ER write-down taken by Aircastle this week, which was preceded by unusual comments … made by Delta in October,” Arnold wrote. “We see fears as widely overblown and refute the more common myths and misunderstanding.”

Since deliveries of the 777 began in 1995, Boeing has delivered 1,346 of the airplanes, according to Boeing.

In his note, Arnold disputes the notions that the 777 has fallen out of favor with airlines, arguing that the 777 “remains one of the most popular widebody aircraft types in operation.”

Arnold also counters the notion that 10-year old 777-200ERs have a $10 million value, as Delta’s Anderson was reported to have said in a media conference call. “Scrap value for an older generation 777/200/200ER is ballpark $20-$25M (million) with no/little remaining time on life limited parts like engines,” he wrote. “The … comment out of Delta was either out of context or incorrect, based on our discussions with active aircraft traders.”

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