Two recent acquisitions by lessors of Boeing 747-8 Freighters could be interpreted as a vote of confidence in the 'Queen of the Skies', but they really show a series of sharp deals that still leave the jumbo's future looking bleak.
BOC Aviation announced in late March that it had purchased two Boeing 747-8Fs leased to AirBridgeCargo. While it did not name the seller, in a stock exchange filing, it noted that they were subsidiaries of the US airframer "primarily engaged in aircraft leasing" – all but confirming that they were sold by Boeing Capital Corporation (BCC).
Neither BOC Aviation nor BCC would discuss further details of the deal when approached by FlightGlobal, however Flight Fleets Analyzer showed that BCC had two 747-8Fs leased to AirBridgeCargo: MSNs 60117 and 60118, both of which were built and delivered in 2014.
Soon after BOC Aviation announced its purchase, Intrepid Aviation announced the delivery of the first of two 747-8Fs to – surprise, surprise – AirBridgeCargo.
Unlike the two aircraft sold to BOC Aviation, the Intrepid 747-8F is a new-build jet, and part of a deal that the Connecticut-based lessor struck with Boeing last year to allow it to cancel orders for two remaining 777-300ERs.
At that time, Intrepid said that the aircraft were to be leased to "an existing customer of Boeing", but did not reveal that it was AirBridgeCargo until early April.
It comes as little surprise given that Boeing announced an ambiguous deal at the 2016 Farnborough air show that would see the Volga-Dnepr Group take delivery of 20 747-8Fs over six years – including four that had already been handed over.
In return, the manufacturer also signed a long-term logistics support agreement with Volga-Dnepr using the 747-8Fs and its Antonov An-124s.
Fleets Analyzer shows that Intrepid and BOC Aviation have now joined a small list of lessors managing 747-8Fs. Sberbank Leasing has two aircraft leased to AirBridgeCargo, while seven of Nippon Cargo Airlines' eight 747-8Fs are leased from Jackson Square Aviation, IBJ Leasing, Sumitomo Mitsui Finance and Leasing. Doric also manages one aircraft operated by Cargolux.
A TALE OF TWO DEALS
Nonetheless, the BOC Aviation deal in particular raised eyebrows in the industry, given that the company largely acquires new passenger aircraft, with a particular focus on liquid types.
The lessor said in its stock exchange statement that this "is in line with the growth strategy of the company and enables the company to build its balance sheet by investing in modern, efficient, in-demand aircraft."
The latter point is highly debatable, with Fleets Analyzer showing that there are only 10 operators of 747-8Fs. That includes Nippon Cargo Airlines, which only weeks ago cancelled the last two of the type that it had on order.
Citing confidentiality provisions in its purchase agreement, BOC Aviation did not say how much it paid for the aircraft, but market data indicates that it was likely presented with a compelling investment proposition.
Values data from Flight Ascend Consultancy shows that 2014 vintage 747-8Fs have a market value of around $123 million. At the time of delivery, the indicative lease rate for the aircraft was around $1.24 million. With the aircraft reportedly on 14-year lease terms, even assuming that BOC Aviation paid close to the market rate, then it appears to be a very attractive deal for a long-term player with patient capital. Add in the likely maintenance reserves, which should still be high, and the yield benefits appear to vastly outweigh the residual value risks.
For the record, Ascend's 747-8F ratings estimate a 20% downside off future base values for future market values, indicating a high level of residual risk on the type.
Compared to BOC Aviation's deal, Intrepid is unlikely to be as potentially rewarding, given that it was negotiating from a weaker position. Boeing arguably had a stronger hand, as it would be able to play with some of its other 777 orders, even though pricing on that type is being compressed by end-of-the-line pressures.
Although Boeing has expressed a willingness to step in and finance aircraft through BCC, the two transactions appear to demonstrate that it does not plan to play a significant long-term role as an owner of 747-8Fs, even when the lease yields present a compelling case.
COUNTING DOWN THE DAYS
Nonetheless, Boeing may have to rely on such tactics if it is to extract any more life out of the 747-8. With production slowing to an anaemic six aircraft per year, and the backlog now dwindling to only 22 aircraft (including seven passenger-carrying Intercontinentals), Seattle needs all the help it can get to keep the 747 line open.
As the 747-8I is now being overlooked by carriers in favour of the 777-X, the only hope for the original jumbo is of a rebound in the maindeck cargo market, bringing customers back to the freighter variant. There are some signs of life in the cargo market, but the fundamental shift away from dedicated freighters continues, as does the persistent overcapacity in that market from 747-400Fs that can be brought back into service relatively easily.
Those market factors have been unkind to the programme recently, with Nippon Cargo Airlines citing the poor market as the reason for its cancellation of the order. Clearly, any owner or investor trying to find a home for the type is going to struggle if an important existing operator was able to walk away.
Alas, while the recent Intrepid and BOC Aviation deals go some of the way to helping the 747-8, its future remains bleak.
Source: Cirium Dashboard
