Who wins and who loses – A380 bonds downgraded by Moodys as SQ parks them up

AsiaConsult  - Airbus A380

9VSKA on its first ever take off during pre-delivery testing

As the first Airbus A380 is returned to its German lessor (Doric/ Dr Peters) after just 11 years in operation, it is clear that this aircraft has not been the saviour that legacy carriers thought it might be. Apart from on a few routes to very busy slot constrained airports, it seems they just cannot fill the 500 plus seats.

Moody’s has also downgraded the certificates used by Doric to fund the leasing of a clutch of the aircraft operated by Emirates, last week. It cited weakening demand for ultra large aircraft with Airbus receiving only 5 new orders since 2013.

9V-SKA – the first Airbus A380 delivered to Singapore Airlines was taken out of service in June and is currently undergoing pre-return maintenance at Changi, prior to being handed back to the lessor. Four more SQ units will follow by June next year.

From a value perspective the interesting thing will be what happens next. Doric is essentially a financial engineering business. It has very little experience of selling end of lease aircraft but if its residual forecasts and lease terms were sound, it should be OK. However it is making some strange pronouncements. CEO Anselm Gehling suggestion that the planes might part out at USD 100 million (approximately 50% of their original purchase prices) looks pretty optimistic for 11 year old units. With relatively few aircraft in service, the parts market will be nowhere near as liquid as it was for the B747.  The fact that the newer, more fuel efficient A380’s have been substantially redesigned will further complicate the components market.

Of course, much depends on the detailed return conditions written into the leases. This is where the financiers often do well, by making sure aircraft are returned in almost ‘as new’ condition. With Malaysian and other carriers looking to get out of some of their units next year it will be interesting to see what a secondhand A380 is actually worth.

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