I. INTRODUCTION AND EXECUTIVE SUMMARY
MORTEN BEYER & AGNEW (MBA) has been retained by Morgan Stanley & Co.
International Limited to determine the Adjusted Base Values of 61 aircraft and
one engine as of November 30, 1999. The aircraft and the engine and their Base
Values are identified in Section II of this report.
In performing this valuation, MBA did not inspect the aircraft, and the engine
or their historical maintenance documentation, and relied solely on information
provided to us by Morgan Stanley Aircraft Finance. Based on the information set
forth in this report, it is our opinion that the Adjusted Base Value of the 61
aircraft and one engine in this portfolio is $2,103,140,000 as noted in Section
III.
MBA uses the definition of certain terms, such as Current Market Value and Base
Value, as promulgated by the Appraisal Program of International Society of
Transport Aircraft Trading (ISTAT). ISTAT is a non-profit association of
management personnel from banks, leasing companies, airlines, manufacturers,
brokers, and others who have a vested interest in the commercial aviation
industry and who have established a technical and ethical certification program
for expert appraisers.
ISTAT defines Current Market Value (CMV) as the appraiser's opinion of the most
likely trading price that may be generated for an aircraft under market
conditions that are perceived to exist at the time in question. Current Market
Value assumes that the aircraft is valued for its highest, best use; that the
parties to the hypothetical sale transaction are willing, able, prudent and
knowledgeable and under no unusual pressure for a prompt sale. It also assumes
the transaction would be negotiated in an open and unrestricted market on an
arm's-length basis, for cash or equivalent consideration, and given an adequate
amount of time for effective exposure to prospective buyers.
The ISTAT definition of Base Value (BV) has, essentially, the same elements of
Market Value except that the market circumstances are assumed to be in a
reasonable state of equilibrium. Thus, Base Value pertains to an idealized
aircraft and market combination, but will not necessarily reflect the actual
Current Market Value of the aircraft in question. BV is founded in the
historical trend of values and is generally used to analyze historical values
or to project future values.
<PAGE>
II. VALUATION
In developing the Adjusted Base Values, MBA did not inspect the aircraft and
the engine or their historical maintenance documentation, but relied on partial
information supplied by the Client. Therefore, we used certain assumptions that
are generally accepted industry practice to calculate the value of aircraft
when more detailed information is not available. The principal assumptions are
as follows:
1. The aircraft is in good overall condition.
2. The overhaul status of the airframe, engines, landing gear and other
major components are the equivalent of mid-time/mid-life unless
otherwise specified.
3. The historical maintenance documentation has been maintained to
acceptable international standards.
4. The specifications of the aircraft are those most common for an
aircraft of its type and vintage.
5. The aircraft is in a standard airline configuration.
6. The aircraft is current as to all Airworthiness Directives and
Service Bulletins.
7. Its modification status is comparable to that most common for an
aircraft of its type and vintage.
8. Its utilization is comparable to industry averages.
9. There is no history of accident or incident damage.
10. No accounting is made for lease obligations or terms of ownership.
Maintenance Adjustments for the airframe is presented in Section IV of this
report. Section V presents the adjustments related to the Engines and the
Landing Gears. Since there were no information related to the Engine Life
Limited Parts (LLPs) and the Landing Gears, they were all assumed to be
half-life and no positive or negative adjustments were made. Depending on the
Maximum Take Off Weight (MTOW) of each aircraft, adjustments are calculated
based on the difference from the aircraft Base MGTOW at 59 dollars per pound.
2
<PAGE>
III. BASE AND ADJUSTED VALUES OF AIRCRAFT & ENGINE
Adjusted
Aircraft Type Engine Type S/N Mfg. Date Base Value Base Value
------------- ----------- ------- --------- -------------- -----------
A300-600R PW 4158 A0555 Mar-90 $49,390,000 $48,210,000
A300-600R CF6-80C2A5 A0625 Mar-92 $54,460,000 $53,220,000
A310-300 JT9D-7R4E1 A0409 Nov-85 $30,520,000 $29,499,000
A310-300 JT9D-7R4E1 A0410 Nov-85 $30,520,000 $30,501,000
A310-300 JT9D-7R4E1 A0437 Nov-86 $33,090,000 $33,419,000
A320-200 CFM56-5A3 D0279 Feb-92 $31,110,000 $31,652,000
A320-200 V2500-A1 D0393 Feb-93 $32,610,000 $33,098,000
A320-200 CFM-5A3 D0397 Mar-93 $32,970,000 $33,319,000
A320-200 V2500-A1 D0414 May-93 $32,740,000 $33,363,000
A320-200 CFM56-5A3 D0446 Oct-93 $33,650,000 $33,834,000
A320-200 V2500-A1 D0428 May-94 $34,590,000 $35,176,000
A321-100 V2530-A5 G0557 Dec-95 $36,800,000 $37,638,000
A321-100 V2530-A5 G0597 May-96 $38,610,000 $37,567,000
A330-300 CF6-80E1 E054 Apr-94 $87,870,000 $87,754,000
A340-300 CFM56-5C3G F094 Mar-95 $97,850,000 $97,684,000
B737-300 CFM56-3B1 23255 Jun-85 $14,300,000 $14,837,000
B737-300 CFM56-3B1 23256 uly-85 $14,280,000 $14,961,000
B737-300 CFM56-3B2 24449 May-90 $19,740,000 $20,575,000
B737-300 CFM-56-3B2 25161 Feb-92 $22,200,000 $23,784,000
B737-300 CFM56-3C1 27635 May-95 $27,610,000 $27,137,000
B737-300 CFM56-3B2 24299 Nov-88 $17,850,000 $19,140,000
B737-300 CFM56-3C1 26295 Dec-93 $25,270,000 $25,546,000
B737-300 CFM56-3B1 26309 Dec-94 $26,840,000 $26,602,000
B737-300F CFM56-3B2 23811 Oct-87 $19,520,000 $19,936,000
B737-300QC CFM56-3B2 23788 May-87 $19,080,000 $19,782,000
B737-400 CFM56-3-C1 24707 Jun-91 $24,850,000 $24,644,000
B737-400 CFM56-3-C1 26279 Feb-92 $25,740,000 $26,702,000
B737-400 CFM56-3-C1 26291 Aug-93 $27,850,000 $28,584,000
B737-400 CFM56-3-C1 26308 Oct-94 $29,620,000 $29,154,000
B737-400 CFM56-3C 24234 Oct-88 $21,590,000 $22,435,000
B737-400 CFM56-3C 25104 May-93 $27,490,000 $27,541,000
B737-400 CFM56-3C1 25105 Jul-93 $27,370,000 $27,262,000
B737-400 CFM56-3C 25371 Jan-92 $25,620,000 $25,300,000
B737-500 CFM56-3-C1 26304 Sep-94 $23,390,000 $23,311,000
B737-500 CFM56-3B1 25165 Apr-93 $21,450,000 $20,762,000
B747-300 CF6-80C2 24106 Apr-88 $50,480,000 $51,991,000
B747-400 RB211-524 24955 Sep-91 $106,050,000 $104,476,000
B757-200ER RB211-535E4 23767 Apr-87 $31,320,000 $31,259,000
B757-200ER PW2040 24965 Mar-92 $40,600,000 $41,106,000
B757-200ER PW2037 25044 May-91 $38,570,000 $39,271,000
B757-200ER PW2037 28160 Jul-96 $50,210,000 $50,344,000
B757-200ER RB211-535E4 24367 Feb-89 $34,380,000 $33,392,000
B757-200ER RB211-535E4 24260 Dec-88 $34,090,000 $35,424,000
B757-200ER RB211-535E4 26266 Jan-93 $41,990,000 $42,305,000
B757-200ER PW2037 26272 Mar-94 $44,570,000 $42,618,000
B767-200ER CF6-80A 23807 Aug-87 $32,050,000 $28,539,000
B767-300ER CF6-80C2B2F 24798 Oct-90 $57,770,000 $57,665,000
3
<PAGE>
B767-300ER CF6-80C2B6 24875 Jun-91 $59,750,000 $59,425,000
B767-300ER CF6-80C2B6F 25132 Feb-92 $61,790,000 $62,469,000
B767-300ER CF6-80C2B6F 26256 Apr-93 $66,540,000 $67,204,000
B767-300ER CF6-80C2B6F 26260 Sep-94 $70,520,000 $68,534,000
CF6-80C2B6F CF6-80C2B6F 704279 Jul-95 $4,750,000 $4,506,000
F.50 PW125B 20232 Oct-91 $5,360,000 $5,355,000
F.50 PW125B 20233 Oct-91 $5,360,000 $5,366,000
F.70 TAY MK620-15 11564 Dec-95 $14,450,000 $14,331,000
F.70 TAY MK620-15 11565 Feb-96 $14,550,000 $14,430,000
F.70 TAY MK620-15 11569 Mar-96 $14,600,000 $14,478,000
MD-82 JT8D-219 49825 Mar-89 $19,270,000 $19,528,000
MD-83 JT8D-219 49657 Apr-88 $20,630,000 $20,543,000
MD-83 JT8D-219 49822 Dec-88 $21,440,000 $21,431,000
MD-83 JT8D-219 49824 Mar-89 $21,690,000 $22,143,000
MD-83 JT8D-219 53050 May-90 $22,880,000 $21,078,000
Total $2,104,100,000 $2,103,140,000
4
<PAGE>
IV. SUMMARY OF VALUE ADJUSTMENTS
Aircraft Airframe Maintenance MTOW Adjusted
Type S/N Base Value Adjustments Adjustment Base Value
A300-600R A0555 $49,390,000 ($1,180,000) $0 $48,210,000
A300-600R A0625 54,460,000 (1,240,000) 0 53,220,000
A310-300 A0409 30,520,000 (1,021,000) 0 29,499,000
A310-300 A0410 30,520,000 (373,000) 354,000 30,501,000
A310-300 A0437 33,090,000 (25,000) 354,000 33,419,000
A320-200 D0279 31,110,000 108,000 434,000 31,652,000
A320-200 D0393 32,610,000 228,000 260,000 33,098,000
A320-200 D0397 32,970,000 (85,000) 434,000 33,319,000
A320-200 D0414 32,740,000 363,000 260,000 33,363,000
A320-200 D0446 33,650,000 (250,000) 434,000 33,834,000
A320-200 D0428 34,590,000 131,000 455,000 35,176,000
A321-100 G0557 36,800,000 602,000 236,000 37,638,000
A321-100 G0597 38,610,000 (1,043,000) 0 37,567,000
A330-300 E054 87,870,000 (470,000) 354,000 87,754,000
A340-300 F094 97,850,000 (579,000) 413,000 97,684,000
B737-300 23255 14,300,000 (83,000) 620,000 14,837,000
B737-300 23256 14,280,000 61,000 620,000 14,961,000
B737-300 24449 19,740,000 9,000 826,000 20,575,000
B737-300 25161 22,200,000 758,000 826,000 23,784,000
B737-300 27635 27,610,000 (1,299,000) 826,000 27,137,000
B737-300 24299 17,850,000 552,000 738,000 19,140,000
B737-300 26295 25,270,000 (344,000) 620,000 25,546,000
B737-300 26309 26,840,000 (858,000) 620,000 26,602,000
B737-300F 23811 19,520,000 (410,000) 826,000 19,936,000
B737-300QC 23788 19,080,000 (183,000) 885,000 19,782,000
B737-400 24707 24,850,000 (206,000) 0 24,644,000
B737-400 26279 25,740,000 283,000 679,000 26,702,000
B737-400 26291 27,850,000 55,000 679,000 28,584,000
B737-400 26308 29,620,000 36,000 (502,000) 29,154,000
B737-400 24234 21,590,000 550,000 295,000 22,435,000
B737-400 25104 27,490,000 (244,000) 295,000 27,541,000
B737-400 25105 27,370,000 (403,000) 295,000 27,262,000
B737-400 25371 25,620,000 (999,000) 679,000 25,300,000
B737-500 26304 23,390,000 (138,000) 59,000 23,311,000
B737-500 25165 21,450,000 (1,028,000) 340,000 20,762,000
B747-300 24106 50,480,000 (436,000) 1,947,000 51,991,000
B747-400 24955 106,050,000 (1,279,000) (295,000) 104,476,000
B757-200ER 23767 31,320,000 (61,000) 0 31,259,000
B757-200ER 24965 40,600,000 (379,000) 885,000 41,106,000
B757-200ER 25044 38,570,000 111,000 590,000 39,271,000
B757-200ER 28160 50,210,000 429,000 (295,000) 50,344,000
B757-200ER 24367 34,380,000 (1,578,000) 590,000 33,392,000
5
<PAGE>
B757-200ER 24260 34,090,000 744,000 590,000 35,424,000
B757-200ER 26266 41,990,000 (275,000) 590,000 42,305,000
B757-200ER 26272 44,570,000 (1,362,000) (590,000) 42,618,000
B767-200ER 23807 32,050,000 (1,033,000) (2,478,000) 28,539,000
B767-300ER 24798 57,770,000 (105,000) 0 57,665,000
B767-300ER 24875 59,750,000 (1,564,000) 1,239,000 59,425,000
B767-300ER 25132 61,790,000 (501,000) 1,180,000 62,469,000
B767-300ER 26256 66,540,000 (516,000) 1,180,000 67,204,000
B767-300ER 26260 70,520,000 (1,573,000) (413,000) 68,534,000
CF6-80C2B6F 704279 4,750,000 (244,000) N/A 4,506,000
F.50 20232 5,360,000 (5,000) 0 5,355,000
F.50 20233 5,360,000 6,000 0 5,366,000
F.70 11564 14,450,000 (119,000) 0 14,331,000
F.70 11565 14,550,000 (120,000) 0 14,430,000
F.70 11569 14,600,000 (122,000) 0 14,478,000
MD-82 49825 19,270,000 110,000 148,000 19,528,000
MD-83 49657 20,630,000 (87,000) 0 20,543,000
MD-83 49822 21,440,000 (9,000) 0 21,431,000
MD-83 49824 21,690,000 453,000 0 22,143,000
MD-83 53050 $22,880,000 ($1,182,000) ($620,000) $21,078,000
Total Base Value $2,084,360,000 Total Adjusted Base Value $2,082,565,000
<PAGE>
V. AIRFRAME MAINTENANCE CONDITION ADJUSTMENTS
<TABLE>
Intermediate Heavy Total Airframe
Maintenance Maintenance Maintenance
------------------------------------------------------------------------------------------------------
Aircraft Aircraft Potential Actual Potential Actual Potential Actual
Type S/N
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A300-600R A0555 $250,000 $50,000 $900,000 $270,000 $1,150,000 $320,000
A300-600R A0625 $250,000 ($150,000) $900,000 ($750,000) $1,150,000 ($900,000)
A310-300 A0409 $300,000 ($166,667) $1,250,000 ($1,041,667) $1,550,000 ($1,208,333)
A310-300 A0410 $300,000 $66,667 $1,250,000 ($972,222) $1,550,000 ($905,556)
A310-300 A0437 $300,000 $133,333 $1,250,000 $1,041,667 $1,550,000 $1,175,000
A320-200 D0279 $200,000 $40,000 $500,000 ($116,667) $700,000 ($76,667)
A320-200 D0393 $200,000 $40,000 $500,000 $150,000 $700,000 $190,000
A320-200 D0397 $200,000 ($66,667) $500,000 $66,667 $700,000 $0
A320-200 D0414 $200,000 $173,333 $500,000 $200,000 $700,000 $373,333
A320-200 D0428 $200,000 ($150,000) $500,000 ($100,000) $700,000 ($250,000)
A320-200 D0446 $200,000 $40,000 $500,000 ($129,630) $700,000 ($89,630)
A321-100 G0557 $200,000 $66,667 $500,000 $183,333 $700,000 $250,000
A321-100 G0597 $200,000 ($93,333) $500,000 ($200,000) $700,000 ($293,333)
A330-300 E054 $375,000 $321,429 $1,250,000 ($229,167) $1,625,000 $92,262
A340-300 F094 $400,000 ($177,778) $1,500,000 $100,000 $1,900,000 ($77,778)
B737-300 23255 $150,000 $126,750 $500,000 ($450,000) $650,000 ($323,250)
B737-300 23256 $150,000 $12,000 $500,000 $49,0000 $650,000 $61,000
B737-300 24449 $150,000 ($94,000) $500,000 $365,000 $650,000 $271,000
B737-300 25161 $150,000 $10,000 $500,000 $423,536 $650,000 $433,536
B737-300 27635 $150,000 ($125,000) $500,000 ($374,387) $650,000 ($499,387)
B737-300 24299 $150,000 ($41,461) $500,000 $3,220 $650,000 ($38,241)
B737-300 26295 $150,000 ($146,928) $500,000 ($196,573) $650,000 ($343,501)
B737-300 26309 $150,000 $0 $500,000 ($57,089) $650,000 ($57,089)
B737-300F 23811 $150,000 ($17,268) $500,000 $132,792 $650,000 $115,524
B737-300QC 23788 $150,000 $0 $500,000 ($183,333) $650,000 ($183,333)
B737-400 24707 $175,000 $0 $600,000 $0 $775,000 $0
B737-400 26279 $175,000 $175,000 $600,000 $600,000 $775,000 $775,000
B737-400 26291 $175,000 $81,853 $600,000 ($385,243) $775,000 ($303,389)
B737-400 26308 $175,000 $0 $600,000 $35,806 $775,000 $35,806
B737-400 24234 $175,000 ($131,250) $600,000 $425,000 $775,000 $293,750
B737-400 25104 $175,000 $58,333 $600,000 ($440,000) $775,000 ($381,667)
B737-400 251105 $175,000 $97,222 $600,000 ($500,000) $775,000 ($402,778)
B737-400 25371 $175,000 $74,178 $600,000 ($418,808) $775,000 ($344,630)
B737-500 26304 $150,000 $50,000 $500,000 ($74,074) $650,000 ($24,074)
B737-500 25165 $150,000 $116,667 $500,000 ($343,750) $650,000 ($227,083)
B747-300 24106 $350,000 $70,000 $1,800,000 ($506,250) $2,150,000 ($436,250)
B747-400 24955 $350,000 $116,667 $1,800,000 ($480,000) $2,150,000 ($363,333)
B757-200ER 23767 $275,000 $213,889 $700,000 $486,111 $975,000 $700,000
B757-200ER 24965 $275,000 $91,667 $700,000 $583,333 $975,000 $675,000
B757-200ER 25044 $275,000 $91,667 $700,000 $19,444 $975,000 $111,111
B757-200ER 28160 $275,000 $183,333 $700,000 ($19,444) $975,000 $163,889
B757-200ER 24367 $275,000 ($30,556) $700,000 ($447,222) $975,000 ($477,778)
B757-200ER 24260 $275,000 $122,222 $700,000 $602,778 $975,000 $725,000
B757-200ER 24266 $275,000 ($91,667) $700,000 $466,667 $975,000 $375,000
B757-200ER 26272 $275,000 $213,889 $700,000 ($661,111) $975,000 ($447,222)
B767-200ER 23807 $200,000 ($133,333) $900,000 $300,000 $1,100,000 $166,667
B767-300ER 24798 $200,000 $155,556 $900,000 ($525,000) $1,100,000 ($369,444)
B767-300ER 24875 $200,000 ($133,333) $900,000 ($825,000) $1,100,000 ($958,333)
7
<PAGE>
<S> <C> <C> <C> <C> <C> <C> <C>
B767-300ER 25132 $200,000 ($177,778) $900,000 $275,000 $1,100,000 $97,222
B767-300ER 26256 $200,000 ($66,667) $900,000 $0 $1,100,000 ($66,667)
B767-300ER 26260 $200,000 $200,000 $900,000 ($572,727) $1,100,000 ($372,727)
F.50 20232 $40,000 ($25,948) $175,000 $45,721 $215,000 $19,773
F.50 20233 $40,000 ($36,079) $175,000 $10,268 $215,000 ($25,811)
F.70 11564 $125,000 ($7,676) $250,000 ($110,951) $375,000 ($118,627)
F.70 11565 $125,000 ($10,489) $250,000 ($108,993) $375,000 ($119,481)
F.70 11569 $125,000 ($12,871) $250,000 ($109,372) $375,000 ($122,243)
MD-82 49825 $150,000 $25,000 $600,000 $385,662 $750,000 $410,662
MD-83 49657 $150,000 ($30,000) $600,000 $95,176 $750,000 $65,176
MD-83 49822 $150,000 $35,465 $600,000 ($333,330) $750,000 ($297,865)
MD-83 49824 $150,000 ($108,677) $600,000 $162,512 $750,000 $53,835
MD-83 53050 $150,000 ($130,000) $600,000 ($402,709) $750,000 ($532,709)
</TABLE>
8
<PAGE>
VI. ENGINE & LANDING GEAR MAINTENANCE CONDITION ADJUSTMENTS
<TABLE>
Engine Shop Visit Engine LLP Landing Gear Total
-------------------------------------------------------------------------------------------------------------------------
Aircraft Aircraft Potential Actual Potential Actual Potential Actual Potential Actual
Type S/N
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A300-600R A0555 $1,500,000 ($1,500,000) $1,200,000 $200,000 $2,900,000 ($1,500,000)
A300-600R A0625 $1,500,000 ($339,894) $1,200,000 $200,000 $2,900,000 ($339,894)
A310-300 A0409 $1,200,000 $187,192 $1,000,000 $200,000 $2,400,000 $187,192
A310-300 A0410 $1,200,000 $459,338 $1,000,000 $200,000 $2,400,000 $459,338
A310-300 A0437 $1,200,000 ($1,200,000) $1,000,000 $200,000 $2,400,000 ($1,200,000)
A320-200 D0279 $750,000 $184,649 $1,250,000 $135,000 $2,135,000 $184,649
A320-200 D0393 $750,000 $37,924 $1,250,000 $135,000 $2,135,000 $37,924
A320-200 D0397 $750,000 ($85,283) $1,250,000 $135,000 $2,135,000 ($85,283)
A320-200 D0414 $750,000 ($10,146) $1,250,000 $135,000 $2,135,000 ($10,146)
A320-200 D0428 $750,000 $0 $1,250,000 $135,000 $2,135,000 $0
A320-200 D0446 $750,000 $220,416 $1,250,000 $135,000 $2,135,000 $220,416
A321-100 G0557 $750,000 $352,140 $1,250,000 $135,000 $2,135,000 $352,140
A321-100 G0597 $750,000 ($750,000) $1,250,000 $135,000 $2,135,000 ($750,000)
A330-300 E054 $1,200,000 ($562,561) $1,200,000 $200,000 $2,600,000 ($562,561)
A340-300 F094 $1,800,000 ($501,548) $2,000,000 $200,000 $4,000,000 ($501,548)
B737-300 23255 $800,000 $240,529 $1,000,000 $120,000 $1,920,000 $240,529
B737-300 23256 $800,000 $1,000,000 $120,000 $1920,000 $0
B737-300 24449 $800,000 ($262,000) $1,000,000 $120,000 $1,920,000 ($262,000)
B737-300 25161 $800,000 $324,614 $1,000,000 $120,000 $1,920,000 $324,614
B737-300 27635 $800,000 ($800,000) $1,000,000 $120,000 $1,920,000 ($800,000)
B737-300 24299 $800,000 $590,470 $1,000,000 $120,000 $1,920,000 $590,470
B737-300 26295 $800,000 $0 $1,000,000 $120,000 $1,920,000 $0
B737-300 26309 $800,000 ($800,000) $1,000,000 $120,000 $1,920,000 ($800,000)
B737-300F 23811 $800,000 ($525,793) $1,000,000 $120,000 $1,920,000 ($525,793)
B737-300QC 23788 $800,000 $0 $1,000,000 $120,000 $1,920,000 $0
B737-400 24707 $800,000 ($206,197) $1,000,000 $135,000 $1,935,000 ($206,197)
B737-400 26279 $800,000 ($491,423) $1,000,000 $135,000 $1,935,000 ($491,423)
B737-400 26291 $800,000 $359,057 $1,000,000 $135,000 $1,935,000 $359,057
B737-400 26308 $800,000 $0 $1,000,000 $135,000 $1,935,000 $0
B737-400 24234 $800,000 $256,109 $1,000,000 $135,000 $1,935,000 $256,109
B737-400 25104 $800,000 $138,032 $1,000,000 $135,000 $1,935,000 $138,032
B737-400 25105 $800,000 $0 $1,000,000 $135,000 $1,935,000 $0
B737-400 25371 $800,000 ($653,824) $1,000,000 $135,000 $1,935,000 ($653,824)
B737-500 26304 $800,000 ($114,311) $1,000,000 $120,000 $1,920,000 ($114,311)
B737-500 25165 $800,000 ($800,000) $1,000,000 $120,000 $1,920,000 ($800,000)
B747-300 24106 $2,500,000 $0 $2,500,000 $325,000 $5,325,000 $0
B747-400 24955 $2,500,000 ($915,905) $2,500,000 $325,000 $5,325,000 ($915,905)
B757-200ER 23767 $1,100,000 ($761,442) $1,400,000 $175,000 $2,675,000 ($761,442)
B757-200ER 24965 $1,100,000 ($1,053,928) $1,400,000 $175,000 $2,675,000 ($1,053,928)
B757-200ER 25044 $1,100,000 $34,564 $1,400,000 $175,000 $2,675,000 $34,564
B757-200ER 28160 $1,100,000 $264,878 $1,400,000 $175,000 $2,675,000 $264,878
B757-200ER 24367 $1,100,000 ($1,100,000) $1,400,000 $175,000 $2,675,000 ($1,100,000)
B757-200ER 24260 $1,100,000 $18,572 $1,400,000 $175,000 $2,675,000 $18,572
B757-200ER 24266 $1,100,000 ($650,327) $1,400,000 $175,000 $2,675,000 ($650,327)
B757-200ER 26272 $1,100,000 ($915,009) $1,400,000 $175,000 $2,675,000 ($915,009)
B767-200ER 23807 $1,200,000 ($1,200,000) $1,200,000 $200,000 $2,600,000 ($1,200,000)
B767-300ER 24798 $1,200,000 $264,724 $1,200,000 $200,000 $2,600,000 $264,724
B767-300ER 24875 $1,200,000 ($605,667) $1,200,000 $200,000 $2,600,000 ($605,667)
B767-300ER 25132 $1,200,000 ($597,913) $1,200,000 $200,000 $2,600,000 ($597,913)
B767-300ER 26256 $1,200,000 ($449,020) $1,200,000 $200,000 $2,600,000 ($449,020)
B767-300ER 26260 $1,200,000 ($1,200,000) $1,200,000 $200,000 $2,600,000 ($1,200,000)
F.50 20232 $300,000 ($24,590) $200,000 $80,000 $580,000 ($24,590)
F.50 20233 $300,000 $32,361 $200,000 $80,000 $580,000 $32,361
F.70 11564 $400,000 $0 $400,000 $95,000 $895,000 $0
9
<PAGE>
<S> <C> <C> <C> <C> <C> <C> <C>
F.70 11565 $400,000 $0 $400,000 $95,000 $895,000 $0
F.70 11569 $400,000 $0 $400,000 $95,000 $895,000 $0
MD-82 49825 $650,000 ($300,256) $725,000 $113,000 $1,488,000 ($300,256)
MD-83 49657 $650,000 ($151,629) $725,000 $113,000 $1,488,000 ($151,629)
MD-83 49822 $650,000 $288,927 $725,000 $113,000 $1,488,000 $288,927
MD-83 49824 $650,000 $399,025 $725,000 $113,000 $1,488,000 $399,025
MD-83 53050 $650,000 ($650,000) $725,000 $113,000 $1,488,000 ($650,000)
</TABLE>
10
<PAGE>
V. AIRCRAFT & ENGINE PROFILES
B737-300/-400/-500 Series Aircraft
As Stage 3 noise rules closed in at last on the 737-200, Boeing re-engined the
aircraft with the CFM-56 engine, which met the rules and also offered higher
power and the opportunity to stretch both the fuselage (capacity) in the -400
model and the range. They also built the model -500, which kept the basic -200
configuration. The 737-300 was introduced in the early 1980s, and entered
service in 1984, several years behind the MD-80 which was already achieving
extensive orders, again giving the lead to Douglas.
As of January 2000, Boeing had delivered 1,982 of this re-engined 2nd
Generation series, while another 5 remain on order, thus continuing the
successful tradition of the 737. Success was quick for the current production
737s, as they found homes in fleets already populated with the -100s and -200s.
The aircraft particularly suited the deregulated American market, where smaller
planes fitted hub-and-spoke operations. Overall, more than 160 airlines have
selected the 2nd generation 737 to meet their growth/replacement needs. As
airline consolidation continues, however, and as limited slot, gate, runway,
and terminal facilities impede growth, we look to the airlines to turn to
larger aircraft to meet their needs. This, in short, means that not all-737
operators will upgrade with the newer 3rd generation (-600/-700/-800/-900)
models. The introduction of the -600 / -700 / -800 / -900 series has preempted
incoming orders for the current family. Orders for this 3rd generation now
stand at 1,376. We suspect a good number of the orders for the -700/-800 will
be converted to the -900 as time goes by. Eighty percent of American's
630-plane commitment to Boeing was for 737s.
The 737-300 / -400 / -500 series is fully compliant with all-current noise and
environmental regulations.
Economics
The MBA Model indicates good operating economics for the 737-300 and
particularly the higher capacity -400 during the forecast period. The -500 is
quite marginal on a comparable basis due to its lack of seat capacity and,
therefore, lack of earning power. It was built to be a niche aircraft, and it
is going to have to stay in its niche.
Statistics
11
<PAGE>
Statistics
B737-300/-400/-500 Fleet Statistics
As of January 2000
B737-300 B737-400 B737-500
-------------------------------------------------------------------------------
Number of Ordered Aircraft 1,257 530 443
Number of Delivered Aircraft 1,110 483 389
Number of Cancelled Aircraft 145 44 54
Backlog 2 3 0
Options 0 17 10
Delivered in the last 12 months 26 9 4
Number of Destroyed Aircraft 9 4 1
Number of Retired Aircraft 0 0 0
Number of Parked Aircraft 14 8 1
Number of Aircraft in Operation 1,100 480 388
Number of Operators 120 67 39
Number of Leased Aircraft 743 308 219
Number of Owned Aircraft 357 172 169
Fleet Average Hours 25,752 18,511 16,013
Fleet Average Cycles 17,972 12,675 12,935
Average Age 9.0 6.9 6.3
Availability
Total number on market, August/98: 16 (-300); 12 (-400); 2 (-500)
Total number on market, August/99: 36 (-300); 15 (-400); 1 (-500)
Total number on market, January/00: 22 (-300); 15 (-400); 3(-500)
12
<PAGE>
747-300 Aircraft
The 747-300 is a -200B with an extended upper deck. The original 747-200 design
could accommodate up to 16 first/business class passengers in the upper deck,
behind the flight crew compartment. The -300 extended this compartment back 60
feet, to the point where it could accommodate 40-60 passengers depending on
seating density/class. The aircraft was also known as the 'SUD' or 'EUD' for
Stretched or Extended Upper Deck.
The original concept was initially offered as a conversion of existing -200Bs,
but KLM was the only taker, converting ten late model 200Bs and Combis in
1985/86. The aircraft was then offered by Boeing as an alternative to the -200B
on the production line, and a modest total of 81 were built from 1983 to 1991
for 17 airlines using all three basic engines: P&W, RR, and GE. Two-thirds were
ordered by the Pacific Rim carriers, and none by U.S. airlines. Slightly less
than one-third of the orders were for Combi models. The -300 should have a
direct operating cost per seat approximately five percent lower than a
comparable -200B due to its higher seating capacity. The original Asian
operators are now trying to unload their -300s in order to make room for the
new -400s.
The Combi configuration has fallen somewhat into disfavor in the marketplace
due to pending fire suppression modification requirements. From an economic
standpoint, the Combi offers the carrier the opportunity to satisfy limited
passenger and cargo requirements over a route with the same aircraft.
13
<PAGE>
Statistics
B747-300 Fleet Statistics
As of January 2000
B747-300
-------------------------------------------------------------------------------
Number of Ordered Aircraft 81
Number of Delivered Aircraft 81
Number of Cancelled Aircraft 0
Backlog 0
Options 0
Delivered in the last 12 months 0
Number of Destroyed Aircraft 2
Number of Retired Aircraft 0
Number of Parked Aircraft 8
Number of Aircraft in Operation 79
Number of Operators 25
Number of Leased Aircraft 28
Number of Owned Aircraft 51
Fleet Average Hours 51,599
Fleet Average Cycles 10,984
Average Age 13.7
Availability
Total number on market, August/98: 5
Total number on market, August/99: 9
Total number on market, January/00: 9
14
<PAGE>
B757 Aircraft
The 757 was conceived in 1978 as the successor to the 727. First deliveries
took place in late 1982 as 727 production was terminated. The aircraft was
somewhat slow in penetrating the market, as it came on-line in the depression
of the early 1980s, but has seen accelerating popularity in the late 1980s and
90s. The aircraft is offered in two engine configurations, Rolls Royce and
Pratt & Whitney. The aircraft's popularity has increased as airlines have grown
to appreciate its fuel economy and operating efficiency. As of January 2000,
the Rolls version had the greater market share, with 511 deliveries, compared
to 376 deliveries for the P&W version. Both versions have achieved decent
operator bases, with 46 airlines ordering the RR version and 19 the P&W. A
cargo version is also in production, with 80 already produced and 2 more on
order. United Parcel Service was the major purchaser, ordering 35 P&W powered
models, and then 20 more Rolls-powered configurations along with 41 options.
The 757's capabilities have grown in the 17 years it has been produced, and it
is currently available at much higher gross weights and in an ER (extended
range) version used by several European carriers in transatlantic operations.
In late 1995 and 1996 a total of three 757s were lost in accidents, with crew
reactions to emergency situations considered the probable cause. In the prior
15 years only one had been lost in a hijacking situation in China.
The backlog of undelivered ordered and optioned 757s speaks to the appeal of
the aircraft. The economic superiority of the 757 over the smaller
narrow-bodies (737 and MD-80) suggests that the heaviest casualties may befall
these latter aircraft, and that the airlines will tend to move up to the 757.
The major competitor to the 757 is not the smaller American twins, but rather
the Airbus A319/320/321 series which has piled up an impressive order backlog.
Airbus is increasingly penetrating the U.S. market, as seen by USAir's recent
order for up to 400--at the expense of existing Boeing options. Current
operating costs suggest the A320 is up to 25 percent more efficient than the
737s or MD-80s, and even equal to, or superior to, the 757, but Boeing's own
B-737-800/900s also challenge the B-757 from below.
15
<PAGE>
The difficulty in placing Eastern's 25-plane fleet after its bankruptcy perhaps
raises a note of caution with respect to any aircraft. Their disposal required
some two years, involving lessors, banks, and Boeing. Realizations were
reasonable in the early transactions, but tended to decline later. The fact
that the aircraft were encumbered by tax benefit transfer liabilities did not
appear to be a factor. There have been no recent `fire sales' of this nature.
In the final analysis, the 757 is assured of a firm share of the aircraft
market for many years to come in both passenger and cargo configuration. It has
excellent environmental characteristics and has not experienced technical
difficulties.
Economics
The MBA Model shows the 757 to be one of the most efficient aircraft of any
type, size, or age. Its combination of capacity, low fuel consumption and
reasonable price all contribute to its outstanding economics. We expect that
the 757 will prove to be one of the strongest players in the residual value
market for the next two decades.
16
<PAGE>
Statistics
B757 Fleet Statistics
As of January 2000
B757
-------------------------------------------------------------------------------
Number of Ordered Aircraft 1,052
Number of Delivered Aircraft 893
Number of Cancelled Aircraft 82
Backlog 77
Options 120
Delivered in the last 12 months 55
Number of Destroyed Aircraft 5
Number of Retired Aircraft 0
Number of Parked Aircraft 0
Number of Aircraft in Operation 887
Number of Operators 69
Number of Leased Aircraft 400
Number of Owned Aircraft 487
Fleet Average Hours 23,134
Fleet Average Cycles 10,042
Average Age 7.6
Availability
Total number on market, August/98: 8
Total number on market, August/99: 16
Total number on market, January/00: 1
17
<PAGE>
B767-200/-300/-400 Series Aircraft
The twin-aisle semi-wide-body 767 was launched in 1978 and entered service in
1982. The aircraft has undergone significant development in terms of gross
weight and capacity, affecting payload and range. The initial model, the
767-200, offered a MGTOW of 280,000 pounds, while the current 767-300ER is
certified at 412,000 pounds. Early development extended the range of the -200
as the ER model, enabling it to fly the Atlantic nonstop. Initial routings were
circuitous, since the aircraft had to stay within 90 minutes of a landing
place. But as experience was gained, the FAA and international authorities
approved ETOPS (extended range twin-engine over water operations), and more
direct routes became possible. The first production models of the larger
767-300 were delivered in 1986 in domestic configuration, soon to be followed
by successively higher gross weight Extended Range (ER) models. Orders for the
-200 slowed to a trickle following the introduction of the -300, and it is
probable that production of this model will be discontinued in the near future.
Much of the success of the 767 program is attributable to ETOPS operations,
where these aircraft (and the A310) have replaced 747s, DC-10s and L-1011s on
many long flights. So far there have been no untoward incidents under the ETOPS
programs.
Economics
The MBA Model indicates that it is hard to make money with the 767.
Satisfactory margins are achieved only by classifying the 767 as a narrowbody
in terms of seating capacity. By definition, MBA has assumed that only 67.5
percent of maximum certified seating is installed in a widebody, compared to 85
percent in a narrowbody. This is in accord with industry experience. By making
this narrowbody assumption, we increased the available seating in the 767-300
from 218 to 247. Interestingly, this compares with the experience of American
and Delta in their -300s. American uses theirs both domestically and
internationally, and has 215 seats installed. Delta's are all used
domestically, and have 248 seats.
In the long term, the relatively high seat mile costs of the 767s will make
them less desirable in the used market, and the demand for and price of these
aircraft will decline further than that of more desirable types. Their residual
values will also be impaired and they will move into the cargo market.
18
<PAGE>
MBA has classified the aircraft as having seven-abreast seating. Interestingly,
British tour operators utilize the aircraft in an eight-abreast configuration,
thus increasing potential maximum seating from 290 seats in our model to 375
seats claimed by Boeing. With 375 seats, the 767-300 becomes a potent economic
competitor. However, until the industry shows more signs of utilizing this
capability we will continue to use the conventional capacity.
Statistics
B767 Series Fleet Statistics
As of January 2000
B767-200 B767-300
-------------------------------------------------------------------------------
Number of Ordered Aircraft 242 642
Number of Delivered Aircraft 230 536
Number of Cancelled Aircraft 2 63
Backlog 10 43
Options 0 29
Delivered in the last 12 months 0 36
Number of Destroyed Aircraft 4 2
Number of Retired Aircraft 0 0
Number of Parked Aircraft 3 2
Number of Aircraft in Operation 226 534
Number of Operators 37 67
Number of Leased Aircraft 71 235
Number of Owned Aircraft 155 299
Fleet Average Hours 45,756 23,145
Fleet Average Cycles 16,713 6,857
Average Age 13.8 6.2
Availability
Total number on market, August/98: 1 (-200); 5 (-300)
Total number on market, August/99: 4 (-200); 15 (-300)
Total number on market, January/00: 7 (-200); 11 (-300)
19
<PAGE>
MD-80 Series Aircraft
McDonnell Douglas was the first manufacturer to recognize and act on the
imminence of future noise restrictions, as well as to take advantage of
available technology to stretch the DC-9 at least one more time from a basic
139-seat to a 172-seat configuration. The MD-80 series is an elongated, higher
gross version of the venerable DC-9 fitted with Stage 3 Pratt & Whitney
JT8D-217 / -219 engines. It was originally certified in 1980 after a few
embarrassing pratfalls. In the last decade gross weight and range have been
increased, and a truncated version, the MD-87, offered. Most recently, DAC had
announced the MD-90 series, using the new IAE V-2500 engine, which offered
quieter, more efficient operation. But the MD-90 was a slow seller, a victim of
the malaise, which gradually paralyzed Douglas and lead to the Boeing merger.
Boeing after the remaining 30 orders are delivered has now officially
terminated the MD-90. Saudi Arabian Airlines, with 19 MD-90s in service, is the
largest remaining customer.
Eleven hundred and sixty-three MD-80s of all versions are currently in service.
MD-80s have a five-abreast seating configuration, contrasted with the
six-abreast seating of the competitive Boeing and Airbus products. The
JT8D-217/-219 engines achieve only marginal compliance with Stage 3 noise
limits; therefore, the nagging concern exists that as noise rules are
invariably tightened the MD-80 will be squeezed out before its time. The only
solution would be reengining with the same power plants as the MD-90--an $8.0
to $10.0 million project per aircraft, or development of further noise
suppression, which is the more likely solution.
The MD-80 suffers from a smaller operator base than the Boeing
737-300/-400/-500s with which it competes. This has been a long-term problem
with the Douglas DC-8 and DC-9 as well. There are 56 airlines worldwide, which
operate the MD-80 series, and 40 percent are in the hands of two carriers,
American and Delta. Many operators utilize more than one type of MD-80; no
carrier utilizes more than four of the five. Most carriers have fleets of five
or less, suggesting that ultimate resales to these operators will inevitably be
in lots of one and two each.
The MD-80's accident record is relatively good--only seven have been destroyed,
only one of which is potentially attributable to design problems: the SAS icing
incident in
20
<PAGE>
Europe in 1994. The MD-80 should have a long and relatively problem-free
structural life, given the good record of Douglas on the DC-8, DC-9, and DC-10.
The MD-80's cost characteristics are reasonable due to its high seating
capacity; and provided it can skirt the ever-present risk of more stringent
noise restrictions, it should have a long and productive useful life in
competition with existing and newly developing aircraft. On the used market
older models are already priced in the range of $80,000 a seat--about 30
percent that of a new aircraft--giving it a significant advantage for a new
operator. Its largest probable market is with existing DC-9 operators,
replacing their 30-year-old aircraft as they are forced to retire them.
Economics
The MBA Model shows the MD-80 series (with the exception of the short-bodied
MD-87) to have superior economic characteristics. At comparable seating
densities, its lower capital costs offset slightly higher fuel consumption than
the 737-300. The stretched fuselage gives it better seat-mile costs than
earlier DC-9s.
General Comment
FAA very recently announced that they were planning to order the re-wiring of
all DC-10, MD-11 and MD 80-90 series aircraft. The contemplated AD will order
the removal of all metalized mylar-covered wiring and replacement within four
years in conjunction with major maintenance operation. The change is supposed
to decrease the danger of wire fires such as suspected to have brought down the
Swissair MD-11 a year ago. The FAA estimates the cost per aircraft at $380,000
to $800,000 per aircraft
21
<PAGE>
Statistics
MD-82/-83 Fleet Statistics
As of January 2000
MD-82 MD-83
-------------------------------------------------------------------------------
Number of Ordered Aircraft 583 284
Number of Delivered Aircraft 565 276
Number of Cancelled Aircraft 18 2
Backlog 0 6
Options 1 10
Delivered in the last 12 months 0 20
Number of Destroyed Aircraft 6 1
Number of Retired Aircraft 0 0
Number of Parked Aircraft 7 2
Number of Aircraft in Operation 590 260
Number of Operators 29 26
Number of Leased Aircraft 301 200
Number of Owned Aircraft 289 60
Fleet Average Hours 32,678 23,012
Fleet Average Cycles 20,860 13,069
Average Age 12.1 8.2
Availability
Total number on market, August/98: 0 (MD-82); 4 (MD-83)
Total number on market, August/99: 7 (MD-82); 0 (MD-83)
Total number on market, January/00: 6 (MD-82); 1 (MD-83)
22
<PAGE>
A300 Series Aircraft
The twin engine Airbus A300 was launched in 1971, just as the bigger American
widebodies were entering service. The first production model was delivered in
1974, and for a number of years the aircraft was a dud on the market--only Air
France and Air Inter ordered any. By the end of 1976, 34 had been ordered and
27 were in service. But then Airbus took off--aided by a dramatically
successful order placement for 28 aircraft by Eastern. As of January 2000, 537
A300s of all types had been ordered--outstripping the record for the DC-10
(446) and L-1011 (250) by a wide margin. In the past 12 months there have been
no deliveries, and although no passenger aircraft remain on order, the demand
for cargo versions (with 36 on order from FedEx and UPS) is thriving.
The aircraft has developed through five iterations, distinguished mostly by
gross weight increases and engine enhancements. Starting with the later
A300-600 series, a two-man glass cockpit was standard equipment.
Almost all earlier models of the A300 were equipped with GE CF6-50C2 engines,
except for 24 powered by JT9Ds. During the late 80s the newer P&W 4000 series
engines were installed in 31 A300-B4-200s for five customers.
Airbus offered a cargo version of the A300 in the mid-70s, but only eight
aircraft were sold at the time. In the mid-1990s Airbus hit it big with FedEx,
who ordered 36 and optioned 50 aircraft. Last year UPS also placed an order for
30 A300-600RFs, clearly establishing the primacy of the A300 as a cargo
aircraft. The A300 freighter offers a modest range and excellent cubic
capacity. The older used aircraft are currently being bought for freighter
conversions. The A300 offers a good alternative to the B-727 freighter, now
under a cloud due to FAA AD Note restrictions, and is also an alternative to
the aging B-707 and DC-8 freighters still in service.
The current production model of the Airbus A300 is the -600R version, with 160
passenger models in service (not including 35 A300-600s). These aircraft are
split almost 50/50 between the traditional GE CF6-80 and the newer P&W 4000
engines.
23
<PAGE>
The passenger A300 series has an operator base of 72 airlines, but a major dent
was put into the overall number in operation as a result of the Pan Am and
Eastern liquidations. As with the DC-10s and L-1011s, freighter conversions for
the A300s are affecting the number of aircraft on the market, as we predicted
previously.
The A300 complies fully with Stage 3 noise requirements. The metallurgical
qualities for the older aircraft have proved to be a bit difficult to cope
with, leaving operators with a rather large bill following structural
inspections. It is wise in any transfer of ownership or registration to check
the physical condition of the aircraft carefully, as it is not forgiving of
carelessness or neglect.
Airbus has played a very positive role in the marketing and re-marketing of the
aircraft, leading to some political criticism in the United States. This
support has been necessary in order to gain acceptance for a new type of
aircraft from a new manufacturer in the face of intense competition from the
established manufacturer, Boeing/Douglas, as well as the devaluation of the
American dollar.
A total of 15 A300s have been destroyed (several due to hostile action) and 35
have been retired or scrapped. The U.S. Navy shot down an Iranian passenger
flight over the Arabian Gulf and two Iraqi A300s were destroyed on the ground.
Economics
The economics of the big twin A300 has more than justified the faith, which
Airbus had when it launched the aircraft. Interestingly enough, Douglas also
toyed with the idea of a twin-engine DC-10, going so far as to develop an
active sales program, but then dropped the idea. In the MBA Model, the A300
shows a consistent operating margin in the low 20 percent range, and a net
margin of 11 percent or better, making it an attractive acquisition for
carriers able to utilize its capacity and medium-range capability.
The recent decisions of Continental and the new Pan Am to retire their A300s
casts a shadow over the economics of the aircraft. This is believed to be due
as much to the basic utility of the aircraft as well as to its improper
application.
24
<PAGE>
The economic comparisons following portray four models of the A300, including
the A300B4-100, B4-200, the updated A300-600, and the current A300-600R
version. The latter two are available with either Pratt & Whitney or GE
powerplants. The introduction of the A330 was apparently the final nail in the
coffin of this model as there were no orders during 1994, and only 13 orders
for passenger A300's since then, although there have been orders for 66 cargo
configurations. Production of the passenger models will probably cease soon.
Statistics
A300-600R Fleet Statistics
As of January 2000
A300-600R
-------------------------------------------------------------------------------
Number of Ordered Aircraft 219
Number of Delivered Aircraft 202
Number of Cancelled Aircraft 16
Backlog 1
Options 9
Delivered in the last 12 months 0
Number of Destroyed Aircraft 3
Number of Retired Aircraft 0
Number of Parked Aircraft 1
Number of Aircraft in Operation 195
Number of Operators 24
Number of Leased Aircraft 62
Number of Owned Aircraft 133
Fleet Average Hours 21,300
Fleet Average Cycles 11,017
Average Age 8.5
Availability
Total number on market, August/98: 1
Total number on market, August/99: 1
Total number on market, January/00: 1
25
<PAGE>
A310-200/-300 Series Aircraft
The A310 entered service in 1982, and 255 have been delivered. The earlier -200
version has been superseded by the higher gross weight and longer range -300
model. The aircraft are offered with both the GE and P&W power plants, the
former having about a two-thirds market share. The A310 was primarily ordered
by European carriers, and the only ones in service in North America are those
Delta took over from Pan Am (21 - quickly returned to Airbus) and those bought
by FedEx (34 total) to convert to cargo. The current operator base is almost
50, which includes 43 airlines plus military and governmental operators. The
A310 has appealed to those airlines wanting full widebody capability with
minimum seating capacity. It is generally operated with about 218 seats,
although Pan Am used only 192, and Delta knocked that down to 177, contributing
to poor economics.
In an economic comparison, the A310 is equal to or better than a 767-200, but
will be more costly per seat mile than the larger capacity 767-300. Various
gross weight options are offered up to 361,600 pounds, but this is almost
50,000 pounds below the maximum of 412,000 permitted on a hi-gross 767-300.
This means the Boeing can carry more payload further than an A310.
The A310 is also offered in a cargo/combi version, but no one operates it in
this mode. Like its brother the A300, this is changing as operators find
success with the freighter version. FedEx has converted 34 aircraft acquired
from Lufthansa and Delta and is very satisfied with them.
The A310 has had a boost from the current trend toward use of ETOPS twins on
over-ocean routes, replacing the larger 747s and DC-10/L-1011s. This permits
airlines to serve long thin routes more frequently and economically.
The A310 is a two-crew aircraft with a glass cockpit and incorporates a
standard tail-tank, which allows in-flight center of gravity control for
optimum fuel efficiency. The aircraft is too new to have experienced aging
aircraft maintenance problems. The A310 fully complies with Stage 3 noise
criteria. As of January 2000 twenty seven A310-300's remained on order.
26
<PAGE>
Economics The limited seating capacity of the A310 aircraft gives it a
relatively high cost per seat-mile and, therefore, a thin earnings potential in
the MBA Model. Many operators because of the nature of their route systems
justify the lower cost per aircraft mile and lesser capacity. However, in
head-to-head competition, the A310 (and the 767-200 as well) is at a
disadvantage because of its lack of leverage.
Statistics
A310-300 Fleet Statistics
As of January 2000
A310-300
-------------------------------------------------------------------------------
Number of Ordered Aircraft 197
Number of Delivered Aircraft 170
Number of Cancelled Aircraft 21
Backlog 6
Options 2
Delivered in the last 12 months 0
Number of Destroyed Aircraft 3
Number of Retired Aircraft 0
Number of Parked Aircraft 12
Number of Aircraft in Operation 167
Number of Operators 50
Number of Leased Aircraft 71
Number of Owned Aircraft 96
Fleet Average Hours 28,145
Fleet Average Cycles 8,864
Average Age 9.4
Availability
Total number on market, August/98: 13
Total number on market, August/99: 5
Total number on market, January/00: 4
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A319 - A320-200 - A321-100/-200 Series Aircraft
The A320 was Airbus' first all new design since the launch of the original A300
in 1971. The program was initiated in 1983 and logged almost 400 orders prior
to first delivery in 1988. The A320s are now offered with both the CFM-56 and
the IAE V-2500 engine, with the CFM version having a long head start.
The A321, a stretched version designed to directly challenge the 757-200 and
bridge the gap between the A320 and A330/340, was launched in 1989. The first
deliveries were made to Lufthansa and Alitalia in early 1994. Seating in the
A321 was increased to 186 (and more in all-coach configurations) from a nominal
150 in the A320 and the gross weight increased by 19,200 pounds. As of January
2000, there were 141 A321s delivered and 137 on order.
The A319 is the opposite of the A321--that is, a truncated version of the
original aircraft. The program was officially launched with a modest
six-aircraft order by leasing giant ILFC in late 1992. Prospects were not
encouraging as more than one year went by before subsequent orders were placed.
However, Air Canada provided a major boost to Airbus with an order of 34 A319s
in April 1994. As of July 1999, 625 A319s have been ordered, 145 delivered, and
458 are on order.
The Northwest and Air Canada situations are significant due to the Airbus
family concept factor, (common type ratings and minimal differences training
for pilots of the A319 through A340 aircraft), which is the core of the
manufacturer's goal to develop entire fleets with major carriers. Air Canada,
which operates A320s already, chose this Airbus concept with both the A319
order and an eight-plane A340 order as well. Northwest Airlines, which operates
69 A320s (and has 13 on order) ordered 50 A319s and switched their A340 order
for 16 A330s for delivery beyond 2000. Other carriers, including Air France and
Lufthansa, operate at least three of these five types, but the European
influence may tilt decision-makers at airlines such as these. Airbus believes
its concept will give its new designs significant advantages over Boeing
aircraft, and the 1997 and 1998 order books indicate it is doing just that. MBA
believes the combination of extremely efficient designs and the inherent
savings in training and other costs make
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the Airbus family an attractive avenue for an entire fleet refurbishment, as US
Airways' commitment for 400-some aircraft appears to justify.
The A320 family incorporates an increased amount of composites in its secondary
structure compared to older jets, a complete fly-by-wire control system, and a
computerized flight management system which, when engaged, virtually precludes
putting the aircraft into stalls or other extreme conditions. This system has
been blamed by some for two early incidents in which the crews placed the
aircraft in an untenable position close to the ground with the system
disconnected and from which it was unable to recover. These two aircraft were
totally cleared by the airworthiness authorities, as well as one involved in a
third incident in which the crew made a below-minimum approach in bad weather
and struck high ground. This third aircraft had no ground proximity warning
device installed, a device now required by the French government and long
required by many others. In general, all these components have held up well in
service, and the reliability of the aircraft has been excellent.
United's 1994 order for 50 A320s, plus an option for 50 more was announced as a
727 replacement, of which United still operates 53 and has 33 A320s on order.
It is obvious that other airlines will use their large orders to surplus older
aircraft as well. Alitalia, with 22 A321s in service and three on order, is
replacing its stable of MD-82s. As mentioned, Air Canada's commitments for the
A319 will eventually go to reduce the fleet count of DC-9s. Thus the advent of
the A320 family is hastening the retirement of older, less efficient jets. The
A320s currently in service are operating at seat mile costs as low as half of
that for older aircraft. The combination of all the above factors leads us to
believe the A320 family will enjoy a long production run and in-service useful
life, with strong residual values.
The A320 offers the advantage of being able to carry seven LD-3 cargo
containers--a feat not even the 767 can perform. The fuselage is approximately
10 inches wider than that of the 727/737/757 series, offering wider aisles and
roomier seats. There are no cargo or Combi models currently offered by Airbus,
although such a configuration is possible. The exception is the A300 `Beluga'
outsized special cargo aircraft, which is being leased for commercial
applications.
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Economics
The A320/321 vies with the 757 as the most efficient aircraft in service. Fuel
efficiency, new technology design and low operating cost parameters combine to
give these aircraft among the lowest seat mile costs of any being built or in
service. MBA believes both will produce satisfactory operating and net ratios
well into this century. The A319 will not be as favorable, as is the case with
most truncated derivatives (747SP, L-1011-500). They will, however, provide
enough incentive for larger carriers (likely with Airbus aircraft already) to
order and place them at the bottom of the capacity scale in their fleets.
Statistics
A320 Fleet Statistics
As of January 2000
A320
-------------------------------------------------------------------------------
Number of Ordered Aircraft 1,415
Number of Delivered Aircraft 775
Number of Cancelled Aircraft 132
Backlog 508
Options 160
Delivered in the last 12 months 84
Number of Destroyed Aircraft 6
Number of Retired Aircraft 0
Number of Parked Aircraft 5
Number of Aircraft in Operation 769
Number of Operators 83
Number of Leased Aircraft 444
Number of Owned Aircraft 325
Fleet Average Hours 15,169
Fleet Average Cycles 8,787
Average Age 5.7
Availability
Total number on market, August/98: 8
Total number on market, August/99: 5
Total number on market, January/00: 3
30
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A330 Aircraft
The A330 and A340 projects were launched simultaneously in 1989 and quickly
racked up over 200 orders in two years for the new aircraft. Both aircraft
utilize the same basic airframe and wing, and have identical dimensions in the
basic models. The A330 is a big twin-engine aircraft, and the A340 utilizes
four CFM-56 engines to obtain greater range and payload capability over water.
Both aircraft continue the A300/310 fuselage cross section and design concepts,
but are 33 feet longer than the A300. Gross weight for the initial delivery
aircraft is about 140,000 pounds greater than the A300-B4 for the A330, and
over 200,000 pounds greater for the A340.
The A330 offers significantly greater capacity and lower seat mile costs than
the Boeing 767 or the older A300s. The A330/340 now both come in two
configurations, a standard body long-range aircraft, and a shorter-bodied
longer-range model. In a nine-abreast, all economy configuration the A330/340
can carry 440 passengers, giving it a capacity close to the 747, identical to
the 777-200 series and 10-to-20 percent greater than the DC-10/MD-11 or the
L-1011.
We do not believe the A330/340 will make obsolete any of the earlier
widebodies, though evidence exists that the A300-600 line was all but finished
with the introduction of the A330. It will, however, hasten their replacement
in the fleets of the major carriers, and increase the number on the market
available for low cost services, cargo conversions, or alternative military
missions. As we predicted last year, the economic superiority of the big
Airbuses and the B-777s brought an end to the MD-11 production.
Economics
The MBA Economic Model shows the A330 to have one of the highest operating and
net margins of any aircraft due to its excellent cost characteristics and great
operating efficiency. Cost per seat mile is among the lowest of any aircraft
type, and the wide range of capabilities of the A330, from domestic
medium-range, high density to long-range ETOPS international routes, makes it
very desirable.
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<PAGE>
Statistics
A330-300 Fleet Statistics
As of January 2000
A330-300
-------------------------------------------------------------------------------
Number of Ordered Aircraft 204
Number of Delivered Aircraft 78
Number of Cancelled Aircraft 52
Backlog 74
Options 59
Delivered in the last 12 months 3
Number of Destroyed Aircraft 1
Number of Retired Aircraft 0
Number of Parked Aircraft 0
Number of Aircraft in Operation 78
Number of Operators 13
Number of Leased Aircraft 28
Number of Owned Aircraft 50
Fleet Average Hours 9,911
Fleet Average Cycles 3,815
Average Age 3.6
Availability
Total number on market, August/98: 0
Total number on market, August/99: 2
Total number on market, January/00: 2
32
<PAGE>
F.50 Aircraft
The F.50 was the replacement for the F.27, and came into service in 1987, a
year after the last F.27 was delivered. Although it is physically similar to
the F.27, and has the same cabin length as the F.27-500, the F.50 design has
less than 20 percent commonality with its predecessor as newer technologies
were applied to the 30-year-old design. The F.50 is principally a European
aircraft, with 131 of the 211 aircraft in service operated by European
carriers. No F.50s are operated directly by the European majors, but many are
being operated by their regional subsidiaries, such as Aer Lingus Commuter (6),
KLM CityHopper (13), and SAS Commuter (22). None are operated in the U.S.
The demand for the F.50 ended abruptly, and although it was still nominally a
production aircraft when Fokker went out of business, 1995 was the last year of
production, and 1993 was the last year of meaningful production. There were 27
aircraft built in 1992, ten in 1993, and one thereafter. It was not the demise
of Fokker which terminated the F.50, but the competition of the regional jets
and other large turboprops.
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<PAGE>
Statistics
F50 Fleet Statistics
As of January 2000
F50
Number of Ordered Aircraft 220
Number of Delivered Aircraft 212
Number of Cancelled Aircraft 8
Backlog 0
Options 0
Delivered in the last 12 months 0
Number of Destroyed Aircraft 1
Number of Retired Aircraft 0
Number of Parked Aircraft 8
Number of Aircraft in Operation 211
Number of Operators 30
Number of Leased Aircraft 148
Number of Owned Aircraft 63
Fleet Average Hours 13,434
Fleet Average Cycles 15,414
Average Age 8.3
Availability
Total number on market, August/98: 9
Total number on market, August/99: 5
Total number on market, January/00: 2
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<PAGE>
F.70 & F.100 Aircraft
The Fokker 100 went into service in 1988 as the successor to the F.28 series.
It is a longer, stretched version of the basic F.28 design equipped with Rolls
Royce Tay engines which meet Stage 3 noise requirements and have greater power.
The basic aircraft can accommodate up to 122 passengers in an all-economy
version, and is configured at 104 in the MBA Model.
A total of 280 F.100s have been built. Over 40 percent of the delivered
aircraft are at American (75) and USAir (40), who are not happy campers.
Twenty-one other carriers make up the rest of the F.100 operator list.
Early in 1993, a joint venture between Fokker and GPA (now GECAS) collapsed,
leaving 58 aircraft without a destination. The backlog was subsequently worked-
off through purchases by old customers as well as start-ups like
Raleigh-Durham's Midway.
A truncated version of the F.100, Fokker rolled out the F.70 in 1994. The
aircraft was aimed directly at the largest turboprops--ATR-72, Jetstream 61,
etc.--as an alternative in some larger, short-haul commuter markets. If anyone
could have pulled this off, it was Fokker--as it proved with the F.28. But this
time around, the competition was fiercer as far as jets were concerned.
Already, the AVRO RJ-70 and Canadair RJ-100/-100ER grabbed over 150 orders in
this segment, while the F.70--the last of the three to enter service--captured
47 orders. The fact that the aircraft was a shortened F.100 did not help it, as
the major structures were designed to carry 100-110 people.
Economics
The MBA Model shows a reasonable operating margin for the F.100, generating an
average margin of 23 percent for the mature aircraft and 15 percent at the net
level. It should be noted that the major operators (American and USAir) paid
only about two-thirds of the nominal price for the aircraft, and at these
prices the net margin is substantially improved. The figures suggest that the
F.100 has matured to a price level where any route which could take advantage
of the aircraft's seating. Typically, this will be those routes where yields
are higher and capacity is not a fundamental requirement.
35
<PAGE>
Statistics
F70 Fleet Statistics
As of January 2000
F70
-------------------------------------------------------------------------------
Number of Ordered Aircraft 75
Number of Delivered Aircraft 45
Number of Cancelled Aircraft 30
Backlog 0
Options 0
Delivered in the last 12 months 0
Number of Destroyed Aircraft 0
Number of Retired Aircraft 0
Number of Parked Aircraft 0
Number of Aircraft in Operation 47
Number of Operators 12
Number of Leased Aircraft 17
Number of Owned Aircraft 30
Fleet Average Hours 6,586
Fleet Average Cycles 5,662
Average Age 3.9
Availability
Total number on market, August/98: 0
Total number on market, August/99: 0
Total number on market, January/00: 0
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CF6-80C2 Engine
Rating: 52,500-61,500 lbs thrust
Applications: Airbus A300-600/-600R, A310-200 Advanced/-300; Boeing
747-200/-300/-400, 767-200ER/-300/-300ER; McDonnell Douglas MD-11
General Electric developed the CF6 engine as the main power source for the
DC-10 by late sixties. Initial thrust ratings of 40,000 lbs have steadily
increased to 67,500 in the -80E1 variant that is offered on the A330. The CF6
engines have accumulated more than 200 million flight hours in 28 years of
operation. Dispatch reliability is reported to exceed 99.9%. One CF6-80C2
engine remained on wing on a US Airways B767-200ER for more than 30,000 hours
with only routine maintenance, establishing a new record of reliability.
All CF6-50C/E and later/higher derivative of CF6 family of engines achieve
Stage 3 noise compliance. Early models of the engine required some
modifications to upgrade them to the later -C2/E2 standard, but this was a
relatively minor problem compared with the earlier versions of the Pratt &
Whitney engines.
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VII. COVENANTS
This report has been prepared for the exclusive use of Morgan Stanley & Co
International Limited and shall not be provided to other parties by MBA without
the express written consent of Morgan Stanley & Co. International Limited.
MBA certifies that this report has been independently prepared and that it
fully and accurately reflects MBA's opinion as to the Current Market Value. MBA
further certifies that it does not have, and does not expect to have, any
financial or other interest in the subject or similar aircraft and engine.
This report represents the opinion of MBA as to the Current Market Value of the
subject aircraft and engine and is intended to be advisory only in nature.
Therefore, MBA assumes no responsibility or legal liability for any actions
taken, or not taken, by Morgan Stanley & Co. International Limited or any other
party with regard to the subject aircraft. By accepting this report, all
parties agree that MBA shall bear no such responsibility or legal liability.
PREPARED BY:
Edwin G. Lindquist
Director - Asset Assurance
REVIEWED BY:
February 1, 2000 Morten S. Beyer, Appraiser Fellow
Chairman & CEO
ISTAT Certified Senior Appraiser
38
