Fleets: 777-300ER availability glut as early leased units enter market. Cheap deals and overcapacity

Premium Analysis

The 777-300ER was a late bloomer. By improving capabilities and through rising fuel prices the type has become the most successful 777 variant, gaining traction only late in life.

The first -300ER was built in 2002, and half of the world's -300ER fleet was built over the following decade. The other half of the fleet was built in only five years.

These two key statistics are forcing airlines and lessors to re-evaluate medium and long term plans. Firstly, while the -300ER in many instances is young, many airlines have frames that are mid-life. As these operators tend to be premium and prefer low average fleet ages, mid-life aircraft could be disposed of.

Secondly, the -300ER's late-life production increase means there will likely be a glut of -300ERs that rapidly come onto the market. The A350 and forthcoming 777X reduce the -300ER's once-leading economics.

Faced with oversupply and potential retrofit costs, lessors may opt to allow airlines to renew -300ER leases (or purchase entirely) at much lower rates. This will likely create some overcapacity as airlines use this "cheap growth" to their advantage. While this brings airlines an opportunity, there is also a challenge that the -300ERs that they own outright may no longer bring good sales, and/or may need a notable depreciation charge.

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