Friday, June 14, 2013

Sale Now -- Very VIP Jets: WSJ

June 14, 2013, 10:27 AM

By Daniel Michaels

The Wall Street Journal

What’s next for the unloved A340?

Big versions of the A340 jetliner from European plane maker Airbus haven’t fared well lately in the market, but that doesn’t mean their lives are over. At the right price, say industry officials, the planes could be quite attractive.

Question is, “What’s the right price?” Probably a lot lower than current owners hope.

The giant A340-500 and A340-600 can carry hundreds of people across the world, but their fuel consumption and maintenance costs are higher than those of competing 777 models from Boeing Co., airlines say. Airbus, a unit of European Aeronautic Defence & Space Co., stopped building the models in 2011 after barely a decade because demand evaporated. Airlines that fly them, including Virgin Atlantic Airways Ltd., Dubai’s Emirates Airline and Singapore Airlines, are removing them from their fleets at relatively young ages.

Airbus and some investors who own the planes see a good future for them – though not as standard airliners.

Airbus is pitching the A340-500 – one of the world’s longest-range planes – as a great VVIP (that is, Very VIP) private jet. Imagine a widebody airliner built to carry 300 people with just a handful onboard. Sounds like the good life. One Central Asian government just snapped up an A340-500 that had been idle for several years from a Saudi company.

The bigger A340-600 could work well for a charter airline that packs in travelers on non-scheduled flights, Airbus says.

“If I were running a charter airline now, I would look at an A340-600,” said John Leahy, Airbus chief operating officer for customers.

Hi Fly Malta, an airplane-leasing company, is now closing a deal for at least one of Virgin’s former A340-600s, according to people close to the talks. Hi Fly Malta’s website shows the planes. (Hi Fly Malta is a subsidiary of the Lisbon-based Hi Fly Aero  set up to own and run the planes.)

Here’s the catch: The planes originally sold for more than $100 million each and appraisers until recently valued them at north of $40 million. Now, people who buy and sell jetliners say they’re likely to fetch no more than $20 million. For some investors holding the large metal assets, accepting that price won’t be easy.


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