With the drop in demand, the overflowing supply of used aircraft on the market made very significant changes to the way aircraft are priced. The latest order by Alliance Airlines, an Australia-based airline that also provides charter services, shows how much.

Alliance Airlines announced that it has entered an agreement with Azorra Aviation, a United States-based lessor to expand its fleet by 14 Embraer E190 aircraft. The deal, valued at $79.4 million, also includes six spare General Electric CF34 engines, and a package of inventory related to the aircraft, ground support equipment and training devices.

In addition, the Australian company will have the option to purchase an additional five Embraer jets, including a full-flight simulator and related training equipment.

The order for the used E190 aircraft would mark a significant expansion of Alliance Airlines’ operations, as the all-Fokker aircraft operator would grow by a third of its current size. As of August 3, 2020, the Australian airline owned 37 Fokker jets and five Fokker F50 turboprops in its fleet. A further three aircraft were stored, according to the company.

Presented opportunities

The $79.4 million acquisition for the 14 Embraer E190 jets would mean that one E190 cost Alliance Airlines a measly $5.6 million per aircraft. However, since the deal also includes six spare GE CF34 engines and further assets related to the narrow-body jet, meaning it would not be crazy to speculate that the price for one E190 was much cheaper.

The acquisition by Alliance Airlines presents a very stark contrast to a deal that Japan Airlines made during the Paris Air Show 2017 in June 2017. The Japanese carrier ordered a single new E190 jet during the tradeshow. At the time, Embraer indicated that the list price of the aircraft stood at $50.6 million. During the Dubai Airshow in November 2019, an Egyptian leasing company called CIAF Leasing shook hands with the Brazilian manufacturer for three E190 aircraft, valued at $161.4 million at list prices.

While not very significant, the list price grew by $3.2 million from 2017 to 2019.

Biennial event Dubai Airshow 2019 closed its doors on November 21, 2019. While the event organizers highlight that this year the show attracted a record number of visitors and exhibitors, the sales were slower than two years ago. In fact, the value of orders made (or rather, announced) on site were over two times lower than two years ago. Order book on site reached $54.5 billion in 2019, while it stood at almost $113.8 billion in 2017.   

Even so, the E190 depreciated in value massively as the crisis hit the global aviation sector. With a newer version, the E190-E2, available at the market at an eerily similar price for a better performing product. Furthermore, used E190 overflowed the market throughout 2020, as operators such as Air Canada, American Airlines retired the aircraft from active service.

In total, 231 Embraer E190s are stored throughout the fleets of airlines, according to planespotters.net data. As of March 31, 2020, Embraer delivered 564 jets, with four additional units in the backlog. Thus, out of the total 543 units, including the backlog and excluding 25 aircraft that were either scrapped or written off, 42% of the world’s total E190 fleet is currently stored.