Mexico Set for Loss on AMLO Sale of $219 Million Dreamliner

(Bloomberg) -- Mexican President Andres Manuel Lopez Obrador shouldn’t expect a windfall from his decision to sell the Boeing Co. 787 Dreamliner that has transported his predecessor since 2016.

The so-called V.V.I.P. -- very, very important person -- aircraft is likely to generate a multimillion-dollar loss on the untested secondary market for customized 787s, according to an analysis by Flight Ascend Consultancy. Based on that report, Mexico will probably get about $76 million less than it paid even in a best-case scenario.

“To bring an aircraft to market can be very challenging, can take a long time, and would have to be at a significant discount to allow the sale to take place,” Daniel Hall, a senior analyst at Flight Ascend and author of the report, said in an interview Monday.

Lopez Obrador has criticized the plane, which cost $218.7 million, as too lavish for the leader of Mexico, where millions of people live in poverty. He opened the aircraft to the media over the weekend, giving Mexicans an inside view of its plush seats, dark paneling and swanky living quarters.

The 787-8 headed Monday to a desert lair in Victorville, California, where Boeing will store the presidential jet until a buyer is found, Finance Minister Carlos Urzua and Banobras development bank director Jorge Mendoza said in a message to reporters in Mexico City.

They didn’t say how much the country is seeking for the plane, which is named for Jose Maria Morelos, a hero of Mexico’s early 19th century struggle for independence from Spain. Carlos Cruz, a spokesman for Urzua, said the government will be providing more information on advances in the sale in the coming days.

Urzua, speaking Sunday in front of the 787 at the presidential hangar in Mexico City’s airport, said the government will also sell an additional 60 planes and 70 helicopters.

The Dreamliner was a good value, Ascend found in a December 2015 report for Banobras, which financed the purchase. The cabin isn’t opulent when compared to the gold-plated fixtures favored by some heads of state and Middle Eastern sheikhs. About half of the interior is taken up by standard airline seating for staff.

Although the 787 became a symbol for an out-of-touch regime, “in reality, the aircraft was really practical,” Hall said.

The airliner was only the sixth 787 ever built, and it started life as a flight-test aircraft. That places the plane among the early, overweight planes -- nicknamed “terrible teens” for their assembly struggles and places near the start of the Dreamliner’s production run -- that Boeing parked for years, retrofitted and eventually sold at discounted prices.

The limits on performance for the early model, and cost to install a typical commercial interior, would probably make the aircraft hard to market to an airline. Ascend estimated the jet’s market value, as of January 2019, would be about $81.6 million it it were sold to a commercial carrier and $142.4 million if it went to a private buyer -- or $76.3 million less than the purchase price.

It’s not the only tricked-out Dreamliner on the market. China’s HNA Group Co. is in talks to sell a fleet of private jets, including a 787 that’s available to rent from $70,000 an hour, Bloomberg News reported in October.

It’s rare for a government to put its state aircraft on the market. Highly customized wide-body jets are only sold every few years, and a V.V.I.P. Dreamliner has never been put up for sale with a luxurious interior fully installed. Now there are two on the market.

“It’s new territory,” Hall said.

To contact the reporters on this story: Eric Martin in Mexico City at emartin21@bloomberg.net;Julie Johnsson in Chicago at jjohnsson@bloomberg.net

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, ;Vivianne Rodrigues at vrodrigues3@bloomberg.net, Tony Robinson

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