Why Hong Kong's airport authority is selling this plane for $1 million

PHOTO: South China Morning Post

An old Boeing plane abandoned in Hong Kong four years ago by a bankrupt Russian carrier is now available to any buyer willing to stump up US$795,000 (S$1 million).

The Airport Authority Hong Kong has sought submissions from parties to purchase and remove the 27-year-old Boeing 767. In its tender invitation, the authority stated that the plane had no maintenance records and was not in good condition. It added that the successful bidder was required to remove the aircraft within three months, whether as a whole or in parts.

In October 2015, Russia's one-time biggest private airline Transaero collapsed under a mountain of debt. That year, flight UN965 took off from Domodedovo Moscow Airport for Hong Kong, arriving on October 26, a day after the airline's operating licence was revoked.

It was Transaero's last flight, leaving the 767 plane stranded ever since.

In December 2015, the Airport Authority detained the plane over the non-payment of parking fees. In July 2016, the operator sought to claw back money by using the Airport Authority Ordinance for the first time.

However, the authority has since obtained a court order to sell the plane on an "as-is" basis, according to the tender.

With no maintenance records and a low likelihood of ever flying again without millions being spent on repair works - on top of tracing original documents - the plane is destined for the scrapyard, according to aircraft leasing experts.

Having previously reviewed Boeing 767 aircraft and worked on the ones that came out of the Transaero bankruptcy in mainland China, David Yu, the only independent International Society of Transport Aircraft Trading appraiser in China, said the reserve price for the plane set by the authority seemed to be above its scrap value.

He said the sale would be a difficult one without any documentation of the plane, parts or its current state.

"Even though it's an old aircraft past the normal 25-year assumed lifespan, no records is what will kill it. It would take a lot of additional capital to make it flyable again, including reconstructing records and other maintenance," Yu said.

Peter Huijbers, a former aircraft leasing executive who runs PH Aviation Asia, which advises on leasing, financing, investment and procurement, said the plane's future would come down to the value of its spare parts or viability as a cargo craft. He added that both options came with major hurdles.

"The requested deposit would, in my view, only be sensible if the engines can be brought back to life. Even if the airframe and gear are serviceable, it would have a value less than the deposit," Huijbers concluded.

Laying out what a buyer could do with the plane, Huijbers said "substantial money" had to be put in to make it fly, as this required a recertification of all parts, including an overhaul, and some pieces might have already been subjected to regulatory warnings, needing replacement. With no records, it would be a costly exercise.

He added that a pre-purchase inspection might not reveal corrosion in the plane, which could be present, given it had been idle in an environment that was both saline and humid, conditions not ideal for aircraft metal.

"It smells like throwing good money after bad," Huijbers concluded. "It might be more worthwhile going to Macau and taking a gamble there."

It is unclear why the Airport Authority has only acted now to get rid of the Transaero plane. Having been abandoned in the maintenance hangars of Hong Kong's airport, the Boeing 767 is expected to be in a questionable condition.

Huijbers said the aircraft could be converted for other uses, such as letting aviation engineering students from Polytechnic University work on its machinery for experience.

The tender closes on August 9.

This article was first published in South China Morning Post