Airplane Auctions and a Bidder’s True Value
Recently, several Boeing 747’s appeared to be placed on an auction site called Taobao in China with a minimum offer of approximately $18.5 million (seen on the site as 122 million yuan). Seeing as the way Taobao works is through receiving offers, it would appear that this type of auction would be an ascending auction. Furthermore, since the minimum offer is relatively large compared to the price of most other items, a logical conclusion would be that these planes are of high value to consumers. However, as the article points out later, a similar auction has occurred in the past (albeit with planes that did not have an engine) where, despite the asking price being substantially smaller, no bidder was willing to pay up. The issue here was that there was a hidden cost in shipping: shipping the plane to the winning bidder could cost several times that of the actual plane.
The article also makes a point of how the mere fact that these 747’s are on an auction site in the first place points to the declining appeal of these once-great and iconic aircrafts. Seemingly contradictory, though, is the appeal that these planes have precisely due to their iconic standing in aviation history. So, how could an auctioneer even hope to gauge the possible “true” value that these planes hold with bidders? Why auction off such a pricey item if very few if any bidder would cough up more than ten million dollars? As it turns out, old 747’s are being “recycled” into a variety of other ventures among which a restaurant and hostel are most notable. So, it seems that there does seem to be value in 747’s-just not in the way most would expect.
https://www.economist.com/blogs/gulliver/2017/09/boeing-boeing