Jetrader - Spring 2015 - 41

appraisal

B737-800

Oliver Stuart-Menteth
ISTAT Senior Certified Appraiser
Managing Director
Fintech Aviation Services Sarl
Tel: + 41 22 548 1707
oliverstuart@fintech.aero
www.fintech.aero

Background

near- to medium-term as Boeing recently
announced their intention to raise model
production rates yet again to 52 per month
in 2018.

The 737-800 was launched in 1993 on
the back of orders from Hapag Lloyd Flug,
and since the first deliveries in 1998, the
variant has accumulated 4,540 orders with
3,485 deliveries. The 737-800 is the most
popular variant of the 737NG family with
operators and financiers, accounting for
70 percent of all NG orders. The aircraft
continues to offer competitive operating
economics with adaptable seating solutions
allowing it to service both the low-cost
and main-line carriers. A long-range version is not available; however the incorporation of optional Air Partners APB or
Blended Winglets increases fuel efficiency
and provides additional take-off and range
performance enhancements. Such are the
benefits of this option that 98 percent
of all -800s delivered from 2012 to 2014
incorporated this modification.
The leasing and finance sector owns
over 60 percent of the installed fleet,
and remains a core asset for the sector.
Dispersed amongst 167 operators, the 16
largest account for over 50 percent of the
current fleet, with Ryanair the largest at
302 units. Backlog currently stands at 1,055
with 40 aircraft in storage and 3 ex-Jet
Airways in a state of part-out. The average
age of the fleet stands at only 6.4 years
and is unlikely to waiver significantly in the

Source: ATDB

Current and Future Outlook
Since 2008, values for the 737-800 have
recovered well and market values are currently at or near to base values. The ability
of lessors to continue to place the new
737-800s on lease for 12 years at firm
market rates clearly indicates the value
of the aircraft to both operators and the
finance industry alike. Reliance on a single
powerplant supplier may reduce negotiating leverage of some purchasers but the
used market benefits from a homogenous
product with excellent liquidity.
As of the start of 2015 Air Fax were
reporting 16 737-800 aircraft for sale
or lease (an increase of two units from
January 2014). Given the financial and

political turmoil in Russia and Ukraine,
some lessors who have significant 737-800
exposure are assessing their options and
it is likely that availability will increase
in the short term. In addition, as a result
of production rate increases in 2005 and
2006, we also expect further availability as
initial 10 year lease terms are completed.
Offers from part-out companies currently
remain below Current Market Values but
the launch of Aeronautical Engineer's -800
freighter programme will offer further
residual-value support.
There is, understandably, considerable
focus on forecasted values of the 737-800
over the next 10 years given the planned
introduction of the 737-8MAX in 2017
and Boeing's reluctance to confirm the
estimated NG termination date. Fintech
does not foresee any immediate impact
in residual values of the model as a whole
and we share the common conception that
residuals will become impacted once the
MAX assumes 40-45 percent of the NG market. We also believe the magnitude and
timing of any shift will also partly depend
upon oil price trends. Given that the main
attribute of the 737MAX is the provision of
a more fuel-efficient engine some operators
and investors will be re-assessing purchase
pricing levels in light of the recent pricing
collapse of jet fuel.

Boeing 737-800 Values as of January 2015
Future Values inflated at 2%

Year of Build

Current Market
Value

Current Base
Value

2015

2017

2019

2021

2023

2025

2027

2029

1998

$15.16

$15.32

$14.34

$12.17

$9.80

$7.36

$5.11

 

 

 
 

2000

$17.59

$17.78

$16.89

$14.92

$12.66

$10.19

$7.66

$5.32

 

2002

$20.41

$20.63

$19.36

$17.58

$15.52

$13.17

$10.60

$7.97

$5.53

 

2004

$23.85

$24.10

$22.77

$20.15

$18.29

$16.14

$13.71

$11.03

$8.29

$5.75

2006

$27.70

$27.99

$26.50

$23.69

$20.96

$19.03

$16.80

$14.26

$11.48

$8.62

2008

$30.99

$31.32

$30.18

$27.57

$24.65

$21.81

$19.79

$17.48

$14.83

$11.94

2010

$35.04

$35.41

$33.91

$31.39

$28.68

$25.64

$22.69

$20.59

$18.18

$15.43

2012

$40.22

$40.65

$38.62

$35.29

$32.66

$29.84

$26.68

$23.60

$21.43

$18.92

2014

$47.00

$47.50

$44.72

$40.18

$36.71

$33.98

$31.05

$27.76

$24.56

$22.29

Aircraft specification assumes MTOW 174,200 lbs, CFM56-7B27E engines and Blended Winglets
Future Values assume maintenance status returning to half life at 4 years of age.
Jetrader  *  Spring 2015 41
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Jetrader - Spring 2015

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