ISTAT Jetrader - Spring 2021 - 37

with the 737-900ER, and though each
has similar ranges of 3,000 nautical
miles, the 737-900ER can carry 16 more
passengers in a typical, two-passenger
class configuration. It has been used as
a replacement for the 757-200 on routes
that do not need the 757-200's 4,000
nm range, including transcontinental
routes in the U.S. The 737-900ER is now
being supplanted by the 737-MAX 9, the
737-MAX 10 and the A321neo.
Not surprisingly, the COVID-19
pandemic has negatively impacted
737-900ER utilization, resulting in 30%
of the delivered fleet being placed into
storage as of 1 December 2020. This
compares favorably to the A321ceo,
with 40% of its installed fleet in
storage. The difference in percentage
of fleet stored may be driven by
the slightly lower cost per trip (as
acknowledged by Airbus) of the 737900ER versus the A321-200.
Interestingly, Delta, the only
carrier with significant quantities of
both - 129 737-900ERs and 114
A321-200s - has approximately 30%
of its -900ER fleet in storage versus
approximately 20% for the A321-200.
This could be driven by Delta's vacant
middle-seat policy as it attempts to
maximize passengers on those trips
needing the higher-capacity A321-200.
Although different definitions of storage
and utilization across airlines makes
these comparisons imperfect, they
are still useful data points as indirect
indicators of aircraft value retention.
Operating aircraft generate revenues,
while stored aircraft obviously do not.
Even during the pandemic, it remains
true that the value of any particular
aircraft is directly related to the
revenue it can produce.
AISI anticipates the 737-900ER
delivered fleet will return to nearnormal utilization levels by the end of
2021. We see no large-scale earlyretirements of the 737-900ER, as the
operators of these aircraft will still need
to fill the post-pandemic niches in their
networks for which the 737-900ER
was designed.

Overall Approximate COVID-19 CMV Impact

% Change

737-800

737-900ER

A320

A321

757-200

-10%

-15%

-10%

-5%

-20%

737-900-ER Values as of 01 December 2020
($MM)

CMV

Base Values

YOB

2020

2020

2021

2022

2023

2024

2025

2026

2007

22.1

22.9

22.0

20.4

18.9

17.6

16.3

15.1

2011

28.0

29.1

27.9

25.9

24.0

22.3

20.7

19.2

2015

33.5

34.9

33.3

31.0

28.8

26.7

24.8

23.1

Aircraft Specification: CFM56-7B27E, 187,700 lbs. MTOW.
All value assume half-life condition
Future Base Values assume 2% inflation

As for potential 737-900ER
freighter conversion programs, more
than 80% of the fleet was delivered
since 2012, which will likely make
potential feedstock cost too high for
a number of years. This may provide
time for the recently certified A321-200
conversions to lead the replacement
market for 757 freighters, which
may preclude a 737-900ER program
given its smaller number of potential
feedstock aircraft.
The above chart shows AISI's
overall opinion on the impact the
COVID-19 pandemic has had on
values for the 737-900ER and its
main competitors.
We do expect further pandemicdriven Current Market Value declines
going into 2021 for most aircraft
types, but for aircraft like the 737900ER whose economic useful lives,
we believe, will not be significantly
impacted by the pandemic, Base Values
should continue their historic 5-10%
age and utilization annual declines.
Given the lack of a stable and
thriving aircraft trading market, AISI
has relied more on additional value
indicators such as lease revisions,
including rate reductions, power-by-

the-hour agreements and payment
holidays, lease rejections, order
cancelations, and numbers of aircraft
in storage or permanently retired in
determining our value opinions. In line
with the ISTAT definition, our Base
Values are based on the underlying
economic value of an aircraft in an
open, unrestricted, stable market
environment with a reasonable balance
of supply and demand, which clearly
does not describe the commercial
aircraft market in late 2020.
Accordingly, although AISI's
Current Market Value opinions are
only modestly below Base Values, one
must keep in mind that Current Market
Values assume that the seller is not
under unusual pressure for a prompt
sale and is therefore not a distressed
seller. Future Base Values are
determined similarly, as AISI does not
project recessions, fuel price spikes/
collapses, etc., that may impact future
demand. We do anticipate, however,
that Current Market Values will recover
to near 2019 levels by the end of 2023
when passenger demand should be
more in line with the supply of airline
passenger seats.
Jetrader

* SPRING 2021 * 3 7
ISTAT Jetrader - Spring 2021

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