ISTAT Jetrader - Summer 2021 - 29

Boeing 737 MAX 8 (LEAP-1B27 Engines, 177,500 lb MTOW)
Values as of 1st Quarter 2021 in US$ Millions
Build Date
Jun 2016
Jun 2017
Jun 2018
Jun 2019
Jun 2020
Mar 2021
Current
Market
Value
31.0
33.8
Future Base Values @ 1.00% Inflation
Base
Value
37.3
39.8
2022 2023
35.4
37.7
33.5
35.7
36.9 42.4 40.2 38.0
48.5 45.6 43.2
51.0
47.9
45.3
2024
31.7
33.8
36.1
41.0
42.9
2025 2026
2027
2028 2029 2030
23.8
2031
29.9 28.2 26.6 25.0 23.6 22.2 20.8
32.0 30.2 28.5 26.8 25.3
34.2 32.3 30.5 28.8
40.2 45.2 42.8 40.6 38.4 36.4 34.5 32.6 30.8
44.1
46.4
38.8 36.8 34.9 33.0
Source: AVITAS BlueBook of Jet Aircraft Values, 1st Half 2021
previously. As investigations into
the accidents progressed, it became
clear that the causes were related
to the maneuvering characteristics
augmentation system (MCAS)
incorporated into the 737 MAX design.
Following a lengthy investigation,
the system was recalibrated using
a software update with the close
cooperation of the Federal Aviation
Administration (FAA) and other
authorities. While this process was
underway, the 737 MAX fleet remained
inactive, all deliveries were stopped
and Boeing suspended production
for a time.
In early 2020, the COVID-19
pandemic crisis was beginning to
unfold. Commercial aviation worldwide
was thrown into turmoil as passenger
traffic collapsed and demand for
aircraft all but evaporated. The severe
market downturn was still ongoing
when the FAA finally lifted the 737 MAX
grounding order in November 2020.
This cleared the way for a resumption
in airline operations and the delivery
of new aircraft. While other authorities
have followed suit, including the
European Union Aviation Safety Agency
and the British Civil Aviation Authority,
approval from the Civil Aviation
Administration of China has not yet been
secured as of mid-June 2021.
As of January 2021, the backlog
stood at 3,609 firm orders. By this
point, 30 737 MAX 8s were back in
active service, while 330 aircraft were
held in storage and another 12 units
parked. In addition, there were also 384
aircraft that had been built by Boeing
but were still awaiting handover.
There have been several hundred
order cancellations and delivery
deferrals since both the grounding
and the onset of the pandemic. The
severe financial distress on the aviation
industry caused by the COVID-19
crisis has forced operators worldwide
to both drastically restructure their
fleets as well as rethink the extent and
timing of their future needs in terms of
capacity, and the delays caused by the
production pause allowed many buyers
to cancel without penalty. However,
the MAX program continues to attract
new sales, with several high-profile
deals announced in the first quarter. In
late March 2021, Southwest Airlines
confirmed an order for 100 737 MAX
7 aircraft (70 of them converted from
the MAX 8) and reserved 155 options
for either the MAX 7 or MAX 8. Prior
to this, United Airlines said it would
top up orders for the 737 MAX while
accelerating some future deliveries.
Ryanair also announced it would buy an
additional 75 737 MAX 8-200 aircraft,
bringing its orderbook for the type -
in a special high-density layout - up
to more than 200 units.
MAX customers may also increase
orders as they plan for a recovery in
passenger demand. Boeing is also
likely to continue to benefit from the
extensive operator base that exists
for the 737NG to secure fleet renewal
orders for the 737 MAX.
The 737 MAX 8 competes directly
with the A320neo and, as of January,
there were 1,018 A320neos in service,
while the backlog stood at 2,766 firm
orders and 406 options. Competition
between the two is expected to remain
very intense going forward.
In the year following the grounding
orders, values for the 737 MAX came
under significant negative pressure as
uncertainties grew over the aircraft's
eventual return to service. However,
this was soon overtaken by the COVID19-driven
collapse of passenger traffic.
Values and lease rates for narrowbody
jets, especially younger units, should
recover strongly once the expected
upturn in the market takes hold, and
the 737 MAX will be well positioned
when this occurs.
While the return to service of the
737 MAX has been welcome news, a
number of challenges remain, not least
because of the prevailing operating
environment. AVITAS believes that it
could be two years before the backlog
of aircraft that are already completed,
but not yet delivered, can be placed
in the hands of operators. That being
said, the 737 MAX 8 orderbook remains
robust, and it has secured a large and
diverse customer base, which includes
many top-tier airlines and lessors. The
type appears set to be a dominant force
in the narrowbody market for years
to come.
Jetrader * SUMMER 2021 * 2 9
27.1
29.1
31.1
25.5 24.0
27.4
29.4
40.7 38.6 36.6 34.6 32.7 30.9
22.4
25.8
27.7
29.1
Current Market
Lease Rate
0.240
0.250
0.260
0.270
0.280
0.290
ISTAT Jetrader - Summer 2021

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