B737-7MAX Values Face Uncertainty As Orders Fail to Emerge

With 969 B737MAX orders placed through to the end of November 2012, there is little indication that the B737-7MAX has achieved any notable orders. The placement of an order by Southwest allows for the B737-7MAX or -8MAX to be selected but recent orders from the archetypal low cost carrier have been more for the B737-800. The lack of orders for the B737-7MAX thus far reflects recent limited interest in the B737-700 in terms of new orders though Yakutia Airlines has recently placed an order for three -700s and nine -800s. Used -700s have been placed, albeit based on attractive rentals of perhaps less than $180,000 per month. As most -700s were delivered in the early years of the B737NG program more aircraft can be expected to become available in the near term making it more difficult to contemplate that there will be a demand for -7MAXs. The problem for the -7MAX is that both the market structure and the competition have changed just as Boeing discovered with respect to the B737-600. The market has increasingly found that the optimum seating capacity in today’s market is the 150 seater. As routes continue to mature, and landing slots become ever scarcer at airports, then operators have acquired larger aircraft. The 150 seaters also bring down seat mile costs which make operations ever more efficient. As a means of reducing the level of deposits and progress payments, customers may initially select the -7MAX but then switch to higher capacity aircraft at a later date, just as some customers did with the -600.