B737-800 Values See Slight Rise

The values of the -800 have suffered during the Covid Event but at least there are now sufficient signs of improvement that values can exhibit something of an improvement even if the return to service of the B737-8 is having a negative effect.

Orders for the -800 first appeared in December 1994, over a year after the first order for the -700 which came from Southwest. Air Berlin (6) and Hapag-Lloyd (16) ordered the first examples reflecting the future enthusiasm for the -800 from European operators. The market in 1993 and 1994 was still very much in a recession with lessors experiencing considerable difficulty in placing existing aircraft and maintaining reasonable lease rates. The 91 orders for the B737NG series secured during the first year of development was a disappointment though not a surprise in view of the lack of surplus airline capital. With a gestation period of some four years, the norm for a new aircraft, the market was expected to have experienced a recovery by the time the B737NG entered service.

Deliveries of the B737-800 commenced in April 1998, some four months after the first delivery of the -700 to Southwest in December 1997. When the B737-700 was launched in November 1993, the first delivery was scheduled to take place in October 1997 with the first -800 due in early 1998. Hapag Lloyd was the first to receive the -800 after the JAA certificated the aircraft earlier in the month, though a month after FAA certification. In June 1998 Continental became the first US airline to receive the -800. Deliveries to lessors ILFC and GE Capital commenced in June and July respectively.

As of February 2021, orders for the B737NG amounted to 7,114 (including BBJ). Of these 152 were for the BBJ, the Boeing Business Jet that mates the fuselage of the -700 with the wing of the -800. Another 69 are for the B737-600, the only variant that continues to experience problems in terms of orders. Orders for the B737-800 numbered 5,163. Total deliveries for the B737NG at the end of February 2021 amounted to 7,070 comprising 69 for the -600, 1,164 for the -700, 5,131 for the -800 and 52 for the -900. 505 -900ERs have also been delivered. With a total of 5,130 -800 deliveries as of the end of January 2021, the operator base has solidified to 219. The participation of the lessors in the B737-800 is significant. This proportion is slightly lower than for some other narrowbodies but the proportion is expected to increase as existing orders are switched to the -800 and as more orders are placed by existing and additional lessors.

Boeing first quoted the list price of the B737-800 in 1994, the year the first order was received. Boeing usually quotes a high and low value to reflect differing specifications, engine selections and MTOWs. In 1994 the list price of the -800 ranged between $41-47 million, representing a $3m dollar rise over the B737-400. By 1999 however, the difference between the -400 and -800 had increased markedly. The 1999 list price for the -800 was $51-57.5m compared to the $44-51.5m for the -400. The -800 list price had therefore risen by over 23% during a five-year period which is much higher than the 16% rise in -400 list prices. In 2000 the list price for the -800 was $53-60m and in 2001 $57-64.5m. In 2002 the list price rose only slightly to $57.5-64.5m. In 2005 the list price amounted to $63.5-72.0m. In 2006 this had risen to range between $66 and $75 million and in 2008 $72.5-81m. The 2010 list price was $80.8m and for 2011 this has increased to $84.4m. In 2012 the list price was $88.3 million and in 2013 $90.5m. For 2015 this had increased to $96.0m and for 2016 remained the same. For 2018 this had increased to $102.2m and in 2019 to $106.1m. But list prices are an irrelevance when discounting starts at 50 percent.

There is little doubt that the values and lease rentals of the B737-800 have been buoyed by the grounding of the B737-8 but with the return to service at a time of market weakness, any premium applied the B737NG is likely to dissipate.

The values and lease rentals of both the A320ceo and B737-800 benefitted from the grounding and production hiatus of the B737MAX. The arrival of a new type traditionally sees values and rentals of the outgoing models fading with the end of the line particularly impacted. The values and lease rentals of the A320ceo and B737-800 also benefited from a strong market prior to the Covid Event and demand for engines. The older examples of both outgoing types were therefore still able to attract values of more than $10 million depending on the life remaining on the engines but no longer. There are now some 800 -8 aircraft available for service, subject to modifications, training and certification by the relevant authorities. With production also restarting, there will be a steady flow of -8’s entering the market at its weakest point. Instead of the -8 being used as growth capacity, more will be used to replace existing -800s. Because of the grounding of the MAX, the lessors have previously extended existing leases on the -800 but these will have been for only a few years or less and as such the -8 will be used as replacement capacity as -800s are returned to lessors and retired. There remain nearly 9,00 -800’s in storage with another 1,300’s A320ceo also yet to be returned to service.