Southwest fatigue failure likely to have little effect on 737 values

Here’s an article on values we did for Commercial Aviation Online:

Date: 11/04/2011 08:04
Source: Commercial Aviation Online
Location: Seattle
By: Scott Hamilton

The in-flight fuselage rupture caused by metal fatigue is, in the end, likely to have little affect on Boeing 737 Classic values, predicts Fred Klein, president of Aviation Specialists.

The event airplane was 15 years old and had about 50,000 hours and about 40,000 cycles. The aircraft was part of a batch of 570 that was constructed between 1993 and 2000 with a slightly different method than those preceded it and the Next Generation 737s that followed. Boeing designed this batch for 60,000 cycles before key inspections would be required; fatigue developed only two-thirds of the way there.

There are 175 737 Classics of all sub-types that have 30,000 cycles or more; in the US, Southwest operates 80 of them. Inspections revealed five more besides the event airplane to have cracks requiring repairs, which will take up to 16 hours. The cost is not clear.

Klein said that 87 of Southwest’s nearly 200 737-300s and 737-500s have at least 40,000 cycles, based on Flighglobal’s ACAS database. Forty-five percent, or 78 airplanes, are 1991 and older-but these pre-date the change in the construction method involving the event airplane. Fully 160 of the nearly 200 airplanes are 1996 and older, Klein said, some involving the different construction method.

Klein said that from an appraiser’s perspective, they are still assessing the details of the Airworthiness Directive and the implications. But with respect to values, he notes that because of the age and higher cycles of the Southwest aircraft, and the fact that Southwest’s Classics are all analog airplanes, the values are going to be less than other Classics. Additionally, Southwest’s planes are equipped with the CFM56-3B1, “the least desirable” of the CFM56 engines, which also will depress values.

“The values of the oldest 737-300s are in the $2 million range,” Klein said, and most of this is in the engines. Values of the younger -300s average between $5 million and $6 million, with engines comprising a good portion of these figures, he said.

“If you [retired] the [entire] Southwest Classic fleet in the next two or three years, I think Southwest would fly them to the heavy check and engine run-out and just park them,” Klein said. Coupled with the nature of the Southwest airplanes described above, he doesn’t think the fatigue incident will have much affect on values.

At a conference 8 April in Dallas, Southwest’s headquarters city, Kelly was asked by moderator Terry Maxon, the aviation writer of the Dallas Morning News, if Southwest was considering accelerating retirement of the Classic fleet, which up to now has been replaced largely on a one-to-one basis as 737NGs are delivered. Kelly gave a rather ambiguous answer but one that doesn’t rule out the possibility.

According to a transcript provided by Maxon to CAO, Kelly said, “That is something that we would logically – once we understand why this happened and then understand now what additional maintenance spending might be required – obviously we’ll work with Boeing Co. to decide what’s the best reliability answer, what’s the best economic answer in terms of retirement versus replacement of new aircraft. It clearly introduces that new question because we may have some new maintenance expenditures that we weren’t planning on. But it’s premature to make that judgment.”

One Comment on “Southwest fatigue failure likely to have little effect on 737 values

  1. Pingback: Random Thoughts on Southwest and the 737-300 - Things in the Sky

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