Boeing celebrates going to “Rate 35” on 737

Boeing celebrated the transition to producing 35 737s per month, from 31.5, at a huge employee pep rally today (Jan. 10) at its Renton (WA) plant, where the assembly is done.

With the country-rock band Chance McKinney & Crosswire blasting away, the event was festooned with blue-and-white balloons, cupcakes with blue or white frosting, green T-shirts embossed with “Boeing 737 MAX” and a sometimes cheesy, scripted cheer-leading effect from employees, the event marked not only a milestone for the 737 but for Boeing Commercial Airplanes. No aircraft has been produced in such numbers by Boeing.

And more is to come. The production rate is to increase in 2013 to 38 per months and to 42 the following year.

Beverly Wyse, VP and GM of the 737 Program, told the 10,000 Renton employees that the rate could climb to 60 per month someday.

All this means more jobs for Renton and Puget Sound (the greater Seattle area). Renton will be adding 600-700 more jobs in the each of the next two years for the NG production rate increases, Wyse says. It is too early to know how many more jobs will come with a third line for MAX, which doesn’t have a first-flight time until 2016 and an entry-into-service in 4Q13.

Meanwhile, Boeing is processing through weekly orientation days 100-200 every Friday for Puget Sound employment, says Tommy Wilson, Business Relationship guru for IAM 751 at Renton.

We did two stories on the celebration for Flightglobal. Under our agreement with Flight, we have to wait 24 hours after Flight’s publication before we can post those here.

Separately, Aspire Aviation published this long piece, looking at the 787 program and ramp up.

54 Comments on “Boeing celebrates going to “Rate 35” on 737

  1. Boeing produced some 11,500 B-17s between 1938 and 1945, for an average of 136 per month. Okay Boeing did not build every one, they only produced 8400 B-17s, that is an average of 100 per month. Between 1950 and 1955 2100 B-47s were build, 1500 by Boeing for a monthly average of 25 per month. At peak production the B-727 was building at 30 per month, and the B-707 at 28 per month.

    My point is Boeing has produced airplanes in large monthly averages before, so why is the B-737 going to 35 per month, and up to as many as 42 per month (and maybe 60 per month) such a big deal?

      • leehamnet :What commercial program has ever achieved this rate?

        I think the comparison is misleading though, since today’s 737 spans missions that in the past would have been carried out by three to four different airframes (737/727/757, even 767)?

        So what there is to celebrate is maybe not so much the sympton (high production rate), but rather the achievement of developing in the 737NG an airframe that has this amazing flexibility. It’s coming close to the definition of a ‘killer-app’, I guess.

    • In the 1950-1965 period Boeing produced
      – 2100 B47
      – 744 B52
      – 800 KC135
      and piles of rockets, helicopter, engines etc. all exclusively for the US government.

      The good old cold war provided invaluable experience and capabilities at the start of the passenger jet age. Maybe we need another big, dishonest, evil, enemy threatening our values so we have to defend ourselves πŸ˜‰

    • 1968 looks like a big year for narrowbody deliveries. Combined 707, 727, and 737 for a total of 376 compared to 2011 at 372.

  2. I am much more concerned about a sudden worldwide economic slowdown this
    year and next, than the rate at which the 377MAX can be produced, which could
    reduce the number of 737MAX airplanes the airline industry already assured
    Boeing in 2011, they would commit to this year, i.e., 1000 plus!
    Because of the economic slowdown in Europe and the US, even China is nega-
    tively effected and facing a serious increase in unemployment!
    This slowdown could also cause some A320NEO’s to be cancelled or deferred.
    On the other hand, it is probably more likely that the airlines will cancel existing
    model 737/A320 airplanes, rather than the MAX/NEO versions, if the economic
    near-term slowdown becomes a real concern!

    Therefore, while caution remains the key word, the long term future for the 737
    MAX will remain very strong and will pretty well match the A320NEO in numbers
    sold!

  3. KC, you have reminded us that through 2004 Renton was producing more than one type of airplane.

    The dates are approximate, but it went something like this:

    1947-1956 Stratocruisers and KC-97’s
    1956-1965 KC-135’s and all the variations thereof
    1957-1995 [??] 707’s, E-3’s and E-6’s
    [Boeing could not offer the civil 707 until they got USAF permission;
    that happened in mid 1955]
    1963-1983 727’s
    1982-2004 757’s

    The first 737-100’s and -200’s were built at Boeing Field starting in 1967; the line moved to Renton in late 1970. Since then all 737 classics and NG’s have come from Renton

    It would be interesting to chart the combined monthly totals over the decades. Does anyone have that info?

    Boeing’s Renton footprint got a lot smaller after 2005; it will be interesting to see how the NG and MAX lines [plus the U.S. Navy’s P-8 Poseidon] will fit into the available space. Also, how much overlap will there be until the MAX’s supercede the NG’s.

    • Ups. you actually were talking about per month production across all types, right?

      I would have to gather those data points first. wait a minute πŸ˜‰

      • Uwe, your chart clearly shows the effects of the Boeing union strikes in 1997 and 2008, as well as the order drop-off from the Sept. 11 2001 terror attacks. Except for the order drop-off for those same terror attacks for Airbus, the lack of labor strikes effects is clearly shown.

      • Boeing will not build white-tail aircraft and Airbus will. As you note in a later post, this is a philosophical difference in the fundamental construct of the companies. Airbus at is core is is about nations and jobs. Boeing at is core is a business. The reason Boeing contracts production during a recession is not simply because it would otherwise be building an airplane without a buyer; it is because when you build white-tails, you damage your existing customers by depressing the value of the assets they already own. Airlines, lessors and banks all hate this. After 911, Airbus continued A320 production of aircraft for which the orders were canceled. These were eventually fire-saled into the market, significantly depressing A320 residuals and lease rates over the past ~8 years – a problem which is still deeply hurting A320 owners today. Boeing is unwilling to do that to their customers.

      • CM, with all due respect, your point of view seem to square well with the typical self righteous, simplistic and IMO ridiculous point of view that’s been sadly coming out of Seattle for too long, which says that Airbus somehow is not a really a “real business” and the reason for its rise as a commercial entity is solely based on “unfair subsidies and business practices”.

        Any serious analysis on the issue would include, at least, an assertion that how Airbus is run as a business reflects more on its European roots and how shareholders have typicaly not been allowed to call all the shots to the detriment of the rest of the stakeholders.

        Ted Piepenbrock has repeatedly used Airbus vs. Boeing as cases:

        http://www.london.edu/assets/documents/facultyandresearch/Charlie_Fine_-_MIT.pdf

        In this linked paper, Boeing is described as a having a modular enterprise architecture, while Airbus is described as having an integral enterprise architecture. In a modular enterprise what’s perceived to be important is short-term speed and flexibility (i.e. laying off personnel when there’s a bust in the cycle) to ensure short-term maximization of shareholder value. In an integral enterprise, on the other hand, long term speed and stability as well as maximization of stakeholder surplus are the primary objectives.

        Finally, as for “fire-sales”, somehow I’ve got this naging feeling that the mother of all fire-sales was this one:

        The answer comes down to the fact that Michael O’Leary has always driven a hard bargain. He waited to order the initial batch of 737s until 2002, when Boeing was struggling after 9/11. But the order for Boeing was never a foregone conclusion; instead, he brilliantly played Airbus and Boeing off of each other, reportedly faxing the latest offer he received from Airbus over to Boeing and vice versa, in an attempt to get a lower price. Airbus offered to sell him A320s at half price, and O’Leary had apparently even shaken hands with the Airbus CEO before switching at the last minute to order from Boeing at even lower prices. O’Leary didn’t mince words when recounting how he managed to get a spectacular deal from Boeing, saying: “We raped the fuckers.”

        • CM is largely correct about Airbus production rates through the hard times and the negative impact on values for the A320. Appraisers have been talking about this for years.

          OV, Boeing may be self righteous, simplistic and have ridiculous points of view–but that doesn’t mean it’s necessarily wrong. But be careful how you phrase things. This came close to becoming personal to CM. Not in conformance with our Reader Comment rules.

      • Scott, the comment was not intended to be personal. However, my apologies if it was interpreted as such.

        Please do note that I was not talking about Boeing’s “behaviour” in general, but that I was talking about the specific case on how IMO quite a few people whithin and outside Boeing seemingly tend to view their only present competitor in the LCA business, as well as their opinion on the reasons for why Airbus today is highly competitive with Boeing. Too often, it seems, Boeing spokepersons have been implying that Airbus is only competitive because of subsidies and that the the “playing field is not level” — whatever that means — and that the Airbus enterprise is prioritising jobs over profit.

        Now, from the point of view of many appraisers, but not all, general market shortages is generally better than over supply since during the former they should be able to stay firm on prices, even raising them if given the chance.

        Of course, if one believes that the preferences of appraisers are the most important metric in the civilian aerospace industry, and not such things as the demands in investment, skilled personnel and industrial long term strategies, then by all means, permanent market shortages should be agreed upon by the two OEMs.

        Finally, looking at the total delivery output from both Airbus and Boeing during the late 1990s and the early 2000s, we have the following numbers:

        —————-Airbus——Boeing

        1999———-294———-620

        2000———-311———-491

        2001———-325———-527

        2002———-303———-381

        2003———-305———-281

        It seems to me that it’s better to try to keep the production as steady as possible, that is, for most stakeholders involved, instead of letting the production output going up and down like a yo-yo; but then again, that’s just me. πŸ˜‰

      • “The interesting thing imho is that with Boeing the production contractions are much more pronounced.”

        As they should be, since they were Boeing strikes… No?

  4. leehamnet :What commercial program has ever achieved this rate?

    The only other commerical airplane in the 35 per month production rate is the A-32X series. Uwe posted a good chart showing the B-737 and A-32X production rates.

  5. KC135TopBoom :
    Uwe, your chart clearly shows the effects of the Boeing union strikes in 1997 and 2008, as well as the order drop-off from the Sept. 11 2001 terror attacks. Except for the order drop-off for those same terror attacks for Airbus, the lack of labor strikes effects is clearly shown.

    If you can give concise data I could add those events into the plot.

    IMHO you can’t attribute a multi year massive depression in production numbers to a couple of month of strike action.
    From my limited viewpoint Boeing management is unable or unwilling to provide the workforce with any kind of perspective. Hiring and firing large scale as they see fit.
    Not much removed from very early capitalism. The results are completely unsurprising.

  6. You are correct. But while a strike may effect production until it recovers to pre-strike levels, that is only a few months. Some of the other dips, for both OEMs would be because of the down-turns that happen every few years. That also accounts for the peaks on other years.

  7. CM :
    After 911, Airbus continued A320 production of aircraft for which the orders were canceled. These were eventually fire-saled into the market, significantly depressing A320 residuals and lease rates over the past ~8 years – a problem which is still deeply hurting A320 owners today. Boeing is unwilling to do that to their customers.

    One could rewrite the comment this way:

    After 9/11, Boeing stopped 737 production of aircraft for which the orders were cancelled. The employees were eventually fired, significantly depressing them for the past eight years – a problem that is still deeply hurting them today. Airbus is unwilling to do that to their employees.

      • After looking at it for a while I have to note that leasing costs are dependent on risk at the lessee side.
        Potentially higher values (lease, resale) are achieveable with risky and “type hamstrung” customers.

        Lots of Pravda sprouted on that topic.

        Compare to the higher incidence of 757 TATL usage by US carriers while the Euro crowd is not present with that type on
        the TATL routes.
        For some the US carriers are advantaged by owning 757 while “they don’t have anything more efficient and/or larger
        to fly those routes” is probably a better description.

        Whitetails:
        With the exception of the early A300 phase how many whitetails did Airbus actually build?
        Afaiu not dipping production was achieved by carefully rearranging customers ordering and
        aiding them in financing.

        Changing production speeds is quite involved and expensive.
        Firing off your workforce in a massive way will disperse good workers that never return.
        Aircraft manufacture is a high qualification domain.

    • Finally, with Jim Albaugh in charge of BCA, it may seem as if Boeing has finally realised that the established practice, during down cycles, of large scale firings of highly experienced personnel and the focus on short term margins, is to the long term detriment of the company.

    • I won’t disagree with this viewpoint, Normand; it is the exact same reality viewed from the other perspective. Vantage point aside, the facts are what the facts are – I just hope everyone is honest enough to see where the differing company philosophies are helpful and damaging (albeit in different ways) to both businesses.

      It is true (noted by OV-099 below) Boeing has in recent years restructured the business so there will be much greater workforce stability during a recession in the commercial aviation sector. What has not changed is Boeing’s philosophy of managing production in a way which protects the entities which have already purchased the airplane. If any of you have access to Avitas data (or any other such industry sources for aircraft pricing, lease rates and residual values), everything I have stated in my first post is 100% borne out by the data.

      As for my statement about the fundamental differences between the companies, it is laughable that anyone would argue with what I said. Of course Airbus is a business, and that brings with it pressures for profit and a return to the shareholders. However, the two companies were fundamentally formed in different ways and for different reasons. To believe Airbus at its core is not about nations and jobs is to egregiously revise history.

      • No, Airbus “at its core” was not “about nations”, but the realisation in the 1960s that European national aerospace industries, mostly serving national airlines, could not compete with North American OEMs, unless they joined forces and created a European multi-national OEM.

        As for the jobs part of the equation, please do note that for both Airbus and Boeing there are more stakeholders than just workers and shareholders. Also, Airbus “at its core” is not really “more about jobs” than any other European company “at their core”.

  8. leehamnet :
    CM is largely correct about Airbus production rates through the hard times and the negative impact on values for the A320. Appraisers have been talking about this for years.

    Isn’t that predominantly fallout from having competition?

    In a monopoly situation the initial sale is significantly overvalued and
    allows the chain of secondary sales to retain high value.
    This only works if you can control the “new” supply.,
    producing below demand allows higher margins and creates
    demand for second hand items.

    This leads to a market of superanuated products and no technical progress.

    Only path would have been an Airbus / Boeing Cartel which would have been against
    the US market philosophy ( at least as publicised πŸ˜‰

  9. CM :
    If any of you have access to Avitas data (or any other such industry sources for aircraft pricing, lease rates and residual values), everything I have stated in my first post is 100% borne out by the data.

    I have no such access … but Airbus said they cancelled the A320 P2F because of the high residual values, and that would tend to indicate to me that there aren’t scads of A320s on the market at fire-sale prices. Or if there are, maybe you could post some references rather than just referring to “Avitas data?”

    • Avitas and other appraiser data is not pubic, it is a subscription service. Because it costs literally thousands of $US for an one year subscription, they frown heavily on subscribers republishing their data on the internet. Sorry.

      The A320 P2F program is cancelled for the same reason Boeing is not selling the 737-700C… The freight market is very soft, particularly for small jet freighters. We need to discern between PR spin from the OEMs and what is really behind the decisions they make. The last thing either OEM will admit is when there is little or no market for an aircraft they offer.

      • “The last thing either OEM will admit is when there is little or no market for an aircraft they offer.”

        In general I find I have to apply much less “despin” on Airbus communications than I have to use for fixing Boeing releases
        into some reality hugging semblance.

        Anyway : supply / demand is not the only metric working on those financial references.
        Lessee attached risk should have quite an impact on those
        values. With a lot of Boeings large US customers transitioning through chap 11 …

  10. CM :
    Avitas and other appraiser data is not pubic, it is a subscription service. Because it costs literally thousands of $US for an one year subscription, they frown heavily on subscribers republishing their data on the internet. Sorry.

    I am quite sure that a subscription service will allow you to quote a couple of data points in a public forum — such as % residual value for an 8-year-old A320 and the same for an equivalent 737. Certainly this has been true for subscription services (for other types of information) that I have subscribed to over the years.

    Otherwise we must all just assume that you know everything and the rest of us know nothing.

    • When we co-owned Commercial Aviation Report magazine, we created the first Valuation conference at which nearly every US appraisal company then in business participated on the panels. This was in 1990. In our conferences following the 1991 Gulf War and airline crisis, and at other conferences such as ISTAT where appraisal panels were always included, appraisers noted RV differences between A320s and 737s and *one* of the reasons was the Airbus decision to maintain production through economic downturns. This depressed RVs.

      This discussion continues to this day. Data points are made available from the presentations to conference participants.

      This is a well-known issue within the industry for those of us who live and breath this stuff.

      CM is absolutely correct in his statements about RV and production rates, insofar as he reflect the sentiment of appraisers. THYSI, your last paragraph above is out of line.

      Other reasons for valuation differences between the 738 and the A320: the 738 carriers 12 more passengers and is a sole-source engine. The A320 having two engine types makes the plane somewhat more difficult to place in a remarketing situation under some circumstances, thus depressing values. The CFM engine on the A320 is generally regarded as more attractive than the V2500 due to customer-base.

  11. Here is some idea of what is available, at least for Boeing pax, freighter, and BBJ/VIP aircraft through Boeing, airlines, and brokers. The prices are not listed. I would guess there is a list price, but it is negoueated by the buyer and seller/leaser once the aircraft has been fully inspected by the buyer and their maintenance folks.

    http://active.boeing.com/commercial/am/index.cfm?content=include/reports.cfm&pageid=m38072

    http://www.wentworth.aero/Gallery-Aircraft-Listings.htm

    There are other organizations that sell, trade, or broker aircraft worldwide. I am sure EADS/Airbus provides such a service, as Boeing does.

    This does not count the aircraft airlines trade among themselves, or have offered for sale in the deserts of the world.

  12. CM :
    To believe Airbus at its core is not about nations and jobs is to egregiously revise history.

    OV-099 :
    No, Airbus β€œat its core” was not β€œabout nations”, but the realisation in the 1960s that European national aerospace industries, mostly serving national airlines, could not compete with North American OEMs, unless they joined forces and created a European multi-national OEM.

    These two statements need not be conflicting. There is truth in both viewpoints.

    Yes in the sixties the European aerospace industry had to unite in order to compete with the American OEMs (Doulas, Boeing, Lockheed and Convair). None of the nations involved (France, Germany and the UK) could fight that war alone. So these nations decided to unite their efforts. Ever since the creation of Airbus, the respective governments have intervened at various stages in order to preserve jobs and national pride. To say otherwise would indeed be an unwarranted revision of History.

    This game is played everywhere around the world; Japan, France, Brazil, Russia, India, Canada, USA, Israel, South Africa, etc., they all want to protect jobs, maintain national pride and preserve their independence. This is natural and legitimate. National prestige, sovereignty and job creation are the driving forces behind government interventions. But it remains a fair game as long as everyone plays by the rules. Follow here two infamous examples of government influence gone too far, one in Europe and one in the USA.

    1- The A400M program had selected the P&WC engine in a fair competition. The President of France intervened to give the engine contract to a European consortium.

    2- The USAF ran a competition for the Tanker and Airbus won. Again the President of a country had to intervene to give the contract to an American company.

    The basic requirements are the same everywhere. Only the social values change. Europe has well developed social views centred on personal benefits, and the US spirit is more individualistic and centred on business interests . Other than that it’s all the same; national pride, autonomy and jobs are at the centre stage of all the world economies.

  13. leehamnet :
    When we co-owned Commercial Aviation Report magazine, we created the first Valuation conference at which nearly every US appraisal company then in business participated on the panels. (…)

    Lee, thank you for the additional insight. This is much more helpful for understanding the residual value situation than just a blanket statement.

  14. Over on Airliners.net there have been several postings regarding lease rates.

    I did a fast search and came up with this: (This was a 22 Dec 2010 thread)

    http://www.airliners.net/aviation-forums/general_aviation/read.main/5017554/?threadid=5017554&searchid=5017554&s=A320+737+lease+rates#ID5017554

    Qoute: (from airliners.net)

    “Below are estimated current market value (USD$mil) based on oldest to newest airframes, and the sample monthly lease rates (USD$,000) based oldest to newest airframes.

    A319 – $12.55M-$30.15M, $135-275,000
    A320 – $6.0M-$37.5M, $100-315,000
    A321 – $20.4M-$42.2M, $195-365,000
    A330-200 – $43.5M-$79.9M, $420-725,000
    A340-300 – $24.0M-$61.75M – $315-615,000
    A340-600 -$63.0-97.0M – $600-815,000
    B737-300 – $2.5M-$7.0M – $60-100,00
    B737-700 – $15.9M-$32.7M – $165-280,000
    B737-800 – $20.0M-$39.5M – $235-340,000
    B747-400 – $19.5M-$60.0M – $380-710,000
    B757-200 – $6.0-$20.6M – $115-210,000
    B767-300ER – $9.9M-56.5M – $200-500,000
    B777-200ER – $48.8M-$112.5M – $580-995,000
    B777-300ER – $85.2M-136.2M – $850-1,250,000”

    ** I would note: that the poster stated that they were from “oldest to newest airframes”. So in this case only the newest numbers are applicable unless you have a by year breakdown.

    I know there there has been other recent postings on a-net regarding lease values.. feel free to explore for yourself.

    Rgds

  15. I found a more recent aircraft valuation thread over on a-net. It includes the 737-900ER.

    “Below are estimated current market value (in USD) based on oldest to newest airframes, along with sample monthly lease rates in (USD,000) based on oldest to newest airframes for many common models.

    A319 – $11.8-31.1M, $125-265,000
    A320 – $5.0 – 39.3M, $70-320,000
    A321 – $19.3 – 43.4M, $195-365,000
    A330-200 – $43.0 – 83.4M, $440-775,000
    A340-300 – $20.0 -59.7M, $275-580,000
    B737-300 – $2.5 – 6.5M, $105-145,000
    B737-700 – $15.3 – 31.2M, $160-280,000
    B737-800 – $19.7 – 40.7M, $235-350,000
    B737-900ER – $32.9 – 44.4M, $310-375,000
    B747-400 – $18.0 – 59.3M, $350-670,000
    B757-200 – $6.5 – 20.6M, $120-225,000
    B767-300ER – $9.5 – 58.9M, $205-520,000
    B777-200ER – $42.0 – 107.8M, $560-995,000
    B777-300ER – $86.0 – 147.0M, $860-1,285,000
    MD-11 – $10 – 12.5M , $150-190,000
    MD-82 – $1.0 – 2.9M, $25-60,000
    CRJ200 – $2.8 – 7.1M, $40-80,000
    CRJ700 – $10.0 – 21.2M, $110-220,000
    CRJ900 – $13.8 – 23.6M, $150-245,000
    Q400 – $8.5 – 18.8M, $130-210,000
    ERJ145 – $4.8 – 8.7M, $60-90,000
    EMB170 – $14 – 23.3M, $150-230,000
    EMB190 – $19.5 – 29.0M, $210-260,000
    ATR-72 – $5.6 – 18.5M, $70-180,000

    Information is derived from transactions and valuation and is current as of June 2011.”

    http://www.airliners.net/aviation-forums/general_aviation/read.main/5229355/?threadid=5229355&searchid=5243808&s=aircraft+values#ID5243808

  16. To OV-099 Please watch ‘FASCINATING AIDA’ cheep flights on ‘O’ Learyair on youtube? and he was not shamed in enyway

  17. As Scott notes, 737-800 vs A320 comparisons are not precisely apples to apples due to seat count differences. However, if we can agree that exit limit seating is typical for the types, (189 and 180 seats, respectively) then the 5% difference in seats can be used to account for roughly a 5% value premium to the 737-800. Any remaining value deltas (above 5% or below) would be attributable to other factors which deliver or decrease value to the owner of the aircraft (as estimated in the view of appraisers).

    Here is current data from two different appraisers…

    Average purchase price for a new (2011) production aircraft:

    737-800 A320
    Appraiser 1 $45.7M $41.2M = (737-800 +10%)
    Appraiser 2 $47.2M $43.7M = (737-800 +10%)

    Projected residual value for the same aircraft in 2021

    737-800 A320
    Appraiser 1 $31.4M $26.9M = (737-800 +14%)
    Appraiser 2 $28.3M $25.9M = (737-800 +8%)

    Projected residual value for the same aircraft in 2030

    737-800 A320
    Appraiser 1 $20.5M $16.6M = (737-800 +19%)
    Appraiser 2 $16.7M $15.1M = (737-800 +10%)

    A quick look at the 737-700 and A319 (which are identical in typical seat counts) also shows Airbus gets less for the aircraft at the time of sale, and A319 operators can expect to get less than a 737-700 operator when reselling or financing the aircraft in secondary markets.

  18. I see a lot more old 737’s in Africa, South America and under developed parts of Asia and Russia.

    So for 737s there probably is a better market for airlines replacing their -200s by 300s and later on by 737NG’s.

    Personally I think the A320 will produced longer then the A320s and Airbus is expanding the lifetime 120k hrs and longer.

  19. CM :
    Projected residual value for the same aircraft in 2030
    737-800 A320
    Appraiser 1 $20.5M $16.6M = (737-800 +19%)
    Appraiser 2 $16.7M $15.1M = (737-800 +10%)

    “Appraiser 2” is projecting a near-identical 35% residual value for both the 737-800 and A320 in 2030, not really a strong indication of depressed AIrbus residual values.

    Admittedly “Appraiser 1” estimates a 45% (!) residual value for the 737-800 and 40% for the A320. More shocking to me than the 45-to-40 difference between the two aircraft, though, is the difference in the two residual value estimates (45% and 35%) for the same aircraft (737-800) in 2030.

    • Do the commercial aircraft appraisers have “secondary” objectives like the financial rating agencies have? ( i.e. strong financial motivation to come to biased conclusions )

      • As I mentioned earlier, airlines and consultants like myself pay a considerable fee to access what is advertised as accurate and unbiased value analysis and projections. We are the customers of this data, and we are the ones funding the appraisal firms. If there was one shred of evidence they were beholden to the OEMs, the lenders or the lessors, the appraisers would instantly lose what is their principal source of income.

        Despite a great deal of hopeful imaginations on this board…

        Keesje -> Demand for 737NGs in the third world artificially inflates 737NG values.

        Uwe -> US airlines who operate the 737NG and who are in or have been through bankruptcy have artificially inflated 737NG values.

        …the truth is, the 737NG is a very effective and efficient competitor to the A32X series of aircraft. I realize this statement is anathema to some here, but the facts are what the facts are.

        Helpful facts for Keesje: Both Airbus and Boeing publish their backlogs, which can be sorted by operator and region. They also publish RPK forecasts by region. I recommend you compare where the backlog resides and where RPKs exist and are forecast to grow. This should help clear up your misconception about where demand for 737NGs exists and if it’s different than for the A320. http://www.airbus.com/company/market/forecast/ http://www.boeing.com/commercial/cmo/ I think you will find both Airbus and Boeing are effectively competing in and for the same markets.

        Helpful facts for Uwe: Northwest Airlines, US Airways, United Airlines, and Frontier all went through bankruptcy as committed A320 operators. Continental’s last bankruptcy was prior to the 737NG coming into the fleet. This leaves only AAL and DAL as US majors to go through Chapter 11 while operating the 737NG. Alaska Airlines, JetBlue, Virgin America and SWA have never gone through Chapter 11. Unless US A320 operators going through Chapter 11 has artificially inflated A320 values as well, your comments simply aren’t supported by the facts.

  20. Pingback: Understanding appraisers in aircraft values « Leeham News and Comment

  21. CM to help you out, πŸ˜‰ both the Airbus & Boeing outlooks are projections for different aircraft categories, not specifcally for their own models.

    If you look at third world countries you see more 737s not a surprise, they have around 20 yrs longer.

    • Keesje,

      You are failing to recognize aircraft values are all about demand. Looking at the backlog, as well as where projected RPKs exist tells us everything about demand in a region. Demand for the A320 and 737NG are not geographically aligned, except perhaps higher A320 demand in Europe and higher 737NG demand in Japan. Other than those exceptions, demand is pretty evenly split for the types throughout the world, including Africa.

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