Dissecting the 737-10 numbers

Analysis

June 19, 2017, © Leeham Co.: Boeing’s launch of the 737 MAX 10 on its face was a surprisingly strong showing here at the Paris Air Show.

Kevin McAllister, CEO of Boeing Commercial Airplanes, and Dennis Muilenburg, CEO of The Boeing Co., announced there were 240 orders from more than 10 customers when they confirmed the show’s worst kept secret: that the launch was here.

The 240 orders were more than had been expected—and less than advertised.

Dissecting the numbers

The number 240 announced by the two CEOs were not firm orders. As Boeing began to roll out the announcements within the hour, it became clear that many of those announced today were “commitments,” under Memorandums of Understanding (MOUs).

Boeing 737-10. Source: Boeing.

While MOUs of a new airplane program almost always covert to a firm order, MOUs nevertheless don’t get booked to Boeing’s backlog until they are.

Of the 118 commitments announced today, 66 of them were conversions from existing MAX orders, mostly MAX 8.

Lessors share

Lessors played a big role in Monday’s announced. Sixty of the 118 orders and commitments announced were from leasing companies, including a new one, Tibet Financial Leasing.

Lessors haven’t been fans of the MAX 9 or its predecessor, the 737-900ER, due to a small customer base and lack of liquidity (relative to the 737-800/8). Some key lessors were skeptical of the MAX 10 for the same reasons.

One of the lessors converting MAX 8 orders was GECAS, whose sibling, CFM, makes the engines for the MAX 10. GECAS had not been a MAX 9 customer and its conversion from the MAX 8 was a modest 20.

More orders/commitments should be announced this week.

Update: Since this post was written, Lion Air announced a new order for 50 MAX 10s.

42 Comments on “Dissecting the 737-10 numbers

  1. Well a lot more than I would have thought.

    Do you have to put money down for MOU?

  2. Hi Scott,

    Did you post this before the Lion Air announcement? Looks like those 50 MAX 10 commitments are incremental to its existing order book.

  3. So 240 orders are actually 66 new orders for the 737 family, whereof mostly are orders from leasing companies.

    • Leasing companies do not buy aircraft that they cannot place. Look at what Aerocap has done with the 787-9. They OWN that program now, and just ordered 30 more. Must be that customers have an interest for that frame as well?

      • I think it is a very good sign that the leasing companies have ordered the 737-10. They were never really interested in the 737-9.

      • An MOU isnt ‘buying an aircraft’. The hierarchy goes
        Firm Order
        Option
        Memorandum
        letter of Intent

          • A “commitment” is a Letter of Intent, Memorandum of Understanding and an Option. At this stage of a new program launch, an MOU tends to get converted into an order, but an LOI or and Option doesn’t necessarily.

            Boeing’s head of Investor Relations by mid-day Monday emailed aerospace analysts assuring them that MOUs typically become orders.

  4. So far the only *firm* order is GECAS and this is a conversion from MAX 8 slots.

    Any known EIS date ?

    Also has Boeing announced the height increase due to the redesigned landing gear ?

  5. Will take a while for the murky waters to settle. Even if it is conversions Boeing customers are getting a potentially better aircraft and/or what they want?

    But also, think the 737 is now squeezed to the limit.

    • At about 4,000 orders the MAX has done it’s job. It will be a cash cow for a long time. Yep it’s at it’s limit but it’s been a hell of a long productive ride!

      • Much as the MAX has been derided on this forum you have to agree it has done pretty well. The counter viewpoint is that it allowed the A320 to achieve primacy in this space. If I were Boeing I could live with that providing there is a NSA in the locker that will be announced before the end of the decade

        • Agree, but an CS500 and A322 could spell the end of the road for the 737?

          • Well a 322 wouldn’t make a MAX 8 any less attractive.

          • A322 will target the upper-end of the SA market and the CS500 the MAX8 market?

            But Airbus seems to want to keep the 737 alive because then Boeing won’t develop the NSA?

  6. Not a decisive launch, but necessary.

    In the end I think the A321neo will come close to or outsell the A320neo, even though it is behind by 2000 at this point in time.

    Airlines are upgauging. Boeing had to compete! So right decision

    • Well, time will tell whether it was the right decision, or merely the best they could do given where they are.

      Here’s Boeing with effectively a few tens of orders for the -10 (it seems to have scavenged orders from other 737 models), whereas Airbus look like they can sell A320/321 neos all day long at premium prices. I guess the coming months will show how the -10 order book goes, but I can’t see them selling 500, never mind 1000, 2000.

      The time for the right decision – replace the 737 – was approx 25 years ago. As it is everyone’s simply counting down to the moment Boeing exit this part of the market, and the -10 simply makes it more, not less, inevitable.

      • Not so simple. As Boeing was the market leader back then a lot of their big customers just wanted more efficiency out of the same package. Airlines like Southwest are very conservative and dont like change ( they resisted even having an automatic flight system) and the changes Boeing did with an entirely new wing saving weight and improved but similar CFM engines were what was wanted then.

        What they should have done back then was an updated 757 to give it wider appeal as the 767-200 was fading, so that it could stay in production. As it was the fuselage production was moved 3 times in its life ( Tulsa, then Renton before ending up at the then Boeing Wichita plant )and then dropped from production soon after 9/11 evaporated any new orders.

        • Just another lesson that you should not follow the wishes of your customers too closely.

      • I agree, it is making the best out of a bad job. But they needed to compete.

        That’s where Boeing is at the moment. They need a new single-aisle short haul and twin-aisle medium haul solution. Unless Boeing suck it up, the A320neo/A321neo juggernaut will continue with Airbus putting themselves into prime position for their own replacement programmes, the piggy bank full of cash

  7. In today’s market, 240 orders of anything is good. Would assume that much of what will be converted are those moving up from the 8 and 9. Not a bad thing if that happens, because those orders would have moved to the A321NEO. Now when UA, AA, and DL make their announcements to add -10s to their fleets it will be interesting. AA and DL have A321s in their fleet currently, and we’ll see how many -10s they order.

    And, was it not this site that said the 737-10 was/is DOA? Guess they are 240 up on DOA. Might not be 1,000 to equal out the space, but 240 certainly stems the tide of the A321NEO. Think that was the objective of the -10 anyway?

    • Only 28 ‘firm orders’ ,all conversions as mentioned below. Then again getting your customers to pay more for a more competitive product is good business for Boeing- lets hope launch deals meant they were paying more ?

    • Stemming the tide is surely only going to work for a short period of time, if at all.

      If there’s anything to be learned from the past 25 years of A320, A320neo in the market place vs 737, it’s that airlines really, really like the Airbus offering.

      Stemming the tide? I think the tide has already washed over them…

      I like Boeing – I wish they’d get their mojo back and do something properly for a change. I know they got a proper scare from the 787 program; they made a lot of mistakes. But surely the time benefit from those hard lessons is straight afterwards, not 10 years down the line?

      • A different view on history, the A321 was a minimal change on the A320 to grow the narrowbody family much derided at the time for its lack of field performance and range etc against the B757.

        The B787 debacle is now fast becoming ancient history (haven’t they cleared the terrible teens?) and the MAX development was on time or better.

        The MAX 10 is not an A321 but has a capability that complements the overall range. I believe it has a solid role to play and answers a number of issues that the MAX 9 had no hope of addressing.

  8. Here’s the breakdown of the 118 (+50 from Lion) based onBoeing’s newsroom:
    10 LOI/MOU (2 new, 8 conversions): CDB Aviation
    20 firm (all conversions): GECAS
    10 LOI/MOU (new): BOC Aviation
    18 firm (all conversions): TUI
    20 LOI/MOU (new): Tibet Financial Leasing (NB: this is actually a mix of MAX 10 and MAX 8, but breakdown isn’t given)
    20 LOI/MOU (all conversions): Spicejet
    20 LOI/MOU (new): Spicejet
    50 LOI/MOU (new): Lion

    ==>168 total of which:
    0 new & firm
    38 firm conversions
    102 new LOI/MOU
    28 conversions LOI/MOU
    39% conversions/61% new

  9. GE favors GE engines (also for the new A320NEO order). But they’ve ordered PW1500G units before too. How far out are deliveries on new 737’s or A320’s at this point (LEAP/GTF)?

    I would assume these aren’t actually available, even as conversions for 73-10’s, prior to around 2024? No matter how great the plane is, did Boeing indicate when they believe they will have this model EIS?

    • From what I’ve read around 2020. 2020, wow, the years are flying by at an alarming rate!

  10. Now that is QATAR saying they will take the 737 Maxes in substitution for the 320 Neos while these will be converted to 321 Neos. Interesting!

    • Could be a new airline in India they are talking about starting up ? Otherwise will end up with some new short haul planes and not enough destinations with the airspace ban.

  11. Looks like the economics of the MAX 10 were a no brainer. 12 seats adds 12 to 24 million dollars to the value of the aircraft over its life for the airlines. Boeing can harvest 6 million of that value, as a premium over the 9, and pay off the program with 200 conversions.
    If the new landing gear works, without too unstable take off and landing performance, the obvious application is to stretch the MAX 8 two rows with the new gear or on the MAX 9, to access more airports with greater capacity for the MAX family. Southwest and Ryanair must serve many airports with short runways unsuitable for the current MAX 9 or 10.

    I’m still wondering how far the main landing gear center of support can be moved rearward from the center of lift before it becomes problematic. It seems like the aircraft would want to pitch up on take off, as the load support quickly transfers forward to the wing, and pitch down hard on landing when the load support quickly transfers rearward to the main gear.

    • Very good reasoning, it seems those factors were why only two rows extra could be accommodated, other wise Boeing would want to go the whole hog to outdo the A321.

  12. I wouldn’t be to proud of this orderbook.
    Lion Air has twice as many orders as it has fleet: strong growth, extreme risk.
    Really missing is a blue chip airline from USA or Europe.
    I expected Delta, UA or Alaska to order some.

  13. Am I getting this right, that the -10 comes on top of the -9? It does not replace the -9 like the new -7max repalced the old -7?

    Any quotes how much it cost to develop and certify the -10max?

    I already hear Chicago saying “Great, now we can wait with the MoM plane another 10 years!”

  14. The 737 program still has legs to run. It’s one great attribute is that it is lighter than the A320 by quite a bit. That is very importnat and something Airbus can’t address easily. This -10 will surprise us all in its ability to gather substantial orders within the next 2 years.

    • The A321 is an good aircraft, but the MAX10 is a better option to Boeing operators than the MAX9.

  15. As of this morning, the -10 order book appears to be 336 total orders/LOI/MOU with 137 of those being brand new orders and 199 being conversions. 137 brand new orders is nothing to sneeze at, not to mention a potential backlog of 336 frames.

    Add to this another 281 new -8 orders, 5 -7 orders, and 55 unidentified 737 model orders and you have 478 brand new orders for the 737 family over the past 3 days. Compares very favorably to 214 new orders for the A32X family… at least thus far.

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