Pontifications: Avolon sees strong sales for Boeing 737-10

By Scott Hamilton

Aug. 14, 2017, © Leeham Co.: Avolon, one of the world’s largest aircraft lessors following the acquisition of the CIT Aerospace portfolio, believes Boeing will see 2,000 of the 737-10—doubling the internal figure Boeing used to launch the program.

In a new white paper, which Avolon periodically issues, the lessor “projects that the MAX 10 will account for approximately 20% of all 737 MAX family deliveries, which would equate to around 2,000 aircraft. This compares to the A321neo, which is forecast to account for 40% of the A320neo family, with over 4,000 deliveries,” writes Steve Mason, Avolon’s SVP of Strategy.

Mason joined Avolon from CIT acquisition, where he held a similar position and likewise issued periodic white papers.

“The value proposition of the MAX 9 has been impacted by the launch of the MAX 10. It is unclear what role remains for the aircraft, but it is likely to have a limited future,” Mason writes.

Comparing Airbus v Boeing

The white paper, The 737 MAX Takes Flight, a Product Assessment, which is available on the lessor’s website, has a plethora of data that succinctly puts in one location statistics that those who compare Airbus and Boeing claims will like to have.

For example, the number of operators with in-service, orders and option/LOIs for the 737NG, 737 MAX, A320ceo and A320neo families are shown. Airbus is comfortably ahead in many categories.

Lessors, which prize aircraft “liquidity” and a broad customer base, overall have more Airbuses on order than Boeings in the neo v MAX sector.

Poor-performing models in the 737-7, 737-8-200 and 737-9 hurt Boeing, Mason writes. Airbus only has the poor-performing A319neo (Mason does not break out the A321LR).

From a lessor’s standpoint, only the 737-8 gets a green color, Mason writes. The MAX 7 and MAX 9 are red while the MAX 200 and MAX 10 are orange.

“Even before the launch of the MAX 10, the market’s reception to the MAX 9 was lukewarm. United Airlines decision to convert orders for 100 MAX 9s to the MAX 10 demonstrates the aircraft’s vulnerability,” Mason writes. “It will no longer serve as the lowest unit cost family member and whilst airfield performance is expected to be superior to the MAX 10, it is inferior to the MAX 8.

“The A321ceo has attracted five times the number of operators as the 737- 900ER. The A321neo is maintaining that advantage with five times the number of announced operators as the MAX 9. Appraisers assign a higher value to an A321ceo over a 737-900ER despite the 737-800 garnering a higher value than an A320ceo, based on the average of four appraisers. The MAX 9 incurs a significant operating cost per seat penalty when compared to the A321neo, particularly with Airbus’ 240 seat configuration. This difference, almost 7%, is untenable and ultimately led to the launch of the MAX 10.”

19 Comments on “Pontifications: Avolon sees strong sales for Boeing 737-10

  1. Interesting. Judging by what Scott writes, the white paper seems to indicate that the Max Family is not doing well when compared to the A320 NEO family but they do indirectly forecast both families delivering 10000 units of each family.
    That number comes from the statement that the Max 10 will account for 20% of Max Family deliveries, or 2,000 aircraft, whereas the A321NEO will account for 40% of deliveries or 4,000 aircraft.

    Also interesting is that the biggest 737NG operator who ordered directly from Boeing and has not yet made no Max commitments is Delta, who ordered 292 737NGs back in the day.

  2. DL will not be ordering the Max to replace their 737 fleet. Their CEO has noted that if A has a competitor within a few points of a Boeing model they will not go for another Boeing. It’s why Boeing felt safe with respect to their BBD DL complaint in the first place; no realistic future business exists for them with DL.

    The MD90 and MD80 fleets (which average 25 years I think) will need to be replaced first in any case, I believe, although their A320 fleet is over 20 years old on average now (65 frames or so). The 737 fleet averages less than 10 years in age.

    I would put the MD and A320 fleets in the same “elderly” category, as the Douglas birds can typically be flown 10 years longer than an A320. Hopefully Airbus can achieve a nice margin on future DL NB orders (or maybe some shocking CS500 order/launch).

    • Money talks, if the 737MAX is offered at good price, DL will buy. They already have a large fleet of 737’s and adding more is not introducing a new fleet type that would add costs.

    • “DL will not be ordering the Max to replace their 737 fleet. Their CEO has noted that if A has a competitor within a few points of a Boeing model they will not go for another Boeing.”

      Where did the Delta CEO say this? This is news to me, and it doesn’t seem to help Delta’s bargaining position or comments to Congress about reigning in Ex/Im, either

    • Thank you for saving all that space by using abbreviations everywhere. It not only saved all kinds of screen space, it make you look very smart.

      sigh

  3. Why does Boeing not scrap the 737 MAX 9? I can’t imagine that they can’t convince those few orders to upgrade to a MAX 10. It would certainly save them some development costs as well as a production hassle for yet another type. And it would allow them to possibly advance the MAX 10 EIS.

    • The -10 is for long runways and shorter routes. Some airports and routes need the -9 performance or -8 as the -10 becomes too limited. The question is how many if an airline has a mix of -8’s and -10’s do they need the -9?

  4. It’s already flying. It would cost more to scrap it (and Boeing is loath to write down losses as we know), than to keep producing/tweaking it. It entered production over a year ago.

    Plausibly, a 739Max with cantilevered gear/737-10 tweaks (flap/aft contour/tail tip mods) might even be seen eventually if someone wants it (doubtful, but if, again, for instance SWA or DL or AA etc. wanted to order a couple hundred Boeing would figure it out quickly.)

    CFM may yet have some more tricks for the LEAP on the -9 too, seeing as a bumped variant is now on the -10, and the -9 is widely perceived as under-powered. Unlike Pratt, GE/CFM tend to under-promise/over-deliver.

    • What bumped version of the Leap-1B ?
      The Neo Leap-1B is 24K-35k but the Leap-1B for the Max is only 23-28K. I dont think there is any announcement by CFM of a ‘thrust bump’

        • Wonder how many commitments (“orders”) will it require for a MAX10+ with upgraded wing/undercarriage to take the larger fanned LEAP1A’s before Boeing does it?

          It could also bring life to an MAX9-“ER”?

          The PW1100G’s could do more damage to AB’s NEO’s if things are not sorted out in the near future than is anticipated?

          On the DL order, forget the politics, a company is run by its shareholders. Technically the MAX8 is probably the best replacement for DL’s aging 737NG’s and A320’s in combination withCS300’s for longer thinner routes?

  5. The fact that smaller variants are doing so bad is strange -“Larger aircraft carry an additional trip cost however the trip fuel cost di erence between a 737-700 and 737-800 on an average sector is approximately $250, a small amount considering the larger aircraft typically carries 30 to 35 more passengers.” ( From the actual report on Avolon site ). How much does an LCC profit from a pax. The margins are very low and sometime one see ridiculous fares ( 10 Euro for a flight ). If an aircraft makes 4 sectors a day thats more than 300 thousands dollars a year or 30 million if an operator has 100 units.

  6. Scott is right – marvellous to have the performance data of 320ceo and neo compared with 737 NG and Max. It also shows that the 737-8 is the only star among Max. I would love to see a similar comparison of A-350 and 787, in particular A350-900 and 787-9. Adding data for A330 and 777 wouldn’t hurt either.

  7. If the market is for 2ooo MAX10’s I can see half of that going to the smaller of the “797’s” in reality?

  8. Scott,
    not anywhere related to this topic, but you have your ears to the ground in the Pacific Northwest: why in the world has Dennis Muilenberg NOT exited Trump’s manufacturing council after this weekend’s events regarding Charlottesville, and Trump’s comments? Seems like a huge swing and a miss from a slow pitch right over the freaking plate to me.

    Muilenberg and Immelt better tighten up….their silence is deafening.

    WalMart, Merck, Intel, Under Armour, and a couple of others have bailed out.

    • @Neutron: I don’t know anything about this, but here’s my take:

      Muilenburg was between a rock and a hard place. He’s CEO of a company that employs diversity. He’s CEO of one of the top two or three defense contractors. He persuaded Trump to reverse himself on ExIm Bank. If he resigned, Trump–being the incredibly vindictive so-and-so that he is–could harm Boeing in defense and reverse on ExIm. These would have long-lasting impacts on his diverse employees. What would you do?

      I would have liked to see Dennis take the moral ground but I’m glad I wasn’t him.

  9. Nuetron: Thank you for asking that question, high on my mind as well.

    If Muhlenberg had any smarts he would not have joined that council in the first place. POTUS has been toxic all his life. Thinking you can use him regardless of your circumstances is fools thinking.

    What of course damming is you have thrown your whole workforce to the wolves for the remote possibility that staying gets your company something .

    If you don’t stand up against that, there is little if anything morally you will stand up for.

    As I once told someone, the decision was easy, I just had to buck up and live with the consequences.

    The reality is the US is changing, you can go with the change and try to make it positive or you can moan and complain all the way to welfare, racism, white supremacy our choice.

    And I am an old white guy so I can say that!

    • While I do not think there is a true parallel, what enabled Hitler was the people who supported him thought they also could control him.

      Its a slippery slope when you convince yourself that you are doing it for XX reason and find yourself being eaten by the tiger.

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