Aircraft Asset Assessment

November 26, 2018

Market Presence. As a member of the B737NG family the fate of the -900ER is somewhat assured. The use of extra fuel tanks provides the range while the extra exits offers operators the necessary capacity to compensate for the higher weight – and cost. The extra tanks, which can be changed on a seasonal basis but no more frequent, do come at some cost both in terms of initial capital cost and operating weight. With orders of 501 – nearly 20 less than two years ago – the -900ER has secured a credible though modest presence. When launched there was an expectation in some quarters that the Boeing product would win all future competitions when compared to the A321-200. Instead, orders for the A321 have continued to progress. The A321ceo has secured 1,800 orders (excluding the A321neo) of which 1,696 have been delivered, leaving the Airbus product with a clear advantage. With only 15 customers for the B737-900ER, the customer and operator base is perhaps more limited than is desirable. Lion Air in particular represents a significant portion of the customer base. With orders for 130, Delta represents by far the largest customer and this has repercussions both now and in the future. Lion Air has 102 orders. Customer and operator concentration is not desirable in terms of residual value performance. While GECAS has ordered four units the absence of lessor’s orders is a concern as this makes it more difficult for the operator base to expand. Investors may be less enthusiastic about financing the -900ER due to the limited operator base.

Market Outlook. The backlog of A321 orders amounts to 104 units which is still significantly higher than the 31 of the -900ER. Operators are increasingly turning their attention to larger aircraft as a means of reducing unit costs. The aircraft has a limited operator base and remarketing will prove difficult in the coming years. There is increasingly little to commend the -900ER.


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