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End of Line B737-800 Values Show Fatigue

September 17, 2018

Some have long sought to dispel the apparent perception that aircraft built in the final years of the program are not subject to greater than average deterioration particularly with respect to the and B737-800 but there is growing evidence that values of those -800s delivered recently are falling at a rate that is greater than for earlier examples.

The B737-800 has been in production for some 20 years during which time 4991 have bene produced, leaving a backlog of only 133 as of end of July 2018. The transition to the B737-8 has been relatively trouble free although the rate of deliveries of the new model has perhaps not been as great as might have been expected due to supplier issues. The values of the outgoing -800 have managed to remain relatively stable. This is due to the higher than trend traffic growth and extensive lead time for new aircraft. Consequently, the significant fall in value of those -800s produced in the period 2015-2018 have managed to achieve some consistency whereas there was an expectation that there would be a significant fall.

Yet, this needs to be seen in the context of more recent data which appears to show that the end of line -800s are suffering to a greater extent than earlier vintages. The value of a 2014 vintage -800 fell by five percent between October 2017 and April 2018 according to Aircraft Values Pro (www.aircraftvalues.net). This compares with a seven percent fall in the value of a 2017 vintage aircraft. When compared to 2011 -800 the fall is even more marked, with this vintage aircraft falling by only three percent during the same six month period. To a large extent the greater fall for those -800s delivered in recent years can be traced to a lack of increase in the value of new -800s. In early 2017, the value of a new -800 amounted to $48.3 million (high gross weight version) but by mid 2018 the value of a new -800 had fallen to below $47 million. With an actual fall in the value of a new aircraft, the effect on the values of young aircraft is that much more noticeable. In contrast the value of a new B737-8 rose from $52.85 million in early 2017 to the current level of $54.5 million (again for a high gross weight aircraft).

With the ending of -800 production perhaps next year the values of the younger aircraft will likely exhibit a greater decline. As production ends and with no clear difference in specification between a 2011 and 2018 vintage -800, buyers are increasingly less willing to pay a premium for a younger but still used aircraft.

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