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Two Early Build B737-900ERs Sold Between Lessors

October 29, 2018

Establishing values of the B737-900ER is likely to be difficult as there are relatively few operators and in view of the predilection for lessors to sell encumbered aircraft between themselves.

The operator base of the B737-900ER is not as liquid as it is for many other aircraft types and this will case problems for the assessment of values going forward as more are released by their original customers. The -900ER only started to be delivered in 2006 and as such most will remain on lease or in service with their original operator. FPG Amentum has sold two B737-900ERs leased to Lion Air to another lessor. The aircraft are remaining with Lion Air. The deal will therefore likely have taken account of the lease rentals in place as well the potential for any lease extensions and onward lease thereafter. The aircraft, serial numbers 35713 and 35716 were delivered in 2007 and 2008 respectively. The aircraft are likely to be powered by CFM56-7B26 engines rather than the Tech Insertion version. Aircraft Values Pro (www.aircraftvalues.net) indicates in its latest October 2018 issue that the value of a 2007 build -900ER is $18.3 million and for a 2008 vintage aircraft, $19.4 million. The lease rentals are expected to approximate $180,000 based on a eight year lease. Despite the large size of the -900ER, these values and lease rentals are actually below the values and rentals cited for a similar vintage B737-800 equipped with similar engines and winglets. Whereas there is a clear premium applied to the A321 compared to the A320, the reverse is the case for the -900ER. the -900ER may have originally cost more to buy than the -800 but the limited operator base popularity of the -900ER has proved a hindrance to strong residual values.

Gong forward the difference in values – and lease rentals – becomes ever more apparent. By 2025 the residual value of the 2007 built -900ER is estimated to reach $8.5 million with a lease rental of $120,000. Conversely, the value of the similar vintage -800W will be $9.5 million and the lease rental $140,000 per month. By 2025 the -900ER will either be a candidate for conversion to freighter or for parting out – except that the engines are likely to be worth much less than current pricing. The differential between the two B737NG variants is increasing over time to the detriment of the -900ER. This clearly demonstrates that the actual size or capacity of the aircraft is not an indicator of market success. All too often the market value of the larger variants can experience a more significant decline in the event there is insufficient market attraction. For the B737-900ER, the problems surrounding the type are likely to remain with remarketing proving more time consuming when seeking to sell without an attached lease.

 

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