Values of B737-300 Face Decline As Market Seeks Efficiencies

After experiencing a not so remarkable recovery over the course of the last few years, values of the ubiquitous B737-300 are under threat once more as operators seeking alternative equipment. In the period immediately after 2001, values of the B737-300 fell to record lows with some even being scrapped. Since...

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After experiencing a not so remarkable recovery over the course of the last few years, values of the ubiquitous B737-300 are under threat once more as operators seeking alternative equipment.

In the period immediately after 2001, values of the B737-300 fell to record lows with some even being scrapped. Since then values have improved significantly, encouraged by much higher lease rentals. The level of availability has been edging higher. A year ago less than 20 were on the market but today there are nearer 30. While 30 still represents a small proportion of the total fleet, the leasing of -300s is increasingly being viewed by operators as a stop gap measure rather than a long term solution to capacity needs. The youngest -300s are already nudging ten years of age and the oldest 25. The average service life of narrowbodies has been cut over the last decade from nearly 30 to 25 years such that the oldest -300s are facing testing times. The state of the market can accelerate or delay parting out. The last few years has seen the latter and now the potential reversal of the trend-line could see increased emphasis on retirement. Operators are only too aware that aircraft such as the CSeries represent a major improvement in efficiency. With few other areas available to target for cost reduction exercises, aircraft efficiency is a key target. The values of the -300 are therefore experiencing a modest decline.

However, the -300 still has some attributes not least the lack of alternatives due to an extending backlog. The impact of fuel prices is significant but on one hour sector lengths, the contribution of fuel to direct operating costs is less than for long haul aircraft. The differential in lease rentals between the -300 and alternatives is significant and can easily compensate for maintenance holidays afforded by newer types. An upgrade to the CFM56-3 engine is available which can provide some recompense for ageing systems.

Having enjoyed the first recovery, values will be increasingly under pressure as the introduction of another generation of narrowbodies nudges closer. Few aircraft types are afforded the luxury of a second period of recovery.