After some uncertainty concerning relative strength, current and residual values of the B737-900ER continue to perform, comparing favorably with not only the B737-800 but also the competing A321-200. With constant talk of a replacement for the B737NG, there had been concern that the B737-900ER was introduced...
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After some uncertainty concerning relative strength, current and residual values of the B737-900ER continue to perform, comparing favorably with not only the B737-800 but also the competing A321-200.
With constant talk of a replacement for the B737NG, there had been concern that the B737-900ER was introduced too late in the B737 program product life cycle to become a mainstream product, comparable to the B737-700 and -800. The delay in the development of the -900ER, caused by the errant decision to focus on the failed -900, was initially view as a potentially insurmountable problem, particularly in the context of mounting orders for the long standing and proven A321.
The orderbook for the B737-900ER, as at the end of February, stood at 227 with only 15 delivered. In March two more orders were announced from new customer, Turkmenistan Airways. While the very disappointing orderbook for the B737-600 and B737-900 have essentially marginalized the two variants, the 227 orders placed for -900ER represents a much more promising total, if all are fulfilled and matched by a similar increase over the next few years. The placement of orders further orders are being hampered by the lack of early delivery slots though as congestion and traffic continues to rise outside of the U.S. there may yet be further conversion of -800 orders to the larger variant, particularly as it provides an opportunity for operators to further reduce unit costs.
While the increase in the -900ER orderbook is considered a major positive, the customer base remains relatively limited. There have been just nine customers to date contrasting with the more than 60 customers for the A321. Orders for the -900ER are dominated by the 178 placed by a single customer - Lion Air. The 178 orders represent 78 percent which represents one of the greatest concentrations of any order book. Continental has ordered 27 or 12 percent. Lessors to date have all but failed to participate with only GECAS ordering six. ILFC is not as yet listed though with new orders likely as well as conversion of existing B737NG orders this may yet change. There has been a temptation to assign a sizeable premium to the B737-900ER because of its performance capability. Yet with so many ordered by so few there seems little justification for discounting values of the A321- 200 by such a margin when remarketing the latter has already proven to be easy, not least as a result of a much larger existing customer and operator base. Performance characteristics alone cannot be the basis for values. The size of the orders placed by Lion Air and Continental suggests considerable strategic discounting, creating similar problems for single unit values. The orderbook of 227 for the -900ER compares with 707 for the A321 of which 434 have been delivered leaving a backlog of 273, some 25 percent more than for the -900ER.
The -900ER still has an opportunity to confirm its potential in view of continued delays in the expected service entry of a replacement, although the lack of delivery slots over the next three to four years will continue to hamper demand. While the prospects for values of the -900ER are continuing to improve there also has to be note of caution, particularly if Boeing jumps the gun and launches the B737NG replacement in the next two years
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