Avolon publishes assessment of Boeing 737 MAX

Avolon, the international aircraft leasing company, today issues a paper assessing the Boeing 737 MAX aircraft family titled, The 737 MAX – Taking Flight. This paper analyzes the impact of the evolving changes to the MAX family’s composition on the narrowbody aircraft market. At a broader level, the paper analyzes the strategic moves that led to the launch of the MAX family and how Boeing responded to Airbus’ launch of the A320neo family.

Key Findings:

 Boeing’s MAX product strategy decisions have been reactive; resulting in lower market share and a wide range of variants.

 The MAX 8 remains the heart of the MAX family and a key target for investors. The aircraft has maintained its Cash Operating Cost advantage over the A320neo on a per seat and trip basis. This aircraft is, and will continue to be, particularly attractive for the low-cost carrier market, which is focused on seat

mile cost as a key performance metric.

 To regain market share from Airbus, Boeing launched the MAX 10 at the 2017 Paris Air Show. The reaction has been positive, strengthening the MAX family and doubling Boeing’s share of the large narrowbody market.

 There is potentially strong placement demand for aircraft lessors’ forward 737 MAX orders to date as 54% of 737NG operators, who have previously ordered new aircraft directly from Boeing, do not have commitments for any of the current 737 MAX variants.

 The shift away from smaller variants, such as the MAX 7, has been driven by several factors including unit price and the continued dominance of the LCCs, which focus on larger and more cost-effective models, like the MAX 8. However, a change in pricing strategy could stimulate further demand for the MAX 7.

 The value proposition of the MAX 9 has been impacted by the launch of the MAX 10. It is unclear what role remains for the aircraft, but it is likely to have a limited future.

 Boeing has secured only three customers in three years for the 737 MAX 200 (a sub variant of the MAX 8) making it questionable from an investor’s perspective.