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Dutchy
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Resale value of 737-700 and A319

Sun Dec 02, 2018 4:59 pm

An article got my attention the other day. It mentioned that an 11 y/o Boeing 737-700 from TIU will be broken up in Twente. It continued to say that the resale value of these kinds of aircraft has slipped below the resale value of its parts. It seems that this size of aircraft isn't popular anymore, not new, not second hand. They seem to be heading the same way as the A318 and Boeing 737-600.

Article in Dutch.
Many happy landings, greetings from The Netherlands!
 
n471wn
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Re: Resale value of 737-700 and A319

Sun Dec 02, 2018 5:31 pm

I can never figure out why some of these low cycle aircraft go to the scrappers but I am sure they go to the highest bidders and I know that retirement rates have dropped and the scrappers are hungry;

but what a shame. Both these types have done well on the secondary market with SWA taking nearly 100 used 700’s and more surprising both United and American going after used 319’s.
 
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lightsaber
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Re: Resale value of 737-700 and A319

Sun Dec 02, 2018 5:41 pm

We have regular (ish) threads on aircraft values:

viewtopic.php?t=1399391

The issue is PIPs reduce the cost of flying more for the larger types in a family than the smaller. Going from memory, the CFM-56-5 used to flying only about 14,000 cycles between overhauls on the A321 while on the A319 it was 20,000 (1st overhaul). Now it is 18,000 for the a321, and 20,000 for A320 and A319. The same is true on fuel burn.

It isn't size, it is the fact the size is reduced by cost isn't. Again, going from memory, it used to be a cost per flight of 7% to 8% savings flying an A319 vs. A320 or a 73G vs. 738. But after wingtip treatments ("Sharklets/Winglets")and engine PIPs, it is closer to 3.5% to 4%. Before there was enough of cost savings per flight to justify buying the shrink.

Yes, they are heading the way of the A318/736. Sad, but economic reality. Once production of the A220 and E2-195 ramp up, there will be airframes in the size that are economical. The A220 has done about as well as the A319 (now that Airbus is selling, assuming JetBlue and "Moxie" firm their orders).

Airbus expects to sell 3,000 A220 over the next few decades:
https://leehamnews.com/2018/07/11/what- ... rbus-a220/

I personally expect more, but only after Airbus gives the production process a good scrubbing to cut costs and improve details (PIP).

The A220 has better CASM/CASK, from https://airinsight.com/cseries-beats-ne ... ile-costs/
Image

Per that study, an A320NEO will cost $9.40 per mile to fly
A319NEO at $8.45 (much more cost savings than I estimate, but we'll take the numbers).
A220-300 at $7.62
A220-100 at $7.00

Compareto A320CEO at $10.20, A319CEO at $9.08, 738 at $10.16

Notice the A320NEO saved $0.80 per mile vs the A320CEO
But the A319NEO only saves about $0.50 per mile. So this shifts the business case for the A320 family to the larger family member as has been true of all PIPs. (PIPs always benefit the heavier members of the family more than the lighter unless there is a weight savings PIP exclusively for the lighter family aircraft.)

So compare to those new aircraft and the used (10+ years) A319/737-700 (aka 73G) have a poor resale value in use compared to their part resale value. It appears WN has slowed their 73G purchases which kills 73G resale value (they are taking a flood of -8 MAXes, so this was to be expected).

With high fuel prices (anything over $35/bbl for airlines is high) and new generation aircraft having *much* better predictive maintenance (saves money in the long run), I predicted in threads years ago that the retirement age of aircraft will drop.

But this will stabilize. Eventually used part prices will drop until the resale price drops to attract low utilization airlines to go out and buy more used aircraft. (e.g., Allegiant. Delta also flies a sub-fleet low utilization, hence the MD-80s/90s, as does AA and UA. So there is a market, for the right price.) In fact, the 737NGs and A320CEOs will have a long life in that role (not just at US airlines, they are just easier to analyze due to our quarterly report requirements).

In no way should either Boeing or Airbus discount new build -7 MAXes or A319 NEOs; their backlogs are too healthy to throw away profits at this time. However, the A220 and E2-195 will claw into that role. Look at that above chart. I believe Airbus will get the production in order such that the A220-300 will indeed provide CASM/CASK at the same level as the A320NEO. At that point it will sell very well. Poor Airbus will just have to build a greater fraction of A321NEOs. ;) Oh wait, I've been predicting that for years!

Boeing has already shifted to -8/-9 and soon -10 production, so it will be an easier transition for them (no size specific production lines).

The best analogy is the MD-80. For years they were being scrapped. So many the parts support became uneconomical and was shut down! Yet, we only see their final fading away due to an incredibly expensive avionics requirement that would be foolish to invest in. The same will be true of the A319CEO/NEO. They will drop in resale (but above the $300,000 the MD-80 bottomed out at) and find the same sort of niche (high RASK peak flying which is low utilization) as those old narrowbodies. Oh wait, there are already many examples in that role that just aged naturally to those operations. :spin: Allegiant being the extreme example (they used to have zero flights on Tuesday IIRC), but I can identify subfleets at other airlines flying other roles. Look at how many fewer flights DL typically has on Tuesday and Wednesday versus the rest of the week as those days, excluding holiday weeks, have poor yield and so high variable cost aircraft get rest time those days.

LIghtsaber
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Flighty
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Re: Resale value of 737-700 and A319

Sun Dec 02, 2018 6:05 pm

These are good head-of-state aircraft for many countries.
 
IWMBH
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Re: Resale value of 737-700 and A319

Sun Dec 02, 2018 7:21 pm

We're probably going to see this a lot the coming years, KLM and Transavia are both going to get rid of their -700's and the first one is already of to the scrapper...
 
GalebG4
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Re: Resale value of 737-700 and A319

Sun Dec 02, 2018 7:39 pm

lightsaber wrote:
We have regular (ish) threads on aircraft values:

viewtopic.php?t=1399391

The issue is PIPs reduce the cost of flying more for the larger types in a family than the smaller. Going from memory, the CFM-56-5 used to flying only about 14,000 cycles between overhauls on the A321 while on the A319 it was 20,000 (1st overhaul). Now it is 18,000 for the a321, and 20,000 for A320 and A319. The same is true on fuel burn.

It isn't size, it is the fact the size is reduced by cost isn't. Again, going from memory, it used to be a cost per flight of 7% to 8% savings flying an A319 vs. A320 or a 73G vs. 738. But after wingtip treatments ("Sharklets/Winglets")and engine PIPs, it is closer to 3.5% to 4%. Before there was enough of cost savings per flight to justify buying the shrink.

Yes, they are heading the way of the A318/736. Sad, but economic reality. Once production of the A220 and E2-195 ramp up, there will be airframes in the size that are economical. The A220 has done about as well as the A319 (now that Airbus is selling, assuming JetBlue and "Moxie" firm their orders).

Airbus expects to sell 3,000 A220 over the next few decades:
https://leehamnews.com/2018/07/11/what- ... rbus-a220/

I personally expect more, but only after Airbus gives the production process a good scrubbing to cut costs and improve details (PIP).

The A220 has better CASM/CASK, from https://airinsight.com/cseries-beats-ne ... ile-costs/
Image

Per that study, an A320NEO will cost $9.40 per mile to fly
A319NEO at $8.45 (much more cost savings than I estimate, but we'll take the numbers).
A220-300 at $7.62
A220-100 at $7.00

Compareto A320CEO at $10.20, A319CEO at $9.08, 738 at $10.16

Notice the A320NEO saved $0.80 per mile vs the A320CEO
But the A319NEO only saves about $0.50 per mile. So this shifts the business case for the A320 family to the larger family member as has been true of all PIPs. (PIPs always benefit the heavier members of the family more than the lighter unless there is a weight savings PIP exclusively for the lighter family aircraft.)

So compare to those new aircraft and the used (10+ years) A319/737-700 (aka 73G) have a poor resale value in use compared to their part resale value. It appears WN has slowed their 73G purchases which kills 73G resale value (they are taking a flood of -8 MAXes, so this was to be expected).

With high fuel prices (anything over $35/bbl for airlines is high) and new generation aircraft having *much* better predictive maintenance (saves money in the long run), I predicted in threads years ago that the retirement age of aircraft will drop.

But this will stabilize. Eventually used part prices will drop until the resale price drops to attract low utilization airlines to go out and buy more used aircraft. (e.g., Allegiant. Delta also flies a sub-fleet low utilization, hence the MD-80s/90s, as does AA and UA. So there is a market, for the right price.) In fact, the 737NGs and A320CEOs will have a long life in that role (not just at US airlines, they are just easier to analyze due to our quarterly report requirements).

In no way should either Boeing or Airbus discount new build -7 MAXes or A319 NEOs; their backlogs are too healthy to throw away profits at this time. However, the A220 and E2-195 will claw into that role. Look at that above chart. I believe Airbus will get the production in order such that the A220-300 will indeed provide CASM/CASK at the same level as the A320NEO. At that point it will sell very well. Poor Airbus will just have to build a greater fraction of A321NEOs. ;) Oh wait, I've been predicting that for years!

Boeing has already shifted to -8/-9 and soon -10 production, so it will be an easier transition for them (no size specific production lines).

The best analogy is the MD-80. For years they were being scrapped. So many the parts support became uneconomical and was shut down! Yet, we only see their final fading away due to an incredibly expensive avionics requirement that would be foolish to invest in. The same will be true of the A319CEO/NEO. They will drop in resale (but above the $300,000 the MD-80 bottomed out at) and find the same sort of niche (high RASK peak flying which is low utilization) as those old narrowbodies. Oh wait, there are already many examples in that role that just aged naturally to those operations. :spin: Allegiant being the extreme example (they used to have zero flights on Tuesday IIRC), but I can identify subfleets at other airlines flying other roles. Look at how many fewer flights DL typically has on Tuesday and Wednesday versus the rest of the week as those days, excluding holiday weeks, have poor yield and so high variable cost aircraft get rest time those days.

LIghtsaber


This answer was eye opening to me. A220 compatable with a320 family(as much as possible parts, type rating, etc...) a220-300cask like A320neo and a220-300 is going to sell like hot cakes. To me a220-100 looks like smaller unwanted child at this moment.
 
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Jouhou
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Re: Resale value of 737-700 and A319

Sun Dec 02, 2018 7:46 pm

It's for this reason I hope the cseries/a220 sees the -500 version. Its a damn good aircraft and its the only clean sheet narrow body out there but the segment of the market it serves is dying off. Then again, it may be hastening the die-off of the 737-700 and a319 by being such a superior aircraft.

I'm pretty sure my assessment here is a less in depth version version of what lightsaber just wrote, so basically "I concur", with the exception that I worry about the success of the cseries/a220. If I was an airline I'd be buying up every production slot, I don't know why airlines are still standing at the sidelines on these after Airbus guaranteed the model is here to stay, and it worries me.
 
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lightsaber
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Re: Resale value of 737-700 and A319

Sun Dec 02, 2018 9:55 pm

Jouhou wrote:
It's for this reason I hope the cseries/a220 sees the -500 version. Its a damn good aircraft and its the only clean sheet narrow body out there but the segment of the market it serves is dying off. Then again, it may be hastening the die-off of the 737-700 and a319 by being such a superior aircraft.

I'm pretty sure my assessment here is a less in depth version version of what lightsaber just wrote, so basically "I concur", with the exception that I worry about the success of the cseries/a220. If I was an airline I'd be buying up every production slot, I don't know why airlines are still standing at the sidelines on these after Airbus guaranteed the model is here to stay, and it worries me.

It worries me JetBlue and Moxie haven't firmed. Once those are firmed, there won't be worries.

I'm less certain about a -500. The 5-across cross section is ideal around the A220-300. It saves 7.6 tons versus the A319NEO, albeit about 1.6 tons are the larger engines sized for the A321NEO.

The A220-500 will have shorter overhaul interval on the engines than the A220. That adds about $0.25 to the cost per mile. The cross section will only be about 4 tons lighter for the -220-500 vs. A320 NEO instead of 7.6 tons. So the cost per flight goes up about $0.75 (total). Partially as the higher weight means the wing loading of the A220-500 is not optimal. In fact, I would increase wingspan a la A321.

Note: the A320 w/ SHARP kit will have better short field performance than any A220-500. About 1,500 ft better if a wing extension is performed.
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hOMSaR
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Re: Resale value of 737-700 and A319

Mon Dec 03, 2018 1:18 am

GalebG4 wrote:
A220 compatable with a320 family(as much as possible parts, type rating, etc...) a220-300cask like A320neo and a220-300 is going to sell like hot cakes. To me a220-100 looks like smaller unwanted child at this moment.


The A220 is not, and likely never will be, compatible with the A320. It was designed as a standalone model, and was already certified and in service before Airbus ever entered the picture. It would cost significant investment to make it compatible, and then even if you did, it would be incompatible with existing A220s, including the several hundred already on order.
The plural of Airbus is Airbuses. Airbii is not a word.
There is no 787-800, nor 787-900 or 747-800. It's 787-8, 787-9, and 747-8.
A321neoLR is also unnecessary. It's simply A321LR.
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GalebG4
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Re: Resale value of 737-700 and A319

Mon Dec 03, 2018 1:44 am

hOMSaR wrote:
GalebG4 wrote:
A220 compatable with a320 family(as much as possible parts, type rating, etc...) a220-300cask like A320neo and a220-300 is going to sell like hot cakes. To me a220-100 looks like smaller unwanted child at this moment.


The A220 is not, and likely never will be, compatible with the A320. It was designed as a standalone model, and was already certified and in service before Airbus ever entered the picture. It would cost significant investment to make it compatible, and then even if you did, it would be incompatible with existing A220s, including the several hundred already on order.

In 2018, Boeing will change the 787-8 manufacturing to raise its commonality with the 787-9 above the current 30% to be more like the 95% commonality between the 787-9 and 787-10, as it will benefit from learning from those.
https://leehamnews.com/2018/04/17/boein ... mmonality/
A320 in 2018 is different from 1988 model, it looks the same but it’s not. Same thing is going to happen with a220 in couple of years.More it’s compatible with a320, it’s more sellable to existing a320 customers.
 
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ikolkyo
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Re: Resale value of 737-700 and A319

Mon Dec 03, 2018 2:02 am

GalebG4 wrote:
hOMSaR wrote:
GalebG4 wrote:
A220 compatable with a320 family(as much as possible parts, type rating, etc...) a220-300cask like A320neo and a220-300 is going to sell like hot cakes. To me a220-100 looks like smaller unwanted child at this moment.


The A220 is not, and likely never will be, compatible with the A320. It was designed as a standalone model, and was already certified and in service before Airbus ever entered the picture. It would cost significant investment to make it compatible, and then even if you did, it would be incompatible with existing A220s, including the several hundred already on order.

In 2018, Boeing will change the 787-8 manufacturing to raise its commonality with the 787-9 above the current 30% to be more like the 95% commonality between the 787-9 and 787-10, as it will benefit from learning from those.
https://leehamnews.com/2018/04/17/boein ... mmonality/
A320 in 2018 is different from 1988 model, it looks the same but it’s not. Same thing is going to happen with a220 in couple of years.More it’s compatible with a320, it’s more sellable to existing a320 customers.


And what changes are you proposing that won’t jealousies the certification of each aircraft? The example you’re choosing is poor in this case because the A320neo and A220 are literally 2 completely different aircraft.
 
XT6Wagon
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Re: Resale value of 737-700 and A319

Mon Dec 03, 2018 2:44 am

Right now with the minimal production rate of the A220, I doubt its actually cheaper to produce than a A32x. Thus why BBD is paying Airbus to try and get something out of the project for the next few years.

Regarding this frame, who knows its actual condition. If its got missing paperwork or in need of lots of actual work thats going to keep the airlines who do buy used -700 from being interested. More than enough -700 users to get value out of the -700 specific parts so that keeps the scrap value high despite the commonality differences with the -800/900/900ER
 
GalebG4
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Re: Resale value of 737-700 and A319

Mon Dec 03, 2018 3:09 am

ikolkyo wrote:
GalebG4 wrote:
hOMSaR wrote:

The A220 is not, and likely never will be, compatible with the A320. It was designed as a standalone model, and was already certified and in service before Airbus ever entered the picture. It would cost significant investment to make it compatible, and then even if you did, it would be incompatible with existing A220s, including the several hundred already on order.

In 2018, Boeing will change the 787-8 manufacturing to raise its commonality with the 787-9 above the current 30% to be more like the 95% commonality between the 787-9 and 787-10, as it will benefit from learning from those.
https://leehamnews.com/2018/04/17/boein ... mmonality/
A320 in 2018 is different from 1988 model, it looks the same but it’s not. Same thing is going to happen with a220 in couple of years.More it’s compatible with a320, it’s more sellable to existing a320 customers.


And what changes are you proposing that won’t jealousies the certification of each aircraft? The example you’re choosing is poor in this case because the A320neo and A220 are literally 2 completely different aircraft.

I don’t agree because anything that is under skin can be re engineered. So anything that is electric, hydraulic, pneumatic even aerodynamic like winglets can be re engineered. https://www.flightglobal.com/news/artic ... or-354481/ During lifespan of 30 years, on a320 family has changed nearly everything except main structure. There’s no aircraft manufacturer that is not improving it’s product. Look at first prototype of 737-100 and 50 years later 737-max10. A220 like every aircraft will evolve: electric, pneumatic, hydraulic systems plus aerodynamic and everything that makes economic sense will be changed. You will not see a220 with 100% a320 family parts, but during 10-15 years of life span Airbus will change everything that will make product better and not only on a220 but also on the all family members.
 
Chaostheory
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Re: Resale value of 737-700 and A319

Mon Dec 03, 2018 12:20 pm

lightsaber wrote:
We have regular (ish) threads on aircraft values:

https://www.airliners.net/forum/viewtopic.php?t=1399391

The issue is PIPs reduce the cost of flying more for the larger types in a family than the smaller. Going from memory, the CFM-56-5 used to flying only about 14,000 cycles between overhauls on the A321 while on the A319 it was 20,000 (1st overhaul). Now it is 18,000 for the a321, and 20,000 for A320 and A319. The same is true on fuel burn.

LIghtsaber


It's got nothing to do with pips and no cfm56 or iae will achieve 18 000 cycles on the A321. Above 30k rating, both engines take a hammering and need to be removed due to egt margin deterioration a long time before 18 000 cycles.

Where do you get your figures from? I spend an inordinate amount of time rubbishing them!
 
MIflyer12
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Re: Resale value of 737-700 and A319

Mon Dec 03, 2018 12:50 pm

lightsaber wrote:
Eventually used part prices will drop until the resale price drops to attract low utilization airlines to go out and buy more used aircraft. (e.g., Allegiant. Delta also flies a sub-fleet low utilization, hence the MD-80s/90s, as does AA and UA. So there is a market, for the right price.)


One might expect WN and UA to be ready buyers for any well-maintained, low price -700s. And yet...

Why these are worth more as parts than as flying aircraft is an interesting market anomaly.
 
brindabella
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Re: Resale value of 737-700 and A319

Mon Dec 03, 2018 12:57 pm

lightsaber wrote:
We have regular (ish) threads on aircraft values:

viewtopic.php?t=1399391

The issue is PIPs reduce the cost of flying more for the larger types in a family than the smaller. Going from memory, the CFM-56-5 used to flying only about 14,000 cycles between overhauls on the A321 while on the A319 it was 20,000 (1st overhaul). Now it is 18,000 for the a321, and 20,000 for A320 and A319. The same is true on fuel burn.

It isn't size, it is the fact the size is reduced by cost isn't. Again, going from memory, it used to be a cost per flight of 7% to 8% savings flying an A319 vs. A320 or a 73G vs. 738. But after wingtip treatments ("Sharklets/Winglets")and engine PIPs, it is closer to 3.5% to 4%. Before there was enough of cost savings per flight to justify buying the shrink.

Yes, they are heading the way of the A318/736. Sad, but economic reality. Once production of the A220 and E2-195 ramp up, there will be airframes in the size that are economical. The A220 has done about as well as the A319 (now that Airbus is selling, assuming JetBlue and "Moxie" firm their orders).

Airbus expects to sell 3,000 A220 over the next few decades:
https://leehamnews.com/2018/07/11/what- ... rbus-a220/

I personally expect more, but only after Airbus gives the production process a good scrubbing to cut costs and improve details (PIP).

The A220 has better CASM/CASK, from https://airinsight.com/cseries-beats-ne ... ile-costs/
Image

Per that study, an A320NEO will cost $9.40 per mile to fly
A319NEO at $8.45 (much more cost savings than I estimate, but we'll take the numbers).
A220-300 at $7.62
A220-100 at $7.00

Compareto A320CEO at $10.20, A319CEO at $9.08, 738 at $10.16

Notice the A320NEO saved $0.80 per mile vs the A320CEO
But the A319NEO only saves about $0.50 per mile. So this shifts the business case for the A320 family to the larger family member as has been true of all PIPs. (PIPs always benefit the heavier members of the family more than the lighter unless there is a weight savings PIP exclusively for the lighter family aircraft.)

So compare to those new aircraft and the used (10+ years) A319/737-700 (aka 73G) have a poor resale value in use compared to their part resale value. It appears WN has slowed their 73G purchases which kills 73G resale value (they are taking a flood of -8 MAXes, so this was to be expected).

With high fuel prices (anything over $35/bbl for airlines is high) and new generation aircraft having *much* better predictive maintenance (saves money in the long run), I predicted in threads years ago that the retirement age of aircraft will drop.

But this will stabilize. Eventually used part prices will drop until the resale price drops to attract low utilization airlines to go out and buy more used aircraft. (e.g., Allegiant. Delta also flies a sub-fleet low utilization, hence the MD-80s/90s, as does AA and UA. So there is a market, for the right price.) In fact, the 737NGs and A320CEOs will have a long life in that role (not just at US airlines, they are just easier to analyze due to our quarterly report requirements).

In no way should either Boeing or Airbus discount new build -7 MAXes or A319 NEOs; their backlogs are too healthy to throw away profits at this time. However, the A220 and E2-195 will claw into that role. Look at that above chart. I believe Airbus will get the production in order such that the A220-300 will indeed provide CASM/CASK at the same level as the A320NEO. At that point it will sell very well. Poor Airbus will just have to build a greater fraction of A321NEOs. ;) Oh wait, I've been predicting that for years!

Boeing has already shifted to -8/-9 and soon -10 production, so it will be an easier transition for them (no size specific production lines).

The best analogy is the MD-80. For years they were being scrapped. So many the parts support became uneconomical and was shut down! Yet, we only see their final fading away due to an incredibly expensive avionics requirement that would be foolish to invest in. The same will be true of the A319CEO/NEO. They will drop in resale (but above the $300,000 the MD-80 bottomed out at) and find the same sort of niche (high RASK peak flying which is low utilization) as those old narrowbodies. Oh wait, there are already many examples in that role that just aged naturally to those operations. :spin: Allegiant being the extreme example (they used to have zero flights on Tuesday IIRC), but I can identify subfleets at other airlines flying other roles. Look at how many fewer flights DL typically has on Tuesday and Wednesday versus the rest of the week as those days, excluding holiday weeks, have poor yield and so high variable cost aircraft get rest time those days.

LIghtsaber


:D

Super cool post!
cheers
Billy
 
bennett123
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Re: Resale value of 737-700 and A319

Mon Dec 03, 2018 12:58 pm

IMO, operators with A320/A321 and B737NG will continue to use these types due to commonality.
 
brindabella
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Re: Resale value of 737-700 and A319

Mon Dec 03, 2018 1:02 pm

GalebG4 wrote:
lightsaber wrote:
We have regular (ish) threads on aircraft values:

viewtopic.php?t=1399391

The issue is PIPs reduce the cost of flying more for the larger types in a family than the smaller. Going from memory, the CFM-56-5 used to flying only about 14,000 cycles between overhauls on the A321 while on the A319 it was 20,000 (1st overhaul). Now it is 18,000 for the a321, and 20,000 for A320 and A319. The same is true on fuel burn.

It isn't size, it is the fact the size is reduced by cost isn't. Again, going from memory, it used to be a cost per flight of 7% to 8% savings flying an A319 vs. A320 or a 73G vs. 738. But after wingtip treatments ("Sharklets/Winglets")and engine PIPs, it is closer to 3.5% to 4%. Before there was enough of cost savings per flight to justify buying the shrink.

Yes, they are heading the way of the A318/736. Sad, but economic reality. Once production of the A220 and E2-195 ramp up, there will be airframes in the size that are economical. The A220 has done about as well as the A319 (now that Airbus is selling, assuming JetBlue and "Moxie" firm their orders).

Airbus expects to sell 3,000 A220 over the next few decades:
https://leehamnews.com/2018/07/11/what- ... rbus-a220/

I personally expect more, but only after Airbus gives the production process a good scrubbing to cut costs and improve details (PIP).

The A220 has better CASM/CASK, from https://airinsight.com/cseries-beats-ne ... ile-costs/
Image

Per that study, an A320NEO will cost $9.40 per mile to fly
A319NEO at $8.45 (much more cost savings than I estimate, but we'll take the numbers).
A220-300 at $7.62
A220-100 at $7.00

Compareto A320CEO at $10.20, A319CEO at $9.08, 738 at $10.16

Notice the A320NEO saved $0.80 per mile vs the A320CEO
But the A319NEO only saves about $0.50 per mile. So this shifts the business case for the A320 family to the larger family member as has been true of all PIPs. (PIPs always benefit the heavier members of the family more than the lighter unless there is a weight savings PIP exclusively for the lighter family aircraft.)

So compare to those new aircraft and the used (10+ years) A319/737-700 (aka 73G) have a poor resale value in use compared to their part resale value. It appears WN has slowed their 73G purchases which kills 73G resale value (they are taking a flood of -8 MAXes, so this was to be expected).

With high fuel prices (anything over $35/bbl for airlines is high) and new generation aircraft having *much* better predictive maintenance (saves money in the long run), I predicted in threads years ago that the retirement age of aircraft will drop.

But this will stabilize. Eventually used part prices will drop until the resale price drops to attract low utilization airlines to go out and buy more used aircraft. (e.g., Allegiant. Delta also flies a sub-fleet low utilization, hence the MD-80s/90s, as does AA and UA. So there is a market, for the right price.) In fact, the 737NGs and A320CEOs will have a long life in that role (not just at US airlines, they are just easier to analyze due to our quarterly report requirements).

In no way should either Boeing or Airbus discount new build -7 MAXes or A319 NEOs; their backlogs are too healthy to throw away profits at this time. However, the A220 and E2-195 will claw into that role. Look at that above chart. I believe Airbus will get the production in order such that the A220-300 will indeed provide CASM/CASK at the same level as the A320NEO. At that point it will sell very well. Poor Airbus will just have to build a greater fraction of A321NEOs. ;) Oh wait, I've been predicting that for years!

Boeing has already shifted to -8/-9 and soon -10 production, so it will be an easier transition for them (no size specific production lines).

The best analogy is the MD-80. For years they were being scrapped. So many the parts support became uneconomical and was shut down! Yet, we only see their final fading away due to an incredibly expensive avionics requirement that would be foolish to invest in. The same will be true of the A319CEO/NEO. They will drop in resale (but above the $300,000 the MD-80 bottomed out at) and find the same sort of niche (high RASK peak flying which is low utilization) as those old narrowbodies. Oh wait, there are already many examples in that role that just aged naturally to those operations. :spin: Allegiant being the extreme example (they used to have zero flights on Tuesday IIRC), but I can identify subfleets at other airlines flying other roles. Look at how many fewer flights DL typically has on Tuesday and Wednesday versus the rest of the week as those days, excluding holiday weeks, have poor yield and so high variable cost aircraft get rest time those days.

LIghtsaber


This answer was eye opening to me. A220 compatable with a320 family(as much as possible parts, type rating, etc...) a220-300cask like A320neo and a220-300 is going to sell like hot cakes. To me a220-100 looks like smaller unwanted child at this moment.


A: I don't know the answer, but

B: I suspect the EMB E2-series will be far more important than may be apparent at this time ...


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Spacepope
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Re: Resale value of 737-700 and A319

Mon Dec 03, 2018 1:41 pm

MIflyer12 wrote:
lightsaber wrote:
Eventually used part prices will drop until the resale price drops to attract low utilization airlines to go out and buy more used aircraft. (e.g., Allegiant. Delta also flies a sub-fleet low utilization, hence the MD-80s/90s, as does AA and UA. So there is a market, for the right price.)


One might expect WN and UA to be ready buyers for any well-maintained, low price -700s. And yet...

Why these are worth more as parts than as flying aircraft is an interesting market anomaly.


One did in fact see that WN bought a large number of used -700s and were the main reason they maintained their resale value so well for the past few years. The used buy was so large that it actually put huge pressure on the spare parts market (especially engines) and was a factor in the delay of the P2F conversion programs (as it made all retired 737NGs more valuable including the 738 feedstock, but those retiring 736s got a scrappers premium over trying to sell them to other potential operators).

Now that the buy is complete, -700 prices are coming down and we've seen 4 go to the scrapper this week (including 2 ex-germania ones in the SN 20-30 range).

Look for this process to repeat itself as UA and AA are picking up used A319s however they are more choosey and we've seen serial numbers as high as the 1600s head to the chopper this fall. Once the UA and AA buys are done, expect to see more A319s get broken up compared to other types in the family. Lately it's been sub-1000 A32x of all types headed to the chopper and the last of the South American A318s providing a source of spares, but that last well is nearly dry.
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Re: Resale value of 737-700 and A319

Mon Dec 03, 2018 2:05 pm

Spacepope wrote:
One did in fact see that WN bought a large number of used -700s and were the main reason they maintained their resale value so well for the past few years. The used buy was so large that it actually put huge pressure on the spare parts market (especially engines) and was a factor in the delay of the P2F conversion programs (as it made all retired 737NGs more valuable including the 738 feedstock, but those retiring 736s got a scrappers premium over trying to sell them to other potential operators).


The 2017 annual report shows acquisition of 18 'pre-owned' -700s. Were there some in prior years, too? The report also shows delivery of 52 -800s/Max 8s, so the used component is relatively small.
 
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Re: Resale value of 737-700 and A319

Mon Dec 03, 2018 2:10 pm

MIflyer12 wrote:
lightsaber wrote:
Eventually used part prices will drop until the resale price drops to attract low utilization airlines to go out and buy more used aircraft. (e.g., Allegiant. Delta also flies a sub-fleet low utilization, hence the MD-80s/90s, as does AA and UA. So there is a market, for the right price.)


One might expect WN and UA to be ready buyers for any well-maintained, low price -700s. And yet...

Why these are worth more as parts than as flying aircraft is an interesting market anomaly.


I think we have to look at the complete aircraft ownership picture to see why it is economic / advantages for 11 year old airframes to be parted out.

If we go back ten plus years airlines still flying the 744 were sending 14-16 year old frames to the scrappers whilst retaining 20 year old aircraft.

The reason revolved around the heavy maintenance check in combination with the value of the 14-16 year old parts in relationship to economically maintaining the remaining 744 fleet as a viable aircraft.

In basic terms (and hypothetically) a scrapped 20 year old frame might be sufficient to supply parts to keep a fleet of five 744's flying for two years whereas a scrapped 14 year old 744 could keep a fleet of ten 744's flying for six years.
 
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Re: Resale value of 737-700 and A319

Mon Dec 03, 2018 2:15 pm

MIflyer12 wrote:
Spacepope wrote:
One did in fact see that WN bought a large number of used -700s and were the main reason they maintained their resale value so well for the past few years. The used buy was so large that it actually put huge pressure on the spare parts market (especially engines) and was a factor in the delay of the P2F conversion programs (as it made all retired 737NGs more valuable including the 738 feedstock, but those retiring 736s got a scrappers premium over trying to sell them to other potential operators).


The 2017 annual report shows acquisition of 18 'pre-owned' -700s. Were there some in prior years, too? The report also shows delivery of 52 -800s/Max 8s, so the used component is relatively small.


A quick and dirty search of subtypes indicated 179 -700s that are not -7H4s or ex-airtran in their fleet. Here's an article for WN's search for at least 89 used airframes. https://www.bizjournals.com/dallas/news ... -jets.html

Their used buy was pretty extensive with used 73Gs coming from all over.
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keesje
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Re: Resale value of 737-700 and A319

Mon Dec 03, 2018 2:42 pm

Capable machines. You can stuff them with 150 passenegrs, 3 crew and serious cargo & fly them everywhere. And Pilots, support, maintenance providers all over the world. Fuel costs should be the best, but they capability back for it. The thousands of used A319/737-700s provide(d) the biggest problem for the CSeries/A220.

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wakymike
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Re: Resale value of 737-700 and A319

Mon Dec 03, 2018 3:24 pm

Luxair, for example, jhust bought 2 used -700s. I think they are coming from KLM, for delivery in march and may 2019. But an order for next generation aircraft, namely A220 or E2, also seems to be upcoming.

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