July 13, 2024

Airlines desperate for planes are paying up for older models

Airlines are grappling with a growing shortage of popular narrowbody aircraft, as Boeing’s latest crisis with the 737 Max exacerbates the situation, driving up the cost of leasing used jets to levels not seen in years.

Image Source: www.transportenvironment.org

Boeing’s decision to slow production of its flagship model in response to quality concerns following a near-disaster incident involving a 737 Max 9 in January has compounded the scarcity of available planes. Concurrently, Airbus is also facing challenges in increasing its output, further tightening the supply. This scarcity is particularly acute for the largest single-aisle jets, which are in high demand due to their capacity to carry more passengers.

Data from Ishka Global indicates that a 3-year-old 737 Max 9 now commands a higher monthly lease rate compared to pre-pandemic levels, while the price of an earlier 737-900ER is approaching January 2020 levels. Similar trends are observed for the Airbus A321neo and its predecessor, the A321-200.

Rental rates for used aircraft surged in 2023 due to a shortage arising from the rapid rebound in air travel post-pandemic, coupled with delays in Airbus and Boeing’s efforts to ramp up production to meet demand.

Image Source: superlagar.live

The challenges at Airbus include supplier constraints hampering efforts to reach pre-Covid production levels, as well as engine issues leading to the grounding of hundreds of A320-series aircraft, further limiting availability.

Boeing’s production woes stem from the global grounding of the 737 Max in 2019 following two fatal crashes. Since then, the company has faced numerous production setbacks, including a recent incident involving a fuselage panel on an Alaska Air Group Inc. flight.

Regulatory scrutiny has delayed the certification of Boeing’s Max 10 model, prompting airlines like United Airlines Holdings Inc. to adjust growth plans or seek alternative aircraft models. Additionally, US regulators have imposed restrictions on Boeing’s monthly 737 deliveries to ensure a focus on improving safety and manufacturing processes.

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