There has been a surge in the rental rates of older planes as airlines turn to such crafts to cater to the growing demand for the industry given the global grounding of the 737 Max planes of Boeing has now entered in the sixth month.
“Used 800s are like a gold dust at the moment,” said Phil Seymour, CEO of London-based aerospace consulting firm IBA. He was referring to one of the older model of the plane – the Boeing 737-800s. According to his estimates, there has been an increase of 40 per cent in the lease rates for 24 months or less of some of the older models of the 737 planes to about $300,000 ever since the grounding of the 737 Max planes globally in March this year. The crafts were grounded following two deadly crashes in within a period of just five months. The total lives lost in the two crashes were 346 lives and there has been no indication from regulators about when the 737 Max planes would fly again.
Initial investigation in both the crashes has pointed to a possible flaw in a piece of flight-control software which allegedly pushed the nose of the planes down. Investigators claimed that this happened in both the crashes – the Ethiopian Airline and the Lion Air crash. The planes involved in both the crashes were 737 Max planes. A software fix for the planes is being tested by Boeing and the company now expects that the planes would be allowed to fly again by regulators in the early days of the fourth quarter. The company however has also warned that the date could be delayed further.
As a consequence of the groundings, airlines have been left in a lurch because they had anticipated making extensive use of the fuel efficient 737 Max planes during the busy mid-year vacation season. Instead many airlines have been forced to shell out money for leasing the less fuel efficient older models.
In the first half of 2019, there has been a 5 per cent year on year increase in air travel demand, said the International Air Transport Association, a trade group, this week.
Airlines whose lease for the older 737 jets are nearing their end are hurrying to extend their agreements, said Michael Inglese, CEO of leasing firm Aircastle, and added that the company had made a modest benefit from the increased demand. The firm doesn’t have any 737 Max planes or any on order. Customers were expecting that the grounded 737 Max jest would get back to service quality after they were grounded in March, Inglese said. The airlines however are now discussing way to tackle the extended grounding of the planes.
“Now it feels there’s a little more decision paralysis,” he said. “Everybody is scratching their head at the moment.”
It has been more than 50 years that the Boeing 737 has been a support for airlines. This is so because it is a single-aisle jet which is suitable for short- and medium-haul flights and for over 150 passengers.
(Adapted from CNBC.com)