Boeing and Airbus meet new competition: Their own used planes

It is hard to compete against your own products. Vaccination campaigns are finally giving airlines the visibility they need to buy jets again. This is of particular relief to Boeing Co, which back in July had about 100 of its 737 MAX planes in storage without an owner. Now the number is only about 10, thanks to a wave of orders from major carriers like United Airlines and Alaska Airlines. It confirms one of the cornerstones of aviation economics: There are always buyers of new, more efficient aircraft. With fuel accounting for a third of airlines' operating expenses, the cost of the latest jets is small compared with the savings they provide. The question is at what price. Carriers' haste to purchase the MAX suggests that Boeing is offering generous discounts. Irish low-cost carrier Ryanair, which is known for scooping up cheap planes at moments of crisis, ordered 75 units last December. The MAX's tarnished reputation gives Boeing a particular reason to prioritize sales over margins. But a broader factor also is at play, including for European manufacturer Airbus SE: It is extremely cheap to buy their planes -- particularly bigger models -- in the secondhand market. According to the latest appraisals by international advisory firm Ishka, a 15-year-old 737 was 20% cheaper this April than in January 2020. A wide-body 777-300ER was 45% cheaper. The book values of planes often take between 12 and 24 months to fully reflect the impact of a crisis. The data suggest that these older planes, which have been the biggest victims of airlines' moves to shrink their fleets, have already found their footing in the used market, and may even be revalued higher from here. When it comes to more modern wide-body planes, though, valuations haven't stopped falling. <br/>