Boeing 737 MAX crisis increases demand for older planes

“This only exacerbates supply shortages and pushes back the date when we can return to a balanced market.”, said analyst George Dimitroff of aviation analytics firm Cirium, who sees tensions until at least 2027.

Airlines are paying high prices to ensure they have a large enough fleet that can handle demand. In that sense, the supply crisis has been a hot topic in Dublin this week.

“We saw a sharp increase in values ​​because of the shortage,” said Aengus Kelly, CEO of AerCap. In a break from usual patterns, some airlines are buying the planes they previously leased rather than negotiating lease extensions, he said on the sidelines of the Airline Economics conference. This is a sign that “Airlines know that the problems we have will not be solved anytime soon”, he added.

More than half of the global enger fleet is lessor-owned. Rental prices for these jets were rising before the January 5 emergency door incident that led to FAA to halt production of the Boeing 737 MAX and create an inspection plan for resuming flights.

 

Typical lease rates for a 737-year Boeing 800-10, which preceded the MAX, were about $220.000 per month in January 2024, up from $183.000 in January 2023 and $156.000 in 2022. said Cirium. Current 737-800 leasing bills are still 5% below January 2020 levels, but Cirium said that should change by the end of March.

Boeing had hoped to increase production of its MAX family of aircraft after a years-long crisis stemming from crashes in 2018 and 2019, but the recent incident with Alaska Airlines has added more regulatory oversight, which will likely slow production growth. 

The average age of an airline-owned enger plane was 16 years in 2024, up from 14 in 2019, Cirium said. Planes are typically used for 25 years, but can fly longer and are as safe as new aircraft if properly maintained, experts say.

“Airlines and lessors are making the decision to invest in maintenance of older aircraft to keep these older aircraft running for another four or five years”, said Avolon CEO Andy Cronin.

“We’re seeing a lot more of this activity in the sort of older part of our portfolio than we expected.” Even though delays in new plane deliveries have hurt airlines and lessors waiting for new planes, demand for older equipment opens up a potentially lucrative avenue for those with older fleets. In the meantime, maintenance companies will benefit from greater use of older planes. However, labor shortages mean the queue for these repairs could be longer.

Engines are especially scarce because of repairability issues on the RTX. Likewise, manufacturers increased the prices of new engines, which reduced the incentive to switch to newer equipment. Typically, enger jets are eventually converted into freighters or broken up for parts. But Robert Convey, senior vice president at Florida-based Aeronautical Engineers, said companies expect to find fewer enger planes to convert.

Extending the life of older, less fuel-efficient planes could also increase environmental pressure on an industry that has touted its efforts to generate net-zero emissions by 2050. Industry officials have said production setbacks will not derail those goals, but environmentalists disagree.

“There is an over-reliance on new so-called 'more efficient' aircraft technology, but there are no plans to stop adding more polluting planes to the sky,” said Jo Dardenne, director of aviation at Brussels-based Transport & Environment.