Boeing buoyed by $20bn of idled Max jets valued like new

Bloomberg

When Boeing Co ended a long commercial drought last month by handing over 737 Max jets to two top customers, the transactions marked a little-noticed break with tradition.
The planes were built in 2019 but recorded as 2020 models when they were delivered,
having sat dormant during the longest jetliner grounding in US history. The seemingly innocuous distinction could provide some financial relief for the beleaguered aerospace giant, which lobbied appraisers to accept the new approach.
Hundreds of Max jets valued at about $20 billion are poised for similar age-defying treatment as they emerge from storage lots to join the fleets of such carriers as American Airlines Group Inc and United Airlines Holdings Inc.
Their vintage will be based on when they’re delivered, even if that doesn’t happen for another year or two while air travel inches back from the coronavirus pandemic.
Such arcane details are crucial to Boeing’s campaign to restore a little luster to its best-selling plane, which was banned in March 2019 after two deadly crashes.
A newer model year adds millions of dollars to appraisals, a critical boost for a jet fighting to regain its footing in a depressed aircraft market. The company’s Max 8 planes have slipped below Airbus SE’s slightly smaller A320neo in value — a humbling setback for Boeing after decades in which the 737 commanded a premium.
“With the grounding being longer than expected and then followed by the Covid pandemic, values and lease rates have taken a hit,” said Douglas Kelly, senior vice president for asset valuation with Avitas Inc. “The A320neo has declined also, but not as much as the Max.”
In the rare cases in the past that an aircraft delivery has taken more than a year, appraisers typically dated the plane to its initial flight after rolling out of the factory.
With the Max, Boeing argued for basing the model year on when a customer takes control — as is the practice for factory-fresh aircraft — since the planes are still technically part of the company’s production system. Appraisers also plan to reset the vintage of other undelivered jets stranded for more than a year by the pandemic.
Boeing said it was continuing to “work with global regulators and customers to safely return the 737-8 and 737-9 fleet to service worldwide.” Already, the Max’s estimated value trails the A320neo’s by $2.1 million, according to Avitas. Another appraiser, Ascend by Cirium, pegs the gap at $5 million and puts the Max 8 at $43.5 million, or 11% less than than before the grounding in early 2019.