As China plans to begin flight testing on the Boeing 737 Max, we analyse the potential impact on the market and competition with the A320 NEO. Image: Wikipedia Commons
Aviation officials in China have stated a willingness to begin flight testing on the Boeing 737 Max aircraft, an early step towards future certification. It is reported that Boeing plans to send a professional team of 35 pilots and engineers to China in July 2021. The 737 Max's entry to service has been delayed by a mix of political tensions and trade issues.
Intelligence data from IBA's InsightIQ platform reveals that the 737 Max is proving prevalent amongst narrowbody aircraft orders in 2021. In the United States, the recovery of Max orders appears to correlate directly with the recovery of the market itself. Significant recent orders include over 200 airframes for United Airlines, as well as new aircraft for Alaska Airlines and Southwest Airlines.
Whilst it is likely that discounted prices have been offered by Boeing as it attempts to regain ground lost to the Airbus A320 NEO, MAX orders stood at 490 against 137 for the A320 as of June 2021. Overall however, the A320 NEO retains market dominance despite this recent growth in Max orders. Some airlines have had notable success in swapping sectors operated by the A320 CEO with NEO models, such as EasyJet's London Gatwick to Tenerife route, which drove an 18% reduction in CO2 emissions.
Whilst this step is a positive one, It is likely it may still be some time before the aircraft enters service following this test flight.
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Whilst 737 MAX sale and leaseback rates look set to strengthen in the near term, the future looks bleak for direct lease rates. As far back as the mid 2018s, lessors were experiencing difficulty placing the MAX, resorting to placements with weaker credit airlines at increasingly softer rates. By the end of the 2018s, rates had dipped as low as $270,000 - $280,000 and, as 2019 dawned, even before its grounding many lessors and operators were questioning the MAX's value against the comparative attraction of its 737-800 sibling.