Turnaround Time

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  • More on that scrapped 737-600
    Posted by Michael Mecham 6:33 PM on Jun 18, 2010

    These are topsy-turvy times. As Boeing and Airbus step up production rates to keep up with demand for their narrow-body airplane series we get word that a Boeing 737-600 Next Generation aircraft is being scrapped.

    Elyse Moody has already commented on the scrapping, but here's a bit more.

     

    So far as we can determine, it is the first NG to hit the scrap yard since the family entered service in 1997 – just 13 years ago. Remember, aircraft veterans figure no airplane has really reached hallmark status until it passes at least the 20-year mark. The original 737-100 entered service with Lufthansa on Feb. 10, 1968. That’s 42 years ago, folks.

     

    “My reaction was, Holy Cow, that’s fairly amazing,” says Fred Klein of Aviation Specialists Group upon hearing the news. Aviation Specialists specializes in airplane valuations and financial analysis of the used airplane market.

     

    Built in 1999, this -600 was sold to CT Aerospace to be dismantled for parts, according to the International Bureau of Aviation (IBA). It was formerly owned by FlyGobespan, which entered administration (receivership) last December. It was recently returned off a sub-lease from Midwest Airlines in Egypt.

     

    The dismantling is taking place at Cotswold Airport in Gloucestershire.

     

    IBA Group was appointed in February by PricewaterhouseCoopers, the joint administrators for FlyGlobespan’s Group, to manage and remarket the aircraft. Its conclusion: the best sale was to break it up for parts. After all, its parts have resale value across the NG line and are not restricted to the poor-selling -600 series.

     

    “We are very pleased with the outcome, especially since IBA has achieved a sale price that exceeded our original price expectations,” a spokesman for the joint administrators said. The better price means “there will be more cash available for shareholder distribution.”

     

    At 102 ft., a 737-600’s fuselages is 8 ft. shorter than a standard-size 737-700 and 27 ft. shorter than the best selling member of the family, the 737-800. Translated, that means a -600 seats far fewer passengers – 110 in a nominal two-class configuration – than the market wants, at least in a heavy airframe type like a 737 rather than a comparably lighter fuselage in one of Bombardier or Embraer’s regional jets.

     

    A few years ago, the 737-700 with a nominal two-class seating of 126, was Boeing’s best seller. But it now takes second billing to the 162-seat -800. In fact, there are now more orders for the 737-800 than airplanes delivered for Boeing’s original 737-100 through -500s combined.

     

    Needless to say, the 737-600 never sold well. It’s been an orphan for years. Boeing has taken just 69 orders since its launch in 1995 and all have been delivered. The last went out the door in August 2005, to WestJet.

     

    What a contrast to the NG series as a whole: 5,277orders, with 2000 still to be delivered (as of May).

     

    The circumstances surrounding the scrapping of this 737-600 may be unique to that airplane, but they certainly illustrate how tough the 100-125 seat market is when what you have to offer is a shortened – and relatively heavy -- version of an original. And it is not just the -600; the smallest of Airbus’ offerings, the A318, has not found a market, either.

     

    Time was when a 90-110 seat jet was very viable for the major airplane makers. Think of the DC9-30 or the original 99-110-seat 737-100/200s.

     

    It remains a good market for regional jet specialists. For instance, Embraer had delivered 264 EMB190s, as of last year, with 176 in backlog. The longer EMB195 had 49 deliveries and 64 in backlog.

     

    “If you have the right airplane in the 100-110 series market, you can do well,” says Klein.

     

    The logical question is what all this may mean for Bombardier’s CSeries, with its 110 and 130-seat variants.

     

    Boeing and Airbus view the bottom end of the 100-seat market as a niche – only 2% of the market. Yet they defend it vigorously against encroachment by the likes of the Canadians with their CSeries and are wary of what the Chinese are doing with the C919.

     

    They fear any toe-hold outsiders make to their comfortable duopoly will eventually lead to a challenge in the 150/180/200-seat market that accounts for two-thirds of all commercial airplane sales.

     

    Meanwhile, if you need NG parts, give CT Aerospace a call.

       

    Tags: om99, tw99

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