Appraiser valuations of 737-800 feedstock out of sync

The spread in appraisal opinions for 737-800 passenger airframes — a type in high demand as feedstock for freighter conversions — varies widely, according to ISTAT certified appraisers on a session at Cargo Facts Symposium 2021 that delved into aircraft values on Oct. 27. Panelists agreed that 737-800 values have obviously come down because of the pandemic but noted that values have stabilized and are even on the rise again amid strong demand for freighter-converted 737-800s. [caption id="attachment_416935" align="alignright" width="447"] An appraisers roundtable at Cargo Facts Symposium 2021. Pictured left-to-right: Doug Kelly, SVP asset valuations, AVITAS; George Dimitroff, head of valuations, Ascend; and Mark Halsor, President, AISI and AAMI.[/caption] About 17% of the 737-800 fleet is in long-term storage, while another 10% hasn’t flown in the past 30 days, noted Lindsey Webster, VP asset valuations of mba Aviation on Oct. 27. “Despite this, there's about only 0.5% of the fleet that's being publicly marketed for sale, and that is actually a decrease from the high that we saw in March 2021, when 1% of the fleet was available,” Webster said. Aircraft coming off lease and going into freighter conversion rather than the secondary passenger market “has helped hold up some of the base, or some of the market values for these older 737-800s” she said. Webster estimated that lease rates for a 2000-build 737-800 in passenger service would be in the $100,000 range, while the same vintage freighter-converted unit could fetch $170,000 to $185,000 per month. The part-out market is a strong indicator of demand for freighter-converted 737-800s, said George Dimitroff, head of valuations of Ascend. Just eight 737-800s have been parted-out year-to-date, compared to more than forty A320s. In September, Ascend made an upward revision to 737-800 values. “They were at the bottom between February and September, and they've started coming back up again,” he said. While four of the appraisers had current market values ranging from $9.0 million to $11.6 million, not so fast, said Olga Razzhivina, director of Oriel, who gave a $6.5 million valuation for the type. “We have actually seen aircraft sold into freighter conversion even below that level,” Razzhivina said. “But we obviously had to adjust for engine condition.” Turning to the A321-200 airframe, CMV values varied widely, from $6.0 million according to Oriel, to as much as $13.7 million, according to AISI. “The market values of the aircraft are in the range that would justify a freight conversion,” Razzhivina said. With a fifteen-year-old aircraft going for between $6 million and $10 million, “that's a pretty attractive price,” said Razzhivina, estimating that a freighter-converted A321 would trade in the realm of $18 million to $20 million. Despite the influx of newer narrowbody freighters, the consensus among appraisers was that strong demand for lift has kept current market values above base values for older narrowbody types. Lease rates for the 737-400SF “are actually pretty stable for the type, even with the influx of the -800 freighters,” Webster said. As for when current market values might return to base, there are many values in play. “It’s probably looking like the 2024 to 2025 time period, but that could be delayed depending on how e-commerce drives demand for narrowbody lift, and the number of new narrowbody freighter types redelivered,” Webster said.

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