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​ISTAT appraisers cautious on impact of Max grounding on values

Potential implications of the grounding on future 737 Max values topped the agenda for the appraiser panel at the ISTAT EMEA conference in Berlin on 25 September.

The general consensus was that it would be premature to draw any conclusions about potential long-term effects of the grounding, which has so far lasted six months. But appraisers are cautious about potential long-term issues.

"It's very important for us as appraisers not to lead the market. We're supposed to reflect the market," says Ascend by Cirium's head of valuations, George Dimitroff. He points out that there are many unanswered questions around the timing of the recertification, public perception, lessor behaviour, and delivery positions.

Olga Razzhivina, senior ISTAT appraiser with aviation consultancy Oriel, argues that prior to the grounding, the value perception of the Max was already less rosy than that of its predecessor, the market-leading 737-800.

"It's not exactly a mirror image of the 737-800," she says. "The 737-800 has enjoyed remarkable value-retention life. The type of compromises that Boeing had to go through to integrate the larger engines into the existing aircraft has, in our view, compromised [the Max], and we did not have as strong a view of Max 8 [values] as a 737-800 to start with."

The grounding has confirmed Oriel's views about the Max's "technical compromises", adds Razzhivina.

"However, there is no other choice for Max operators so they'll have to stick with it and will probably do so. The big question is whether the ensuing technical fixes and regulatory uncertainty have pushed Boeing far enough to curtail the Max and develop an all-new single aisle, which obviously wouldn't help the value retention of the aircraft."

Oliver Stuart-Menteth, managing director of Fintech Aviation Services, raises the possibility that the European Union Aviation Safety Agency could require additional modifications to anything specified by the Federal Aviation Administration. "This may then signify two sets of values, for an FAA-type Max and an EASA-type Max," he says.

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