The Boeing 717-200 faces continuing competition from both existing and out-of-production aircraft in a challenging and concentrated market segment. However, there is some stability in residual values reports Angus Mackay and Stuart Rubin from ICF.
The Boeing 717 single-aisle narrowbody aircraft is a further development of the DC-9 series aircraft. The aircraft was originally announced by McDonnell Douglas as the MD-95 during the 1991 Paris Air Show. In August 1997, Boeing acquired McDonnell Douglas and renamed all of their aircraft, with the MD-95 re-designated as the Boeing 717.
The 717 was developed for the short-haul, high frequency 100-seat regional market in competition with aircraft such as the Airbus A318, Boeing 737-500, Boeing 737-600 the Fokker F100 and, latterly, larger variants of the new generation of regional jets including the Embraer 195 and CRJ1000.
The Boeing 717-200 programme was officially launched on October 19, 1995, with an order for 50 firms and 50 options from the AirTran Airways’ predecessor, ValuJet Airlines. First delivery to the airline took place in September 1999 with production at Boeing’s Long Beach plant ending in May 2006 with 156 aircraft delivered.
The Boeing 717-200 was the first version that went into production. All the major elements of the airframe are based on the DC-9/MD-80 series but it offers many other changes from the older DC-9. The systems and avionics are a blend of low cost and advanced technology.
The avionics of the aircraft have been improved over the earlier DC-9 with the incorporation of six LCD screens, Honeywell EFIS cockpit displays and the cabin interior was redesigned in line with the MD-90 to provide greater comfort for the regional customers. A new turbofan engine, the Rolls-Royce BR715, was specifically built for the 717 providing a thrust range by option between 18,500 and 22,000 lb.
The aircraft has a typical capacity of 106 passengers in a two-class seating. The basic gross weight (“BGW”) version has a range of 1,510 nm and the high gross weight (“HGW”) version range extends to 1,730 nm.
Further versions of the aircraft were proposed including the 717-100 with 80 seats and the 717-300 with 130 seats with about the same range, and a VIP variant but none came to fruition. As of July 2019, there were 147 Boeing 717-200 aircraft in service, four parked and four retired.
Current and future market outlook
The Boeing 717 was designed and developed to meet replacement and expansion needs in the 100-seat category and in particular, for a perceived replacement need at Northwest Airlines, for the DC-9-30.
At the time of programme launch, the total market was forecast by Boeing at 3,000 aircraft over 20 years and which placed the aircraft in competition with other aircraft which were all vying to replace ageing DC-9s, Fokker F28s and Boeing 737-200s as well as satisfying the needs of turboprop and small regional jet operators ready to move up in size.
The 100-seat market segment has, for a variety of reasons, proved both challenging and disappointing for most manufacturers.
Although technically a good aircraft, built specifically for the short-haul, high-frequency regional environment and offering low fuel consumption, relatively low operating weight, fast turn-around times and low operating costs, the 717-200 has not enjoyed the market appeal that Boeing had hoped for.
No sales were ever completed with a major airline despite a number of high profile sales campaigns and significant studies into derivative 86-seat and 130-seat variants, unfulfilled largely due to OEM concerns over perceived competition to existing 737-600 and -700 models despite market interest from Delta, Northwest and Iberia.
Boeing 717-200 orders and deliveries also suffered heavily from the travails of a general economic downturn in 2001, exacerbated by the events of September 11, 2001.
Sales for the competing Airbus A318 and Boeing 737-600 have also proved disappointing but have benefitted from the family associations lacking in the 717-200. An overcrowded 100-seat market eased somewhat with the disappearance of several potential competitors.
BAe cancelled its Avro RJX, an updated BAe 146; Fairchild Dornier ceased business, withdrawing the potential 728 and 928 series competitor aircraft; and Bombardier cancelled its new BRJ in favour of a less ambitious stretched 90-seat CRJ900.
Nevertheless, the Boeing 717-200 sold only 155 aircraft before production ended in the face of lackluster sales and ambivalent OEM support.
The type effectively straddles two markets occupied at one end by smaller regional airlines with their low cost structures and route networks favouring smaller less-costly aircraft, and at the other by major airlines restricted by pilot scope clauses and higher operating costs which seek to improve yields through the use of higher-capacity aircraft.
Smaller carriers are confounded by the absence of any 717 family associations, further limiting potential sales. Currently, the fleet is with a mere four active operators including Delta Air Lines, Hawaiian Airlines, QantasLink and Volotea.
Volotea is in the process of phasing out the type. Airline ownership is relatively low with Cobham Aviation Services owning 18 aircraft, Hawaiian Airlines owning 15 aircraft, and Southwest Airlines ten aircraft operated by Delta. Boeing Capital Corporation represents the largest lessor with 97 aircraft.
As such, from a sale transaction perspective, the market is particularly illiquid with little or no pricing transparency. Major fleet disposals leading to further deterioration in values and lease rates seem unlikely in the short to medium term given the continuing commitment to the type and the growth plans of major operators.
Delta Air Lines currently operates 90 aircraft having subleased 10 of the type from Southwest Airlines which inherited post-merger with AirTran. Delta became the largest operator of 91 aircraft in 2015 when it absorbed the remaining 31 Southwest aircraft and a further three aircraft purchased from SAS.
Hawaiian Airlines has 15 aircraft in service and Qantas has 18 QantasLink aircraft placed with Cobham Aviation Services which operates 20 aircraft. The most prominent current production competitor would be the Embraer 195.
The level of competition in the 100-seat market has intensified with new offerings from current OEMs including the Airbus A220-100, Bombardier CRJ1000, and the Embraer E2 Jet series which are expected to enter service in significant numbers over the next five years.
Other recent or new entrants to the market include manufacturers from Russia, China and Japan with Sukhoi’s SSJ100, COMAC’s ARJ21-900, and Mitsubishi’s M90, the latter fitted with the highly fuel-efficient Pratt & Whitney geared turbofan.
Current aircraft values and lease rates reflect the general market view that the Boeing 717-200 is limited by its out-of-production status, concentrated operator base, a lack of commonality with other fleet types, reduced range and increasing exposure to competition from new entrant aircraft incorporating step-change technologies.
Typically, the aircraft has traded in multiple units, which has led to a degree of convergence of values and lease rates irrespective of year of build.
Nevertheless, ICF sees stability in residual values for this niche aircraft with current top three operators quickly absorbing available aircraft which are well regarded for low operating costs and high maintenance reliability in high frequency operations.
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