Baby Boeing Rolled Out

Summary

• Boeing 737 MAX 7 positions aircraft better in 2 markets.
• Southwest Airlines is the biggest operator of the -700.
• Replacement cycle of these aircraft will steam up around 2025.

On the 5^th of February, Boeing (NYSE:BA) rolled out the smallest variant of the Boeing 737 MAX: The MAX 7. While roll outs usually do gather some attention, the roll out of the Boeing 737 MAX 7 despite being a milestone in reality is a non-event considering the underlying sales at this very moment. In this article, I want to have a look at the Boeing 737 MAX 7, the sales and why Boeing did not kill of the MAX 7.

Source: Boeing

Replacement

On paper, the Boeing 737 MAX 7 replaces existing Boeing 737-700 aircraft in service. Boeing received orders for 1,164 Boeing 737-700 aircraft and has a backlog of just 4 aircraft. So, on paper the replacement potential is big. Also, if we look at the active fleet of 1,135 there seems to be a bright future for the Boeing 737 MAX 7.

Sweet spot is moving north

While there is a big installed base for the Boeing 737-700, there are several factors that limit the appeal of the aircraft. One of the most important reasons is that with growing demand for air travel the sweet spot of the single aisle market is shifting. That sweet spot has shifted towards 160 seats in recent years and it is likely that growing demand for air travel will move that sweet spot towards 180-200 seats in the future. So, in essence a growing market is good but it puts some pressure on existing smaller aircraft.

Optimizing the core product

Source: Boeing

What also pressures the prospects for the Boeing 737 MAX 7 is the fact that Boeing focused the process of MAX’ing the Boeing 737 on getting the most efficiency for the Boeing 737 MAX 8 design. With the core of the market being at the spot where the Boeing 737-800

Analyst’s Disclosure: I am/we are long BA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.