Aerospace & Defense

The Value of Boeing's Now Infamous 737 Max 8 Drops by Millions of Dollars

Boeing Co. (NYSE: BA) faces a multitude of problems due to crashes of its 737 Max 8, which took 346 lives. Boeing faces a large number of legal actions from the families of those who died, and perhaps from airlines that had to take the planes out of service. The software problems that caused the crashes may delay the data that could put the plane back into service until year’s end. The incidents and their aftermath also have driven down the value of the 737 Max 8.

Boeing’s list price for a 737 Max 8 is $117.1 million. However, in the aviation industry, list prices mean very little. Airlines and aircraft leasing companies usually make large orders that come with sharp discounts.

At the start of the month, a research firm that measures airplane values cut the prices of the 737 Max 8 to $46.7 million from $49.1 million. Oddly, the crashes were not the major reason. According to research company Flight Global, low-priced sales to large airplane leasing companies are the primary reason for the drop. Another sign of trouble is an analysis of the huge drop in orders for Boeing planes in the first half of the year.

Demand for the 737 Max 8 has not evaporated. There is a still a backlog of orders for the jet, although some analysts believe airlines may cancel orders to switch or Airbus models. Saudi-owned carrier flyadeal has canceled an order for 30 of the Boeing airplanes. However, there have been no other large cancellations so far.

Boeing makes a margin of over $10 million on each 737 Max 8, according to several sources. As the prices of the plane have come down, the figure could show some erosion. Based on the latest data about what the plane sells for, that already has happened.

Finally, Boeing’s aircraft sales and prices could be affected by its reputation. It has not landed on the list of the least respected companies — here are the companies with the best and worst reputations.