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Boeing's (NYSE: BA) 737 MAX 9 -- the second variant of its upgraded 737 MAX family of single-aisle planes -- is finally ready for action. Last Friday, the aerospace giant announced that the FAA had issued an amended type certificate for the MAX 9. This will allow Boeing to begin deliveries to customers, including rapidly rising Southeast Asian carrier Lion Air and United Continental (NYSE: UAL).
However, the 737 MAX 9 hasn't sold very well. Further, Boeing launched a slightly larger model last year (the 737 MAX 10) to better compete with the Airbus (NASDAQOTH: EADSY) A321neo. The 737 MAX 9 now fills a tiny niche between the 737 MAX 8 and 737 MAX 10, which will make it very difficult to gain additional orders.
Boeing's 737 MAX 9 was certified by the FAA last week. Image source: Boeing.
Boeing's 737 mistake
Boeing's outgoing generation of 737 jets came in four basic sizes: the 737-600, 737-700, 737-800, and 737-900. The smallest model (the -600) sold very poorly, with fewer than 100 orders. By contrast, the 737-800 and its variants accounted for more than 5,000 orders -- roughly three-quarters of the total. The 737-700 and 737-900 size classes both sold in respectable numbers as well, with more than 1,200 orders for the former (including business jets) and nearly 600 orders for the latter.
Not surprisingly, when Boeing designed an upgrade program for the 737, it dropped the smallest model. However, it left the other three model sizes unchanged, which proved to be a mistake.
The 737 MAX 7 attracted little interest from airlines, as its relatively small size means unit costs are higher. Boeing eventually changed the MAX 7's specifications to add 12 more seats, while increasing its commonalities with the 737 MAX 8 to reduce development costs.
Demand for the 737 MAX 9 was a little better, but still underwhelming. Boeing doesn't provide an official breakdown of its 737 MAX orders by variant, but one third-party analysis pegged the number of MAX 9 orders at approximately 410 as of a year ago. For comparison, Airbus currently has 1,920 orders for its competing (but somewhat larger) A321neo.
Stuck in the middle
At last year's Paris Air Show, Boeing launched the 737 MAX 10, a model that can fit 12 more seats than the MAX 9. The MAX 10 has roughly the same capacity as Airbus' A321neo, and will likely have similar unit costs.
The 737 MAX 10 has superseded the MAX 9 in Boeing's product lineup. Image source: Boeing.
Not surprisingly, airlines and aircraft leasing companies responded much more positively to the 737 MAX 10 than to the MAX 9. Boeing garnered 361 orders and commitments for the 737 MAX 10 in the span of a week during the air show.