AVITAS Chart of the Month – October (an AVITAS mini Case Study). The Demise of the A319 and the 737-700. What Happened?

AVITAS Chart of the Month – October (an AVITAS mini Case Study). The Demise of the A319 and the 737-700. What Happened?

AVITAS Chart of the Month – October (an AVITAS mini Case Study). The Demise of the A319 and the 737-700. What Happened?

deliveries 737-700 and A319Combined, the A319 and 737-700 currently have more than 2,400 aircraft in service—a very big number overall; but, their deliveries and order book backlogs has shrunk substantially in recent years.



Their decline owes to two key developments: the increase in fuel prices and the growth in low cost airlines; together, both of these elements have disrupted new demand for these aircraft.

Oil Price

deliveries 737-700 and A319 vs oil priceAs oil price began a steady increase beginning in 2002, deliveries of both the A319 and the 737-700 declined in an opposite and moderately correlated trend.  The shift away from the A319 and the deliveries 737-700 737-800 and A319 A320737-700 occurred as airlines migrated from smaller narrowbody aircraft to larger narrowbodies like the 737-800 and the A320.  In short, the 737-800 and A320 have better seat mile costs than the A319 and 737-700, i.e., more seats to spread the total cost of operation across.  Fuel price consumes a higher amount of cash operating costs on all aircraft but hurts, in particular, smaller aircraft on a seat mile basis.
In addition, larger narrowbody aircraft are very popular in major hub flow patterns (which are dominant in North America and in Europe) and are favored by low cost operators worldwide as they try to attract low fare yield passenger traffic.

Despite the negative correlation between fuel price and delivery declines on the 737-700 and the A319s, fuel price alone doesn’t explain all of change.

Low Cost Airlines

The movement to larger gauge narrowbody aircraft on the part of low cost airlines (LCCs) is the other reason for the demise of the A319 and 737-700s.  More and more LCCs have developed in the last decade and more and more of them In-service Narrowbody LLChave chosen large narrowbody aircraft like the 737-800 (Ryanair puts 189 passengers on their 737-800s) and the A320 can also be configured to a similar amount in high-density seating.  Lower seat unit costs allows for pursuit of low yield traffic.  So, as LCCs have taken delivery of A320s and 737-800s, they have taken less A319s and 737-700s.

When higher fuel prices are coupled with the development of LCCs and their choice of 737-800s and A320s, it explains a great deal regarding the demise of smaller narrowbody aircraft like the A319 and 737-700.  In fact, it can be statistically modeled effectively using oil price and LCC growth and the effect of both of these elements on deliveries of the A319 and the 737-700.  Simply and without trying to get too complicated, when these variables are modeled, 80% of the overall changes in the deliveries of A319s and 737-700s over the time period 2002 to 2014 are explained by changes in oil prices and the growth of LCCs.

What is the outlook for the A319s and 737-700s?  From a delivery standpoint and in terms of new orders, more of the same, i.e., less and less.    Despite the low fuel price environment, LCC growth for larger narrowbody aircraft is now trumping the oil price effect that was demonstrated in this analysis. Both the A319 and the 737-700 will still be popular and will be mainstream aircraft for the long-term given their large installed base.  But their market clout has and will continue to be diminished.


Note: sources for the graphs are AWIN Fleet Data, CAPA Fleets, and US Energy Information Administration (EIA); Indexes were used to simplify trend analysis;

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