ANALYSIS: Lessors bridge gap to Neo/Max

Farnborough
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The operating leasing industry grabbed more commercial aircraft headlines at this year's Farnborough air show than the airlines as lessors lined up to take early position slots on re-engined Airbus and Boeing single-aisle programmes.

The show was always going to be the place for "catch-up" for Boeing and its 737 Max after Airbus secured A320neo orders and commitments during the past year with Air Lease, Aviation Capital Group, ALAFCO, CIT Group, ILFC and GE Capital Aviation Services.

This week at Farnborough, Boeing unveiled three of them - Air Lease, ALAFCO and GECAS - for the 737 Max programme. All three also committed for more current-generation 737-800 aircraft, saying the aircraft type remains in demand and will be needed to bridge the gap through the first 737 Max deliveries.

ALC's president and chief commercial officer John Plueger says the 737-800 is perceived by financiers as the "best aircraft" for residual value retention. Before the Max announcement ALC's 181-aircraft orderbook included 77 737-800s, according to Flightglobal's Ascend Online database. The operating lessor is scheduled to receive its 737-800s through 2017 and will switch to the 737-8 model the following year.

GECAS also based its tentative order for more 737NGs on continued airline demand for the narrowbody. It signed for 25 737-800s, along with 75 re-engined 737 Max 8s, which comes on top of an order two years ago for 40 of the type. Chief executive Norman Liu says: "The fleets are performing well at the moment and we wish we had more aircraft to place."

GECAS's current narrowbody orderbook is committed up to 2014 and according to Liu, the first 737-800 deliveries are scheduled for 2015, 2016 and 2017. Deliveries of its Max 8s will start in 2018.

Avolon Aerospace Leasing signed tentative agreements for both the 737 Max and the A320neo products, but also added 10 737-800s. While both families will start delivering in 2018, the lessor also needs more 737-800s for 2015 and 2016.

CIT Group, an A320 Neo customer, did not commit for the 737 Max, but placed orders for five additional A330s. ALAFCO committed for 20 Max 8 at the show, and holds commitments for 85 Neos.

Ambitious Chinese lessor China Aircraft Leasing Corporation did not place orders for Neo or Max products. But the lessor is currently building a portfolio of Airbus aircraft through sale and leaseback deals, but needs more feed over the coming years. Its 36 Airbus A320/A321 order with the European manufacturer will lay the foundation for CALC to become a major aircraft lessor in the region. "Our business plan is to have 100 aircraft by 2015," says CALC chief executive Mike Poon.

Boeing, which only announced Southwest Airlines, American Airlines, Lion Air and Virgin Australia for the 737 Max before the air show, is confident more lessor announcements will follow this year. The manufacturer is in discussions with several lessors, one of which is Aviation Capital Group. "We are working on finalising the terms with them," says Ray Conner, chief executive of Boeing Commercial Airplanes.