Operating lessors differ in opinion about the attractiveness of the Boeing 787-8 aircraft as an investment for their portfolios.
“The Boeing 787-8 is the initial model of three types, and to me, is a bit like the Boeing 727-100, 737-100, 747-100, the DC10-10 and the Lockheed L1011-1,” said Steven Udvar-Hazy, chairman and president of Air Lease at the International Society of Transport Aircraft Trading conference this week. "It is a great airplane, but in terms of a long-term investment for an aircraft lessor, we have different criteria for choosing an aircraft than an airline."
He says the value proposition of the 787-8 is “not the same” as on the latter types.
Air Lease has orders for 30 787-10 and three 787-9 aircraft.
AerCap’s chief executive officer urges lessors to be cautious of ever-changing airline demand for aircraft before determining the value of a unit.
“I would be very careful about writing off any airplane too soon,” said AerCap’s Aengus Kelly. “You have to be careful about aircraft trends as
Kelly recalls bankers once offering more money towards an Airbus A330-200 purchase than an A330-300.
“And then the world changed, due to capacity constraints in Asia, and now the A330-300 is probably the most in-demand aircraft in the world, commanding a significant premium,” he says.
The shift in demand also can be seen on the Airbus A319 and A321, according to Kelly.
“In 2003 you couldn't give A321s away, and now they are selling like hot cakes. The same is true with the A319,” he says.
In May, AerCap entered into a $2.6 billion sale and leaseback agreement with LATAM Airlines Group for 25 widebody aircraft, including two new 787-8s.
“We are very bullish on the 787 family,” says Kelly, adding: “Clearly we are more focused on the -9, but the -8 certainly has a future.”
SMBC Aviation Capital’s chief executive officer Peter Barrett said the lessor sees a space for the 787-8 in its portfolio.
“I think we would have some appetite for the -8,” he said, agreeing with Kelly that airline demand for aircraft “does tend to change over time.”
“But I see us having more 787-9 than -8s; it [the portfolio split] would be something like one-third, two-thirds, in that range, but ultimately it is would be down to what our customers want.”
RBS Aviation Capital, which was acquired by SMBC Aviation in 2012, cancelled an order for 25 787s in 2009.
“On balance, it would be a good thing to have the order,” says Barrett, adding: “The delays in the aircraft would have meant, ironically, we would have had the aircraft at the right time in terms of growing our business.”
Barrett says, if the decision was his, he would have liked to have kept the order. “But having said that, it was the right thing for the shareholder at the time.”
According to CIT’s president of transportation of finance, Jeffrey Knittel, the 787-8 production delays have proved problematic for the 787-9.
“The reality is the airplane [787-8] slipped and that did not help,” he said. “It would have been much better to have the aircraft earlier on to fill a hole [in capacity], and then the evolution toward the -9 would have occurred earlier.”
Knittel believes there is still a gap in the market today and that “opportunity should exist for a while.”
Speaking on CIT’s position on new aircraft programmes, he says the lessor prefers to be on the “front-end”.
“We find that the risk shifts in the latter half of programmes, so the earlier you are on a programme, the better you tend to be, as the actual value depreciation tends to be less.”
Flightglobal's Ascend Online database shows that CIT has 10 787-8s on order. Two have been placed with Royal Jordanian, and two with Aeroméxico.