Udvar-Hazy warns of slowing 2010 production rates

Washington DC
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International Lease Finance Corporation (ILFC) chairman Steven Udvar-Hazy warns Airbus and Boeing could be forced to cut production rates next year to adjust to market conditions.

Speaking today during the 2009 ALTA Leadership Forum Hazy said examining aircraft production purely from a supply and demand perspective, "manufacturers are building too many aircraft".

But the manufacturers need cash to fund their new aircraft in development - the A350 and 787. The 787 in particular is an "expensive proposition", says Hazy, as Boeing continues to invest in the programme "with no money coming in". ILFC's chief says both Airbus and Boeing are maintaining higher production rates to offset those costs.

Hazy believes at some point the market reality will set in, and predicts production adjustments next year.

Government export credit agencies have played a key role this year in financing for both airlines and leasing companies, Hazy explains. Manufacturers have also supplied incentives for airlines to accelerate deliveries to compensate for deferrals.

Securing financing for 2010 deliveries should prove more difficult as Hazy explains carriers finalised financial packages for a large number of aircraft delivered this year before the onset of the economic downturn.

Overall the global airline industry has not turned a good performance, and the quality of carrier credit ratings will create aircraft financing challenges during the next year, Hazy says. "The next 12 months will be interesting to watch."