Avolon commits to up to 30 Boeing 737s


Irish lessor Avolon placed a $2.3 billion provisional order for up to 30 Boeing jetliners picking a moment when many airlines are slowing orders and prices are under pressure to expand its own fleet on hopes of an economic recovery.

Boeing Co is leading Airbus in deals at a subdued Farnborough Airshow, the aerospace industry’s showcase event, where there are signs a faltering global economy is finally catching up with demand for new aircraft.
“It doesn’t feel buzzy, but it is the kind of environment I like to buy planes in,” said Domhnal Slattery, a leasing industry veteran who founded Dublin-based Avolon in 2010, Reuters reports.

He forecast the economy would recover from Europe’s sovereign debt crisis more quickly than some expect and said Avolon, which buys aircraft and rents them to airlines, based its projections on higher GDP in the decade ahead.
“Markets stop panicking when regulators start panicking,” he said.

A cyclical boom in aircraft orders, accentuated by a rush among airlines for the latest technology on their jets to help drive down their fuel bills, showed signs of running out of steam this week, although the slowdown had been expected.
“This was the right moment to get this deal done. It is the right time to restock,” Slattery said in an interview.

The order, which Slattery expected to finalize in the next few weeks, includes 15 Boeing 737 MAX aircraft and 10 Boeing 737-800s, the benchmark model currently in service.

The deal also includes reconfirmation rights for five more 737 MAX aircraft.

It is the latest in a series of deals for the revamped version of Boeing’s narrowbody 737 as it battles to catch up with European rival Airbus’s popular A320neo.
“These should be firm orders by the end of August,” Slattery said in an interview.

Avolon’s fleet includes 49 of Airbus’s current single-aisle A320, but although Slattery sees the A320neo as part of Avolon’s fleet in future, he has no immediate plans to order the jet.
“The MAX is the right aircraft for us today,” he said.

The deal brings to almost 200 the number of 737 MAX aircraft sold in firm or provisional deals to leasing companies at the show, which has been marked by a near dearth of airlines and a visible drop in the number of people touring the exhibits.

United Airlines is expected to confirm a 100-plane 737 MAX order from outside the air show on Thursday.

Boeing announced long-awaited detailed specifications for the 737 MAX this week, giving it a longer range than its predecessor and highlighted the fact that the current 737 held its value better in the aircraft market than the A320.

Air Lease Corp, GECAS, the leasing arm of General Electric, which co-produces the aircraft’s engines, and Kuwait’s Alafco announced orders or commitments for the revamped Boeing jet earlier this week.

Although not buying more Airbus jets this week, Slattery welcomed the company’s recent decision to suspend plans to increase its production target to 44 from 42 a month, saying this would help solve an imbalance in the supply of A320s after roughly a decade in which Airbus has out produced its rival.

A pending order for 260 Airbus jets from American Airlines, subject to Chapter 11 proceedings, should also mop up supply, and resurgent economic demand should do the rest.
“I sense that in the course of next year through 2015 we will see a … clean-up of the supply/demand imbalance of airplanes,” Slattery added. (Reporting by Karen Jacobs, Tim Hepher;