Leasing company SMBC Aviation Capital confirmed in its quarterly results presentation this week that it would defer the delivery of a number of 737 MAX aircraft. The lessor had been in discussions with Boeing for some time and has settled on the deferral of 68 jets. As yet, no part of its order has been canceled.
68 Boeing 737 MAX deferred
Irish leasing company SMBC Aviation Capital has confirmed it will defer the delivery of 68 Boeing 737 MAX jets for several years. The lessor has 133 of the type on order but said in its quarterly results briefing that 68 of the type will be deferred until at least 2025.
The results briefing showed a solid performance by the leasing firm, coming out with a record-breaking full year profit of $364.5m. However, with the financial year ending on March 31st, it is yet to see the full impact of the coronavirus pandemic on its books. The firm declared it was in a strong position with good levels of capital and liquidity.
Nevertheless, the lessor is taking a cautious approach to new aircraft deliveries by pushing back the arrivals of these MAX. It said that, at this point, it had no plans to enact any cancellations. The jets were due to be delivered in 2021 and 2022 but had not entered production yet. This likely means that Boeing offered some favorable terms for the leaser to push back the delivery date.
Why the deferral?
During the call, no specific reason for the cancellation was given. However, SMBC Aviation's CEO Peter Barrett told Reuters that it would allow them to plan better over the next number of years. Barrett is expecting a good couple of years of disruption in the leasing industry, telling the Financial Times,
"It will be a tough couple of years for customers and the leasing market... We will have to manage the portfolio, but we see opportunities for businesses like ours to support a recovering industry."
Clearly, with demand for new aircraft likely to be low for some time, it makes sense for SMBC to back off new additions to its inventory for the time being. But could there be another reason for the deferral? Comments by Barrett in an interview with FlightGlobal suggest that could be the case. He told the publication,
"It is driven by the challenge that the Max has faced. So, it's driven by the Max program [rather than coronavirus]."
The CEO went on to say that the company had been in discussion with Boeing for some time regarding the change to the delivery schedule and indicated that more deferrals may be requested further down the line. He did not, however, indicate that any cancellations will follow.
In good company
SMBC is not alone in seeking either deferrals or cancellations of the 737 MAX aircraft. Fellow leasing firm Avolon previously canceled 75 of its order book and deferred delivery of a further 16. Another leasing firm, AerCap, has deferred dozens of deliveries and may cancel some orders, while GECAS slashed orders for 69.
On the airline side, Southwest Airlines, the biggest customer of the MAX, has deferred 59 aircraft, while Gol outright canceled an order for 34. In March alone, Boeing lost 150 orders for the MAX and could lose more before the crisis is over.
What do you think about the future of the MAX? Let us know in the comments.