Aviation leasing company Avolon has canceled commitments for 75 Boeing 737 MAX aircraft. In addition, orders for four A330neos have been canceled, and 25 more narrowbodies have had their delivery date delayed. The lessor said that the action was in response to the current effect the coronacrisis is having on the industry.
Airlines have been grounding fleets left, right, and center. This has meant that airlines are not flying the aircraft that they already have. Of course, it goes without saying that acquiring additional aircraft is not something that they will wish to focus on right now. This means that lessors are struggling to place aircraft.
Avalon is canceling commitments for 79 aircraft and delaying delivery of another 25. According to the lessor, of the 79 canceled commitments, 75 are for Boeing 737 MAX aircraft, with the remaining four for A330neos. The airline hasn’t detailed which other aircraft are being delayed, beyond saying that it consists of 25 narrowbodies.
According to Boeing’s current order book, Avolon has 75 Boeing 737 MAX orders placed under Avolon Aerospace Leasing Limit (Cayman Islands) on the 17th of November 2017. In a 2017 press release Boeing said: “The confirmed order is for 55 MAX 8s and 20 MAX 10s, with options for 20 additional MAX 8s.”
Additionally, through the Irish ‘Avolon – Ireland’, a further 20 aircraft are on order, of which three have so far been delivered.
In a press release the company said:
“The net impact of our actions in the first quarter is to reduce our aircraft commitments in the 2020 to 2023 timeframe from 284 aircraft, as at year end, to 165 aircraft today and thereby significantly reducing our near-term capital commitments.”
Airlines don’t want aircraft right now
A large part of the reason why the orders will have been canceled will be because airlines simply don’t want or need aircraft right now. In fact, the company remarked that the entire Boeing 737 MAX order being canceled is currently unplaced. Avolon remarked: “While we remain committed to the B737MAX programme, we have cancelled commitments for 75 unplaced B737MAX aircraft.”
It will take an awfully long time before we return to ‘business as usual’. In fact, airBaltic confirmed that it will return as an Airbus A220 only airline once it returns to operations, as there will be no need for the capacity currently provided by its 737s.
However, another thing worth considering is that there could possibly be a surplus of available aircraft once this crisis is over. Considering that the Boeing 737 MAX is currently grounded, airlines that are still looking for aircraft could target other aircraft.
Although, this would depend on when the Boeing 737 MAX does return to service. It is possible that this could happen before the aviation industry recovers unless the return to service efforts are hampered by the current crisis.
Do you think canceling the Boeing 737 MAX order was the right choice? Let us know your thoughts in the comments.