Airlines' demand for modern technology-enabled, fuel-efficient commercial jets drives the business strategies of several leading aircraft lessors. The regulatory concerns culminating in the grounding of Boeing Co.'s 737 MAX variants in multiple jurisdictions is not likely to change that.
Ethiopian Airlines Flight 302 crashed shortly after takeoff on March 10, just more than four months after the crash of Lion Air Flight 610. Both flights were on MAX 8 aircraft.
Boeing touted the MAX family as being 14% more fuel efficient than its predecessor Next Generation 737 models, in a pitch that has been well-received among operators keen to modernize fleets, open new routes and reduce costs per available seat mile, a key measure of profitability. It delivered a MAX 8 in May 2017 to a subsidiary of Indonesia-based Lion Air, the first of the manufacturer's 330 deliveries of MAX aircraft in 2017 and 2018.
Lessors have figured prominently in that total, according to a review of figures reported on their individual websites. Among them, General Electric Co.'s GE Capital Aviation Services, or GECAS, took delivery of its first such aircraft in February 2018 for lease to a Czech Republic-based carrier. BBAM Aviation Services Ltd. and its affiliates claimed seven MAX 8 aircraft in its 512-plane managed fleet. Avolon Aerospace Leasing Ltd. and its affiliates reported six MAX-family jets in its fleet of 512 owned and delivered aircraft. BOC Aviation Ltd. had five MAX aircraft in its 303-plane owned fleet. SMBC Aviation Capital Ltd.'s 425-plane owned and managed fleet included eight MAX 8s and four MAX 9s.
According to disclosures by publicly traded lessors in their most recent annual or quarterly reports, Air Lease Corp.'s operating lease portfolio of 274 planes included 14 MAX 8s. AerCap Holdings NV's 866-plane portfolio of owned aircraft included five from the MAX family.
The MAX aircraft figure much more prominently in the lessors' order books. GECAS said in June 2017 that it had 170 MAX-family aircraft on order. Avolon had commitments to purchase 135 MAX family aircraft; BOC Aviation reported 90 on order. SMBC's 109 MAX 8 and two MAX 9 orders accounted for more than one-third of its 306 commitments. Aviation Capital Group LLC reported in July 2018 a total of 100 orders for MAX-family aircraft, including its role as one of the launch customers for the MAX 10. Air Lease's 372-plane order book included 154 MAX-family aircraft, including 28 slated for delivery in 2018. AerCap had 99 MAX aircraft on order out of its total commitments to purchase 363 new planes.
Many lessors also have sizable numbers of next-generation Airbus SE A320neo family aircraft, the narrowbody competitors to the MAX family, in their owned fleets and order books. Those aircraft have encountered their own set of challenges in the form of production delays triggered by technical problems involving certain new-generation engines.
"Air Lease has been working diligently to help our myriad of airline customers in all regions of the world modernize their fleet and craft [strategic] plans as they look to expand their operations," Air Lease Executive Chairman Steven Udvar-Hazy said during a February conference call.
More modern fleets can boost the fortunes of aircraft operators, and they also protect the interests of the lessor. Air Lease President and CEO John Plueger said during a February call as part of a discussion about the financial wellbeing of lessees, particularly in emerging markets, that selecting "the most modern, young, widely distributed aircraft in the world" is "the biggest risk mitigant of all" in the event of a customer default.
"What's very important when it comes to asset acquisitions is making sure that you keep your discipline," AerCap CEO Aengus Kelly said during a February call. "You buy airplanes that your customers want, not the ones Boeing and Airbus want to sell you, or not the ones where you see struggling demand."
S&P Global Ratings said March 11 that a perceived safety issue could cause the aircraft to lose market share over the long term but added that any accident-related order cancellations would have to be substantial to affect near-term production rates given the current size of the backlog.
The uncertainty of the moment aside, it seems unlikely that the MAX family would transition out of favor overnight from what Boeing described as the fastest-selling airplane in its history, with more than 5,000 net orders placed through December 2018.