ILFC Sees New Orders From Customers Who Can't Buy
It's a staple of economic theory... no matter how bad things
are, somewhere SOMEONE will benefit, and benefit greatly. In the
case of airlines that have seen profits erased by high fuel prices
-- but still need new aircraft badly -- those "someones" will
probably be aircraft leasing companies.
International Lease Finance Corp. certainly hopes that's the
case. Bloomberg reports the world's largest airliner lessor may
soon order 300 narrowbody planes combined from Boeing and Airbus,
for the sole purpose of offering leases to airlines that may have
to cancel their previous orders for new planes. The orders may be
announced during next month's Farnborough International Air Show in
England.
ILFC Chief Operating Officer John Plueger says his company plans
to ask for steep discounts from each manufacturer, especially if
both planemakers experience the spate of order cancellations many
analysts predict.
If Boeing and Airbus see their respective backlogs shrink too
much, that puts ILFC in an enviable position. "A stressed
marketplace provides us with a lot of opportunities, maybe buying
some airplanes at reduced cost," Plueger said.
Still, there's only so much ILFC -- or any buyer -- can expect
in the form of discounts, says analyst Nick Cunningham with
Evolution Securities, Average order discounts hover around 30
percent; at anything over 50 percent, planemakers start losing
money... even on planes like the erstwhile Boeing 737 and the
newer, but still 20-years-old, Airbus A320. Even if the tooling is
long-since paid for, labor costs still swell the price.
Boeing and Airbus would likely consider such steep discounts
only "in absolute desperation," Cunningham said. A more realistic
figure ILFC can expect is probably closer to 30-40 percent off
list.
As more customers cancel or defer orders, however, planemakers
may just become that desperate. Already, about two dozen airlines
worldwide have filed for bankruptcy or otherwise cut operations
flying this year. Others, like JetBlue Airways, have already
announced they're deferring deliveries for the foreseeable
future.
"There's going to be some good values on deferred or canceled
orders," said Teal Group analyst Richard Aboulafia. "Production
slots will open for planes getting built and you'll see great deals
on those planes."