Jan. 23, 2019, © Leeham News, Dublin: Investors and lessors should take into account the entire product line offered by Airbus and Boeing when considering sub-types that may have few sales to date, officials of the two companies said at the annual conference in Dublin organized by Airfinance Journal.
Tim Myers, president of Boeing Capital Corp., and Mark Pearman-Wright, Head of Leasing & Investor Marketing for Airbus, said the 737-7, 737-9, 737-10, A319neo, A321LR, A330-800 and the new 777X should be looked at in context of the entire 737, A320, A330 and 777 lines when making investment decisions.
The 737 line is dominated by the 737-8, Myer said. The other models have not sold as well. Although Myers declined to provide sales numbers, LNA previously reported that based on public announcements and customer company documents, about 70 737-7s have been ordered.
Based on public announcements by Boeing and customers, including order swaps to the MAX 10, about 250 MAX 9 orders were outstanding going into the fourth quarter last year. Using the same sources, MAX 10 orders numbers between 550-575.
Boeing has a huge backlog of Unidentified customers with unspecified MAX orders that could inflate any of these numbers.
At Airbus, there are only 55 orders for the A319neo at Dec. 31.
The A330-800 has only a handful of orders.
Investors and lessors typically like broad customer bases and “liquidity” (ie, a large number of airplanes in service or on order) of types and sub-types as investment opportunities.
Niche airplanes like the 777-8, which won’t enter service until 2022, the 777LR, the A350-900ULR and the A321LR, likewise fall within limited appeal for investors.
Then there is the Airbus A220, which until last July was the Bombardier C Series. Bombardier’s own poor financial cast a cloud over obtaining orders and gave pause to some lessors to acquire the aircraft through a direct order or via purchase-leaseback (PLB).
Pearman-Wright noted that some C Series had been financed for Air Baltic through PLBs (Nordic Aviation Capital, for example).
“We’ve certainly [seen] much more interest” since the Airbus purchase of 50.01% of the program, he said. “We clearly have more lessor interest now. The Air Baltic sale/leaseback was oversubscribed. Bringing it into the Airbus stable, the investors appreciate that.”
The MAX family must be viewed as a whole when investors consider which models to put money into, Myers said.
The MAX 10, a program launched at the Paris Air Show in 2017, now represents about 12% of the 737 MAX backlog with some 550+ orders. In lessor terms, this is a small number. The MAX 9 is about half this and the MAX 7 a fraction.
The MAX 10 EIS is next year; the MAX 7 enters service this year.
“When you look at the MAX family, one of the things you have to look at is how we provide the whole gamut and meet our customers’ needs,” Myers said. “The heart of the market is really the Dash 8. There will be investments in the 9. There will be investments in the 10. When you look at the Max family, you have to look at the whole array.
“What’s out in the investor base today, you have a lot of people trying to differentiate themselves.”
(One such lessor is Altavair, when while yet to invest in the MAX family has acquired 737-900ERs and the 777LR, two limited-appeal aircraft sub-types.)
“If you go for bid on the 737-8, you probably will have 35 or 40 offers. That won’t necessarily be true for some of the other product types that may be viewed as more of a challenge in the investor base.”
Pearman-Wright said that the operator base for the A319 and A330-200 is broad and both airplanes sold well.
The retirement age of the aircraft will begin to create a wave shortly into the next decade, when he sees sales of the upgraded neo versions taking off.
Versality will help sales of the A319neo and A330-800, he said. The ranges of each aircraft allows long operations while these aircraft also serve shorter routes.
“The investor community has to look at the A319neo and what it does in its niche,” he said.
The 330-800 will replace the 330-200, with a replacement wave to come. “It’s the cheapest, most versatile airplane you can acquire,” he said of the -800.
Myers said the MAX 7 has hot-high, longer range and somewhat less capacity than the MAX 8 and will find its own use. “That’s just as true for the MAX 9 and the MAX 10,” he said.
“As an investor, you have to look at the whole MAX family and how it will be used,” Myer said.
The 777X has less than 350 orders with about a dozen customers, but 72% of the orders are concentrated with the three Big 3 Middle East airlines.
Myers again said that investors have to look at the entire 777 line, with a replacement wave beginning in 2021-23.
Myers said the Embraer EJet is already a proven airplane and that Embraer has a long history of successful products.
The pending joint venture, in which Boeing will own 80% and EMB 20%, therefore is unlikely to provide the same investor boost to the EJet as did Airbus to the C Series.