Sept. 5, 2022, © Leeham News: Boeing has been delivering 737s from its stored inventory and its new production line more slowly than desired. Some customers face a three-month delay, even as Boeing tries to return to normalcy following the 21-month grounding of the MAX and the impact of the two-year pandemic.
The supply chain is a key culprit. Reconfiguring stored airplanes for lessees or buys after a change from the original operator is another. Engine shortages are still another.
BOC Aviation, a lessor headquartered in Singapore, faces three months delays, Robert Martin, the CEO, said in an interview with LNA.
“It’s a mixture of things. The first thing is the engines,” Martin said. “There’s been a delay in engines, and this is not just a Boeing problem, let’s be clear. Airbus has the same problem. Basically, the numbers of engines that they have available to put on the aircraft that are being built are not sufficient. There are different reasons for that.”
Martin said some are due to issues at the engine manufacturer and their own supply chain behind them. Some issues even go back as far as the forging of the shafts for the engines.
“It’s all the way down the supply chain. The second thing is we’ve seen a lot of supply chain problems. People didn’t realize how quickly things were going to gear back up. [The industry] laid off a lot of labor during the downturn. Attracting that labor to come back has been more difficult. This has caused supply chain disruption, and of course, spare parts as well. Parts to go on the engines and further down the supply chain have also had some problems.”
Martin affirmed previous LNA reporting that it takes time to bring the 737s out of storage. Depending on whether they’re going to the original customer or whether they’re going to a different customer, work may need to be done on the aircraft. There’s just not enough labor to do that additional work, he said.
“When Boeing’s working normally, you probably have sufficient capacity to be able to do that with the strains they’re under at the moment. If you ask them to do something additional, it just takes longer, as opposed to the paperwork, and to do the physical work itself.
“We’ve tried to absolutely minimize the customization because we know it will take a long time to get the work done. I think of the situations we’ve been in where we’ve taken a plane that was destined for one customer and getting to another customer. “But the main things generally we’re looking for is changes in maximum takeoff weight, maybe engine thrust. We’ve tried to limit it after that because we’re aware that it does take paperwork changes,” Martin said.
Another lessor told LNA that it’s sometimes seen Boeing take as long as nine months to process the paperwork on its airplanes for changes.
Martin said that sometimes BOC Aviation saw delays from Boeing Global Services (BGS). “But that’s tended to be for us more to used aircraft than aircraft in production.”
BOC Aviation is owned by the Bank of China but is a Singapore company. Accordingly, it doesn’t face the same import restrictions Chinese lessors do. Nevertheless, some of its aircraft originally destined for China have been redirected to other lessees. It’s also helped Boeing redirect aircraft that became surplus to the original buyer.
“We’ve worked with Boeing when they’ve got excesses of aircraft,” Martin said. “We’ve been doing this over the last two years, picking up aircraft that may have been surplus to airline’s requirements.” The aircraft were placed outside China. There’s no reason why BOC Aviation couldn’t do so with China as well, placing the aircraft with other carriers.
Boeing had about 120 787s that were accumulated during the delivery pause. (Deliveries resumed in August, with about a half-dozen tendered to buyers so far.) John Plueger, the CEO of Air Lease Corp, had said publicly that he wouldn’t be surprised if up to 50% of those airplanes wound up being canceled by customers. Martin couldn’t affirm this observation, but clearly, the delays give the customers the right to do so. BOC Aviation canceled three orders during the nearly two-year pause in deliveries.
More from our interview with Robert Martin will be published soon.