G500
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Lessors Want Airbus & Boeing To "slow Down"

Sun Mar 25, 2012 1:45 pm

Looks like Aircraft Lessors and Financiers want Airbus and Boeing to curb their enthusiasm.. They claim A and B are producing too many aircraft, specially narrow-bodies, and they're risking "flooding the market"..

the survey was taken at an aviation conference in Phoenix

Lessors Want Boeing And Airbus To Slow Down

[Edited 2012-03-25 07:59:04 by srbmod]
 
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Stitch
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RE: Lessors Want Airbus & Boeing To "slow Down"

Sun Mar 25, 2012 2:21 pm

During the last order boom (mid-2000s), lessors were able to charge literally insane rates - new 737-800s were renting near a half-million a month. And they had to since they were paying a premium to Boeing and Airbus to secure early delivery slots to meet customer demand. Two years later, that was down over $150,000.

This has had a big impact on rates for older frames. For a 1998 737-800, rentals are down by half over the past five years, in part due to the constant improvement in the 737NG (per Boeing, a 2012 737-800 should be close to 10% more efficient to operate than a 1998 model).

So I can see where lessors are worried that if Boeing and Airbus "flood" the market with new, more efficient frames, this will continue to drive down the rental rates of older, less efficient airframes and hurt the RoI.
 
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seabosdca
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RE: Lessors Want Airbus & Boeing To "slow Down"

Sun Mar 25, 2012 3:02 pm

This headline is more predictable than the sunrise. It could be paraphrased "Business Unhappy About More Competition."
 
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lightsaber
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RE: Lessors Want Airbus & Boeing To "slow Down"

Sun Mar 25, 2012 3:41 pm

Quoting Stitch (Reply 1):
So I can see where lessors are worried that if Boeing and Airbus "flood" the market with new, more efficient frames, this will continue to drive down the rental rates of older, less efficient airframes and hurt the RoI.

That was my thought. Due to high oil prices, there is a choice. Either Boeing and Airbus meet the demand or the C919 and C-series meet the demand.

The reality is we'll have a time frame where the service life of airframes drops. This is ok, unless one is a fan of T-tails or 737 classics as those two will bear the brunt of scrappings. There is a risk for the leasing companies.   

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fn1001
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RE: Lessors Want Airbus & Boeing To "slow Down"

Sun Mar 25, 2012 7:37 pm

We should not underestimate the part of the lessors in the aviation business. The leasing business is the early warning system on the aircraft market.
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NWAROOSTER
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RE: Lessors Want Airbus & Boeing To "slow Down"

Sun Mar 25, 2012 9:23 pm

The lessors can answer their own question.
How many new build aircraft have the lessors ordered for themselves or customer airlines?   
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flylku
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RE: Lessors Want Airbus & Boeing To "slow Down"

Sun Mar 25, 2012 9:55 pm

Quoting NWAROOSTER (Reply 5):
How many new build aircraft have the lessors ordered for themselves or customer airlines?

By this do you mean how many have they orderer with an airline placement already in hand versus how many have they ordered on speculation? If so I have often wondered about the ebb and flow of that ratio.

Has anyone seen a list that shows, by airline, the percentage of the fleet owned (either outright or financed) versus leased?
...are we there yet?
 
frmrCapCadet
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RE: Lessors Want Airbus & Boeing To "slow Down"

Sun Mar 25, 2012 9:57 pm

50 years ago everyone in most business and even non-profit organizations were touting 5 year plans. Not much more than a decade later it was agreed that you cannot closely plan 5 years out. Replacing those plans were contingency scenarios (not the actual technical name). Unfortunately given the nature of producing aircraft very long pre-planning is necessary. And the consequences of not having enough planes can be really bad. There are major risks in the huge back log of orders. I suspect that A and B as well as lessors and airlines worry about all this a lot. And who knows what sorts of cintingencies some of those orders come with?
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PHX787
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RE: Lessors Want Airbus & Boeing To "slow Down"

Sun Mar 25, 2012 10:10 pm

Quoting NWAROOSTER (Reply 5):
How many new build aircraft have the lessors ordered for themselves or customer airlines?

Well if you look at Wiki you'll see ILFC has an order for 74 B787s...and they say that B and A are "flooding the market"   

[Edited 2012-03-25 15:13:18]
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prebennorholm
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RE: Lessors Want Airbus & Boeing To "slow Down"

Sun Mar 25, 2012 11:44 pm

Quoting frmrcapcadet (Reply 7):
...the consequences of not having enough planes can be really bad.

Right! But bad for whom?

"Not enough planes" is very good for the leasing companies:

No planes parked in the desert.
Robust leasing rates.
No need to search for customers, they all line up by themselves outside your office door.
They can even place worn out fuel guzzlers which only deserve do be beercanned.
Always keep your number of landings equal to your number of take-offs
 
4tet
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RE: Lessors Want Airbus & Boeing To "slow Down"

Mon Mar 26, 2012 1:24 am

Quoting prebennorholm (Reply 9):

Amen!
 
flyingcat
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RE: Lessors Want Airbus & Boeing To "slow Down"

Mon Mar 26, 2012 1:28 am

Really the narrow sighted lessors wish the 737 Max and the NEO did not exist as they will drive down the rates and resale value considerably for the older AIrbus and 737 NG models.

Some, not all, lessors were smart enough to realize that the NEO was on the horizon and did not overextend on securing slots for areas as the Indian market ( we now know this was a bubble).



most of the models have been incremental improvements but also with the new design narrowbodies roughly another 10 years out the next 10 to 15 years will not be fun for narrowbody lessors who were jumping on the bandwagon. Expect many to bow out mostly "me too" firms and those that overspent on securing production slots far down the line.
 
frmrCapCadet
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RE: Lessors Want Airbus & Boeing To "slow Down"

Mon Mar 26, 2012 1:53 am

In an ideal system the long term interests of A and B, lessors, airlines, and passengers would be aligned. The lack of alignmenbt is a market failure. I am merely asserting that there is some market failure in all of thisl.
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ebj1248650
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RE: Lessors Want Airbus & Boeing To "slow Down"

Mon Mar 26, 2012 10:35 am

Quoting g500 (Thread starter):
Looks like Aircraft Lessors and Financiers want Airbus and Boeing to curb their enthusiasm.. They claim A and B are producing too many aircraft, specially narrow-bodies, and they're risking "flooding the market"..

Boeing and Airbus produce according to demand. It's as simple as that. The Lessors concerns are self serving, even if considered legitimate. Airlines don't order airplanes they don't need and leasing companies shouldn't order airplanes they don't have homes for.
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abba
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RE: Lessors Want Airbus & Boeing To "slow Down"

Mon Mar 26, 2012 11:02 am

Quoting lightsaber (Reply 3):
That was my thought. Due to high oil prices, there is a choice. Either Boeing and Airbus meet the demand or the C919 and C-series meet the demand.



   The idea that the market can be manipulated in the way the leassors want is outright nonsense.
 
Archer
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RE: Lessors Want Airbus & Boeing To "slow Down"

Mon Mar 26, 2012 11:45 am

My concern is the usual "cycle" of the airline business. Fuel prices increasing, fares increasing,
economy questionable (worldwide), will passengers keep coming?

When they don't airlines lose money, some fail, orders get cancelled.

Some shaky airlines have really large orders and really small wallets.

Hope it's "different this time".
 
na
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RE: Lessors Want Airbus & Boeing To "slow Down"

Mon Mar 26, 2012 12:03 pm

Utter nonsense, transparent like a window. They are just fearing that lease rates are dropping when the new A320 and 737 generations flood the market. Their business plan is based on a certain lifespan of an aircraft, around 20 years. If now new generations of planes suddenly bring pressure on the lease rates of relatively new planes, then its of cause bad for their business. But the aviation world centers around passengers paying fares, and the more efficient the plane, the more attractive the fare. The fuel prices are becoming so high these days, the pressure on a more than "normal" leap in fuel efficiency is inevitable to keep passenger numbers at high levels. The alternative would be worse even for the lessors.
 
r2rho
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RE: Lessors Want Airbus & Boeing To "slow Down"

Mon Mar 26, 2012 12:44 pm

If it were up to leasing companies, we'd all still be flying 727's. The A320 is already at its 20-year aircraft program cycle, the 737NG is getting close to it. Normally you would have an all-new a/c program to replace them, so the leasing companies should consider themselves lucky that A&B have gone only for engine upgrades instead.
 
dl021
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RE: Lessors Want Airbus & Boeing To "slow Down"

Mon Mar 26, 2012 12:58 pm

The leasing companies have to be able to charge their fees on the planes they have in order to pay them off, and the manufacturers rely n them to buy these airplanes. without them fewer airplanes could be purchased.

as far as ticket prices of, they are also based on aircraft purchase costs....someone has to pay for that airplane. if the aircraft. leasing model falls apart then many airlines will not be ale to finance their planes, and ticket prices will go up until new leasing companies are formed.

I don't really get the apparent anti-business sentiment here. the airline business is the main topic here, and financing the airplanes is at the heart of this industry. the leasing companies may not be able to make it through a flooded market...similar things have happened in the automobile business where terms are shorter, and exposure is less. if they do suffer from loss of equity in their lease portfolios past a certain point we will have a massive problem on multiple levels and we will all suffer for it on multiple levels.

I really think its sort of inevitable in certain ways.
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RE: Lessors Want Airbus & Boeing To "slow Down"

Tue Mar 27, 2012 12:47 am

Quoting ebj1248650 (Reply 13):
Boeing and Airbus produce according to demand. It's as simple as that.

But you can stimulate that demand by providing sweetheart loans to customers, the way the Americans and Europeans have been doing through export agencies that offer credit on really cheap terms to highly indebted clients like Air India. This has been on the news lately too, and it's being fought in the courts and in congress.

If this boom turns to a bust, both manufacturers will have a lot of excess production capacity in their hands and that's very costly.
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planemaker
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RE: Lessors Want Airbus & Boeing To "slow Down"

Tue Mar 27, 2012 4:22 pm

Quoting lightsaber (Reply 3):
That was my thought. Due to high oil prices, there is a choice. Either Boeing and Airbus meet the demand or the C919 and C-series meet the demand.

On the other hand, SUH is critical of BBD for not being aggressive enough on CSeries pricing...

http://www.aviationweek.com/aw/gener...tions%20CSeries%20Sales%20Strategy

So, either he wants BBD to bend over before he places a large CSeries order or... he wants BBD's to lower the price for the CSeries so that he can use it to beat up A and B on pricing.
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RE: Lessors Want Airbus & Boeing To "slow Down"

Tue Mar 27, 2012 6:10 pm

Any technological advance creates winners and losers; there is nothing new in this. As long as aircraft demand exceeds supply, lessors will do OK even with new models making much of their inventory obsolete. But as soon as there is a downturn, the least efficient planes are the ones most likely to be parked. If they belong to lessors, they will not bring them any more money. While the lessors will buy their share of new models, their risk will rise, and the return they get for their older planes will be less. So of course they would be happier if the manufacturers keep building the same models without substantially improving them. But everyone else will not.
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lightsaber
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RE: Lessors Want Airbus & Boeing To "slow Down"

Wed Mar 28, 2012 1:06 am

Quoting planemaker (Reply 20):
So, either he wants BBD to bend over before he places a large CSeries order or... he wants BBD's to lower the price for the CSeries so that he can use it to beat up A and B on pricing.

Or Bombardier just doesn't have the 'economies of scale' to price with A and B. 500 planes per year should cost about 30% less per plane than 100 planes per year and Bombardier isn't there yet.  

Lightsaber
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