The chief executives of Avolon and AerCap, wrote to Guillaume Faury, Airbus chief executive, in recent weeks to express their concerns that the aircraft market would not support the most aggressive increases in output rates, according to four people familiar with the situation.

A surge in supply of new aircraft, potentially flooding the market, could push down the value of the lessors’ existing fleets. They make their money by renting to airlines.

There is also wider concern that suppliers, many of which were forced to reduce their workforces during the pandemic and are facing rising raw material prices, would be unable to cope at this point in the recovery.

Two people confirmed that one of the letters had been copied to the chief executives of aero-engine makers, including Safran and General Electric.

https://on.ft.com/3C8kqO8 via @FT

I think it is not so much the numbers but the capabilities of new aircraft that make life hard for heritage types. Who needs a A380 or 777 when you can get some easier to fill and cargo capable 787 or A350 at better cost per seat? And now this seems to happen again with single aisle aircraft like the A321XLR.

What happened to leases overall? it feels like airlines can move away easier than before and some types are not leased a second term but just disassembled?

Leasing companies complain about increasing supply. Water is wet

Noshow wrote:

I think it is not so much the numbers but the capabilities of new aircraft that make life hard for heritage types. Who needs a A380 or 777 when you can get some easier to fill and cargo capable 787 or A350 at better cost per seat? And now this seems to happen again with single aisle aircraft like the A321XLR.

What happened to leases overall? it feels like airlines can move away easier than before and some types are not leased a second term but just disassembled?

As for the OEM's, new NB leases are the lessors bread and butter. Simple, straightforward, generic contracts, easy to place. Anything that places pressure on NB margins is unwelcome, especially as WB's in the doldrums, with many non-performing / under-performing.

Shorter aircraft financial life is the way of the future, replicating what happened with vehicles more than a decade ago.

For Airbus, they are extracting further scale savings, internally and with suppliers, raising the bar higher for Boeing to replace the MAX.

Expect Airbus to have to take a much greater direct role in financing WB aircraft, as Boeing already does, and increasingly with NB's too.

smartplane wrote:

Shorter aircraft financial life is the way of the future, replicating what happened with vehicles more than a decade ago.

Care to expand upon that? The avg age of cars on the road has been increasing for at least the last three decades. Loan terms for new cars have gotten progressively longer.

it's now Airbus trying to consolidate it's lead in the narrowbody market vs other stakeholders including lessors

smartplane wrote:

Noshow wrote:

I think it is not so much the numbers but the capabilities of new aircraft that make life hard for heritage types. Who needs a A380 or 777 when you can get some easier to fill and cargo capable 787 or A350 at better cost per seat? And now this seems to happen again with single aisle aircraft like the A321XLR.

What happened to leases overall? it feels like airlines can move away easier than before and some types are not leased a second term but just disassembled?

As for the OEM's, new NB leases are the lessors bread and butter. Simple, straightforward, generic contracts, easy to place. Anything that places pressure on NB margins is unwelcome, especially as WB's in the doldrums, with many non-performing / under-performing.

Shorter aircraft financial life is the way of the future, replicating what happened with vehicles more than a decade ago.

For Airbus, they are extracting further scale savings, internally and with suppliers, raising the bar higher for Boeing to replace the MAX.

Expect Airbus to have to take a much greater direct role in financing WB aircraft, as Boeing already does, and increasingly with NB's too.

Outside of 747-8Fs, I don’t think Boeing financed a single WB.

Duke91 wrote:

Leasing companies complain about increasing supply. Water is wet

Indeed - didn't leasing companies also complain about re-engined planes (A320neo & MAX) not being needed?

Aircraft values have dropped brutality, about 25% for A320CEO
2021 $33.5
viewtopic.php?f=3&t=1460947

2019 $44.8 million
viewtopic.php?t=1422705

If aircraft will have shorter lives, lease companies will price accordingly.

In 2018, 40% of aircraft were leased:
https://brandongaille.com/24-aircraft-l ... agreements.

This is a balance. Narrowbody economics only work at high production rates. Neither Pratt nor CFM would have authorized new engines at old production rates. Neither Boeing nor Airbus can let the other develop a production economy of scale advantage over the other.

Naturally Airbus wants to gain market share and profit as the A321NEO is in high demand.

But leasing companies old portfolio is hurt by too many new aircraft. Since leasing companies are such a huge part of the market, this will naturally balance out. If they hurt to where they cannot lease as many aircraft, that will drive up lease rates on new. If new entrants join the market, that will push out some.

I would imagine leasing companies such as AirCastle that are the 2nd tier of leasing companies would hurt the most. AerCap, ALC, and Avolon will have to slow down buying new as 737NG and A320CEO used prices dropped far faster than previous trends.

This means they will receive less cash, produce lower returns, and thus attract less investment. While this won't stop new demand, it will slow sales leaseback financing.

Notice I only talked money flows? That is all that matters. I personally want more production, but that means used return values are less and older examples might not be placed. Freight conversions will only absorb so much.

I believe we are headed to over-production and the massive layoffs that entails if production targets are met. But not for years.

Lightsaber

lightsaber wrote:

Aircraft values have dropped brutality, about 25% for A320CEO
2021 $33.5
viewtopic.php?f=3&t=1460947

2019 $44.8 million
viewtopic.php?t=1422705

If aircraft will have shorter lives, lease companies will price accordingly.

In 2018, 40% of aircraft were leased:
https://brandongaille.com/24-aircraft-l ... agreements.

This is a balance. Narrowbody economics only work at high production rates. Neither Pratt nor CFM would have authorized new engines at old production rates. Neither Boeing nor Airbus can let the other develop a production economy of scale advantage over the other.

Naturally Airbus wants to gain market share and profit as the A321NEO is in high demand.

But leasing companies old portfolio is hurt by too many new aircraft. Since leasing companies are such a huge part of the market, this will naturally balance out. If they hurt to where they cannot lease as many aircraft, that will drive up lease rates on new. If new entrants join the market, that will push out some.

I would imagine leasing companies such as AirCastle that are the 2nd tier of leasing companies would hurt the most. AerCap, ALC, and Avolon will have to slow down buying new as 737NG and A320CEO used prices dropped far faster than previous trends.

This means they will receive less cash, produce lower returns, and thus attract less investment. While this won't stop new demand, it will slow sales leaseback financing.

Notice I only talked money flows? That is all that matters. I personally want more production, but that means used return values are less and older examples might not be placed. Freight conversions will only absorb so much.

I believe we are headed to over-production and the massive layoffs that entails if production targets are met. But not for years.

Lightsaber

I think leasors will get creative to find new demands. That's their value added contribution to the aviation ecosystem

lightsaber wrote:

I believe we are headed to over-production and the massive layoffs that entails if production targets are met. But not for years.
Lightsaber

It seems like the problems are always years down the road until they're suddenly not. No predictions or arguments, just an observation.

My opinion, hopefully the leasing companies have already crunched the numbers of what it will cost to cancel their existing orders by paying the penalty, the effect on their existing portfolio if the OEM's have less a/c on the market as a result of those cancellations, and whether that cost is greater than the penalty.
I assume that the leasing companies are now purchasing more new a/c because the airlines lack or do not want to make that big of an initial capital outlay.

In my opinion the real news in this story from the OP Ft.com is this quote:

Industry executives said the European company was keen to take advantage of what one described as a “once-in-a-lifetime opportunity to crush Boeing”.

To me this quote indicates that Airbus is less concerned about leasing companies and more interested in market share as they see a once in a lifetime opportunity to take on the competition.

Crush Boeing and achieve what? Turning the duopoly into a monopoly just to be split up or having governments invest money into building new competitors? The only way to "crush" Boeing is destroying the business case of a MoM and securing the market with the A321. But that is not "crushing" Boeing as a company, it is just avoiding a competitor that would be most unpleasant for Airbus to counter.

Leasing companies a while back also "blasting" Airbus for the NEO shows that the what's in the lessors' and Airbus' best interests might not always align.

"Crush" is too much drama. They are competitors and try to get an advantage over each other. Boeing did the same with the new engine 787 launch right at the moment when Airbus was committed to build the A380.

Duke91 wrote:

Leasing companies complain about increasing supply. Water is wet

Nice one

seahawk wrote:

Crush Boeing and achieve what? Turning the duopoly into a monopoly just to be split up or having governments invest money into building new competitors? The only way to "crush" Boeing is destroying the business case of a MoM and securing the market with the A321. But that is not "crushing" Boeing as a company, it is just avoiding a competitor that would be most unpleasant for Airbus to counter.

Since the people being quoted by FT is working for Airbus it’s probably as you say to make it as hard as possible for Boeing’s MoM business case. I do not believe Airbus believes it can create a monopoly, but they will set the bar very high for what Boeing does next.

AerCap and the other bigger Leasors have too much power. If supply is increased then the Customer/Airline wins.

MIflyer12 wrote:

smartplane wrote:

Shorter aircraft financial life is the way of the future, replicating what happened with vehicles more than a decade ago.

Care to expand upon that? The avg age of cars on the road has been increasing for at least the last three decades. Loan terms for new cars have gotten progressively longer.

For fleet buyers of new vehicles, average terms held / financed has fallen. OEM's lease to fleets, or sell with buybacks including mandatory first right of refusal, just as Airbus and Boeing are doing.

Commercial aircraft OEM's, including engine OEM's, manage the secondary market (after first owner), by pricing support and parts availability.

Ironic aircraft are being built to higher standards, with increased cycles and hours, but more money for OEM's to sell new units than supporting and financing old (15 years plus and decreasing), and increasingly being associated with prolonging the life of environmentally unsound aircraft.

Interesting to see Boeing's support strategy after the 777XF launches in respect to older 747's and 777's.

In the old days aircraft were leased two terms of -say -12 years each. Plus more if needed. Now some aircraft end their life after one term only leaving their leasing fund investors (not the leasing companies themselves) without the hoped for profits. Profits that typically came from the second term. Will this leave enough future investors to finance all those new aircraft hoped for? Can the high production rates planned be financed at all as many leasing fund investors have not reached the RoI they had hoped for and might feel "burned".

Noshow wrote:

In the old days aircraft were leased two terms of -say -12 years each. Plus more if needed. Now some aircraft end their life after one term only leaving their leasing fund investors (not the leasing companies themselves) without the hoped for profits. Profits that typically came from the second term. Will this leave enough future investors to finance all those new aircraft hoped for? Can the high production rates planned be financed at all as many leasing fund investors have not reached the RoI they had hoped for and might feel "burned".

You just outlined a scenario where the lease co misprojected the residual value at year XX. There's always a risk of that, pandemic or not. Global demand shock, fuel price shock, introduction of game-changing new aircraft... It's investing - there's always a risk of loss of capital. If there's no risk either it's low-return (like U.S. Treasury Bills), or the game is rigged.

It's not as if leasing companies control the market. They don't buy that many aircraft relative to direct purchases. The leasing business itself is reasonably fragmented. There is lots of money available and legal structures established for alternative financing of aircraft.

Oykie wrote:

seahawk wrote:

Crush Boeing and achieve what? Turning the duopoly into a monopoly just to be split up or having governments invest money into building new competitors? The only way to "crush" Boeing is destroying the business case of a MoM and securing the market with the A321. But that is not "crushing" Boeing as a company, it is just avoiding a competitor that would be most unpleasant for Airbus to counter.

Since the people being quoted by FT is working for Airbus it’s probably as you say to make it as hard as possible for Boeing’s MoM business case. I do not believe Airbus believes it can create a monopoly, but they will set the bar very high for what Boeing does next.

Pretty sure, and as the Airbus officials are not stupid and in difference to others, also think in long term (as Airbus is also, I call it a European project and less a company), they do not want to have a monopoly. Airbus can excellent live with a duopoly, but a monopoly is always bad and they know it. It is nice to have in short term but extremely dangerous in long term, as there is no need to develope new products, the production lines e.g.
An then someone new will come with a superior technology and you are not any more able to jump also on the new train.
Pretty sure, Airbus will be fine to be the number one of the duopoly, but as said, they have no interest in a monopoly.

Sorry to say, but the MOM market is already gone, the Boeing business case is not any more existing. If Boeing would now again new start with the MOM development... Yes, here Airbus will have the monopoly on the lower end of the MOM market for the next decade (as Boeing had the monopoly prior with the B757 and the B767).

The airlines and lessors will have filled their demand with all the A321 LR and XLR on the lower end as also with the A330 Neo and the B787 8 on the upper end of the MOM market.

And I am pretty sure, we will se a nice re-sale and second lease market for the A321 LR and XLR as also as lless for the B787-8 and the A330 Neo.
The leasing companies will have more to fear the regular market with the standard A320 ceo family and the B737 NG family smallbodies and all other widebodies....
The global market will change and countries will globally (with exception of the US) will force airlines (by laws, airport fees e.g.) to fly only the last generation of planes of one type with fuel efficient engines.

In my opinion, leasing companies (and companies like Ryanair, which business is, to by high number of planes cheap and sell them early to a good price) shall more fear, that governments will change laws and demand that only fuel efficient last generation planes will forced, than that Airbus will increase the production numbers.

Isn't all the "green talk" (stricter emission rules, forced move to battery powered aircraft, no more short flights etc.) ruining the value of the existing fleets and threatening the existence of the leasing industry all together?
Will a brand new A321XLR be considered "green" and permissible but not some old -say- ATR aircraft that is green by nature being a turboprop?

lightsaber wrote :
But leasing companies old portfolio is hurt by too many new aircraft.

I totally agree with that. What I don't understand is that Aercap and Avalon are approaching Airbus here.
From Airbus O&D sheet of September some numbers :
Total delivery to leasing companies 1472 A320ceo , to Aercap 20 and to Avolon 4 wich is ~1,7 % of the cake
Total delivery to leasing companies 379 A321ceo , to Aercap 8 and to Avolon 4 wich is ~3,2 % of the cake
Strange that the companies that have the least to lose are the first to scream. All the other leasing companies should have bigger worries ! Imagine the MAX fiasco would not have taken place. Then there would be hundreds more MAXs in use by the airlines today and the production rate would be much higher also.

oldJoe wrote:

lightsaber wrote :
But leasing companies old portfolio is hurt by too many new aircraft.

I totally agree with that. What I don't understand is that Aercap and Avalon are approaching Airbus here.
From Airbus O&D sheet of September some numbers :
Total delivery to leasing companies 1472 A320ceo , to Aercap 20 and to Avolon 4 wich is ~1,7 % of the cake
Total delivery to leasing companies 379 A321ceo , to Aercap 8 and to Avolon 4 wich is ~3,2 % of the cake
Strange that the companies that have the least to lose are the first to scream. All the other leasing companies should have bigger worries ! Imagine the MAX fiasco would not have taken place. Then there would be hundreds more MAXs in use by the airlines today and the production rate would be much higher also.

Two note:

1) Those are planes ordered/delivered to Aercap/Avalon directly. But Aercap/Avolon have taken over assets of older (now dead) companies. Aercap, for example, took over ILFC’s assets and is the largest leasing company in the world.

2) Both companies participate in sale-leaseback deals where they now own planes that were originally ordered and delivered to someone else.

Noshow wrote:

"Crush" is too much drama. They are competitors and try to get an advantage over each other. Boeing did the same with the new engine 787 launch right at the moment when Airbus was committed to build the A380.

Boeing doesn't launch new engines, GE, RR, Pratt et al launch new engines. It was Airbus's choice to launch the A380 when it did, just like it was Boeing's choice to launch the 787 when it did.

Personally I don't think Leahy's excuse that they did not see the GE90-115B coming holds water, any more than Boeing suggesting that they did not see the PW GTF coming. There was a reason GE invested in a clean sheet to compete with PW and RR on the 777, and there was a reason why PW invested over a decade to get a reliable gear working for the GTF.

lightsaber wrote:

Aircraft values have dropped brutality, about 25% for A320CEO
2021 $33.5

The NEO has been around already for over 5 years, across the board older aircraft have had large drops in their values during covid.

I think it is more likely as things pickup after covid, many airlines will elect for efficiency and use newer aircraft to expand their fleets.

seahawk wrote:

Crush Boeing and achieve what? Turning the duopoly into a monopoly just to be split up or having governments invest money into building new competitors? The only way to "crush" Boeing is destroying the business case of a MoM and securing the market with the A321. But that is not "crushing" Boeing as a company, it is just avoiding a competitor that would be most unpleasant for Airbus to counter.

I agree, both Airbus and Boeing are certainly much better off having each other around than trying to achieve a monopoly only to see the void filled with COMAC and Irkut, with good-enough products but much lower labour costs.

rigo wrote:

seahawk wrote:

Crush Boeing and achieve what? Turning the duopoly into a monopoly just to be split up or having governments invest money into building new competitors? The only way to "crush" Boeing is destroying the business case of a MoM and securing the market with the A321. But that is not "crushing" Boeing as a company, it is just avoiding a competitor that would be most unpleasant for Airbus to counter.

I agree, both Airbus and Boeing are certainly much better off having each other around than trying to achieve a monopoly only to see the void filled with COMAC and Irkut, with good-enough products but much lower labour costs.

isn't it the idea of "crush" in this case? Make sure Boeing sticks around with a weaker product line, able to linger, unable to invest into new products?

seahawk wrote:

Crush Boeing and achieve what? Turning the duopoly into a monopoly just to be split up or having governments invest money into building new competitors? The only way to "crush" Boeing is destroying the business case of a MoM and securing the market with the A321. But that is not "crushing" Boeing as a company, it is just avoiding a competitor that would be most unpleasant for Airbus to counter.

Boeing's issues lie with Boeing itself. It is hard to imagine that Airbus should stay still just because they need to maintain a duopoly where one competitor is sabotaging itself.

Phosphorus wrote:

isn't it the idea of "crush" in this case? Make sure Boeing sticks around with a weaker product line, able to linger, unable to invest into new products?

No company can durably stick around if it maintains a weaker product line than the competitor. But as much as I agree that Boeing's current woes are entirely self-inflicted and well deserved, things will change. We have seen spectacular reversals of fortune before and we will see them again. Once Boeing manages to get the 777X back on track, its next move will most likely be a NSA/NMA project. Then Airbus will suddenly find itself on the defensive with an ageing A32x / (X)LR lineup that presumably will have a tough time against an all-new design.

rigo wrote:

Phosphorus wrote:

isn't it the idea of "crush" in this case? Make sure Boeing sticks around with a weaker product line, able to linger, unable to invest into new products?

No company can durably stick around if it maintains a weaker product line than the competitor. But as much as I agree that Boeing's current woes are entirely self-inflicted and well deserved, things will change. We have seen spectacular reversals of fortune before and we will see them again. Once Boeing manages to get the 777X back on track, its next move will most likely be a NSA/NMA project. Then Airbus will suddenly find itself on the defensive with an ageing A32x / (X)LR lineup that presumably will have a tough time against an all-new design.

That is an incredibly positive view for Boeing.

They may get the 777X fixed (I suspect they will) but the key question remain who really wants such a large frame in the current market conditions.

Despite getting the MAX flying again it isn't really flying out the door. I suspect real margins per delivered per frame are very low.

787 from a delivery perspective is a lemon at the moment. That line is eating up cash.

767 Freighter - the nearest Boeing commercial has to a frame creating profits. The tanker version is eating into that profit. I have to question if the quality issues are just in the tanker conversion process.

I do not believe they will have the cash to finance a brand new game changing frame when the game changing technology is not there!

From an Airbus perspective they need to get volumes up to reduce costs.

There will not be and never should be a monopoly of supply. The duopoly is already not a good place to be. I cannot believe that Airbus really want to crush Boeing. That would add huge risk to their business model. Weaken yes but not crush.

StTim wrote:

rigo wrote:

Phosphorus wrote:

isn't it the idea of "crush" in this case? Make sure Boeing sticks around with a weaker product line, able to linger, unable to invest into new products?

No company can durably stick around if it maintains a weaker product line than the competitor. But as much as I agree that Boeing's current woes are entirely self-inflicted and well deserved, things will change. We have seen spectacular reversals of fortune before and we will see them again. Once Boeing manages to get the 777X back on track, its next move will most likely be a NSA/NMA project. Then Airbus will suddenly find itself on the defensive with an ageing A32x / (X)LR lineup that presumably will have a tough time against an all-new design.

That is an incredibly positive view for Boeing.

They may get the 777X fixed (I suspect they will) but the key question remain who really wants such a large frame in the current market conditions.

Despite getting the MAX flying again it isn't really flying out the door. I suspect real margins per delivered per frame are very low.

787 from a delivery perspective is a lemon at the moment. That line is eating up cash.

767 Freighter - the nearest Boeing commercial has to a frame creating profits. The tanker version is eating into that profit. I have to question if the quality issues are just in the tanker conversion process.

I do not believe they will have the cash to finance a brand new game changing frame when the game changing technology is not there!

From an Airbus perspective they need to get volumes up to reduce costs.

There will not be and never should be a monopoly of supply. The duopoly is already not a good place to be. I cannot believe that Airbus really want to crush Boeing. That would add huge risk to their business model. Weaken yes but not crush.

I think to the contrary, from a purely business point of view a duopoly is probably the most comfortable position you can dream of. You are safe from anti-trust regulations and anti-competitive behaviour investigation, but at the same time you only have one competitor to keep your eyes on, one that you know very well and with whom you really live more in symbiosis than in actual competition.

The 777X was always going to be a niche product but that doesn't mean it's a lemon. It won't have a competitor in its segment and the question is whether the demand, however modest it might be, will be enough to justify the development and production costs. I admit I have no data on that. Maybe Boeing's greatest mistake was to scrap the -8 version to pursue the -9, which among other things seems to have cost them the Sunrise tender.

The 787 might never break even but it's a beneficial project in Boeing in the same way the A380 is good for Airbus: they (hopefully) learned many lessons from it and it forced them to develop tech that will be used on subsequent projects. After all Airbus could successfully develop and launch the A350 on approx half the budget compared to what the 787 cost Boeing and that's largely thanks to the A380.

The civilian jet freighter market is still more or less a Boeing monopoly, Airbus barely made a dent in it.

As for cash to develop new products, it's a non-problem. The US government will never let Boeing down, just like the EU and the French/German/Spanish governments will always be there for Airbus. When it looked like Airbus painted itself in a corner with the hugely expensive A380 while Boeing bet on the right horse with the 787, it really became a matter of survival for team Toulouse to come up with a long range, all-composite widebody twin, and the rush in which the A350 was launched and the initial chaos had "last desperate attempt" written all over it. But they found the cash and lo and behold, the A350 turned out to be a superb product and a commercial success and Airbus' future looks as bright as ever while Boeing seems rudderless. So things do and will change, unless of course Boeing management still believes that the path to profitability is by telling BS to Wall Street rather than actually building good aircraft.

StTim wrote:

I do not believe they will have the cash to finance a brand new game changing frame when the game changing technology is not there!

Which OEM finances their new products with their own cash?
As far as the WTO revelations go, Airbus use launch aid because it is cheaper and Boeing uses tax breaks at the state level, if the feds somehow outlaw that for whatever reason, they will have to replace it with the US equivalent of launch aid.
Engines appear to be the largest item creating game changing tech going forward, the use of composites is already whole frame, so the engine companies will create the engines on their own dime then Boeing and Airbus will create frames to match. In my opinion, once the engines are ready, Boeing will have no trouble creating a new frame.
When you look at the amount of funds that Boeing has already expended for the MAX fiasco - after the fatal crashes - we should have no doubt that if the CEO wanted to do the NMA / MOM or whatever, they could have found the funds.

sxf24 wrote:

smartplane wrote:

Noshow wrote:

I think it is not so much the numbers but the capabilities of new aircraft that make life hard for heritage types. Who needs a A380 or 777 when you can get some easier to fill and cargo capable 787 or A350 at better cost per seat? And now this seems to happen again with single aisle aircraft like the A321XLR.

What happened to leases overall? it feels like airlines can move away easier than before and some types are not leased a second term but just disassembled?

As for the OEM's, new NB leases are the lessors bread and butter. Simple, straightforward, generic contracts, easy to place. Anything that places pressure on NB margins is unwelcome, especially as WB's in the doldrums, with many non-performing / under-performing.

Shorter aircraft financial life is the way of the future, replicating what happened with vehicles more than a decade ago.

For Airbus, they are extracting further scale savings, internally and with suppliers, raising the bar higher for Boeing to replace the MAX.

Expect Airbus to have to take a much greater direct role in financing WB aircraft, as Boeing already does, and increasingly with NB's too.

Outside of 747-8Fs, I don’t think Boeing financed a single WB.

Yes they most certainly have, Boeing Capital Corporation


“ Boeing Capital Corporation is a global provider of financing solutions. A wholly-owned subsidiary of The Boeing Company, Boeing Capital offers asset-backed lending and leasing, concentrating on assets that are critical to the core operations of Boeing customers. Boeing Capital’s primary mission is to support the other Boeing business units by ensuring customers have the financing they need to buy and take delivery of their Boeing products.”

https://www.boeing.com/company/key-orgs/boeing-capital/

Gremlinzzzz wrote:

seahawk wrote:

Crush Boeing and achieve what? Turning the duopoly into a monopoly just to be split up or having governments invest money into building new competitors? The only way to "crush" Boeing is destroying the business case of a MoM and securing the market with the A321. But that is not "crushing" Boeing as a company, it is just avoiding a competitor that would be most unpleasant for Airbus to counter.

Boeing's issues lie with Boeing itself. It is hard to imagine that Airbus should stay still just because they need to maintain a duopoly where one competitor is sabotaging itself.

What means staying still? Does it mean making money considering that the portofolio is as up-to-date as it can be. With neither product having an EiS more than 10 years ago.

A350 - 2014
A320NEO - 2016
A330NEO - 2018

it seems like a good time to earn the money for the next generation that will be needed around 2035, when the engines promise the next significant step in fuel burn reduction.

Actually, aviation needs a much more radical new development now, not in 2035. I am sceptical that the current innovation speed is sufficient.

Something tells me that we will see new competitors in the short range sector first, and in the long range sector last.

seahawk wrote:

Gremlinzzzz wrote:

seahawk wrote:

Crush Boeing and achieve what? Turning the duopoly into a monopoly just to be split up or having governments invest money into building new competitors? The only way to "crush" Boeing is destroying the business case of a MoM and securing the market with the A321. But that is not "crushing" Boeing as a company, it is just avoiding a competitor that would be most unpleasant for Airbus to counter.

Boeing's issues lie with Boeing itself. It is hard to imagine that Airbus should stay still just because they need to maintain a duopoly where one competitor is sabotaging itself.

What means staying still? Does it mean making money considering that the portfolio is as up-to-date as it can be. With neither product having an EiS more than 10 years ago.

A350 - 2014
A320NEO - 2016
A330NEO - 2018

it seems like a good time to earn the money for the next generation that will be needed around 2035, when the engines promise the next significant step in fuel burn reduction.

While I agree that both Boeing and Airbus will need to reap the fruits this decade of their labours last decade, I think they need a bigger step change for the next iterations. You are not moving the needle In the most ideal scenario where they introduce a plane that is 30% more efficient and the market grows by 30%.

In Europe aviation will be given hard targets to reduce total impact and not only reduce co2 per passenger seat...

TheSonntag wrote:

Actually, aviation needs a much more radical new development now, not in 2035. I am sceptical that the current innovation speed is sufficient.

Something tells me that we will see new competitors in the short range sector first, and in the long range sector last.

The barriers to anyone being able to compete globally with Airbus and Boeing are probably too high. Look how long it took Airbus to go from a niche supplier of A300s to where it is today. Even competing in the sub-A320/737 market will be a challenge.

The ‘new’ Russian and Chinese types will sell to a few domestic airlines (who will all be “persuaded” to buy some), but I can’t see much happening outside that.

Where are these new competitors coming from?

Actually, aviation needs a much more radical new development now, not in 2035. I am sceptical that the current innovation speed is sufficient.

Technology needs to mature. There is no point in demanding revolutions and convert too fast to non-optimized solutions. Aviation is about reliability and safety not only about being perceived green for a moment. This must be - and already is and has been - a process over tens of years not one campaign that will be forgotten in a few.

scbriml wrote:

Duke91 wrote:

Leasing companies complain about increasing supply. Water is wet

Indeed - didn't leasing companies also complain about re-engined planes (A320neo & MAX) not being needed?

Think about a certain famous 787-8 order to fill a MoM need …

scbriml wrote:

TheSonntag wrote:

Where are these new competitors coming from?

I see revolutions coming from the field of regional jet startups. When looking at companies like Tecnam, they announced new all electric planes.

Yes, there are physical limits, but my problem with Boeing and Airbus is that the only thing they are doing in their mindset is "more of the same over and over again". Even a more efficient version of a geared turbofan is still burning fuel with an efficiency of maybe 30 %. You might save 20-30 per cent compared to a 30 year old design, and are maybe 50% more efficient than a Boeing 707, but thats it. The efficiency gains are probably maxed out.

Its still a long tube plane. Do not forget that the emissions from planes are not only CO2, but vapour itself.

I believe that we will see all electric and hydrogen powered airplanes for regional commuting planes already in 5-8 years. And this technology might then probably be scaled up. We know the physical limits, but I believe that a company with a start up mindset will be able to offer an entirely new platform of technology which will be radically better.

I just do not believe that SAF will be sufficient to ease the public pressure on aviation.

Boof02671 wrote:

sxf24 wrote:

smartplane wrote:

As for the OEM's, new NB leases are the lessors bread and butter. Simple, straightforward, generic contracts, easy to place. Anything that places pressure on NB margins is unwelcome, especially as WB's in the doldrums, with many non-performing / under-performing.

Shorter aircraft financial life is the way of the future, replicating what happened with vehicles more than a decade ago.

For Airbus, they are extracting further scale savings, internally and with suppliers, raising the bar higher for Boeing to replace the MAX.

Expect Airbus to have to take a much greater direct role in financing WB aircraft, as Boeing already does, and increasingly with NB's too.

Outside of 747-8Fs, I don’t think Boeing financed a single WB.

Yes they most certainly have, Boeing Capital Corporation


“ Boeing Capital Corporation is a global provider of financing solutions. A wholly-owned subsidiary of The Boeing Company, Boeing Capital offers asset-backed lending and leasing, concentrating on assets that are critical to the core operations of Boeing customers. Boeing Capital’s primary mission is to support the other Boeing business units by ensuring customers have the financing they need to buy and take delivery of their Boeing products.”

https://www.boeing.com/company/key-orgs/boeing-capital/

That was not my question.

PhilipBass wrote:

AerCap and the other bigger Leasors have too much power. If supply is increased then the Customer/Airline wins.

And supply can only be increased if customers/operators take delivery, meaning they want/need those planes.
Leasing companies are the middle man between the manufacturer and the operator; if increasing supply benefit the latter 2, then the former will have to suck it up.

Boof02671 wrote:

sxf24 wrote:

smartplane wrote:

As for the OEM's, new NB leases are the lessors bread and butter. Simple, straightforward, generic contracts, easy to place. Anything that places pressure on NB margins is unwelcome, especially as WB's in the doldrums, with many non-performing / under-performing.

Shorter aircraft financial life is the way of the future, replicating what happened with vehicles more than a decade ago.

For Airbus, they are extracting further scale savings, internally and with suppliers, raising the bar higher for Boeing to replace the MAX.

Expect Airbus to have to take a much greater direct role in financing WB aircraft, as Boeing already does, and increasingly with NB's too.

Outside of 747-8Fs, I don’t think Boeing financed a single WB.

Yes they most certainly have, Boeing Capital Corporation


“ Boeing Capital Corporation is a global provider of financing solutions. A wholly-owned subsidiary of The Boeing Company, Boeing Capital offers asset-backed lending and leasing, concentrating on assets that are critical to the core operations of Boeing customers. Boeing Capital’s primary mission is to support the other Boeing business units by ensuring customers have the financing they need to buy and take delivery of their Boeing products.”

https://www.boeing.com/company/key-orgs/boeing-capital/

But, do they, in fact, finance widebodies? They can, but is it actually done?

Gremlinzzzz wrote:

It is hard to imagine that Airbus should stay still just because they need to maintain a duopoly where one competitor is sabotaging itself.

The letter of complaint isn't about Airbus staying still, the letter of complaint is about Airbus pushing beyond its highest ever rate of production in a time where the market in general and the leasing community in particular is still trying to recover from the greatest setback in the history of the aviation industry.

Airbus's rejoinder would be along the lines of this is a rate we planned to hit before covid and we have legally binding contracts we need to fill, but it seems Airbus is smart enough to not fire back in public.

The nature of the leasing business is to be a hedge against risk. If they want to reap the rewards during good times, they have to be able to take the hit during the bad times. They are there to be a fuse that blows instead of letting the house burn down. Yet this is no ordinary electrical surge, it's a direct hit by a massive lightning bolt.

OTOH, the leasing industry provides the large orders that the manufacturers need to safely produce at the volumes they need to keep prices low and profits high.

Airbus definitely has to tread carefully here. A wrong move could put their reputation at risk.

I dont see why Airbus should tread carefully here. Airbus is not an airline and isnt as affected by Covid as airlines or lessors, simply because they can smooth out production. Should they adjust according to short term demand as much as lessors would do? Sucks to be in the wrong business at this time, but thats life

There is obviously a lot of backlog that needs to be reduced, so should they just sit still and dont reap the once in a lifetime opportunity to crush Boeing and gain even more market share just because lessors have a hard time?

Seems to me that lessors are desperate, and seeing that Airbus is projected to make 4 billions or more in profit this year, they are begging for more relief without offering anything in return.

WayexTDI wrote:

But, do they, in fact, finance widebodies? They can, but is it actually done?

I think in most cases they are a "lender of last resort", they don't seem to want to be competition to the usual financial outlets, they mainly jump in when there's a deal that Boeing really wants to close and other institutions won't take the deal. It's clear they were involved in the HA 787 deal ( ref: https://en.wikipedia.org/wiki/Hawaiian_Airlines ). Also https://www.planespotters.net/airline/B ... orporation shows at the bottom some pictures of ex-SQ 777s owned by BCC. I think this also may have been part of the deal where Boeing bought SQ's A340s in order to place 777s at the airline ( ref: https://simpleflying.com/boeing-singapo ... a340-fate/ ).

Duke91 wrote:

I dont see why Airbus should tread carefully here. Airbus is not an airline and isnt as affected by Covid as airlines or lessors, simply because they can smooth out production. Should they adjust according to short term demand as much as lessors would do? Sucks to be in the wrong business at this time, but thats life

There is obviously a lot of backlog that needs to be reduced, so should they just sit still and dont reap the once in a lifetime opportunity to crush Boeing and gain even more market share just because lessors have a hard time?

Seems to me that lessors are desperate, and seeing that Airbus is projected to make 4 billions or more in profit this year, they are begging for more relief without offering anything in return.

it's not clear to me that increasing market share by producing large numbers of aircraft that lessors can't place is a winning strategy. In the end you just force lessors to go under, then their assets get sold cheap in bankruptcy court, then the manufacturers lose out because this undermines future selling prices. It also makes other lessors less willing to order more frames since supply exceeds demand. It could cause a nice profit in a small window while sinking the market for many years to come.