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Paris Air Show: A320neo dominates large orders from lessors


The aircraft leasing sector has emerged at Paris with some of the biggest players placing the show’s key orders. Six lessors brought their chequebooks to the show, demonstrating the sector’s confidence in future demand for leased aircraft assets and expected strong placement opportunities. With the neo now sold out for the first three years of its production, many airlines will be looking to the leasing sector to provide them with Airbus' newest, most efficient product.

Six lessors, Air Lease Corp, GECAS, ALAFCO, CIT, ILFC and Nordic Aviation Capital, placed orders at the air show.

Air Lease’s bold expansion continues

Los Angeles-based Air Lease Corporation continued its fleet expansion plans with an unsurprisingly bullish view of the aviation industry and the leasing sector in particular. Air Lease Corp placed some headline orders on the first day of the show, announcing orders for up to 110 aircraft. These include up to 36 Airbus A320neo-family aircraft and 14 options, one Airbus A321-neo, 12 Airbus A330s, 24 Boeing 737-800s, five Boeing 777-300ERs, four Boeing 787-9s and 15 Embraer E-Jets.

 “This new order enables ALC to continue to offer its customers the most fuel efficient aircraft in the short and medium to long-haul segments. The A320neo family represents the industry’s new single-aisle benchmark and we look forward to seeing our customers benefitting from the cost savings it promises to deliver,” CEO Steven Udvar-Hazy said.

The lessor was already an A320 customer, with an order for 52 A320-family aircraft (30 A320s and 21 A321s). It has already taken delivery of four of these aircraft. Air Lease Corp now has 99 commitments for Airbus aircraft.

Mr Udvar-Hazy confirmed the lessor will be reviewing its position on the A350XWB. President John Plueger said that no decision has been made on Airbus’ new widebody offering, but he noted that in light of changes made to Airbus’ A350 programme, which will see the type challenge Boeing’s popular B777-300ER, Air Lease Corp is likely to place an order. "At some future point you will see something from us [with the A350XWB]”, he said.

Air Lease also awarded Boeing new business, with an agreement to purchase up to 14 Boeing 737-800s with four options, fives B777-300ERs and four B787-9s. The lessor exercised options on six B737NGs which was part of a 2010 agreement for 60 B737-800s.

In addition to their order, the two Air Lease Corp executives sent a clear message to Boeing in urging the US manufacturer to make its next move in the narrowbody market. Mr Udvar-Hazy said Boeing needs to go a step beyond Airbus, which has developed a quasi-interim solution to customer demands for improved aircraft efficiency by using next-generation engine technology with current-generation aircraft design, with only minor structural and airframe adjustments, by developing a new aircraft. “We’re trying to encourage our friends in Seattle to look several decades ahead and hopefully come up with a new family of aircraft that will become the mainstay of the short-haul airline industry,” Mr Udvar-Hazy said. "In the meantime we’ll be buying 737s.’’ Mr Plueger said: “I’m not talking to too many airlines, in fact none, zero, that think a re-engine is the way to go for Boeing.”

Air Lease Corp also exercised its option for five more Embraer E190s, which was part of its order from the 2010 Farnborough Air Show, which was originally for 15 E190s with five options. The order was topped up with another five firm E190 orders, taking Air Lease’s current contract with Embraer to 30 E-Jets, being 25 E190s and five E175s.

GECAS firms neo order and becomes B747-8F customer

GECAS firmed up a previously announced order for 60 A320neos, and with a deal valued at USD5.1 billion, it is perhaps the show’s largest single deal from a lessor. GECAS’ 60 neos will be powered by CFM’s LEAP-X engine. GECAS’s sister company, GE Aviation, is a joint venture partner in CFM. The neo order takes the total number of A320-family ordered by GECAS to 390. Fourteen, excluding the orders from Paris, are yet to be delivered, according to Ascend data.

Boeing and GECAS announced at the show that the lessor has agreed to purchase two B747-8Fs, a new model for GECAS’ portfolio, and eight B777-300ERs. The B747 has a “well established operator base, GECAS CEO Norman Liu stated, with the B747-8Fs helping to “broaden our [GECAS’] cargo portfolio with a high demand freighter”.

GECAS also signed an agreement with French manufacturer ATR for 15 ATR 72-600s, with options for 15 more, in a deal worth USD680 million.

The lessor also topped up its portfolio of Embraer E190s by adding two more firm orders. GECAS currently has 93 E-Jets in its portfolio, with the two new E190s expected to join the fleet in 4Q2012.

ILFC splits neo engine orders

ILFC announced engine orders for its Mar-2011 order for 100 Airbus A320neos and 20 options. The lessor, the world’s largest by fleet market value, split its powerplant order between the two competing options, the Pratt & Whitney PW1100G and the CFM LEAP-X.

ILFC’s firm order with Pratt & Whitney for 120 PW1100G engines, expected to power 60 of the lessor’s neos. ILFC also placed a firm order with CFM for an undisclosed amount of LEAP-X engines. ILFC valued the order at USD950 million. The LEAP-X engines will power the remaining 40 neos on firm order and of its 20 options, should the lessor exercise any. Under such conditions, the order would be for 120 LEAP-X engines to power 60 aircraft.

CEO Henri Courpron stated that the overwhelming success of the neo at the air show, relative to the B737NG, would force Boeing to realise that Toulouse has made the correct decision. He warned at the start of the show that should Airbus reach its targets for the show, it will “prompt Boeing to do something … It [Boeing] cannot do nothing.” Airbus reached its goal of exceeding 500 neo orders on the show’s second day. Toulouse has reported firm or provisional orders for close to 600 A320neo aircraft, with strong signs the numbers will move much higher in the short-term as its sales chief has been hinting at massive interest from carriers in the Middle East, Southeast Asia and North America. The A320neo has become the manufactuer’s fastest-selling product since it’s the launch of the programme in late 2010, which customers spurred on by high oil prices, slowing revenue growth and stalled decisions at Boeing.

Mr Courpron said the neo’s success “validates the Airbus theory that you do not need to redesign an aircraft completely to enjoy significant success in the market place. So I think it should help Boeing come to a decision and maybe the decision is not as dramatic as the one they have been advertising for a number of months," he added.

CIT pushes Airbus past preshow target

US-based lessor CIT Aerospace signed an agreement for 50 Airbus A320neos, an order which pushed Airbus past its preshow target of 500 neo sales by the end of the show. The order brings the total number of aircraft in the Airbus orderbook for CIT to 241, comprising 195 A320 family aircraft (including the 50 A320neo aircraft), 39 A330s and seven A350 XWBs. CIT currently has 141 Airbus aircraft in its portfolio. Deliveries are scheduled to commence in 2016.

ALAFCO tops up Airbus order book with A350s and neos

Kuwait-based lessor ALAFCO announced the signing of an agreement for six more A350XWBs, stating it expects a “surge” in demand for larger aircraft types, something that looks certain to hold true in its local Middle East market. The order takes ALAFCO’s A350 commitment to 18 aircraft.

"This order reflects a strong recovery in long-haul traffic demand from our customer airlines. The A350's position as the most fuel-efficient aircraft in its class is a great asset in our aircraft portfolio," chairman and CEO Ahmad Al Zabin said.

ALAFCO also signed a memorandum of understanding for 30 Airbus A320neo-family aircraft. The lessor had previously ordered 26 A320s, with 25 having been delivered. The order, once firmed up, will take ALAFCO’s Airbus A320 order book to 56 aircraft.

Nordic adds ATR 72-600s

Denmark-based Nordic Aviation Capital (NAC), which specialises in the regional aircraft market, placed an order for 10 ATR 72-600s and 10 options. The type is a new addtion to the lessor’s portfolio, but complements its large fleet of -200s, -300s and -500s.  

NAC is the world’s largest lessor of turboprop aircraft, with 91 ATRs on its books.

Airbus dominates leasing deals

Airbus’ gamble taken late last year to shake up the narrowbody duopoly certainly seems to have paid off. The A320neo has become the manufacturer’s fastest-selling aircraft to date, winning wide praise from the airline and leasing community, reflected in the success of the aircraft relative to its rival. The neo is now sold out for the first three years of production, with many major lessors featuring on the list of early deliveries. This puts those lessors with A320 orders in an advantageous position: demand will be strong for the neo and will command the highest rents for their owner(s). Airlines will increasingly look for cost and emissions savings over the next decade and these lessors might be able to offer the only solution.

Boeing has stated it is not in any rush to make an announcement on its strategy for the narrowbody market, the biggest and most important market for both manufacturers. Boeing’s decision will set its narrowbody strategy for the next few decades, at the very least, and understandably it must get the decision right. But as the A320neo continues to gain traction and the order book continues to grow, the pressure is mounting on Seattle to make its move. But at the 2011 Paris Air Show, the major story for the lessors has been the neo.

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