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Air Lease Corp's Steven Udvar-Hazy on B787, B747-8, globalisation and more. ISTAT conference wrap 3

Analysis

After his panel session at this week's International Society of Transport Aircraft Traders (ISTAT) conference in Arizona, Air Lease Corp CEO Steven Udvar-Hazy responded to wide-ranging questions from a press gaggle, attracted to him like paparazzi to a movie star.

Summary
  • Air Lease Corp CEO expresses skepticism about the repairability of composite narrowbody aircraft due to potential damage from service vehicles and baggage carts.
  • The CEO believes that the Boeing 747-8 will be more successful as a freighter than a passenger aircraft, especially with the A380 losing market share.
  • The break-even point for the Boeing 787 is estimated to be around 1,500 aircraft, considering its expected 30-40 year lifespan.
  • The CEO sees potential for the Boeing 787-9 to perform well once it is "de-bugged," but suggests that the A350-1000 will be the "major star" of the A350 family.
  • The Boeing 787-10, with a higher seat count than the -9, is expected to have limited range and may not be a suitable replacement for the A340-300 or the 777-200 without more powerful engines.
  • The CEO acknowledges that weight issues have affected the 787, but believes that the aircraft will continue to be heavier and more powerful as structural reinforcements are made.

Composite concerns. Mr Udvar-Hazy expressed skepticism of a composite narrowbody. "I'm not worried about the 10- to 14-hours operation that does not have the same exposure to ground damage a narrow body has," he said. "I'm concerned about damage from service vehicles, baggage carts. I don't have enough information on how repairable composite aircraft will be."

B747-8 Freighter. He said the 747-8 would be more successful as a freighter than a passenger aircraft, calling it the benchmark freighter for the next 15-20 years, especially since the A380 has forfeited the market. However, his new company is not interested in four-engine aircraft at this point.

B787 breakeven. The break-even point for the 787 will be around 1,500, said Udvar-Hazy, adding, "then put that into context with a 30- to 40-year life of the aircraft". Boeing has logged 843 orders to date in a market that it estimates at over 3,000. However, that is still twice the 40-year delivery success of the 747. He sees the 787-9, at 250- to 290 passengers with a 8,000- to 8,500nm-range, doing well once it is "de-bugged". On the other hand, he suggested the -9 would be the "major star" of the A350 family although current engines will limit the range of an A350-1000.

B787-10 economics. As for the 787-10, adding 43 passengers to the -9 configuration, which Boeing Commercial President Jim Albaugh signaled the previous day, Mr Udvar-Hazy said the higher seat count will limit its range to trans-Atlantic and West Coast US-Asia. Boeing suggests the range would be about 6,900nm. In discussing the subject, Mr Albaugh called the economics of the -10 "eye-watering" several times. Mr Udvar-Hazy didn't see how it would be a candidate to replace the A340-300 or the 777-200 unless Rolls Royce and GE can give Boeing higher thrust engines.

Weight issues. Delays to the 787 has allowed Airbus to sell some 100 more A330 aircraft, he said, adding he was not surprised that the 787 was over weight. "Show my one commercial jet that has not come in heavier whether its the A380, 777 or the A330, they're always heavier," said Udvar-Hazy. "Engineers are poor judges of weight." Even so, he said the aircraft would have to go on a diet, given the titanium structural reinforcements needed to correct problems. "My gut feeling is that the airplane will always be heavier and they'll just have more power and they'll just increase the max takeoff weight and say we still meet the spec," he concluded. "It's just going to become a heavier more powerful animal."

Globalisation. Mr Udvar-Hazy suggested globalisation is taking some of the cyclicality out of the industry as has been predicted with the Middle East and Asia leading the rest of the world into recovery. He indicated the run up in fuel prior to the recession was a blessing in disguise and made it much easier for the industry to weather the recession. First, they had already taken a lot of capacity and costs out of the system, according to Udvar-Hazy and the falling prices basically subsidised their survival through recovery.

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