Airlines worrying over 2,700 near-term deliveries they largely don’t want

Twenty-five percent of aircraft due for delivery in the next 21 months are expected to be taken by leasing companies, and they’re worried. Many of their clients, the airlines are rapidly reconsidering if they want to take delivery.

Across the board, 2,700 aircraft are due for delivery over the next 21 months, up to the end of December 2021.

Boeing has a double problem on its hands, with production at a stop on the 737MAX and some 440 aircraft built and waiting for modifications prior to delivery – to customers who probably won’t want them over that time frame. They’ll have enough problem with some 380 that were grounded and need to be sent back to service with their owners, who again probably could do without them coming back any time soon.

Boeing will find that its production rates are going to have stay low. Airbus, who have also slowed or nearly stopped A320 production, are facing a swath of potential cancellations, or at the least deferments.

Boeing’s next problem is the gigantic 777-9, who, when they have no cash, who will take delivery (with the exception of Qatar), early next year when the first are ready?

However there is a twist to much of this. While the airlines may not want to pay cash for so many new aircraft, there is a way forward. 777-9’s leased are a lot cheaper to bring on board, and it could well see the aircraft rapidly displace the A380, and the 748i. Many airlines are already disposing of the aircraft, the 777-9 could well see their disappearance vastly accelerated.

The same is also true of the MAX and the Neo. In the end newer, leased aircraft can be brought on, and older models more rapidly disposed of, bringing forward retirements at a quickening pace.

Te trend toward leasing was greatly enhanced because of the last recession, this one is likely to see its percentage of the market rise from the near 50% to up in the 70% range. Why would airlines spend cash, when they can rent? The advantage of buying aircraft you’re going to keep for only ten years is minimal, they only make sense if you can do what BA and others used to do, buy them, have them as an asset, then write them off and just pay maintenance for their remaining years.

Leasing also offers the possibility of renegotiating prices over the life of the contract, handing back the aircraft quickly with relatively minor fees, but the asset for collateral purposes, isn’t available.

When the world finally wakes up and goes back to work, and airlines start to understand where they are, and how badly effected they’ve found themselves, they’ll start to revise what they want and how the future will play out. Meanwhile Boeing, Airbus and their thousands of suppliers are all wondering what happens next. The fact is they have no idea.

This is a self induced recession, man made it, and when it ends it will take time to get things running again. But humans are not good at being locked up, when the restrictions come off, and they will, the desire to travel, the need to move, do something, anything, will bounce back, and quickly, even if it does level off after a few months.

The question is who and what will fail before it gets to that point?