The Aircraft leasing company BOC Aviation on Tuesday said it had cancelled an order for 30 Boeing (BA.N) 737 MAX planes.
BOC Aviation chief executive, Robert Martin, remained confident in the jet which has been grounded for more than a year.
He said the lessor which is based in Singapore and listed in Hong Kong, will also defer the delivery of some other Boeing 737 MAX aircraft.
“We discussed with Boeing what is the best way to deploy our capital in a time like this because everyone realizes this is not a short term downturn, it is a long one.”
BOC is the latest lessor to strike deals with Boeing to cancel 737 MAX orders as the jet remains grounded pending regulatory approval following two crashes.
Also BOC carried out billions dollars purchases of new jetliners, including 737 MAXs, in the purchase-and-leaseback market, agreeing to rent them back to airlines.
“It became clear to us that the best way for us to support the MAX and other Boeing products is by us doing purchase-and-leasebacks during this period and these replaced a number of direct (Boeing) orders we had,” Martin said.
“This is not in any way a loss of confidence in the MAX. We are absolutely confident, otherwise we would never have done purchase-and-leasebacks.”
Although Boeing appears keen to avoid a snowball effect of cancellations, analysts say the two sets of 737 MAX announcements are different.
Norwegian, which was struggling before the COVID-19 pandemic hit the airline industry, has been forced to restructure its debt while lessors are mainly involved in compromise deals, on Monday said it had cancelled orders for 92 737 MAXs and would claim compensation from the U.S. planemaker for the grounding of the jet.
In return, Boeing is seen willing to let lessors lighten commitments amid the heightened risk of the coronavirus crisis.
Plane manufacturers are also producing fewer jets than originally planned, giving them an incentive to shave leasing company orders to keep them in balance with airline orders.
Asked why BOC didn’t simply defer rather than cancel all its MAX orders, Martin said: “That possibility was open to us but we don’t have unlimited capital”.
Source: Reuters.com