The dramatic impact of the coronavirus, combined with the longer-than-expected grounding of the Boeing 737 MAX jet has seen Avolon, the world’s third-largest commercial jet lessor, cancel an order for 75 737 MAXs as well as four Airbus A330neos.
Boeing has confirmed the cancelations, describing them as by mutual agreement. However, Avolon was keen to remain committed to the beleaguered 737 MAX by rescheduling delivery of a further 16 of the jets due for delivery between 2020 and 2024, now scheduled for 2024.
The current state of play is that Avolon has 55 MAX jets currently on order with the American planemaker. The original deal for the 75 canceled jets was made in 2017, with an option for 20 additional jets and, at the time, had an estimated value of US$11 billion at list prices and on canceling the order confirmed that it had not placed any of them with lessees.
Avolon has recently reduced its aircraft commitments to 165 aircraft from 284 between 2020 and 2023, which will substantially reduce its near-term capital commitments. The aircraft lessor is 70% owned by China’s Hainan Group and is currently experiencing lease payment relief requests from 80% of its customers in light of the current coronavirus situation and anticipates agreeing short-term rental deferral agreements with them.
According to Reuters news agency, Avolon ended the first quarter with unrestricted cash and undrawn secured warehouse facilities in excess of US$5 billion, with commitments to sell 21 narrow-body and wide-body aircraft with an approximate value of US$747 million to the Sapphire 2020-1 vehicle. Avolon ended the first quarter with an owned and managed fleet of 549 aircraft, with total orders and commitments for 306 aircraft.
