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No alternative to grounded Boeing 737 MAX, Aercap CEO says

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01/23/2020 | 01:33pm EST

There is no alternative to the grounded 737 MAX and it would be "absolutely stupid" for Boeing to launch a replacement before the next wave of technology a decade from now, the head of one of the world's top aircraft lessors said on Wednesday.

Aengus Kelly, chief executive of Aercap, which has committed to a fleet of 100 MAX jets, told Reuters in an interview he had spoken to all of the biggest MAX operators in the world and said they still viewed it as a very good plane.

Kelly was speaking after Boeing on Tuesday warned of further delays in returning its grounded 737 MAX airliner to service, with the plane not likely to be cleared by U.S. regulators until the middle of the year.

He said that some of his customers may cancel leases, but that the majority would not and some are keen to order more.

"For people to say this is the end of the MAX, that is absolutely incorrect. These people don't have much insight," Kelly said.

He said, however, it was still impossible to say when the MAX might fly again.

"We saw another delay from Boeing last night – I don't think they know," he said. "Is July the last delay? Who knows?"

Asked if the MAX might be replaced in the coming years, a move that might undermine the jet's value, Kelly said it would be absolutely stupid for Boeing to launch a replacement plane before technology allows an additional 15% reduction in fuel burn, something he believes will not happen before 2030.

BANKS STILL LENDING

Kelly said all of the main aviation banks were still willing to lend money against the MAX, but added if that changed, the plane's valuation would be hit.

"Are the lessors and the banks willing to still finance the MAX and buy the MAX? The answer to that right now is yes. And if that is the case that puts a floor on the value of the aircraft," he said.

He acknowledged banks may insist on lower loan-to-value ratios on loans issued against the MAX than against rival Airbus planes.

Kelly said he would expect Boeing to compensate it if it is forced to take back leases and lease the plane to new airlines. Any costs due to the grounding or any fall in the planes value would also feed into talks on compensation, he said.

"We would expect Boeing shareholders to absorb that pain because its their fault not our shareholders," he said.

(Writing by Conor Humphries, editing by David Evans)

By Laurence Frost and Conor Humphries

Stocks mentioned in the article
ChangeLast1st jan.
AIRBUS SE -1.24% 130.22 Real-time Quote.1.00%
CARDINAL HEALTH, INC. -0.53% 59.96 Delayed Quote.17.34%
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