MIAMI — A day after becoming the launch customer for rival Airbus’ A330neo, lessor Air Lease Corporation (ALC) announced an order for 6 Boeing 777-300ER and 20 737 MAX 8 aircraft Tuesday at the Farnborough Air Show. The order includes a new firm order for 6 Boeing 777-300ER aircraft for delivery between spring 2016 and February 2017. ALC also “re-confirmed” a previously un-announced order for 10 Boeing 737 MAX 8 aircraft, and exercised options for a further 10 737 MAX 8s. The new MAX 8 aircraft on order will be delivered between early 2018 and 2021. At list price, the orders are worth more than $5.8 billion.
ALC now has 104 737 MAX on order, including a mix of 737 MAX 8s and 737 MAX 9s. All 20 orders announced today are fully convertible to the MAX 9. Air Lease also has 21 Boeing 777-300ERs on order, and the six ordered today have already been placed with three separate customers (each taking two apiece). Including in-service aircraft, ALC’s present and future Boeing fleet includes 292 airframes, including 45 Boeing 787s (15 787-9s and 30 787-10s).
It is unclear whether Boeing’s recent increase in the seating capacity of the 737 MAX to 200 seats will have any impact on the composition of the order. Speaking at the announcement, ALC CEO Steven Udvar-Hazy was complimentary of Boeing’s capacity up-gauge. “Adding that seat count [to the 737 MAX] makes lot of sense,” said Mr. Udvar Hazy, “More and more people are being crammed onto planes… It’s a natural product evolution.”
Mr. Udvar-Hazy also implied that maintaining a seat-count (and thus seat-mile economics) advantage was likely a key factor behind the decision. “Currently Boeing has a 9-seat advantage on MAX capacity of 189 versus 180 on the A320. Airbus are trying to close that gap, but this capability to go up to 200 seats maintains it. [The extra seating capacity] certainly gives low cost and ultra-low cost operators a way of reducing their unit costs.” However, Mr. Udvar-Hazy did note that configuring the aircraft for non-low cost customers is an ongoing challenge. ALC is working with Boeing to ensure that airlines are not “sacrificing seat counts,” even if they choose not to utilize the additional exit.
On the 777-300ER, ALC’s order is a small but symbolic victory for Boeing, as the manufacturer attempts to bridge a more than 300 airplane gap between the current generation 777 and the re-engined 777X. Mr. Udvar-Hazy alluded to pricing discounts offered for these end-of-production “classic” 777s. “Before delivery we tried to get a discount. It wasn’t not easy, but we managed to come out with something that’s mutually beneficial.” Boeing is widely expected to be offering substantial discounts on 777 delivery slots particularly in 2018 and 2019, which has led many analyses (including Airchive’s) to conclude that an order from US carrier Delta Air Lines is a strong possibility.
Still, Mr. Udvar Hazy as well as ALC President and COO John Plueger both highlighted the 777-300ERs viability. Mr. Udvar-Hazy called the 777-300ER “the backbone of intercontinental air travel.” “I think it’s a strong validation of the quality of the product, to already have 26 placed is testament to the airplane [777-300ER],” added John Wojick, Boeing’s Senior Vice President of Global Sales and Marketing.
While ALC has yet to place an order for the fast-selling 777X, Mr. Udvar-Hazy indicated that ALC were extremely likely to place such an order in the coming years, as the 777X approaches entry into service (EIS). “The first 777X will be coming out in another 6 years. It involves new engine, new wing, and a lot of things that will make the engine more attractive… But we’re a lessor. We don’t receive our money until the aircraft is delivered… So for us, the 777X is a long lead time airplane. We’ve had active discussions with Boeing on the 777X… [We’ve] spent thousands of man-hours working with Boeing on 777X refinements. Many of them have been incorporated… I’m sure that the 777X is the next logical extension of our 777 product line.”
Ray Conner, President and CEO of Boeing Commercial Airplanes, agreed, noting that “Steve and the entire ALC team have been a big part of our discussions on how we define the 777X.” Mr. Udvar-Hazy noted that in particular, his team was eager for Boeing to widen the cabin interior of the 777X (versus the present day 777), and lower the cabin altitude for the 77X to 787 levels (a product enhancement announced earlier in the day at the airshow by Boeing’s Scott Fancher during a commercial program development briefing).