DUBLIN – Declines in the rate of aircraft production are causing consternation in the passenger market.
Steven Udvar-Hazy, chief executive of Air Lease Corporation, told attendees of the Airline Economics conference here today that Boeing and Airbus are currently “not able to meet their contractual obligations,” and that failure is harming the passenger aircraft market.
Air Lease Corporation has a market capitalization of about $4.8 billion.
Udvar-Hazy said production rates of major commercial aircraft are “still well below pre-pandemic levels [and are] unlikely to accelerate significantly.” That includes the 777, of which Boeing is only producing the freighter variant today.
“Both OEMs will be under pressure to increase production rates, maybe not to 2018 levels, but close,” Udvar-Hazy told a standing-room-only audience, referring to Airbus and Boeing.
Air Lease Corporation is the launch customer for the A350F.
Some of the delays in production are well known. According to Air Lease data, Boeing is producing only about one 787 per month though, before its production woes, more than a dozen 787s were coming off Boeing assembly lines monthly.
“These are dramatic changes in the OEM’s ability to deliver aircraft the industry needs badly,” Udvar-Hazy added. However, “[b]oth OEMs are struggling to meet their contractual demands.”
How these struggles will slow freighter production remains to be seen. Production impediments come at a time when air cargo is still viewed as a strong, resilient market within the global aircraft industry.
“There has been a huge step change in air cargo,” said Kieran O’Brien, partner and head of aviation advisory at KPMG.
Avolon Aerospace Leasing Ltd., for one, is investing in freighters because of that “step change” in air cargo profitability.
“We don’t invest in the freighter market based on the stop rate,” said Andy Cronin, CEO of Dublin-based Avolon. “We invest in it based on the five-, ten-, fifteen-year view and that structural trend remains extraordinarily robust with the growth of e-commerce, the growth of globalization, and different types of aircraft flying passengers with actually less belly capacity in those aircraft, so we are really bullish on the freight market.”