Guy Norris/LOS ANGELES
Leasing giant International Lease Finance (ILFC) has confirmed negotiations with Airbus Industrie and Boeing over a possible purchase of the 100-seat A319M5 and 717-200.
"The 717 is under review by ILFC, as is the A319M5. We're talking, we're considering, but I can't give you any definite indications of what we're going to do" says ILFC executive vice-president John Plueger. The leasing company has been linked with earlier talks over the purchase of up to 50 717-200s, but has been reluctant to confirm its interest until now.
Plueger's comments, made at the Speednews supplier conference in Los Angeles, were also the first concerning the A319M5 - a shortened 100-seater variant of the standard A319 now being studied by Airbus. Until now there had been no indication that Airbus had been talking to potential customers about the aircraft, although the rise in the pace of the study has become evident from the increasing activity of engine makers competing for a place on any future programme.
News of the talks emerged as ILFC reports the first indications of over-optimism from manufacturers and a flattening in the growth of the market. "One of the keys is the rate of lease extensions. In 1996 and 1997 we had high rates of lease extensions. However, so far in 1998 the rate is 20% below that of 1997," says Plueger. ILFC will wait until "around the end of July" before it decides if the reduction is meaningful. "We're not pressing the panic button," he adds.
The leasing company now operates 390 aircraft and has 323 aircraft on order, 157 from Airbus and 166 from Boeing. It expects to take delivery of up to 182 of these by 2001, although the rate will drop from 50 in 1998 and 51 in 1999 to 37 a year by 2001.
ILFC hopes this slowing rate will reduce its exposure to any forthcoming downturn. "We see signs of over-optimism by Airbus and Boeing," says Plueger. Both have too high traffic growth forecasts to justify the numbers, and they ignore the Asian economic slowdown, as well as overstating the growth of European short haul networks, he believes.
Although ILFC does "not foresee the bottom falling out of the market", Plueger warns that a new downturn will be unavoidable unless there is sustained traffic growth of 6-7%, an "exercise of restraint" in ordering new aircraft by airlines and leasing companies, and moderation of production rates. ILFC believes that to achieve "moderate" sustained growth, Airbus and Boeing should be producing a combined tally of around 600 aircraft a year by 2000.
This year, Airbus is expected to produce around 235 aircraft, while Boeing is gearing up to make in excess of 516. "Virtually all excess production is for growth rather than to replace aircraft. These factors lead to a lack of yield discipline," warns Plueger. Around 350 new aircraft will be added in 1999, estimates ILFC, representing 800,000 passenger seats. "If this rate of production continues by the fourth quarter of 2000, we will see natural market forces at work, which will hurt," he warns.
Source: Flight International
