Although Boeing 787 delays will likely prompt affected airlines to extend leases on their existing widebodies, these moves will not necessarily result in a sudden surge in lease rates or values on those aircraft. Rather, the extensions will further sustain the current lease rate and value recovery that is under way, due to the lack of widebody aircraft available in the market.
"Many operators, if they were smart, would have anticipated a delay in 787 deliveries, so many would have lease extension options written into their existing contracts," says Bill Cumberlidge, head of aviation asset management Allco Finance Group.
However, some airlines with lease expiry dates from mid-2007, may have delayed lease extension discussions, hoping that by now the availability of alternative widebodies would have been realised.
"These airlines may now have to agree to increased lease rentals, assuming their lease rates are now low because the rates were negotiated back in the 2002-3 period," says IBA Group managing director Phil Seymour. "However, the initial production of the 787 was not ever going to be in huge numbers, so the lease rates and values of the older aircraft were not going to be impacted overnight."
Seymour adds: "But the simple issue is that the lack of supply must mean that lessors of older equipment are rubbing their hands together."
Another issue for some of the initial financiers, lessors and airlines, says Seymour, is pre-delivery payment financing as it will need to be revisited.
"Presumably, Boeing will be offering concessions on those matters," says Seymour.
Source: Flight International
