Air Lease Corporation (ALC) announced a firm order for 32 737 MAX aircraft, continuing a streak of positive momentum for Boeing as the OEM looks to reduce its inventory of stored aircraft and eventually raise production rates.
The new order—a mixture of 737-8s and 737-9s—grows Los Angeles-headquartered ALC’s total backlog for the 737 MAX family to 130 aircraft. The lessor did not provide a delivery timetable, but all of its existing MAX commitments are slated for delivery through 2025, with over 30 jets expected each year between 2022 and 2024.
The order comes after ALC previously converted orders for three 787s into 18 737 MAXs in February. The lessor previewed the 32 incremental 737 MAX orders at the time, part of an MOU with Boeing that was pending final negotiations.
ALC also agreed to a firm order for 116 new aircraft from Airbus in December 2021, consisting of 25 A220-300s, 59 A321neos, 20 A321XLRs, five A330-900s and seven A350Fs. All told, the lessor has firm orders totaling 431 aircraft from Boeing and Airbus, worth an estimated $27.7 billion.
Lessors have “stepped up” to provide “valuable” delivery slots for carriers in need of additional narrowbody capacity as backlogs fill up at Airbus and Boeing through the middle of the decade, noted Jefferies analyst Sheila Kahyauglu. In aggregate, lessors now hold 16% of the total backlog at both OEMs, she observed.
“The lessor offering is attractive in a time of rising fuel and interest rates, with lessors typically offering an investment grade credit rate to airlines that do not typically hold investment grade ratings,” Kahyauglu wrote in a client note.
The additional ALC order is the latest win for Boeing’s 737 MAX program, coming after a sale of up to 35 MAX aircraft to Caribbean startup Arajet on March 14; up to 100 MAX aircraft to Allegiant Air in January; 23 and 30 incremental MAX aircraft to Alaska Air Group and investment firm 777 Partners, respectively, in December 2021; and up to 72 MAX jets to Indian startup Akasa Air in November 2021.
Despite the positive orders momentum for the 737 MAX, the situation at Boeing “remains fluid,” wrote Vertical Research Partners analyst Robert Spingarn, who cautioned that Chinese carriers will probably “not be in any mad dash” to take deliveries of additional 737 MAX aircraft in 2022 because of resurgent COVID-19 lockdowns. As a result, Spingarn reduced his estimate for total MAX deliveries in 2022 from 520 to 480, with 40 deliveries pushed out to 2023-2024.
Despite the slowdown in anticipated deliveries, Spingarn said he was maintaining his forecast for Boeing’s 737 MAX production rate to average 30/month in 2022, growing to 39/month by 2023.
China was the first regulator in the world to ground the 737 MAX following the second crash of the type in March 2019 and is the last large hold-out to approve the model’s return to its airspace. Some analysts, including RBC Capital Markets analyst Ken Herbert, have speculated that the recent deadly crash of China Eastern Airlines Flight MU5735—a 737 NG, not a MAX—could further delay the timing of the MAX return to service, although Herbert said it is “still too early to determine.”
Boeing had outstanding orders for 42 aircraft—including 36 737-8s—with Russian airlines prior to Russia’s invasion of Ukraine on Feb. 24. All of those deliveries will now be barred due to sanctions.
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