Air Lease Chair warns about possible 777X program cancellation

Boeing was at the centre of a tug of war over the future of its newest jet on Monday May 9 as Germany’s Lufthansa ordered the 777X Freighter hours after an influential industry leader questioned the delayed programme’s viability.

The U.S. planemaker last month pushed back first delivery of the world’s largest twin-engined jetliner by more than a year to 2025, five years after it was originally due. The cargo version is a recent expansion of the delayed jet project.

Asked if he saw risks to the future of the 777X programme as a result of cumulative delays, Air Lease Corp Executive Chairman Steven Udvar-Hazy, told financiers, “yes.”

Pressed on whether it was possible the whole programme could be cancelled, Udvar-Hazy, widely seen as the father of the modern leasing industry, said that would depend on what the Boeing board looks like in 18 to 24 months.

“What I’m saying is that those decisions whether to continue with the programme or not, it will probably not be made by this board of directors anyway,” Udvar-Hazy told the Airline Economics conference in Dublin.

A Boeing spokesperson referred to comments last month by Chief Executive Dave Calhoun, who said, “We’ve got to give ourselves the time and freedom to get this right.” Boeing has also said it is highly confident in the 777X family.

Udvar-Hazy’s warning came days after the head of Dublin-based lessor Avolon told a different Dublin event hosted by Airfinance Journal that Boeing had “lost its way” after a barrage of problems and may need new management..

But the head of the world’s largest lessor, AerCap Holdings, threw his weight behind Boeing on Monday, saying the U.S. manufacturer would “bounce back.”

Plans to update the 777 mini-jumbo with a larger 400-seat version have been hit by certification problems, while regulatory issues have frozen deliveries of the smaller 787.

Boeing won a respite from the woes affecting its core widebody programmes on Monday when Lufthansa said it would buy 10 cargo planes including seven of the 777X version, also known as 777-8F.

The carrier also boosted its order for Boeing 787s as part of a compensation deal for delays to the 777X passenger version. It is also a major customer for the Airbus A350.

Jefferies analyst Sheila Kahyaoglu said the deal highlighted the cost to Boeing of concessions to offset recent delays.

Udvar-Hazy said Air Lease had considered buying the recently announced freighter version of the 777X but had decided not to do so because there were “too many questions and delays.”

Air Lease became a launch customer in November for an Airbus A350 Freighter, though Boeing leads in the order race for the two models after deals with Qatar Airways and now Lufthansa.

Despite Monday’s order, the freezing of 787 deliveries remains a major sore point for airlines and leasing firms and a significant drain on cash for Boeing.

“I have never seen anything like (it),” Udvar-Hazy said, noting airlines can cancel airplanes once they are a year late.

Air Lease Chief Executive John Plueger said one airline had filed such a cancellation for a Boeing 787 in the past week.

Turning to delays at Airbus, Plueger did not rule out further delays to the new A321XLR single-aisle model after the European firm announced a three-month delay last week.

He said the delay could stretch to six or nine months, but was unlikely to reach a year or two.

Airbus wants to rely on the housing of the plane’s engines to absorb some impact in the event of a belly crash landing. But regulators are insisting on strengthening its redesigned fuel tanks to absorb the full impact and prevent fire, Plueger said.

Engineers have said such work could take several months.

Reuters.com by Padraic Halpin and Tim Hepher in Dublin, Additional reporting by Maria Sheahan in FrankfurtEditing by Bernadette Baum, Emelia Sithole-Matarise and Matthew Lewis