Aircraft lessor Avolon cancels 27 Boeing 737 MAX jets

Aircraft lessor Avolon on Tuesday announced the cancellation of an additional 27 Boeing (BA.N) 737 MAX planes after canceling 75 of the jets in April as it grapples with the fallout of the COVID-19 pandemic, reported Reuters.

It also canceled one Airbus (AIR.PA) A330neo widebody jet, the fifth it has canceled since the start of the COVID-19 crisis and deferred the delivery of three A320neo aircraft until 2022.

The Dublin-based lessor said it has reduced its near-term commitments by over 140 aircraft since the start of the year.

The 737 MAX has been grounded since March 2019 after two fatal crashes in five months. However, Boeing and the U.S. Federal Aviation Administration last week completed certification test flights, a key milestone toward the plane’s return to service.

Avolon, which had been due to purchase nine of the 27 MAX jets via sale-and-leaseback deals with airlines, still has 37 MAX jets on order.

Boeing said it had come to an agreement with Avolon to further restructure its order book as part of an ongoing effort to help airlines and leasing companies “balance supply and demand with market realities” in light of the COVID-19 pandemic.

“We appreciate Avolon’s ongoing commitment to the 737 family through their outstanding orders,” the spokesman said.

Rival lessor BOC Aviation (2588.HK) last week said it had canceled an order for 30 MAX jets while Norwegian Air canceled orders for 92.

While such cancellations can help clear production slots to deal with a large backlog of MAX deliveries, they also underscore uncertainty over underlying demand for the MAX, analysts have said.

The cancellation of five A330neo from one of the plane’s launch customers is also embarrassing for Airbus.

Avolon, in a financial update at the end of the second quarter, said it still has in excess of $5 billion in liquidity. It said it had reduced by one-third its capital commitments to the end of 2021 and since the start of the year had cut by more than half its 2020-23 capital commitments.