By Robert Wall & Andrea Rothman - Feb 12, 2013 7:01 PM ET
Airlines waiting for the
state-of- the-art Boeing Co. 787 Dreamliner to return to the skies are
relying on 30 year-old planes to fill gaps in their routes.
LOT Polish Airlines SA,
the only European carrier so far with Dreamliners in service, said it is
using Boeing 767s to work around its two grounded models, one of which
is stuck in Chicago following its maiden trans-Atlantic traverse. U.K.
tour operator Thomson Airways and Norwegian Air Shuttle AS, the next two
European airlines due to receive 787s, said they will use other planes
to avoid the risk of stranded passengers.
Reverting to older
aircraft bears the danger of a marketing backlash, and airlines who
typically plan network coverage months in advance risk an open flank if
an aircraft doesn’t get delivered. Uncertainty over the duration of the
grounding is further complicating planning, said Colm Barrington, chief
executive officer of Dublin-based Fly Leasing Ltd.
“There is no doubt the
787 situation has caused strong interest in the A330 and 767,”
Barrington said. “People are now talking about renewing leases that were
set to expire.”
Boeing last week told
airlines that are about to receive Dreamliners that handovers will be
delayed after a Jan. 16 decision by U.S. regulators to ground the jet.
The aircraft maker has not give airlines new delivery dates as it tries
to identify a fix to electrical flaws that caused a fire on a Japan
Airlines Co. jet.
Wet Lease
Lease extensions would
require an airline to operate the asset for at least one additional
year, Barrington said. Airlines can also rent jets from other carriers
for shorter periods, including crews, in what is called a wet lease in
aviation parlance. LOT said it would consider leasing another aircraft
for the summer season.
The Jan. 16 decision by
U.S. regulators to ground 787s has stranded 50 airliners after a fire on
a plane that originated in a lithium-ion battery. The root cause of the
short-circuit has still not been determined, making impossible
predictions of when the plane may again be operational.
“If the market perception
forms that it is a long-term issue, then that will give lessors the
opportunity to push for stronger terms and longer leases on used 767 and
A330 equipment,” said John Higgins, chief commercial officer at Avolon,
which owns six A330s. For now, such renegotiations are still “isolated
incidents,” he said.
Airbus Demand
The aircraft leasing
business, created and championed by Steven Udvar-Hazy at International
Lease Finance Corp. almost four decades ago before he set up Air Lease
Corp., has expanded in recent years as airlines seek to avoid big
outlays of cash and build in flexibility so they can adjust their fleets
to boom or bust times.
Lessors today own about
35 percent of the installed airliner base, compared with less than 20
percent at the beginning of the century. Single-aisle aircraft such as
Boeing 737s and Airbus SAS A320s tend to comprise the bulk of lessors’
portfolios, because the smaller planes are the workhorses of the
industry and always in higher demand.
Still, larger models such
as 787s, 777s, and A330s command premium lease rates and are required
for long-haul routes, securing them a slot in many lessors’ portfolios.
Lease rates for the A330
were already strong even before the 787 woes. The Airbus wide-body “is
liked by nearly every airline, from U.S. majors to Chinese carriers,”
said Aengus Kelly, the CEO of Aercap Holdings. Aercap, with a portfolio
of 333 owned and managed aircraft, has eight A330-200s, 22 A330-300s and
three Boeing 767s.
Boeing Woes
Airbus had benefited from
Boeing’s troubles with the Dreamliner even before the aircraft was
grounded. The three-year delay of the 787 into service boosted demand
for the 330 as a suitable substitute, even as Airbus works to introduce a
new competitor, the A350, which is set for first flight this year and
introduction to service in 2014.
The 787 capacity
bottleneck risks to become more critical if it drags into the summer
season for airlines when demand for jets peaks, said Barrington, whose
leasing business manages five 767s and one A330.
Boeing will need to
change the battery system on the 787 which may take months to complete,
International Consolidated Airlines Group SA CEO Willie Walsh said on
Feb. 10 in Dublin. IAG’s British Airways unit, which currently operates
14 767s in long-haul, expects to start taking delivery of 787s in May.
Delays in delivering the
787 have already eaten into spare aircraft capacity, John Strickland,
director of airline advisory JLS Consulting, said in an interview.
Airlines such as Norwegian, which is introducing a new product, also
have find crew to operate the replacement aircraft.
“We are heading into a
peak period for key parts of the aviation world so this is going to
become a bigger issue in the coming months,” Strickland said.
Source: http://www.bloomberg.com
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