Source: ATW Daily News Author: 08/01/2008
Subject Concerned: Aircraft Airlines
United Airlines' decision to ground all of its 737 Classics in the coming months, a total of 94 aircraft, is expected to have a significant impact on lease rates for the type, Genesis Lease Ltd. CCO Cian Dooley confirmed.
Speaking at the recent Farnborough Airshow, Dooley said he "would not be surprised to see Classic lease rates drop 10% over the next 12-18 months." Rates for A320s older than 10 years also may be affected. Genesis owns just three Classics and all are leased, he noted. None of the leases expire before 2010.
While acknowledging the crisis facing US airlines in the face of record oil prices, Dooley drew a distinction between the current environment and past downturns. "What is fundamentally different [this time] is that on a global basis there is more demand for aircraft," he observed, adding that, "We are not seeing big order cancellations at Airbus and Boeing."
In addition to markets such as China and India, Dooley cited strong interest in new and used Western-built aircraft from Russian carriers. He noted that in the past, the demand was there but not the funding, whereas today the country is awash in cash from oil and natural gas revenue.
Genesis, which was formed by GE and sold into the public equity markets in late 2006, does not place speculative orders for new aircraft with manufacturers. It typically acquires aircraft via sale/leaseback or through a delivery financing. "We do have signed committed debt facility, so we're looking at opportunities," Dooley said.