Thus, lessors and short-term aircraft, crew, maintenance and insurance (ACMI) providers might benefit from the grounding of the 787. If Boeing does not find a quick fix for its battery problem, customers with parked 787s will have to start looking for replacement capacity as the busy summer schedule nears. The situation will be most pressing for operators that have proportionally larger 787 fleets, although some seem to be compensating for the grounding relatively well. All Nippon Airways (ANA), the largest operator to date with 17 aircraft, is trying to improve productivity of its remaining fleet, particularly Boeing 767s and 777s, to limit the capacity shortfall.
For those that do not have enough aircraft themselves, the most sought replacement aircraft will likely be smaller widebodies, such as Airbus A330-200s and Boeing 767-300ERs.
There is some excess capacity on the market for the moment and airlines should have no trouble finding replacement aircraft for short-term requirements. But, as Greenslet puts it, the question could be: “What lift may be available at any price?”
Many 767-300ERs are aging and airlines are phasing them out. It is very likely that the lessors to whom the aircraft are returned have not yet locked in a new lease. They will be happy to extend the leases and put themselves in a “comfortable” position, an industry insider points out.
“A sustained grounding and halt of new deliveries of 787 aircraft would support certain used aircraft values and rentals, especially for A330-200s and 767-300ERs,” says Amentum Capital CEO Martin Bouzaima. “Airlines with 787 orders would seek to delay redeliveries of legacy aircraft, leading to an excess demand relative to what the market had priced in as of January. The effect is likely to be short-term only, but it is all a function of how long it takes Boeing and its suppliers to fix the technical issue.”
Bert von Leeuwen, managing director of aviation research at DVB Bank, believes airlines will look at extending existing widebody leases, primarily for 767s, A330s and 777s, that would otherwise have been terminated. He argues that this should have an impact on lease rates with demand rising, and the effect could be felt most on the A330 fleet, half of which is controlled by lessors.
Greenslet argues that the most difficult issue for Boeing will be “to assure airlines and passengers that whatever is done to fix the problem does, in fact, fix it.” He notes that it is “not hard to imagine that all the assurances in the world may not, for a long time, overcome the concerns that users of the airplane have about its safety. That, more than the costs of the fix, of delayed deliveries and of compensation to airlines, may be the greatest consequence of, and threat to, the 787 program from this. And it is what may, in the end, force Boeing to change to a different battery.”
John Mowry, vice president at ICF SH&E, expects “an increase in demand for other medium twin-aisle aircraft” generated by a need to replace the grounded aircraft and find alternatives for those that will not be delivered on schedule.
Airlines will continue to operate their current aircraft longer and postpone planned retirement to the extent possible, Mowry argues. Many carriers that lease alternative medium twin-aisle aircraft will seek to extend their existing leases. “In addition to these fleet-management techniques, airlines can also delay new route launches or reduce route frequencies,” he says.
Mowry anticipates “a modest lift in dry-lease rates for alternative medium twin-aisle aircraft particularly for short- to medium-term lease extensions,” but he does not expect to see a material effect on aircraft values. And not all lessors will benefit to the same extent. “Most benefits will accrue to larger lessors with significant inventory flexibility in current lease-extension negotiations, and those lessors with speculative orders yet to place,” he notes.