AerCap cancels 15 MAX jets, urges Airbus and Boeing output cuts

DUBLIN/PARIS (Reuters) - Leasing giant AerCap AER.N said on Wednesday it had cancelled 15 orders for the grounded Boeing BA.N 737 MAX aircraft as it slows the pace of new plane deliveries to weather the coronavirus crisis.

FILE PHOTO: Boeing 737 Max aircraft are parked in a parking lot at Boeing Field in this aerial photo over Seattle, Washington, U.S., June 11, 2020. REUTERS/Lindsey Wasson

Announcing the cancellations - which leave 80 of the MAX jets still on its order books - the world's largest aircraft owner also called for more production cuts by Boeing and rival Airbus AIR.PA to help balance the jet market.

AerCap, which has deferred dozens more MAX deliveries, said it remains uncertain when the five MAX planes already on lease will return to service, as regulators review changes to the jet after two fatal crashes.

U.S. authorities said last week they expect to give a green light in the “near future”. As a result, AerCap reached agreement with Boeing this month to restructure its order book, it said on Wednesday.

AerCap boss Aengus Kelly called for a further aircraft manufacturing slowdown as he reported a drop in second-quarter net income to $246 million from $331 million a year earlier, amid a global travel slump unleashed by the pandemic.

“I think we’ll see more production cuts both from Boeing and Airbus, to help us get to that equilibrium,” he said during an earnings call with analysts.

“I would be hopeful that tomorrow when Airbus release their results we’ll see another production cut there,” the AerCap CEO said. Airbus declined to comment ahead of its own results announcement on Thursday.

Leasing firms are traditionally conservative about production to preserve the value of their fleets, but the call from the world’s largest lessor puts pressure on Airbus to defend output levels that some analysts consider too high.

AerCap said it was well placed to weather the coronavirus crisis thanks to its $27 billion in unencumbered assets and record-high liquidity including $3 billion in new funding.

“We have begun leasing airplanes again, but it’s almost exclusively focused on the European market,” Kelly said, adding that earlier signs of a U.S. travel rebound had since “run out of steam” amid new virus outbreaks and lockdowns.

Despite European reversals such as renewed British quarantine measures for Spanish arrivals, a recovery is now “well underway” in the region, Kelly said.

“No doubt there will be setbacks, but the willingness and the desire of the consumer to travel is very clear.”

Reporting by Padraic Halpin and Laurence Frost; Additional reporting by Tim Hepher; Editing by Alexandra Hudson and Jan Harvey