(Reuters) - Aircraft leasing giant AerCap (AER.N) said it had boosted liquidity and reduced capital spending for 2020 by postponing jet deliveries, while withdrawing its full-year outlook as the coronavirus crisis batters aviation.
Shares in the world’s largest aircraft leasing company jumped more than 12% after it announced it had $11 billion in liquidity to help ride out the industry’s worst-ever crisis.
Chief Executive Aengus Kelly said AerCap had obtained the deferral of deliveries of dozens of grounded 737 MAX from Boeing (BA.N) “on competitive terms”.
However, AerCap joined other aviation finance firms in raising questions over orders for the jet following a 14-month-old safety ban and a recent halt in production.
AerCap said it was facing cancellations of 737 MAX leases by some of its own airline customers, and reserved the right to reject taking delivery of affected aircraft from Boeing.
“In cases where leases have been cancelled, we have the right to cancel our corresponding orders for delivery of those aircraft,” the company said in a quarterly earnings report on Tuesday.
Deliveries of Boeing’s best-selling model have been halted for over a year, passing the milestone at which buyers can trigger cancellation clauses, as some leasing firms have done.
Still, Kelly told analysts that assuming a successful move by Boeing to recertify the 737 MAX with regulators across the world, the jet would once again see solid demand.
He also said there was demand for the Embraer (EMBR3.SA) E2 jet after the collapse of a tie-up with Boeing last weekend.
“AerCap is navigating the coronavirus situation as best they can, tapping additional financing and adjusting their risk profile to airlines they believe can sustain the downturn,” Cowen & Co analyst Helane Becker said in a note.
The aviation industry is enduring its worst crisis after the coronavirus pandemic crippled most flights, piling pressure on a sector already weakened by the MAX grounding.
Kelly predicted a limited return to service by European airlines in May, lagging the Chinese market by two to three months, but warned not all global airlines would survive.
“There is no doubt that some airlines will fail because of the crisis,” Kelly told analysts.
There will also be fewer aircraft leasing companies, reversing a flood of capital into the aviation finance market in search of buoyant returns in recent years.
That is despite growing government support for airlines that Kelly said could double to $200 billion worldwide, from around $100 billion already committed in bailouts or public support.
AerCap’s first-quarter net income rose 18% to $276.8 million, driven partly by asset sales.
Reporting by Rachit Vats in Bengaluru, Tim Hepher in Paris,; Editing by Supriya Kurane and Ed Osmond