BOC Aviation cancels 30 Boeing 737 MAX but backs grounded jet

(Reuters) - Aircraft leasing company BOC Aviation 2588.HK said on Tuesday it had cancelled an order for 30 Boeing BA.N 737 MAX planes although its chief executive remained confident in the jet which has been grounded for more than a year.

FILE PHOTO: A Boeing 737 MAX airplane takes off on a test flight from Boeing Field in Seattle, Washington, U.S. June 29, 2020. REUTERS/Karen Ducey

The lessor, which is based in Singapore and listed in Hong Kong, will also defer the delivery of some other Boeing 737 MAX aircraft, it said in a statement.

BOC is the latest lessor to strike deals with Boeing to cancel 737 MAX orders as the jet remains grounded pending regulatory approval following two crashes.

“We discussed with Boeing what is the best way to deploy our capital in a time like this because everyone realises this is not a short term downturn, it is a long one,” BOC Aviation Chief Executive Robert Martin told Reuters.

BOC also recently carried out billions of dollars of purchases of new jetliners, including 737 MAXs, in the purchase-and-leaseback market, agreeing to rent them back to airlines.

“It became clear to us that the best way for us to support the MAX and other Boeing products is by us doing purchase-and-leasebacks during this period and these replaced a number of direct (Boeing) orders we had,” Martin said.

“This is not in any way a loss of confidence in the MAX. We are absolutely confident, otherwise we would never have done ... purchase-and-leasebacks.”

Norwegian Air said on Monday it had cancelled orders for 92 737 MAXs and would claim compensation from the U.S. planemaker for the grounding of the jet..

Although Boeing appears keen to avoid a snowball effect of cancellations, analysts say the two sets of 737 MAX announcements are different.

Norwegian, which was struggling before the COVID-19 pandemic hit the airline industry, has been forced to restructure its debt while lessors are mainly involved in compromise deals.

When lessors agree to buy future planes from airlines it can help Boeing shore up deliveries at a time when alternative finance for the MAX is uncertain.

In return, Boeing is seen willing to let lessors lighten commitments amid the heightened risk of the coronavirus crisis.

Plane manufacturers are also producing fewer jets than originally planned, giving them an incentive to shave leasing company orders to keep them in balance with airline orders.

Asked why BOC didn’t simply defer rather than cancel all its MAX orders, Martin said: “That possibility was open to us but we don’t have unlimited capital”.

Reporting by Anushka Trivedi in Bengaluru, Anshuman Daga and Tim Hepher; Writing by Tim Hepher; Editing by David Clarke