BOC Aviation eyes secondary market for Max | News | Airfinance Journal

Singapore-based BOC Aviation has told Airfinance Journal that it chose to cancel rather than defer an order for 30 Boeing 737 Max aircraft because it wanted to pursue sale and leaseback (SLB) deals.

“That possibility was open to us but we don’t have infinite capital and we’d rather recycle this into supporting the programme through leasebacks of existing units rather than waiting for future deliveries,” BOC Aviation chief executive Robert Martin tells Airfinance Journal.

Earlier this week, BOC Aviation cancelled an order for 30 737 Max variants while also deferring the delivery of "certain" other 737 Max aircraft.

“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,” says the lessor chief.

“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 orders we had,” says Martin.

Despite the cancellations and deferrals, BOC Aviation remains confident about, and committed to the 737 Max programme, as demonstrated by a recent agreement with Southwest Airlines covering 10 737 Max SLBs and a United Airlines SLB deal covering 16 Max deliveries.

BOC Aviation says that after this week’s rejigging it retains 57 direct Max orders with Boeing.

“We have had ongoing conversations with BOC Aviation regarding their 737 MAX portfolio and the impacts from the past year. We have come to an agreement with BOC Aviation to restructure their MAX order book. In light of the COVID-19 pandemic, we continue to work with our customers to balance supply and demand with market realities, especially in the leasing sector,” Boeing tells AFJ.

The Chicago-headquartered OEM adds that it “appreciates” BOC Aviation’s ongoing commitment to the 737 Max programme “through their recent MAX purchases and outstanding unfilled MAX orders”.

Despite the airframer’s efforts to preserve its backlog, many large lessor and airline customers have walked away from 737 Max orders.

Avolon has cancelled orders for 75 Max units, GECAS has cut 69 from its backlog, CDB Aviation has cut 29, Norwegian has cancelled 92 and Brazil’s Gol has cut 34 Max orders.

In March, before the above cancellations, Boeing had already removed 289 737 Max orders from its backlog, including 139 to comply with ASC 606 accounting standards.