Wednesday 26 June 2019

SMBC Aviation will 'have conversation' with Boeing on Max compensation

SMBC chief executive Peter Barrett
SMBC chief executive Peter Barrett
John Mulligan

John Mulligan

DUBLIN-based aircraft lessor SMBC Aviation Capital will engage in talks with Boeing about potential compensation for delayed deliveries of 737 Max jets after two deadly crashes saw the aircraft type grounded all over the world, according to SMBC chief executive Peter Barrett.

However, he stressed that seeing the aircraft back in service was the first priority for the lessor.

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Mr Barrett (pictured) said SMBC, the world's fourth-largest aircraft lessor, expected to have about 30 Max jets in its fleet by the end of this year and 89 by 2022.

It has additional Max sales and leasebacks that it has agreed with airline customers.

Mr Barrett said SMBC had expected to take delivery of about 10 Max jets over the past three months.

He said they have been built but Boeing has not been able to deliver them.

"There's quite a few [Max] aircraft that we would have expected to get delivery of over the last three months that we have not got delivery of, and that's going to continue until it's back in the air," he said.

Airlines such as Norwegian and Turkish Airlines have been pushing Boeing for compensation as Max jets in their fleets lay idle.

The Irish Independent revealed last month that Ryan-air already has struck a compensation deal with Boeing worth hundreds of millions of euro to the Irish carrier. Ryanair has 135 firm orders for Max jets and options on 75 more.

"Our focus is on getting the airplane back in the air safely for our customers," Mr Barrett said. "Obviously we have our contractual arrangements with Boeing and when we get to the next take of this whole situation, that's obviously a conversation we'll be having with them," he said.

"I'm sure Boeing will be having a conversation with all its customers on the impact of this," he said. "I think it's a conversation we'd be having as well."

Mr Barrett was speaking as SMBC posted record profits of $344m (€303.6m) for its last financial year.

The figure for the 12 months to the end of March was up 8pc on the previous year.

SMBC said its operating income for the last financial year hit $1.1bn (€970m), also a record for the group, which is owned by Japan's Sumitomo Mitsui Financial Group and Sumitomo Corporation.

SMBC has an owned, managed and on-order fleet of 731 jets valued at $11.9bn (€10.5bn). Most of its owned fleet is composed of narrowbody aircraft including the Boeing 737-800 and Airbus A320-200.

The lessor placed an order for 65 Airbus A320 neo aircraft last year, with a list price of almost $7.5bn. Mr Barrett said lease rates for used aircraft coming off existing leases are "holding up well" and even improving.

Irish Independent

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