International Lease Finance Corp. said it may order 300 jetliners from Boeing and Airbus to meet lease demand from airlines that can no longer afford to buy their own planes, Bloomberg News reported Wednesday.
International Lease said it may purchase 150 single-aisle aircraft from each aerospace company. The orders would be worth about $22 billion at current plane prices, exclusive of discounts.
Boeing (NYSE: BA) shares fell $4.83 to $69.99 on the news, while Airbus's parent EADS' shares rose 39 euro cents to €12.95 in afternoon trading in Paris.
High oil prices take a toll
Stock analyst C. Leonard Bauer told BloggingStocks Wednesday the era's record-high jet fuel prices are beginning to take a toll on airline business models. "If high prices, basically oil above $120 a barrel, persist, you will see order cancellations, and more postponements, in the U.S. and abroad," Bauer said. "Some airline business models just won't work with oil at $120-$125 or higher, so you will begin to see order delays and cancellations." Bauer added that he does not have ratings on, nor own shares in any airline or airline manufacturer.
Further, Bauer said those airlines with viable business models after cost cuts will increasingly lease aircraft -- good news for ILFC, but bad news for Boeing and Airbus. Boeing's order backlog is 3,645 planes; Airbus's is 3,655 planes. Bauer said if $120 or higher oil prices persist, "order cancellations could exceed 15-20%."
To lessen the order hemorrhage, Bauer said Boeing and Airbus may offer additional price discounts on plane orders, but that would still lead to a sizable decrease in revenue. Both Boeing and Airbus have acknowledged that they are in almost daily talks with airlines seeking to cancel or delay deliveries, The Wall Street Journal reported Wednesday.
Bauer added that "plane manufacturers are reluctant to offer additional discounts, because revenue will decrease and their stock will take a major hit, but if it's a case of retaining a large order or several large orders, it may represent the only option."
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Reader Comments (Page 1 of 1)
6-25-2008 @ 9:14PM
Robert Alexander said...
Come on folks invest in algae production of jet fuel. In research it has been proven feasible. Now we need efficient production models brought online ASAP to replace oil.