ILFC's Hazy Not Planning Any Plane Cancellations
February 6, 2009
The world's most influential plane buyer has no plans to cancel aircraft orders despite the steep decline in demand for travel this year.
"The downturn is pretty severe," said Steven Udvar-Hazy, chief executive of International Lease Finance, the world's largest plane-leasing firm by fleet value. "(But) we're not canceling or deferring any orders."
Both Boeing and Airbus have taken more cancellations than new orders this year as cash-strapped airlines scale back or delay purchases to ride out the global recession.
But Udvar-Hazy's ILFC, a unit of insurer American International Group, may even move into purchasing mode.
"My philosophy is to buy when nobody else is," said Udvar-Hazy at a plane handover ceremony at Boeing in Seattle. "This could be a year where the number of cancellations and deferrals by far exceeds the number of new orders."
That was the situation at the end of January, with Boeing reporting a net loss of 13 aircraft orders for the year so far, and Airbus reporting a net loss of eight.
The cancellations come after an unprecedented 3-year bubble in plane sales, which burst last year as financial turmoil and loss of access to financing hit airlines hard.
Udvar-Hazy, generally considered the most powerful figure in aviation due to his massive plane purchases, refused to be drawn on the future of ILFC, which is up for sale by parent AIG as part of the insurer's plans to pay off a government loan which ensured its survival last year.
Sources say several private equity firms and sovereign wealth funds are bidding for ILFC, including Kohlberg Kravis Roberts, Temasek, Istithmar World, Kuwait Investment Authority and China Investment.
A second round of bids is expected in the third week of February, with a price tag of up to USD$8 billion expected by industry analysts.
"I can't talk about the timeframe or the details," said Udvar-Hazy, shaking off questions on the deal. He joked that the value of the deal could be anywhere between zero and USD$100 billion.
He added that Boeing's new 787 Dreamliner, which is now about two years late due to production holdups, will cost Boeing dear.
"It (the 787) is going to be a good airplane, but very costly," he said. "The challenge is greater than Boeing anticipated."
ILFC is the biggest customer for the 787, with 74 of the planes on order, worth about USD$12 billion at list prices.
