ILFC Considers A380 Cancellation
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By Jens Flottau
International Lease Finance Corporation (ILFC) is “seriously considering” canceling its order for 10 Airbus A380s.
ILFC CEO Steven Udvar-Hazy told The DAILY on the sidelines of the IATA annual general assembly in Kuala Lumpur that he is observing “a fundamental structural shift in how the airlines are thinking about the aircraft.” Hazy added that “if I was Airbus, I would be very concerned about the program right now.”
According to Hazy, ILFC can cancel the order between January and June of 2010 without having to pay any penalties. In addition to an outright cancellation — which would be the first ever for the type — ILFC could also defer deliveries or replace the order with an order for a different Airbus type, for example the A350XWB.
ILFC’s considerations are based on the observation that “there are less customers for the aircraft than we expected, and particularly orders from China are missing.” In Hazy’s view, the A380 is “not a good operating lease aircraft” because around $25 million would have to be spent on cabin reconfiguration every time the aircraft changes operator.” As for the freighter, Hazy is also pessimistic: “The freighter is dead.”
A cancellation by ILFC would be a huge blow for Airbus. Already, Air France, China Southern and Qantas have deferred deliveries of part of their aircraft. Airbus was forced to revise downward its production schedule to 14 aircraft this year and more than 20 next year. “At these production rates, Airbus will never make money on the program,” Hazy believes.
Separately, Hazy said ILFC was in talks with Airbus and Boeing about orders for other aircraft ILFC would like to take advantage of low prices in the current downturn. But for a deal to materialize, “they need a few more cancellations,” Hazy joked, referring to increased pressure on the airframers. Any order would also come only after the lessor’s sale to a consortium of private equity firms.
Asked whether he could confirm advanced negotiations with private equity investors Onex Corp. and Greenbriar Equity, Hazy said, “I don’t say no.” But he added that the closing of the deal could take several months.
Photo: Airbus
