Avia deal fuels much-needed boost after staff walkout cripples production
Boeing has won a $10bn (£7.8bn) order for 737 Max jets in the first deal secured by the US manufacturer since the end of a seven-week strike.
Dublin-based aircraft leasing firm Avia has struck a deal with Boeing for 80 jets, coming as a boost for the US company following weeks of turmoil.
Boeing has been grappling with a staff walkout which crippled production and led to an estimated $10bn in losses for the plane maker, its customers and suppliers, and the Seattle-area economy.
Kelly Ortberg, chief executive of Boeing, was forced to agree to a 38pc pay rise for 33,000 assembly-line workers in order to end the dispute after two previous offers were voted down.
The purchase will also be seen as a vote of confidence in the Max, which was grounded earlier this year. It followed an investigation into the near-disastrous door-panel blowout on an Alaska Airlines jet at 16,000 feet, which revealed a litany of quality control and safety issues.
Gediminas Žiemelis, chairman of Avia, said he was confident that Boeing would bounce back from the crisis and that the 737 Max 8 model was the best option for his company. Its customers include British Airways, holiday giant TUI and discounters Wizz and Jet2.
He said: “We are big believers in Boeing. The Max is a flexible aircraft that is suited to operating across the world.”
Deliveries from the deal, which comprises 40 firm orders plus 40 options worth around $10bn at list prices, will commence in 2030. Mr Žiemelis said that no other lessors are due to be taking the Max 8 around that time “which will give us an advantage in being able to offer these jets to our customers”.
Brad McMullen, Boeing’s senior vice president for commercial sales, said the agreement reflected the enthusiasm of Avia’s airline clients for the Max, which competes with the Airbus A320neo in the short-haul jet market.
Still, the more than 6,400 orders that Boeing has won for the Max remain well short of the near-11,000 secured by its European rival for the A320neo family.
For Avia, the world’s biggest provider of airliners for seasonal hire, the deal represents a first-ever purchase of new jets as it moves to meet burgeoning demand from carriers.
Avia’s business model allows airlines in the UK and Europe to meet the surge in summer demand without being stuck with excess capacity as bookings wane in the winter. It offers them an alternative to buying planes outright or hiring them on traditional long-term leases.
The company, which transports more than 35m passengers annually for clients – double the number carried by Jet2, for example – provides aircraft on so-called wet leases, complete with crew, maintenance and insurance.
The purchase from Boeing promises to expand Avia’s current fleet of 220 aircraft by more than a third.
Mr Žiemelis said wet leasing represents an easy pathway for scheduled airlines to boost their margins, delivering a typical improvement in profitability of 2-3pc.
Avia’s strategy relies on it being able to place jets with customers in the southern hemisphere when they are no longer required further north.
The firm has a licence to operate planes in Australia and Indonesia. It is still working to fulfil requirements to do so in Brazil, Malaysia and Thailand. Qantas, Virgin Australia and Azul are among prospective clients.
Mr Žiemelis said: “Our fleet needs to be adaptable for the entire global market. The planes are like migrating birds, flying from where it is cold to where it is warm to meet demand.”
This story originally appeared on The Telegraph.
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