Dublin-based lessor Avolon has decided to cancel an order for 75 Boeing 737 MAXs and make other changes to its order book to reduce its near- and medium-term exposure to an uncertain airline market.

The order was originally placed in November 2017. Avolon had signed an initial deal for 20 MAXs in 2012 of which three aircraft have been delivered, leaving the lessor with a MAX backlog of 17 aircraft. The 75 additional aircraft now canceled would have been delivered between 2020 and 2023. Deliveries for 16 of the 17 remaining MAXs from the original order have been deferred to 2024 or later, leaving the lessor with just one MAX to be placed in the next roughly five years.

In an April 3 statement, Boeing said it had held ongoing conversations with Avolon regarding their 737 MAX portfolio, resulting in a mutual agreement to restructure Avolon’s MAX order book.  

“As we have produced fewer MAX airplanes than planned, we have implemented these adjustments to regain flexibility in managing the more than 4,300 unfilled 737 MAX orders,” Boeing said. “This is also the right step to align to the realities of the marketplace as we balance supply and demand and protect the 737 MAX’s underlying value, especially in the leasing sector.”

Avolon also canceled orders for four Airbus A330-900s. The company had initially bought 13 of the aircraft, four of which have already been delivered. Nine A320neo family aircraft have been rescheduled from 2020 and 2021 to 2027. In total, Avolon is reducing aircraft commitments between now and 2023 from 284 aircraft to 165.

“We are currently facing the most challenging period in the history of commercial aviation,” CEO Dómhnal Slattery said. “The global fleet has been effectively grounded as countries work hard to slow the spread of COVID-19.” He added, “while we have never seen a crisis of this nature, we remain confident that the industry will recover once the impact of COVID-19 recedes ... [Avolon] has always maintained a flexible approach to ensure we can adapt to rapidly changing market conditions and align our business with the needs of our customers.”

Its customers are demanding mainly one thing—relief from lease payments. “Avolon has received requests for more than 80% of its current owned and managed customer base for relief from payment obligations under their leases, these lessees account for more than 90% of annualized contracted rental cashflow,” the company stated. Avolon so far has agreed to a number of deferral arrangements for an average of three months and expects similar deals to be agreed upon with the majority of its 150 airline customers. 

Avolon expects “additional requests” and acknowledges some of its lessees will fall behind on rental obligations. To ensure Avolon’s liquidity the company has decided to fully draw on its $3.2 billion revolving unsecured credit facility.