China Aircraft Leasing Group (CALC) has abandoned plans to take 64 Boeing 737-8s, -9s and -10s, instead transferring the order to Middle East lessor Dubai Aerospace Enterprise (DAE).
The aircraft form part of an original order for 92 MAXs, which CALC first mooted in June 2017 and finalized in November 2019. However, in March 2021 CALC cut the order to 66 aircraft and rescheduled its deliveries. CALC has already received one MAX from this order, and a second is scheduled to arrive in September, but the remainder will now be transferred to DAE.
Under the agreement, which is expected to complete around Aug. 30, DAE will acquire 12 special purpose vehicle (SPVs) companies from CALC. Financial terms were not disclosed, but CALC said that the value of the deal will be “substantially determined” by pre-delivery payments already made, plus interest.
CALC said the disposal was “a good opportunity” to adjust its Boeing fleet portfolio, giving flexibility in its existing operations and supporting the group’s “long-term sustainable development.”
“The group will continue to consider, from time-to-time, the acquisition of further aircraft from Boeing [pursuant to any future agreements or otherwise], or other aircraft manufacturers,” CALC said.
CALC’s decision comes against the backdrop of geopolitical tensions between China and the U.S. On Aug. 9, the White House detailed plans to ban U.S. investments in some areas of China’s high-tech sector, including quantum computing, advanced semiconductors and certain areas of artificial intelligence, citing national security reasons. According to BBC reports, China was “very disappointed” by this move. Meanwhile, economic indicators are signaling Chinese deflation, making U.S. imports more expensive.
However, China and the U.S. also just reached an agreement to double airline capacity between their respective jurisdictions, signaling some air transport cooperation between the two sides.
DAE confirmed that it had signed “a definitive agreement” to acquire CALC’s 64 MAXs on order, growing its portfolio to approximately 550 Airbus, ATR, and Boeing aircraft, valued at around $20 billion.
“This transaction will increase the percentage of new technology, fuel efficient aircraft in our owned fleet to approximately 66% from 50%,” DAE said.
The MAXs are scheduled for delivery between 2023 and 2026. Approximately 20% of the acquired portfolio is already placed with existing DAE customers. The remaindering aircraft will be placed directly by DAE.
Reflecting on the CALC order change, Altair Advisory managing director Patrick Edmond said: “This seems like an overall smart deal for Boeing and DAE, but this decision does suggest to me that China is not betting on any material improvement in China-U.S. relations in the coming years, and so doesn’t want to take the risk of more Boeing aircraft, especially MAXs.”
Edmond added that the Chinese economy is also “slowing markedly,” potentially causing Chinese domestic airlines to downgrade their forecasts.
“The MAX, especially the 8, is in good demand, not least because the [Airbus] A320/A321 family is sold out so far into the future, so it’s likely an attractive deal for DAE,” Edmond concluded.
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