Declan Kelly

Fast 5: GECAS Delivers Last 737NG, Preps for 737MAX

GECAS delivered its last Boeing 737NG—its 394th—to Hainan Airlines on Nov. 29 and plans to take its first 737 MAX delivery in January. Declan Kelly, executive vice president of the U.S. and Latin American/Caribbean for the lessor, talks about the 737 transition.

How does GECAS decide when to stop ordering one type and start taking deliveries of the next generation version?

It’s always market driven. We look at what the manufacturers are doing and when their change-over point is, as well as what customers are looking for. There’s no real science to this. It’s really driven by customer needs. As we see demand fall off one asset and technologies moving into the next asset, that’s how we manage our orderbook.

How long do you expect each 737NG to operate for GECAS? Will the earlier variants have longer lifecycles than the latter ones?

Our useful life for the aircraft is 24-25 years. The way our leases run and the historical way the NGs are operating, the asset is holding up very well. At the moment, we see that the earlier production models might have a longer life, but we expect the last NGs we’ve taken to have a useful life of 24 years. However, it obviously depends on the next generation of aircraft and the retirement of the existing group. Philosophically, we are planning on that—but will it be one or two years shorter? Maybe. But it won’t be dramatic and it depends on the retirement of the next generation—the MAXs—to really drive that.

The 737NG is an established airplane that has done exceeding well. The benchmark operator is SWA. We look to them as others do. The aircraft has been operating with Southwest for 24 years and we’re seeing our leases extend to that period. It’s a very robust airplane doing very, very well.

GECAS says that its 737NG orders account for about one of every 15 NGs delivered. What do you anticipate the ratio to be for the 737 MAXs?

Boeing has about 4,000 orders for the Max so far—and we have 170—so give or take, that’s one out of every 24. Production rates are going up, so I’d predict that it will move up slightly to maybe one in 20 to one in 24.

How many 737 MAX aircraft do you expect to receive in 2017?

We should take around 15 in 2018 and then we will probably average 19-20 after that.

What are the typical durations of 737NG leases?

For a new aircraft delivery, it’s typically a 12-year lease. That is followed by 6-8 years and then 4-6 after that.

TAGS: Airframes
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