U.S. Markets closed

Boeing 737 Max won't be 'fully absorbed' into the fleet for 2 years: Air Lease Corp CEO

Akiko Fujita

Boeing (BA) may be eyeing deliveries of its long delayed 737 Max aircraft by the end of the year, but Air Lease Corp (AL) CEO John Plueger says it will take 24 months for all those jets to be absorbed into the global fleet. Speaking to Yahoo Finance’s “The Ticker” Plueger said “the complexity involved” with bringing parked planes back into service is likely to draw out the process well beyond 2020.

“We have confidence that Boeing has a handle on what the fix is and how to implement it, how to communicate it to the airlines, and more importantly to the pilot community,” said Plueger, whose company buys commercial aircraft and leases it to airline customers. “But I think it also has to be communicated to the consumers... We need to get the consumers there, the airlines there and the regulators there.”

Boeing’s stock rose sharply on Monday, after the company said it expected the Federal Aviation Administration to approve certification of the Max plane’s flight control software next month, allowing deliveries to resume. In a statement, Boeing said it was “working towards final validation of the updated training requirements” for pilots, which would likely be approved in January, paving the way for commercial service to restart later that month. 

Aerial photos showing Boeing 737 Max airplanes parked at Boeing Field in Seattle, Washington, U.S. October 20, 2019. Picture taken October 20, 2019. REUTERS/Gary He

Boeing’s fastest-selling aircraft has been marred by one delay after another since an Ethiopian Airlines crash, the second involving a 737 Max, killed 157 people in March and grounded the global fleet. 

That has complicated the supply-demand picture for Air lease Corp. It currently has 15 Max jets grounded, with an additional 27 yet to be delivered. On Tuesday, Boeing said Air Lease Corp converted 15 of its Max orders to 5 Dreamliners, opting for the larger jets amid the delays.

‘Many variables’

Plueger says introducing the fleet back into service will require multiple steps, largely because they have been idle for so long.

“They are under a technical preservation program which means the engines have to be sealed up. The pumps, hydraulics, all kinds of things have to be preserved and exercised,” Plueger said, adding that software fixes to the troubled MCAS system will be critical along with the time spent training pilots on the updated system. “What will be the training that may or may not be required by the individual airlines, the regulators themselves. Will pilots have to go through a simulator or simply a classroom course? That can take time as well so there are many, many, many variables that will lead to the reabsorption of the parked Maxs into the fleet.”

U.S. airlines have already pushed back their timeline for the Max’s return. United Airlines (UAL) cancelled hundreds of additional flights last month, after it removed the MAX from its service until Jan. 6. American Airlines (AAL) and Southwest Airlines (LUV) have extended their cancellations until March.  

Plueger insists the delays have done little to dampen its leasing business outside of the U.S., which makes up roughly 95% of Air Lease Corp’s exposure. He specifically cited strong demand in Europe and Asia. 

“It’s still very, very robust and China is very supportive of its airline industry,” he said. “We’re getting requests for aircraft, both Boeing and Airbus, from the Chinese and other areas of the world overall.”

As for fears that the on-boarding of all 371 of the Max aircraft will lead to a global supply glut and significant price drops, Plueger said he is not concerned.

Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita

Follow Yahoo Finance on TwitterFacebookInstagramFlipboardSmartNews, LinkedInYouTube, and reddit.