SMBC urges jetmakers to erase production snags before raising output

By Tim Hepher

PARIS (Reuters) – The head of one of the world’s largest aircraft leasing companies has told leading planemakers to “get their house in order” and wipe out manufacturing delays before pushing already record production rates to even higher levels.

SMBC Aviation Capital’s chief executive, Peter Barrett, urged caution over production increases as he confirmed a new order for 65 Airbus (PA:) A320neo-family aircraft to secure the Japanese-owned leasing company’s growth well into the next decade.

“We have been consistent with both manufacturers (Airbus and Boeing) in saying get deliveries right today … get your production and delivery systems up to scratch,” Barrett told Reuters.

Airbus and Boeing (N:) are within reach of production rates at or close to 60 aircraft a month for their best-selling narrow-body models but have struggled with late deliveries.

Both have begun exploring future output of about 70 jets a month to meet strong demand, but some of their engine makers are reluctant to back the move immediately, given difficulties experienced in switching to a new generation of fuel-saving engines.

The cautious tone on future production reflects recognition that manufacturers must first “get their house in order” and improve the timing and quality of aircraft already being delivered, Barrett said.

Aircraft lessors who control about half the world’s fleet are traditionally cautious about production increases, fearing that a glut would knock values of assets they already own. But they have also been increasingly vocal about supply disruptions.

SMBC Aviation, the world’s fourth-largest leasing company, has said the order for 65 planes first reported by Reuters included 15 Airbus A321neos, the largest medium-haul model.

Barrett said SMBC also had the option to upgrade A321neos to the longer-range A321LR version and that it is monitoring possible plans by Airbus for a longer-range A321XLR.

Industry sources have said Airbus has stepped up pre-marketing for a 101-tonne A321XLR, which would expand the use of narrow-body jets for longer transatlantic trips. It is expected to launch it by mid-year to pre-empt Boeing proposals for a new mid-market jet with 220-270 seats.

Barrett said SMBC would look at the possible new Boeing jet but its price and performance would be critical.

Aircraft financiers are meeting in Dublin this week against the backdrop of a sector concerned that a decade-long boom is faltering as uncertainty creeps into the global economy and interest rates rise.

SMBC is watching developments in China and uncertainty over Britain’s exit from the European Union for any wider economic impact but says overall demand for leased jets remains solid.

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