February 24, 2015 / 5:03 PM / 4 years ago

AerCap CEO sees no looming glut in aircraft production

NEW YORK (Reuters) - The head of the world’s largest aircraft leasing company, AerCap Holdings NV (AER.N), said there was no sign of a looming glut of jetliners that could trigger a cyclical downturn in the sector.

AerCap is seeing consistent demand for the latest, fuel-saving jets and older workhorse planes, Aengus Kelly, chief executive officer, said in an interview with Reuters on Tuesday.

“That’s an indication that the market remains strong,” he said.

AerCap plans to make initial purchases of Boeing’s 737 MAX, but won’t necessarily buy them from Boeing unless the price is right, Kelly said.

“I’m sure we will buy MAX airplanes,” he said. AerCap could buy the fuel-saving single-aisle planes from airlines in a sale-leaseback or through an acquisition, he said.

“Boeing knows that we’re a buyer of the airplane, but we have to agree terms. In the meantime we’ll pick up MAXs elsewhere.”

Concern about a glut of airliners has hung over aerospace investors for more than a year as Boeing Co (BA.N) and Airbus Group NV (AIR.PA) boost output to fill large order backlogs. In the last six months, low oil prices have raised concern that airlines will hold off buying new aircraft.

Kelly said that has not affected talks with airlines about their plans to bring into service fuel-saving planes such as the Boeing 737 MAX or 787, Airbus A320neo, A330neo or A350.

“We’re talking to airlines every week about their fleet plans. Where fuel has been for six months has never come up as a consideration in leasing new technology airplanes,” he said.

On Monday Goldman Sachs analysts downgraded the aerospace sector to “neutral,” and Boeing to “sell,” citing concern that Airbus and Boeing are supplying more aircraft than the market can absorb.

Boeing shares fell 2.3 percent on Monday. Eight of 23 Boeing analysts tracked by Thomson Reuters already rated the company “hold,” “neutral,” “sector perform” or “underperform.” The rest rate it “buy,” “overweight,” or “outperform.”

Kelly, speaking a day after AerCap posted strong fourth quarter profits, said the sector outlook remains strong, and low oil prices are a “tax cut” for airlines and consumers that could spur travel demand.

“No airline is changing their behavior because of low fuel prices,” he said.

Boeing was trading at $154.61 on Tuesday in New York, little changed from Monday. Airbus was down 1.9 percent to 51.85 euros.

Reporting by Alwyn Scott in New York and Tim Hepher in Paris; Editing by Chizu Nomiyama

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