News:

The good news week for Boeing continues after the FAA order ungrounding the MAX in the US, as Alaska has decided to add to its 32 aircraft MAX orders with an additional 13 MAX9 obtained via leasing company Air Lease Corporation. While this is not a new order for Boeing, as Air Lease already had these aircraft on order, it does indicate the continued interest of Boeing operators in expanding their fleets for replacement and growth.

Alaska, with these new aircraft, will be able to replace the Airbus A320s it acquired during its takeover of Virgin America that it sold to Air Lease Corporation as a part of the deal, and will start what could be a return to an all-Boeing fleet. That will enable the carrier to standardize on one type of aircraft again, as it was all Boeing before the acquisition, and reduce and maintenance costs associated with a sub-fleet of aircraft. Until the first 10 new deliveries are completed, Alaska will continue to lease back the Airbus aircraft it sold to Air Lease Corporation to maintain its capacity and schedules.

Based in Seattle, the home of Boeing’s commercial operations, there has been a special relationship between Alaska and Boeing.

Analysis:

It was expected that once the grounding was lifted, orders for the MAX would again begin to come in. Ryanair in and Southwest in the US are also targets for additional MAX aircraft, as they also operate all-Boeing fleets.

Boeing has a large inventory of already-built 737 MAX to sell, but these Alaska aircraft will be from new production rather than existing inventory, with the 13 deliveries beginning in the fourth quarter of 2021 and running through 2022.

Insight:

Alaska has been waiting for the opportunity to standardize its fleet to all Boeing for quite some time and was delayed in that process by the grounding of the MAX. Now that the MAX has been cleared to fly and Boeing can accurately predict its delivery skyline, securing delivery positions and replacing the Airbus sub-fleet became a high priority. With Air Lease having near-term delivery positions in 2021 and 2022 and the willingness to take on a sale and leaseback of the Airbus fleet, this deal, which had been negotiated for some time, was finalized.

This is a win-win-win deal for Alaska, Air Lease Corporation, and Boeing, and an expected loss of a customer for Airbus. However, since the Airbus being acquired by Air Lease are relatively young, it is likely they will find a new home as the industry recovers from the global pandemic in 2021. The fate of Alaska’s A321neos remains unspoken for.

The of the deal indicates that strong interest in additional MAX airplanes from customers who want to expand their fleets. Southwest and Ryanair are likely candidates for additional aircraft from Boeing, and given the pandemic and grounding impacts on demand, the price points today may be at their nadir. We expect a flurry of transactions for the MAX as Boeing moves its inventory of already-built aircraft, some of which are without customers, with great deals. Stay tuned for more MAX transactions as Boeing moves from losing customers to slowly regaining its market position, but as number two, in the narrow-body market duopoly.

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