By Tim Hepher
DUBLIN (Reuters) – AerCap, the world’s largest aircraft leasing company, said on Monday that potential new trade tariffs floated by U.S. President-elect Donald Trump could hit supply chains and hinder planemaker Boeing (NYSE:BA)’s efforts to restore much-needed cash.
AerCap CEO Aengus Kelly said the biggest priority for Boeing and U.S. regulators should be to streamline certification of the 737 MAX 7 and 737 MAX 10 jets as well as the long-delayed 777X.
Trump has pledged tariffs of up to 60% on global goods to protect U.S. workers in a move that experts say would probably draw retaliation from Europe and elsewhere.
“We’ll have to wait and see … what’s in the detail. A lot of parts that are supplied to Boeing, Airbus and Embraer aircraft are common,” Kelly told Reuters on the sidelines of the Airline Economics conference.
“What would you do with an engine that’s partly made in France? Are you going to put a tariff of 20% on that engine? Is that counterproductive?” Kelly added.
Boeing’s largest engine supplier is CFM International, which is owned by GE Aerospace and France’s Safran (EPA:SAF).
“Boeing needs cash. It has to convert inventory into cash. Tariffs don’t help that,” Kelly said. “How do you get cash? You deliver airplanes. To deliver an airplane, it must be certified. If it’s not certified, there’s no chance of getting cash. That is what I would say should be the number one focus,” he added.
Boeing had no immediate comment.
Asked if Boeing had turned the corner under new CEO Kelly Ortberg after a protracted corporate crisis, the AerCap CEO said: “I certainly hope so. I think Kelly is doing a good job.”
There is limited visibility on Boeing deliveries this year but it is too early to say whether more jets will have to be pushed to 2026, he said. AerCap recently said it had been forced to delay some Boeing and Airbus jets due to supply chain problems.
Kelly was speaking as AerCap marks 50 years since the late entrepreneur Tony Ryan brought the fledgling jet leasing business to Ireland, which is now home to a global industry which makes up half of the world’s fleet of aircraft.
AerCap was born from the bad assets left when Ryan’s Guinness Peat Aviation collapsed, while the crown jewels were scooped up by GE to create what became leasing giant GECAS.
Under Kelly, AerCap has expanded by buying the biggest competitor to GECAS, Los Angeles-based ILFC, and finally GECAS itself to bring the Irish leasing industry full circle under a new dominant player.
OLDER JETS
Kelly, who is among a number of industry leaders predicting tight supplies throughout the decade, said supply constraints were “a little bit better in some aspects, but they’ll be here for years to come”.
A switch to new fuel-saving jets has been slowed by scarce parts, forcing carriers to fly older planes for longer. Kelly said he saw no signs of a let-up in demand for older planes.
He downplayed any expectations that lessors could quickly re-enter Russia in the event of a Ukraine ceasefire. Stressing that he hoped for a peaceful outcome, he added: “Even if you wanted to, I don’t think the insurance market will go in there”.
Lessors have clashed with Moscow and their own insurers over jets confiscated in Russia after the invasion of Ukraine.
Perceived geopolitical risk is also a factor in China, where AerCap and others have reduced their exposure, driven also by growing competition for domestic business from local lessors.
“You have to be conscious of it for sure,” Kelly said, adding China would remain a significant part of AerCap activity.
