March 14, 2018 / 9:10 AM / 3 months ago

Jet delivery delays over engines a 'frustration', BOC Aviation says as FY profit rises

SINGAPORE (Reuters) - Engine problems that have postponed deliveries of the latest generation of Airbus (AIR.PA) and Boeing (BA.N) jets are a frustration for BOC Aviation (2588.HK), the head of Asia’s second-biggest aircraft lessor said on Wednesday.

FILE PHOTO: The company logo of BOC Aviation is displayed during a news conference ahead of its listing in Hong Kong, China May 18, 2016. REUTERS/Bobby Yip/File Photo

The company reported better-than-expected record net profit of $587 million for the 12 months ending Dec. 31, up from $418 million a year ago, as it grew its fleet by 74 jets to 318.

However, CEO Robert Martin said growth would have been higher if engine delays had not led to late deliveries.

BOC Aviation is forecasting similar growth this year, with 53 deliveries arranged and the rest expected to come from sale-and-leaseback deals with airlines, he said.

“There is one question mark, and I’ll be frank, and that is just to do with will Airbus and Boeing deliver our aircraft on time because of the engine issues,” Martin told Reuters in a phone interview.

CFM International, a joint venture between General Electric (GE.N) and Safran SA (SAF.PA), Rolls-Royce Holdings PLC (RR.L) and United Technologies Corp’s (UTX.N) Pratt & Whitney arm have all had teething issues with the latest generation of fuel-efficient engines for jets like the A320neo, A350, the Boeing 787 and the Boeing 737 MAX.

Martin said A320neo and 737 MAX jets with CFM engines were being delivered five to six weeks behind schedule, while Pratt & Whitney engined A320neos were three to four months behind schedule. Some A350s with Rolls-Royce engines that BOC had expected to receive last year were being delivered this year, he said.

“What it means is for those aircraft delayed you lose the revenue from the original delivery date to when they are actually delivered,” Martin said. “That is a frustration.”

All of the engine makers have said they are working to fix the problems and minimize delivery disruptions.

Asian lessors are investing billions of dollars to expand in a sector that offers long-term and dollar-based revenue, underscoring the region’s importance to an industry that makes up about 40 percent of the world’s airline fleet.

BOC Aviation’s net lease yield rose to 8.4 percent from 8.2 percent the prior year.

The majority of the company’s aircraft are deployed with Asian airlines, with Cathay Pacific Airways Ltd (0293.HK) and Indonesia’s Lion Air Group among its main customers.

Reporting by Jamie Freed; Editing by Subhranshu Sahu and Jon Boyle

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