What are the main causes and trends of delivery delays and cancellations in the aircraft leasing industry?

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Aircraft delivery delays and cancellations are a common challenge in the aircraft leasing industry, affecting both lessors and lessees. In this article, we will explore the main causes and trends of these issues, and how they impact the market dynamics and the contractual relationships between the parties involved.

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????Vitalii Rusanov????????

Aircraft Sales and Lease | International and Government relations | Aerospace & Defence Cluster | UCCI | LION 21K+
Nimisha Jha

Director - Aircraft Leasing & Sales | Eagle Copters Ltd.
Cmdr (Dr.?) Reji Kurien Thomas , FRSA, MLE?

I Empower Sectors as a Global Tech & Business Transformation Leader| Stephen Hawking Award| Harvard Leader | UK House…

1 What are delivery delays and cancellations?

Delivery delays and cancellations are situations where an aircraft that is expected to be delivered by a manufacturer to a lessor or a lessee is postponed or called off for various reasons. These can range from technical issues, quality problems, regulatory hurdles, supply chain disruptions, financial difficulties, or market changes. Delivery delays and cancellations can have significant consequences for both the lessor and the lessee, as they affect their cash flow, revenue, operational plans, and fleet strategy.

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????Vitalii Rusanov????????

Aircraft Sales and Lease | International and Government relations | Aerospace & Defence Cluster | UCCI | LION 21K+
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When you are trying to lease an aircraft, there can be delays. Many factors influence this. For example, one of my experiences, recently we signed a LOI with one large leasing company for the supply of B737-800BCF. We worked on the document for many weeks. And already after signing, it turned out that the owner does not agree to the registration of the aircraft in the jurisdiction of this country. Check everything in advance!

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2 What are the main causes of delivery delays and cancellations?

Delivery delays and cancellations can be attributed to a variety of factors, such as production bottlenecks, quality issues, supply chain disruptions, financial difficulties, and market changes. For instance, manufacturers may struggle to meet the demand for certain aircraft models or encounter defects in the design, materials, or components. Additionally, external suppliers may experience delays or shortages in the parts and services they provide. Moreover, manufacturers, lessors, or lessees may face liquidity or solvency problems or changes in the demand and supply of the aircraft market. All of these can lead to renegotiations, defaults, or cancellations of delivery contracts.

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Nimisha Jha

Director - Aircraft Leasing & Sales | Eagle Copters Ltd.
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One major factor contributing to supply chain disruption, leading to delivery delays, has been acute shortage of technically trained manpower, especially in the MRO sector. As demand for MRO services rebounds, the industry has had to rapidly scale up production and maintenance operations with fewer employees. To address this issue, operators are implementing measures such as educational outreach, subsidized technical training, improving the work environment, recruiting talent from other industries, and utilising internet-based recruitment platforms. Additionally, the MRO industry faces challenges in material cost management, as material costs are expected to experience inflation of approximately 6.7% annually over the next couple of years

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3 What are the main trends of delivery delays and cancellations?

The aircraft leasing industry is shaped by cyclical and structural factors that have an impact on delivery delays and cancellations. The COVID-19 pandemic has caused a sharp decline in passenger traffic, revenue, and capacity, resulting in many airlines deferring, reducing, or canceling their aircraft orders. Technology and innovation have created new opportunities and challenges for lessors and lessees, while changes in the regulatory and legal environment can affect the certification, compliance, or cost of the aircraft. Additionally, disputes or conflicts between parties can lead to arbitration, litigation, or termination of delivery contracts.

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Nimisha Jha

Director - Aircraft Leasing & Sales | Eagle Copters Ltd.
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The following trends also continue to cause an impact on aircraft delivery delays and cancellations : 1. Geopolitical Factors: Trade disputes, international tensions, and export/import restrictions can disrupt aircraft deliveries, especially if they impact cross-border trade. 2. Sustainability and ESG Considerations: Airlines increasingly consider environmental, social, and governance (ESG) factors in their operations. This may influence their decisions regarding the types of aircraft they order and their delivery schedules 3. Credit and Financing Issues: Difficulty securing financing for new aircraft can result in delivery delays, as airlines may need more time to secure the necessary funding.

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4 How do delivery delays and cancellations impact the market dynamics?

The aircraft leasing industry is highly impacted by delivery delays and cancellations, which can affect the supply and demand, pricing and valuation, and competition and consolidation of the sector. For instance, delivery delays and cancellations can alter the balance of supply and demand for certain aircraft types or models, impacting availability, utilization, lease rates, and residual values. It can also affect the pricing and valuation of the aircraft, as they reflect the expectations and risks of the lessors and lessees. Furthermore, delivery delays can create competitive advantages or disadvantages for certain lessors or lessees, while delivery cancellations can create opportunities or threats for certain lessors or lessees. Ultimately, these events can affect the market share and profitability of the players involved.

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Collin Meyer

Sales Director @ Trust One Components
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Delivery delays and cancellations in the aircraft leasing industry have profound implications on market dynamics, influencing various facets such as supply and demand, pricing and valuation, and competition and consolidation. Delays and cancellations can disrupt the expected timeline for new aircraft entering the market, leading to imbalances in supply and demand. The scarcity of certain aircraft types or models due to delays can create a higher demand for available units, potentially driving up lease rates.

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5 How do delivery delays and cancellations affect the contractual relationships?

Delivery delays and cancellations can have a considerable impact on the contractual relationships between the manufacturers, lessors, and lessees, as they involve various obligations, rights, and remedies of the parties involved. For instance, obligations may be subject to change, waiver, or enforcement depending on the circumstances and contractual provisions; rights may be subject to exercise, negotiation, or arbitration; and remedies may be subject to availability, limitation, or exclusion. Additionally, delivery delays and cancellations can affect payment terms, delivery dates, aircraft specifications, performance guarantees, acceptance or rejection of the aircraft, compensation or penalty for the delay or cancellation, termination or continuation of the contract, liquidated damages, specific performance, injunctions, and rescission of the contract.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Cmdr (Dr.?) Reji Kurien Thomas , FRSA, MLE?

I Empower Sectors as a Global Tech & Business Transformation Leader| Stephen Hawking Award| Harvard Leader | UK House of Lord's Awardee | Fellow Royal Society | CyberSec I 200x LinkedIn Top Voice | CCISO CISM
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Reorganising the order book to accommodate shifting lessee priorities or cancellations can affect the production sequence, potentially delaying delivery timelines. I observed a manufacturer reshuffle its production sequence to prioritise orders for lessees facing high seasonal demand. This change resulted in the postponement of other orders, leading to delays that required renegotiation of leasing terms to satisfy the impacted lessees. New aircraft models can face certification challenges due to new technology or stricter regulatory scrutiny, leading to unanticipated delivery delays. During the certification process for a new wide-body aircraft model, stricter safety regulations required additional engineering modifications.

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What are the main causes and trends of delivery delays and cancellations in the aircraft leasing industry?

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1 What are delivery delays and cancellations?

2 What are the main causes of delivery delays and cancellations?

3 What are the main trends of delivery delays and cancellations?

4 How do delivery delays and cancellations impact the market dynamics?

5 How do delivery delays and cancellations affect the contractual relationships?

6 Here’s what else to consider

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