Boeing NYSE:BA, a U.S. aircraft manufacturer, and Airbus, a European aircraft manufacturer, are competing to secure a potentially major narrowbody jet order from SMBC Aviation Capital, an aircraft leasing and financing company. Boeing is reportedly in advanced discussions for roughly 100 of its 737 Max aircraft, while Airbus (EADSY) is pursuing a possible A320neo commitment that could be similar in size. The companies are working to advance the negotiations ahead of the Farnborough Air Show near London, which begins early next week. However, the discussions remain ongoing, meaning the final order sizes and the timing of any announcements could still change.
A large agreement with SMBC could matter for both manufacturers because aircraft leasing companies have become increasingly important customers for the commercial aviation industry. Lessors allow airlines to modernize their fleets without purchasing expensive aircraft outright, while narrowbody aircraft such as the 737 Max and A320neo remain among the most widely flown and liquid aircraft in the leasing market. SMBC strengthened its position as the world's second-largest aircraft lessor behind AerCap after completing its acquisition of Air Lease Corp. this year. Following the transaction, SMBC said in May that it had approximately 430 Boeing and Airbus aircraft in its backlog.
Avolon Holdings, a Dublin-based aircraft leasing company, is also discussing a large aircraft order, although a deal may not be completed before the Farnborough event. Other possible transactions at the show could involve Flynas, a Saudi low-cost airline, Condor Flugdienst, a German airline, and Riyadh Air, according to earlier reporting. Investors may view the event as an opportunity for Boeing to become more active in aircraft deals after the company sat out last year's air show following an aircraft accident shortly before the gathering. At the same time, a sizeable order for Airbus could reinforce commercial demand for the A320neo as the two manufacturers continue competing for commitments in the important single-aisle aircraft market.