John Plueger: No, you’re right. I mean, the supply/demand invent, we do believe will go on for years. And Boeing is delivering MAXs today. The only question is how many production rate increases and at what pace they’ll be able to increase that rate. As it’s been publicized, the FAA has put a limit on that rate until it is more satisfied. It’s — so we really can’t judge, Ron, when that — that’s anybody’s guess as to when that restriction on production rate might be lifted. But Boeing is delivering MAXs. We’re taking delivery of MAXs that the single-aisle shortage is going to be going on for quite some time.
Steven Hazy: Ron, one other point, the lease rates we’re seeing for new MAX 8s and new A320neos are almost neck and neck. We’re really not seeing a worst lease rate environment for new Max versus an A320. Now obviously, the A321 is a different animal. And then the 737 MAX is between the Dash 8 and the A321 rates. But the Dash 8 rates for new 737s and A320neos they’re almost at the same level.
Ronald Epstein: Got it. Got it. That was actually my next question. So thank you for that.
Steven Hazy: I know, I read your mind.
Ronald Epstein: Yes, you did. It’s quite successful. That was a good one. So the next question, the follow-on from that would be, if this is going to last for a long time, does this open the aperture for more A220s out there or more E2-195s, be it that there’s some lift available there in the more near term?
John Plueger: Yes. I think it does. We’ve been successful in our 220 placements and at the same time, we’re watching how the engine improvements are leading into the gear turbo fan, the 1500 that powers those airplanes. So I think, yes, there is some acceleration on both those aircraft types.
Steven Hazy: Yes. Ron, just to give you an example, if I look back in the last, say, 1.5 years on our A220 placements, for example, in Europe, they are replacing A319s, A320s, 737-700s. So they’re replacing aircraft in that 130 to 180 seat size. In some cases, they’re replacing larger aircraft. Like in ITA, for example, they’re replacing some of their older A320 CEOs with A220s. We have a deal in the Czech Republic, while all their A320s are being replaced by A220s. In Bulgaria, we have 7 A220s replacing a combination of A319s and A320s. So airplane is really catching on. And with the recent orders from Lufthansa, you’ve got really now a very strong customer base here with Delta, JetBlue, Air Canada, in North America. The airplane is catching on. But it is production constrained.
Ronald Epstein: Would you be supportive of a 220 and 500, the kind of mythical stretch of the airplane?
Steven Hazy: What kind of engines are you going to put on it?
Ronald Epstein: You tell me.
John Plueger: I think, Ron, at this point in time, we’re not overly optimistic or favoring an A220-500. We think the — we think that the production of the A220-100 and 300 and the continued maturation of the engine on that airplane is sufficient for most markets these days. There’s one or two airlines that would like it. But frankly, I think with all the strain and production rate pressure that Airbus is under, it’s still got to deliver and certify the A350 freighter and the XLR, these are two big certification programs. Let’s not put another pressure on the development or the supply chain that could take away time and attention or quality from Airbus.
Steven Hazy: And Ron, also, if you look at the infrastructure in Mobile and in Montreal, I just don’t see that Airbus could build 30, 40, 50 of these a month. It just doesn’t appear to be achievable with what’s in place currently.
Ronald Epstein: Got it. Thank you very much.
Operator: Thanks Ron. Our next question comes from the line of Catie O’Brien again with Goldman Sachs. Catie, please go ahead.
Catherine O’Brien: Hi, again thanks so much for the follow up. Just [indiscernible] some puts and takes of the other questions and had one on that spread. You timed the market really nicely in January with that unsecured deal, but you do have some sub-1% maturities, I think, rolling off this year. So guessing we’ll continue to see the average cost of that move higher? And then on the rental side of the equation, as you noted, most of the aircraft are taking delivery of this year would have leases written in 2021, 2022 when we weren’t quite yet in this really strong period, we’re speaking to on lease rates. So I guess what I’m getting at would it follow that we should expect to see net spread perhaps compress a little bit before the tailwinds of the current lease rate environment drive expansion in 2025, 2026. Just any high-level thoughts there would be super helpful. Thanks again for the time.
Gregory Willis: I think it’s really hard to say right now, especially given what’s going on with the Fed and where interest rates are going to go. I think it’s really hard to predict. We do have pretty good visibility of what’s coming on the lease rate side, but we’ve really shied away from giving guidance on what direction our lease spread is going to go.
Steven Hazy: And we do have, what, about a $19 billion book of fixed rate liabilities already and those are not going to change too much. So even if we issue another $500 million or $700 million bond in the 4s or low 5s, it’s not going to change the overall dynamics of our balance sheet.
John Plueger: Catie your estimation of how many Fed rate cuts there will be before the end of the year is probably much better than ours. All I can say is going into the end of 2023, it’s clear that the market had priced in probably too many too aggressive of Fed rate cuts, but we do expect them this year. So again, your guess is as good as ours.
Catherine O’Brien: Yes. I’ll leave that to the people smarter than me in the macro department here. But Okay. Thanks for the color. Thanks guys.
