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Avolon agrees $4 billion deal for 40 Boeing 737 MAX jets

FILE PHOTO: Farnborough International Airshow

By Padraic Halpin

DUBLIN (Reuters) -Global leasing giant Avolon said on Thursday it had committed to ordering 40 Boeing 737 MAX aircraft in a deal worth over $4 billion at current list prices, a boost for the U.S. planemaker as it grapples with fresh delivery issues.

Avolon, the world's third largest aircraft leasing firm, said the new jets are scheduled for delivery from 2027 to 2030 and will increase the overall size of its owned, managed and committed fleet to 870 aircraft.

The deal comes a day after Boeing said it planned to ramp up production of 737 MAX jets during the back half of the year to make up for a slowdown in the second quarter to fix manufacturing issues.

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"Boeing are obviously working through their issues which are well documented. We at our core have confidence in the fundamentals of the (MAX) program and Boeing's capability to deliver these aircraft," Chief Executive Andy Cronin told Reuters in an interview.

Cronin said the new manufacturing issue at Boeing will delay some of its aircraft deliveries but not to the degree where it will require a compensation discussion or fundamentally impact its business.

Before Thursday's transaction, rival Airbus' best-selling A320neo family of jets made up 184 of the 252 jets Avolon had committed to buying.

Cronin confirmed that Avolon understood that Airbus had contacted a "wide number of customers" about impacts to production schedules for next year. Reuters reported on the delivery delays last week.

He said the industry-wide supply chain issues had eased over the past two to three quarters.

"But I think everyone is realistic... We see these challenges persisting through the end of this year and into next year for sure," Cronin said.

The Dublin-based lessor delivered $599 million of lease revenue and net income of $56 million in the first quarter, citing strong demand for aircraft and high levels of leasing activity amid a continued shortage of jets.

(Reporting by Padraic HalpinEditing by Elaine Hardcastle, Kirsten Donovan)