Sales of new narrowbody commercial airliners continue to dominate the worldwide market, while widebodies and air cargo aircraft are making a comeback. Business is therefore good
not just for the airliner and engine maker; it’s also good
for the lessors. Some lessor portfolio aircraft will support
airline growth, while others are part of re-fleeting efforts.
“Strong passenger traffic, lots of cash looking for
opportunities, particularly Chinese money, and low in-
terest rates all make this part of the aircraft industry as
strong as ever,” Teal Goup VP analysis Richard Aboula-
fia said. “But overcapacity, both in terms of financing
and single-aisle jetliner production rates, remains a con-
Passenger demand, the most important driver of
the leasing business, is forecast to grow 7% in 2018 as
measured in revenue passenger kilometers, according to
Singapore-based BOC Aviation.
“Demand for aircraft operating lessor services is expected to grow in line with this,” BOC managing director and CEO Robert Martin said.
As of June 30, BOC had a fleet of 295 owned and 29
managed aircraft plus orders for another 163 airliners to
be delivered by the end of 2021.
The growth of the leasing business is better viewed
over several years, rather than year-over-year basis. During the 1970s, commercial aircraft leasing represented
less than 0.5% of aircraft financing.
“As of the end of June 2018, the leasing community
financed about 44% of the world’s fleet, which we don’t
expect to change significantly,” Martin noted.
Air Lease Corp. CEO John Plueger believes the continued growth of the commercial leasing market is driven mainly by two factors: a large and growing middle
class in emerging markets, particularly in China and
India, and continued growth of long-haul LCCs.
“These are major reasons we continue to see strong
revenue passenger kilometer growth year after year,”
Plueger said. “I think we are seeing a phenomenon
where global traffic continues to grow strongly, despite
increased interest rates and fuel costs.”
The global aircraft market is relatively stable, split 70%
narrowbody and 30% widebody, lessors note. New aircraft
sales and lease placements are dominated by three market
segments—the re-engined Airbus A320neo and Boeing
737 MAX in the narrowbodies; the Airbus A330neo and
Boeing 787 in the mid-size widebodies; and the former
Airbus’ takeover of the CSeries
program and Boeing’s proposal to
take a 51% stake in Embraer could
have a stabilizing affect on both the
A220 and E2 programs and boost
For Bombardier and Embraer,
It is another reason for lessors—and investors—to
have confidence in the market.
“Overall, the financing market for aircraft is doing
extremely well,” Boeing Capital Corp. president Tim
Myers said. “Aircraft continue to be seen as a valuable
asset class, and, as such, we’re seeing growth in new
markets such as insurance risk capital with entities like
AFIC as well as in the financing of progress payments
and the sub-debt market.”
Investors, who may have participated in real estate or
shipping typically “are coming over to the aircraft side
and that is due primarily to the long-term growth [po-
tential] of the industry,” Myers said.
One area of imbalance that continues to affect US
aircraft manufacturers and first-tier vendors is the moribund state of the US Export-Import Bank (Ex-Im). Restoration of the Ex-Im to its full size and lending capability is not yet a front-burner issue to most lessors because
of the availability of capital. But to Boeing, the absence
of the bank remains a long-term disadvantage.
“There are 80 different export credit agencies around
the globe that support our competitors. Not having that
option, we lose our ability to compete is some global
markets,” Myers said.
But like Boeing and the major lessors, Airbus SVP
financing and guarantees Nigel Taylor is bullish about
the overall landscape. “We have had two major visits to
China and each time we go there, more leasing struc-
“I think we are seeing a phenomenon where
global traffic continues to grow strongly,
despite increased interest rates and fuel costs.”
John Plueger, Air Lease Corp.