Jetrader - Spring 2014 - 15

It is fair to say that the remainder of this decade is crammed with
aircraft production and deliveries of the most modern types. However, will
this trend of developing new technology to combat rising fuel costs hinder
the secondary market and lease rates?
Continued from page 13
lease terms from new of around eight to
12 years, single-aisle or twin-aisle respectively. For secondary market aircraft and
other major assets such as engines, this
has also created a problem.
Perhaps the most concerning is the continuing pressure to make the transition from
old to new, which leads to decreased life
spans for certain aircraft. Although this is
often discussed, examining aircraft fleets
ultimately reveals an argument against this,
although the current single-aisle aircraft are
continually targeted. Take, for example, the
Airbus A320 in 2013 where the average fleet
age is 8.25 years and the average retirement
age stands at 19.2 years. Forecasters will
be scrutinizing the younger aircraft in the
entire fleet because the future introduction
of the A320neo, coupled with the 737 MAX
and other players due for service entry over
the coming five years. The belief is that
these impending service entries will put
pressure on the retirement ages of current
single-aisle aircraft to the point where any
A320 or 737 NG is vulnerable, similar to a
scenario experienced in the 737 Classic market where ongoing fleet replenishment takes
place. Even so, there is concern. Whilst
lease rates have largely been suppressed,
the worries about aircraft life and further
placement after the first operator lease end
will question whether lease rates need to
move north to improve margins amidst the
risk of future placement.
Going forward, some have suggested
that original equipment manufacturers
(OEMs) will have to fill some of this gap,
particularly for newer aircraft through their
respective leasing arms. Boeing Capital
Corporation has already seen significant
involvement over the past year following years of many successful placements
of aircraft that required Boeing support;
the past placement of 717-200 aircraft to
Hawaiian Airlines is notable. Furthermore,
for manufacturers, this is a model that can
have significant benefits, especially if the
asset is a solid performer, whilst prizing
orders and securing further production.

Comparing Boeing and Airbus support, this
is definitely an avenue where eliminating
the snags of securing finance could be crucial in claiming orders in a market where
it is hard to choose between, and Boeing
has been delving into it much more. In the

short-to-medium term, expect an increase
in operating leases coupled with enhancing
regulations, such as Basel III, The ASU and
the continued support and implementation
of The Cape Town Treaty, more newcomers
to EETC-type financing.

Aircraft being retired?
Assets coming off lease?
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ACCREDITED

AIRLINE SUPPLIERS
A S S O C I A T I O N

435 Investment Court, Verona, WI 53593 * (608) 848-8100 * www.contrail.com

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Jetrader * Spring 2014 15 PM
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Jetrader - Spring 2014

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