In contrast to the sluggish global economy, the global commercial Aircraft Leasing Market has experienced a strong growth during 2010-11 and looks to expand more in coming future. As the Aviation Industry adapts to soaring demand for air travel, a wealth of opportunities for expansion of the commercial aircraft leasing market looks certain. In emerging and mature markets, upgrades and expansion of airports to accommodate soaring demand for air travel will provide new sources of demand from airlines keen to expand their fleets. In Asia Pacific mainly in china and the Middle East, ambitious construction plans for new international and domestic airports will provide a wealth of new opportunities for commercial aircraft lessors in these new commercial Aviation Hubs.
Sustained increase in travel, Rapid evolution of LCCs, Growing demand for aircrafts in china and Middle East and General shift to leasing is the major growth drivers for the Aircraft Leasing Industry. Associated with these the current European sovereign debt crisis, and its expected impacts on European banks, gives new impetus to aircraft investment opportunities for many investors.
In 2009, the total fleet of aircraft held by leasing companies accounted for more than 31% of the world’s active fleet. The aircraft fleet of all leasing companies grew from 5,757 aircraft in 2008 to 6,180 aircraft in 2009. However, the value of all the aircraft held by the leasing companies fell from $164.18bn in 2008 to $158.87bn in 2009. The global commercial aircraft leasing market currently constitutes 6,864 aircraft with a market value of $233bn as calculated in 2011.
The growing demand from China and the Middle East will keep the industry buoyant over the next 4-5 years. A Frost and Sullivan analyst said: “Banks from China and sovereign wealth funds from the Middle East have shown interest in purchasing the aircraft of leasing companies. The assets of aircraft lessors are likely to stimulate interest among asset management companies that are scouting around for stable incomes over the long term.” Overall fleet belonging to leasing firms grew by 7.34% and the number is expected to increase at a compounded annual growth rate of 5.76% from 2010 to 2015. The narrow-body aircraft sector is expected to grow at a faster rate than the other two segments like Wide-Body Aircraft and Regional jets during the forecast period. A statement from Frost and Sullivan said: “As airlines are finding it difficult to finance fleet expansion due to scarcity of funds, there is a growing trend among airlines for leasing an aircraft rather than buying it. The penetration of the Aircraft leasing industry is expected to increase from the current levels of 31.53 %.”
But with a slump in traffic, the number of airlines declaring bankruptcy and defaulting lease payments are becoming a nightmare for Aircraft Leasing Companies. The number of parked aircraft has increased, which has led to a fall in the market value of aircrafts and lease rentals. Better utilization of fleet and stronger deals with good underlying credit are likely to be the main factors for sustaining profitability in the long term.