Crashing market: plane-leasing sector flies into a world of trouble
Many firms that provide jets to carriers in rental deals won’t survive as Covid-19 kills off business, experts say
Boarding an airliner before Covid-19 halted mass air travel, most people gave little thought to who owned the aircraft they were about to fly on. Most would have assumed it was the airline they had booked their tickets with. In fact, there was almost a 50-50 chance it wasn’t.
A $300bn (R5.5-trillion) leasing industry has sprung up over the past half-century which has allowed airlines to avoid the capital costs of buying aircraft. Instead, aircraft leasing companies (ALCs) have been stumping up the huge purchase prices of new jets, then agreeing rental contracts with airlines typically lasting 10 to 12 years.
In 1970, ALCs represented a tiny fraction of global aircraft ownership, but this has risen to a shade under 50% of the 27,000 airliners operating globally today. With best-selling single-aisle jets such as Airbus’s A320 and Boeing’s 737 having list prices of $100m each, it is easy to see why airlines don’t want to burden their balance sheets with such big purchases...