Azorra: ‘Aircraft lease extensions now at historic levels’
In an era of expanding global travel demand and evolving airline fleet strategies, the aircraft leasing industry is experiencing unprecedented growth.
Writing for FINN, Ron Baur, president of Azorra – an aircraft lessor that provides leasing, financing, fleet transition and asset management solutions to aircraft investors, financiers, and airline operators worldwide, with a focus on regional jets – reflects on the current state of play within the leasing market, and what the order backlogs mean for lessors globally.
“A combination of booming travel demand, limited supply of jets at OEMs and entry-into-service (EIS) issues has led to an increasing number of airlines looking towards lessors to help grow capacity fast. Aircraft lessors are experiencing new demand, with lease extensions at historic levels,” writes Baur.
“While the OEMs are making progress in getting on top of supply chain quality issues, the recent events have illustrated the value of having a diverse fleet. From Azorra’s perspective, our fleet includes a range of current generation aircraft such as Embraer E1s, Airbus A330s and Boeing 777s, as well as an orderbook for new generation aircraft such as the Airbus A220 and Embraer E2. Diversifying your risk is what’s important.
“While there is a trend towards new generation aircraft, with airlines seeking more fuel-efficient jets, there is also a risk of uncertainty that comes with operating a new fleet of aircraft that use the latest and greatest technology.
“While developing new technology aircraft provides significant benefits, this can also lead to delivery delays or increased downtime, which can have a significant impact on airline’s operations. Some lessors have historically focused on only all new aircraft whereas some other lessors specialise in end-of-life aircraft.
“As a lessor, you ideally want to have both – a good balance between current and new generation aircraft – to ensure you spread the risk and cost benefits.
“It’s similar to how we look at lessee risk. If we leased everything to top tier airlines, we would sleep at night, but our investors and shareholders would not be happy with the low returns, and if we leased all assets to a start-up operator in emerging markets, we would have superior returns but not sleep well at night.”
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