Global Aircraft Leasing - Gecas and AerCap dominate the commercial aircraft leasing business in terms of fleet size, each with a portfolio of more than 1,000 aircraft. (Source: Statista)
The proposed $30 billion merger of aircraft leasing giants Gecas and AerCap and the likely consolidation of lessors in the wake of Covid-19 do not appear to worry airlines and aircraft manufacturers, at least not publicly.
Global Aircraft Leasing
"My first observation about lessors is that they stayed strong last year," Airbus Chief Executive Guillaume Faury told analysts during the company's first-quarter earnings conference call. "They have been essential for the industry to continue to develop in a very difficult situation. It depends on the stability of the financial system. There is no financial crisis, and that is very important to us." He acknowledged Faury said that Airbus is considering consolidation. some of the least important. "There are pros and cons in these situations. stressed.
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Willie Walsh, chief executive of the International Air Transport Association, also dismissed concerns about excessive consolidation and the potential risk of anti-competitive behavior in the leasing sector. in a recent briefing on the impact of the pandemic on the global aviation industry. Even the combination of Gecas and Ireland's AerCap — the world's largest aircraft lessor by portfolio value, with a combined fleet of more than 2,000 aircraft and an additional 500 on order — does not account for a large percentage of supply of tenants , he insisted.
"I think in general the rental industry is very competitive," Walsh said. "There are many options for most, if not all, airlines. In fact, it is fair to say that in many cases lessors have been part of the solution to the cash crunch they are facing airlines through 2020 because you see a lot of sales and lease activity.. And in most cases, it's from my personal experience [as former CEO of International Airlines Group] at rates that I consider normal or close to normal. I'm not worried about part of the rental industry at this stage."
According to data from Cirium, the combined fleet resulting from the proposed AerCap-Gecas combination will represent about 16 percent of the global passenger aircraft leasing portfolio and 15 percent by value. With a lessee base of 266 airline customers, the combined entity will provide aircraft to more than a quarter of the world's airlines.
"The lessor market is still not very concentrated and fragmented compared to other industries," said David Yu, a finance professor at New York University in Shanghai and president of China Aviation Valuation Advisors, a focused valuation advisory firm. in aviation in China and Asia. The top 10 aviation lessors control a market share of less than 40 percent, while the concentration of the top 10 in other industries can reach 80 or even 90 percent.
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Yu expects the aircraft leasing segment to see an increase in M&A activity, due in part to Covid. "Over the last 10 years, the average of 10 tenants on average and the minimum size of the amount that can be obtained on the list have increased significantly, and the pandemic will accelerate this trend," he said, pointing to the need for the majority. tenants to renew their rental contracts. .
Lessors support cash-strapped airlines with lease concessions or short-term delivery delays. "One of the main reasons for this is that their banks support them," Yu explained. “It's not about being nice; it's about business ... Who are they going to resell the mortgaged plane to?" So, he added, lenders and banks are reluctant to start repossessing the planes. "But there is a critical point," he said, warning. that many of the portfolio restructuring deals have already started and banks have started to take aircraft from defaulting operators.
Alton Aviation Consultancy identified more than 900 passenger planes operated last year by "high-risk" airlines, defined as operators that carry cash for two months or less and have no government ownership. They acquired most of the 900 aircraft, most of them less than 10 years old, through a lease. "Lenders supported struggling airlines with concessions, others now need a structured plan to deal with the crisis," Alton consultants said. They expect to see a consolidation of the portfolio, of which there are well-capitalized lessors acquiring assets or entire portfolios. small players and investors looking to rationalize their assets or are forced to sell.
SMBC Aviation Capital CEO Peter Barrett recently indicated that the company, one of the world's largest lessors with 496 aircraft owned or managed, is likely to receive offers to join the consolidation as one of the companies with the best capitalization of the sector. "[If there are opportunities] that are of current value and fit our strategy, we will certainly explore them," he told Reuters, adding that he believed the events of the past 18 months "may have accelerated" the consolidation of the sector.
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"Some landlords want to sell because there is no other way, while others want to increase," Yu confirmed. He said some landlords were not officially sold.
According to Yu, aircraft manufacturers should "definitely" heed warnings about overconcentration in the aircraft leasing industry because they will face increasing competition from lessors to place the aircraft to airline customers. but this number becomes larger when the recent increase in buy-to-let transactions is added. 2018-2022. (Graph: Business Wire)
LONDON--( BUSINESS WIRE )--Technavio's latest market research report on global commercial aircraft leasing provides an analysis of the most important trends expected to impact the market's outlook from 2018 to 2022. Technavio defines a trend as a factor that has the potential to affect the market and contribute to its growth or decline.
According to Technavio analysts, the global commercial aircraft leasing market will grow at a CAGR of over 6% during the forecast period. The strong market position of Irish and Chinese landlords is a key factor in the growth of the market.
Aircraft Lease Securitisation
Irish lessors make up the majority of the commercial aircraft leasing market. Over 45% of the leased aircraft market is leased to Irish lessors. Various favorable policies of the country have contributed to the growth of the market. For example, Ireland offers high capital allowance rates and low withholding rates to companies operating within its jurisdiction. This encourages international players to conduct core leasing operations from Ireland. Similarly, in China, the country's rental industry has grown rapidly over the past decade due to regulatory and policy support.
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In this report, Technavio highlights cargo aircraft conversion as one of the main emerging trends driving the global commercial aircraft leasing market:
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The conversion of aircraft to cargo has been growing rapidly in recent times. Many cargo airlines are looking for cargo, as well as delivery companies like Amazon. For example, since November 2017, Cargojet, based in Canada, has purchased a Boeing 767 converted to a propeller. The airline acquired the 767-300BDSF from Cargo Aircraft Management (CAM), the leasing arm of ATSG. On a similar note, Amerijet (an American cargo airline) has also committed to lease three 767-300s converted to propellers from ATSG in 2018.
According to a senior commercial aviation research analyst at Technavio, “Conversions are expected to begin by the end of 2017. The popularity of aircraft conversions, especially cargo ones, is a factor driving market growth. S "expect further efforts by lessors to acquire these aircraft over the forecast period."
Technavio's sample reports are free and contain various report sections, including market size and forecast, drivers, challenges, trends, and more.
This market research report segments the global commercial aircraft leasing market based on leasing type (wet leasing and dry leasing) and key regions (Americas, APAC and EMEA).
Spv Management Services For Aviation Leasing.
APAC held the largest market share in 2017, valued at more than $11 billion, followed by EMEA and the Americas. The APAC market share is expected to increase further during the forecast period.
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