The following is the The development of operating lease business is full of horsepower From Highlights of aircraft leasing industry in 2021 recommended by recordtrend.com. And this article belongs to the classification: Aviation Data.
The situation in 2021 presents challenges to many commercial aviation market sectors, especially operating leasing, that is, leasing aircraft to airline operators without transferring ownership. In the last growth cycle, operating leases continued to provide airline operators with nearly 50% of the global single channel and dual channel passenger fleet. At the end of 2019, just 48% of the approximately 22000 airliners operated or stored by airlines around the world were managed by lessors. About 22 months later, that is, by the end of October 2021, the number of passenger aircraft in service and stored in the world only increased by about 300, and the lease penetration rate increased by 2.2%. Therefore, the lessee’s own aircraft portfolio increased by more than 660. The leasing department finally realized the mythical “50% market share”. This is mainly because since the beginning of 2020, lessors have provided financing for nearly 65% of new aircraft deliveries (including their own orders and after-sales leaseback (PLB), as well as a large number of further purchases (usually near brand-new) of second-hand aircraft through after-sales leaseback. As the aircraft entered the asset portfolio, the number of aircraft retired by the lessee was less than usual. In the same period, only more than 250 aircraft were disassembled, accounting for about 37% of all retired aircraft.
June 2019: peak of the last round of rental bull market
Because the epidemic affected the demand in 2020, the leasing business in the secondary market of second-hand aircraft slowed down for a period of time, and the idle inventory of lessors began to increase. According to cirium fleet data records, from July 2020 to March 2021, the number of single channel and dual channel aircraft available for leasing more than doubled, reaching 423 and 119 respectively in the second quarter of 2021. However, since then, inventories have remained relatively stable. From the 12-month rolling average of new leases, the secondary leasing activities have returned to the pre epidemic level. The number of new leases recorded in June 2021 exceeded any month of the previous growth cycle (except June 2019). Cirium can now regard this month as the peak of the latest rental bull market.
Some of these new lease contracts feature the return of the aircraft to the previous operators under restructuring terms. In order to meet the requirements of the new market paradigm, many operators have also restructured. This undoubtedly puts pressure on the rent. Cirium found that since the outbreak of the epidemic, the current market rent (CMLR) of single channel aircraft has decreased by an average of about 30%. The situation of the latest generation A320 Neo and 737 max series aircraft is slightly better, with an average decline of about 10%. Because of their lower fuel consumption and carbon dioxide emissions, airlines prefer these models in the process of post epidemic recovery. The older generation A320 CEO and 737 ng series aircraft are facing greater competitive pressure due to large supply, resulting in a greater decline in average current market rent (CMLR), usually about 35% or more. Before 2021, most new lease structures have some “hourly” lease terms based on usage. However, as the demand increases, cirium finds that the demand for such terms gradually decreases. In 2022, the market seems to have bottomed out, and the next trend of current market rent (CMLR) may rise, although it is only temporary at the beginning.
Two channel jet: slow recovery
This is not the case with dual channel jets. Cirium found that for some key models, such as 777-300ER and A330-300, the average decline has reached 30% – 40%. As the recovery of the international long-distance market is still slow and the demand for such aircraft is still weak, the lease pressure still exists. Although there are usually fewer dual aisle aircraft with lease ownership, the supply is still relatively high, so there may be more bad news at present before such aircraft begin to recover.
Aercap and GECAS merged
2021 witnessed the largest merger in the field of aircraft leasing. Aercap and GECAS have a lease portfolio of 1018 commercial jets and 1046 turboprop engines at the beginning of 2021. In addition, there is an additional fixed order backlog of 288 and 250 respectively. Although many expected some consolidation in this area, few predicted that the deal in early November would directly merge the two giants. The combined new aercap company has a portfolio of 1971 aircraft and is expected to have a current market value of about US $45 billion, which is twice the size of avolon, the second largest competitor (the portfolio value of about 600 aircraft is more than US $17 billion). However, aercap / GECAS transaction is not the only M & a transaction in 2021. Carlyle aviation’s acquisition of fly leasing in August is the second largest M & a transaction. As aercap adjusts its portfolio strategy and disposes of some non core assets, such as GECAS turboprop aircraft and regional aircraft, there will continue to be M & A activities by 2022.
After discussion, under M & A activities, the lessee really continues to trade assets with leases. However, in 2021, the transaction volume of such activities is usually lower than that in the past few years. In the last three years of the last growth cycle, nearly 400 single aisle aircraft were traded between leasing companies every year. Even in 2020, cirium’s fleet data recorded more than 200 such transactions, although many of them were agreed before the epidemic and usually completed in the first few months of the year. As of September 30, 2021, cirium had recorded only 120 such transactions. Observational evidence shows that market activity is recovering, but for now, the delay in reaching an agreement means that you may not see a real recovery in the market until 2022.
Asset Securitization (ABS) recovery
Finally, there was a relative recovery in the asset securitization (ABS) market in 2021. At the time of writing this article in early November 2021, the lessee has successfully introduced 11 asset securitization (ABS) transactions into the market, covering nearly 300 aircraft. Although some people are worried about the rent collection rate in the existing structure in 2020, the interest in operating leases in the capital market is still very significant. ABS represents an elegant way of aircraft financing or refinancing, otherwise it may be difficult for lessors to sell aircraft in the current market.
In 2021, operating lease is still a dynamic and active industry sector. With the further recovery of transactions in 2022, its prospect remains strong.
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