Michael Doran speaks to James Bennett, Director Sales & Marketing, as he examines the link between profit and power within the complex engine leasing market.
When 2019 began, the aviation landscape was looking positive with airline profits maintaining their highs, aircraft OEMs sitting on years of orders and maintenance suppliers scrambling to meet demand.
The rosy picture changed dramatically with the grounding of the 737 MAX and while there have been many losers there is also an unexpected beneficiary, the engine leasing market.
As a result of having around 800 MAX aircraft sitting on the ground, airlines have kept older variants of the 737 and A320 flying, powered by engines that were expected to be retired but are now in hot demand.
With engine overhauls costing upwards of US$4 million, there has not been much incentive to invest in legacy engines thought to be heading towards retirement. This issue now is finding engines that have been maintained with operational life ahead of them and this effectively pushing values up.
Commenting on the current market conditions, James Bennett, Director Sales & Marketing at AerFin, provides his input:
"The engine leasing market is showing no signs of slowing, with a demand for some 5,000 units in the next 10 years. Certain product lines have seen a higher demand than others, which is reflected in their higher lease rates. That said, it's become an extremely competitive environment exacerbated by the limited retirements and new engine introduction issues.
There's a high demand for the CF34-8E short-term lease market. In a market that two years ago saw no lease demand now we have multiple engines on lease with several global operators. This is driven by MRO capacity and turnaround time constraints, which necessitate operators to consider short-term leasing to cover prolonged maintenance events."
As the Boeing 737 MAX crisis continues to impact all aspects of the commercial aviation industry, AerFin is finding that airlines are extending the operation of existing aircraft to ensure capacity is maintained. "We're seeing a strong demand for short-term leasing, particularly for regional and narrowbody engines. Globally, the MRO market is facing significant engine MRO capacity challenges, due to the recent surge in shop visits."
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