GE Capital Aviation Services Limited (GECAS) recently announced plans to lease five new Airbus A320 aircraft and two new A321 aircraft to Juneyao Airlines. At last count, GECAS was the world’s top owner of airliners with 1,732 planes.
According to the Economist, airlines worldwide are increasingly opting to lease aircraft for a few years at a time, avoiding the risk of a slump in the plane’s second-hand value. An estimated one-third of the world’s aircraft are leased, up from less than five percent in 1980.
Airlines, particularly in the West, may lack cash or cheap credit options to purchase new aircraft. As an alternative, some airlines are shopping for buyers to sell part of their existing fleet to so the airline can rent it back from the buyer. Meanwhile, more lessors are vying for a share of the market. Alafco, a Kuwaiti lessor, reportedly ordered 50 new Airbus A320neos last year, to the tune of about $4.6 billion.
The Royal Bank of Scotland’s Peter Barrett observed that aviation is becoming more like the hotel business: one entity owns the assets while another operates them. The big difference that makes aircraft leasing so much more attractive for the lessor is that if the lessee defaults, the lessor can take his property back fairly quickly and easily. Regaining possession of real estate can be a different matter entirely.
As for the GECAS-Juneyao deal, GECAS delivered the first two A320 aircraft to Juneyao Airlines in September and October. The remaining A320s are scheduled for delivery in 2013 and the two A321s are scheduled for delivery in 2014.
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