LCI Executive Chairman Crispin Maunder sees demand from Asia, South America, Russia
CAPA first spoke to Lease Corporation International's (LCI) Executive Chairman, Crispin Maunder, back in Apr-2011. In this second interview, Mr Maunder delves deeper into industry issues and shares his views on the long-haul low cost market, regional aircraft models, favoured leasing regions, and the future of mega-lessors. Mr Maunder took up the position of Executive Chairman in Sep-2011, following the appointment of Michael Platt as CEO, effective 01-Jan-2012. LCI has a strong leasing portfolio with a large presence in Asia, and was the first lessor to place an order for aircraft from the C Series family.
Do you see the long-haul, low cost market as an important one to target? Is there a higher risk factor with leasing to long-haul LCCs? Do you think this business model will succeed? Is it one suited for leasing?
This market is certainly one to watch. However, it is a relatively small segment and it remains to be seen whether long-haul LCCs can achieve the economies of scale and differentiation of their short-haul cousins. This segment could be suitable for leasing, but as it’s not yet as established as short-haul LCCs, and therefore it carries a higher risk.
Are regional aircraft on their way out? From our data, you have none in service – is this because it’s not in your strategy, or because you haven’t found an aircraft you believe will be successful in the market?
No, we believe there is very much a future for regional aircraft. They’re not currently part of our fleet strategy, but we continue to look for opportunities in this market segment.*
Boeing forecast that 43% of large aircraft deliveries will go to Asia, which puts Lease Corporation International right on the money – with nearly 80% of your fleet being widebodies, and about 60% of your in-service fleet being placed in Asia. Was this the company’s strategy right from the get-go, or has it been changing? Will widebodies in Asia continue to be a core focus for LCI?
This is very much part of our strategy, and will continue to be a significant focus for LCI. However, we will continue to take a prudent approach to our fleet mix and balance our portfolio with other similar risk-weighted investments from other regions in the world.
Do you find certain regions favour leasing more than others? What characteristics do these regions have?
Regions and airlines that have fast-growing capacity requirements coupled with limited access to capital are generally typical of those who favour leasing. We’re seeing demand for leasing growing in Asia, South America and Russia, the latter increasingly driven by the phase out of older Russian-built aircraft.
What region do you think will show the most growth in aircraft leasing, considering both lessors and their headquarters, and the number of aircraft leased vs owned?
At the moment, we estimate that around 35-40% of the worldwide fleet are on operating leases. We see this growing to 50% over the coming few years.
What aircraft types are better suited to leasing?
Generally, it is liquid aircraft with the broader customer bases. We define these as current production aircraft, which meet the latest environmental regulations and offer the most current levels of operating efficiency, coupled with having good prospects in the secondary market. These currently include the 737NG, A320 family and NEO, and the Boeing 777 and A330 families, and in the future, the CSeries too.
Lessors are surging in size and new orders seem to be announced every week. Are we moving towards the day where there will be more aircraft on lease in the sky than there are owned? What is driving this?
In time, yes, the number of leased aircraft will at least be on a par with the proportion of the fleet that’s owned. Whilst access to financing is the principal driver for this, another significant factor is a growing recognition by airlines that they should be focussing on their product offering and brand rather than aircraft ownership.
Is the end in sight for the mega-lessors?
Not necessarily. However, lessors are essentially asset traders where leasing an aircraft out is the “hold” position, and more money is generally made from aircraft trading than margins on rentals. Whilst the larger lessors may have more opportunities to trade, this doesn’t necessarily translate into an enhanced enterprise value – the pool of willing buyers of large lessors is very limited (as can be seen in the case of RBS).
Read Mr Maunder's first interview here: B747-8 vs. A380, US market and ASU. Lease Corporation International's Crispin Maunder talks to CAPA
*LCI defines regional aircraft as those with less than 100 seats
Lease Corporation International fleet data
|
Airline |
Country |
Aircraft |
Engine |
In Service |
In Storage |
On Order |
Average Age (years) |
|
|---|---|---|---|---|---|---|---|---|
|
1 |
0 |
0 |
4 |
|||||
|
Rolls-Royce Trent |
1 |
0 |
0 |
9 |
||||
|
Rolls-Royce Trent |
6 |
0 |
0 |
1 |
||||
|
CFM International CFM56 |
1 |
0 |
0 |
12 |
||||
|
CFM International CFM56 |
1 |
0 |
0 |
5 |
||||
|
Pratt & Whitney PW4000 |
1 |
0 |
0 |
14 |
||||
|
Boeing 777-200LRF |
General Electric GE90 |
2 |
0 |
0 |
1 |
|||
|
Boeing 777-300ER |
General Electric GE90 |
1 |
0 |
0 |
2 |
|||
|
n/a |
n/a |
CS100 |
PW1000G |
0 |
0 |
3 |
0 |
|
|
n/a |
n/a |
CS300 |
PW1000G |
0 |
0 |
17 |
0 |