In this exclusive CAPA interview, Lease Corporation International CEO Crispin Maunder shares his views on emerging markets, how the B747-8 will fare against the A380, and how the A321neo shapes up as a replacement for B757.
Lease Corporation International’s in-service fleet is almost entirely widebodies. What is the reason behind this strategy?
Whilst Lease Corporation International’s (LCI) fleet is currently made up largely of widebodied aircraft, we have always had a long term strategic interest in both wide and narrowbodied aircraft. Each aircraft acquisition is considered on its merits as opportunities arise so inevitably there will be times when one class of aircraft or another dominates the fleet. LCI has ordered 20 Bombardier C Series aircraft, with a further 20 options which when delivered will balance the composition of the fleet.
LCI is indeed a believer in the value of emerging markets, and the opportunities they can herald. However, we do not view South East Asia as an emerging market – Singapore is a key aviation hub which is one of the reasons we have an office there.
Do you see North America being a possible market with impending growth opportunities?
North America continues to be the largest single market for civil aviation and we continue to keep a watchful eye for opportunities in this region.
Do you see the LCC market as a valuable one to pursue?
Yes – there are a number of excellent business models which we watch with interest, particularly as the model is exported to new parts of the world.
Do you think the B747-8 will be more successful as a freighter or passenger aircraft? Is LCI interested in this aircraft?
Certainly the B747-8F is an exciting aircraft and we are confident that it will ultimately be a very successful freighter. The passenger variant has had a disappointing start with only a few airlines signed up so far – however we feel that there is a good rationale for this aircraft which addresses the capacity gap between the larger twins and the A380. However, emotionally, the A380 has now taken on the mantle of the Queen of the Skies in the travelling public’s mind and Boeing will not be able to wrest this back, at least for another generation.
Do you agree with ILFC’s comments that the A321neo could potentially replace the B757? Why or why not?
The B757 was a unique design, offering the operator tremendous versatility in the 1990s and 2000s. In its latter days it offered efficient economics on both short-haul sectors and longer, typically transatlantic, services. Whilst the A321 neo looks like it will be getting closer to this capability, the longer haul market may well be moving on to larger capacity types such as the B787. However I anticipate that the A321neo will be the most successful of the neo range, particularly for the short/medium haul sectors.
Can you comment on the idea of the B787-10 being a candidate to replace the A340-300 or B777-200?
Certainly this looks to be the case, and we are watching this with keen interest.
Do you see consolidation as a big part of the aircraft leasing industry’s future?
We see continuing consolidation in the aircraft leasing sector, as it has in many parts of the aviation industry, but there remains a place for a range of lessors catering to different sub-sections of the airline marketplace. We remain focused on our over-arching strategy of developing a mixed fleet of young, state-of-the-art aircraft.
2009/2010 saw the increased participation of export credit agencies (ECAs) in financing aircraft. What is your take on the current state of the aircraft financing market, the players in it, and the impact of the OECD’s Aviation Sector Understanding (ASU)?
Whilst the new ASU will undoubtedly increase cost of financing, the overall impact may have been somewhat exaggerated, and the ECA’s will still play a major role in financing new deliveries. However what we do need to see as an industry are more players in financing the secondary older aircraft market which is still very sluggish and acts as a brake to the market as a whole. It needs to be emphasised that over the last financial cycle aircraft have performed far better than other asset classes.
Do you see the industry’s recovery leading to an increase in demand for leasing companies?
Yes – as airlines increase their focus their main energies on developing and refining their business models, and gaining market share, they will place more reliance on the operating lease as a means to acquire capacity.