Key lessors cast an eye over aviation trends so far in 2011
CAPA wraps up the past two months in the leasing industry by looking at the trends and influences through the eyes of the industry's top executives.
C Series and COMAC 919
Lessors returned shy results about the C Series and COMAC 919. Aside from GECAS, which has already signed an MOU to purchase up to 10 of the aircraft, other lessors are taking a "wait and see" approach. Mark Lapidus from Doric Asset Finance stated both aircraft are “not for us at this time” but does believe the C Series can have an influence if it overcomes the various technical challenges it is facing. Anders Hebrand, President and COO of SkyWorks Leasing, stated the C Series and COMAC 919 could become serious contenders, and CIT’s Jeff Knittel, and Avolon’s Domhnal Slattery, both agree the models have the backing and characteristics to be successful. Mr Slattery stated he is interested in the C Series 300 but “needs to see more aircraft orders being realised in the near term” before his pen hits paper.
Jackson Square Aviation CEO Rich Wiley stated the aircraft are not core to its business, and that the company does not usually comment on those OEMs.
B747-8 will make a better freighter than passenger jet
Almost all of the interviewees believe the B747-8 will be more successful as a freighter than a passenger aircraft. Lease Corporation International’s Crispin Maunder stated the aircraft has had a disappointing start to its passenger variation. Both he and Mr Hebrand agree that at this stage, the A380 looks like it could be the better option.
Doric Asset Finance is very interested in the B747-8 as a freighter for the same reason the company is bullish on the A380. The MD and founder even believes the B747-8 may not have a competitor for a long time to come.
It comes as no surprise that all lessors have a keen interest in the Asia Pacific region. Mr Slattery told CAPA his company expects to allocate 50% of all their money to the Asia Pacific market, having 36.4% of its current fleet with Asia Pacific carriers. Pembroke’s Kieran Corr agrees and states Asia is a key growth area for his company. Pembroke has 21 aircraft leased to Asia Pacific carriers. Other markets of value include the Middle East, South America while North America will be watched carefully by Mr Maunder of LCI.
What will replace the B757?
Mr Hebrand believes the B737-900ER and A321neo have the characteristics to fill the gap after the B757. Mr Maunder stated the B757 was a unique design and that it has been offering efficient economics on short and long-haul services. While he believes the A321neo 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”. Mr Maunder anticipates the A321neo will be the most successful of the neo range, particularly on the short and medium-haul sectors.
B787-10 a replacement for A340-300 or B777-200?
No surprises the Managing Director of Doric Asset Finance, which currently leases 10 A380s, believes the A380 will make a better replacement of the two aircraft and gives the example of Air France’s replacement on the New York route.
“It’s hard to tell about the B787-10 – we are still some years away from seeing it. I think the B787 will be a great aircraft, once Boeing irons out all the issues – and I do not know if that starts with MSN 50 or MSN 100, but the B787-10 is a great replacement for the B767. It feels that one should be replacing A340-300 or B777-200 with A350 or B777-300ER, otherwise one is downsizing his business – after all aviation is growing by 5% every year,” Mr Lapidus said.
Mr Maunder however does think the B787-10 is a good replacement for the A340-300 and B777-200. LCI is “watching this with keen interest”.
While not all of our interviewees lease to low-cost carriers, the resounding message is that LCCs are valuable to lessors. Mr Knittel describes LCCs as valuable, but riskier, and Mr Corr calls the market resilient.
One point our interviewees didn’t seem to agree on was consolidation in the leasing industry. Mr Lapidus believes that if it has not happened already, it is unlikely to happen, except perhaps a little more fragmentation from the mega-lessors such as ILFC and GECAS. On the other hand, Mr Hebrand believes consolidation is likely but notes business models between new and existing lessors are “vastly” different. Mr Corr was a little more vague and simply stated that consolidation has been limited over the years and that most expansion has been achieved through organic growth by the larger lessors as opposed to consolidation with other parties. He expects this trend will continue.