Aircraft Leasing Market 2020-2026 | Growing at a CAGR of 7.5%

An aircraft lease is a contract between three parties: A lender (providing funds to the leasing company), the leasing company (owner of the aircraft) and the lessor (the operator). For the leasing company, its cost of capital must at least be covered by the rent it receives from the lessor.

The simplest way is to lease an aircraft from a leasing company. A contract is established between the lessee and the lessor over a tenor and at an agreed monthly rental fee. The aircraft remains on the lessor’s balance sheet, can be depreciated, and is generally paid by debt. The asset does not appear on the airline’s balance sheet. Lessors typically make monthly or quarterly lease payments. At the end of the contract – which is typically four to eight years – the airline returns the aircraft to the leasing company. This method offers the most flexibility to fleet adjustment for the airline. The possibility of adding a call option exists.

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The leading companies of Aircraft Leasing are AerCap, Air Lease Corporation, BOC Aviation, GECAS, BBAM LLC, CIT Commercial Air, Aviation Capital Group, Boeing Capital Corporation, Saab aircraft leasing, International lease finance corporation, Dubai aerospace enterprise, Chapman freeborn, Textron financial, General electric capital aviation services (Gecas), Nordic aviation capital, Avolon, Smbc aviation capital, Fly Leasing Limited and other prominent players.

Commercial aircraft lease is a legal arrangement availed to airlines and other aircraft operators offered by leasing companies. Its main advantage is it provides flexibility to lessen the financial burden on the airline's balance sheet while procuring new aircraft or adjust capacity over shorter terms. Because of the relatively low default rate and stable returns in an otherwise low-yield environment, attractive opportunities emerge in aviation financing. Cash is flowing into this sector as the leasing industry provides solutions for the sovereign wealth funds, pension funds, banks, or private equity to allocate large amounts of capital efficiency and safely.

Although the economic reasons for leases are common to all businesses in all industries, there are specific business purposes for why an airline may choose wet leasing. The main reason to lease is capacity. By making use of wet-leasing, airlines are capable of increasing capacity temporarily. This is a big advantage, particularly for commercial airlines, but charter jet operators may also find themselves in need of extra capacity. Usually, the leased aircraft can be used for the very short notice, sometimes as little as three hours, to cover short or medium transportation needs. This ensures smooth operations during peak traffic periods and can help to cope with planned or unanticipated maintenance checks or to test new routes.

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The Asia-Pacific region has been and will continue to be the most dynamic region in the world. The economic development in India and China leads to the rapid development of a middle class that is the primary driver of air traffic growth. And with an increasing population in the region, the market is expected to grow significantly during the forecast period.

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