With demand for air travel booming at the moment, let’s take a look at the aircraft lessor landscape in 2024 with company Stratos.
To determine this, AviationSource sat down with the Commercial Director of Stratos, Jamie Carter, to explore this further.
Without further ado, let’s get into it…
The Overall Assessment of The Aircraft Lessor Landscape By Stratos…
This interview aims to assess where the aircraft lessor landscape is right now in 2024. Here goes.
Supply Chain Issues…
Supply Chain issues have been a big theme of 2024 in the aviation industry.
We asked Carter at Stratos whether they have seen an increased demand in leasing activity as a result of this.
“It’s not always easy to determine, but I would say it has an effect that the OEM supply sort of troubles have had an effect”.
“However, whilst that has been happening, we have also been coming out of COVID, and they have been needing the capacity to deal with demand, so they come into the market looking for aircraft”.
“I would say the majority are just looking for capacity anyway. It’s definitely had an effect, but it’s probably not the main driver for a lot of airlines looking for capacity at the moment”.
“We aren’t as affected because we don’t have any new aircraft orders at the moment. We talk to OEMs regularly, so we obviously understand the difficulties at the moment”.
“I think what is interesting is that it isn’t just OEMs struggling with supply chain issues, but MROs as well”.
“So if you’re buying kits and parts and modification packages from the OEMs, those have been delayed and are taking longer”.
“We are seeing MROs struggling both with manpower and with parts.”
“On both sides, we are seeing longer lead times to get work done, so there is a knock on effect there”.
“What we need right now is more manpower. This is because of the amount of downsizing that took place during COVID”.
“Therefore, it’s been hard for a lot of companies to get back to where they were before. So that’s a main driver or one of the main drivers”.
The Positive Impact Sale & Leaseback Has on Airlines…
One term you may hear from airlines and lessors is the term Sale & Leaseback. This is when an airline sells an aircraft to a lessor or asset management and they lease it back off of them.
As Carter at Stratos explains, this area of the market has been a big part of OEM success over the last 15 years.
“Sale and Leaseback has been key for a lot of operators for at least 15 years. It’s been a very strong market”.
“It is something that airlines with a decent order book have been very keen to tap into.”
“There’s lots and lots of investors as well as lessors who are very keen to bid. The market is as competitive as it ever was to be honest”.
“Obviously there’s benefits to sale & leasebacks. They’re 100% financing effectively so it does free up cash potentially for airlines to do other things with that cash”.
Sustainability As An Aircraft Lessor…
Sustainability and Net-Zero by 2050 continues to be a hot topic in the aviation industry.
We challenged Jamie Carter at Stratos and asked him to lay out how they have been approaching this target.
“On the aircraft side, we manage a number of newer generation aircraft, like the A320neo, A330neo, A350, 787 and the 737 MAX. “
“What we expect going forward is that we have a bigger and bigger percentage of those aircraft because they’re the most fuel efficient in their classes and in the medium term, airlines will be switching over to”.
“What’s interesting at the moment is we have a lot of airlines that want capacity but don’t have the luxury of bringing in aircraft which are next generation for various different reasons”.
“This is where there will always be a space for used aircraft. And there has to be in this industry where we have to sort of recycle and reuse aircraft that are at the midlife and continue to fly them. That is a good thing”.
“Obviously, we have to have the investors who also see that next generation aircraft are the right assets to invest in”.
Net-Zero by 2050…
“Away from aircraft, we have an investment in Universal Hydrogen, which is coming up with the modification and retrofit packages for hydrogen engines”.
“That package is in development currently and they are test flying aircraft at the moment”.
“We hope to see that sort of soon, although we know that certification is not necessarily a quick process. But that’s going really well”.
“We also have a recent partnership with the Whittle Laboratory and AI, which is in the UK. They have a partnership with a number of companies, including Boeing”.
“And that is effectively to develop a plan for the industry to move between now and 2050 because ultimately as in this industry, things take a long time and to hit targets in 2050, there’s decisions that the industry needs to be making in the next year or two in order to hit those targets”.
eVTOLs Not On The Horizon for Stratos…
As has been widely advertised, the eVTOL and Advanced Air Mobility market is growing at a rapid rate.
We asked Jamie Carter at Stratos about whether this is a market they intend on entering.
“We work on behalf of a number of investors and so I think with any asset type, part of our role is to work with them and make sure that these are assets that they want to invest in”.
“And in a lot of cases that’s about understanding the merits, the pros and cons of different aircraft types and markets”.
“We are not actively looking at eVTOL & AAM at the moment, but I think to be honest, any aircraft types that we feel are the future, we are telling investors that’s the way to go”.
“We’re always talking to investors and making sure that they are well informed and well educated about those types so at the right time they’re ready to enter that market, they will support it”.
“But at the moment, no it isn’t on the horizon for Stratos”.
Overall Assessment…
Finally, we asked Mr. Carter at Stratos to give his overall assessment of the aircraft leasing market in 2024:
“Overall, I would say it’s pretty healthy. What we’ve seen, there is pretty good demand”.
“This has obviously been from airlines as far as leasing goes and that’s been strong for the last 18 months”.
“I think it’s quite easy for lessors to talk up the market and say it always looks really, really good. But we’ve come out of a very challenging time. I think some airlines have some baggage from the pandemic because it was a major shock to a lot of markets”.
“However, I think the main airlines are doing a good job of recovering from where we were in the pandemic to current day, and it’s nice to see business around the industry supporting them to do that”.
“Yes, we’ve got backlogs with OEMs, but then that’s always been an issue to some degree. We’re starting to see decent medium long-term planning from airlines which obviously couldn’t happen in COVID or even just out of COVID.”
“I think it’s starting to become a more stable time in the industry. I think that’s a good thing because we’ve had a few years now where it’s been very unstable. Boring is sometimes good”.
“I’m always a bit of an optimist, but I think it’s looking like a pretty good time in the industry for most parts of aviation”.
Final Thoughts…
It remains clear that the aircraft lessor landscape in 2024 is looking very good at the moment.
From the words that Jamie Carter at Stratos has mentioned, demand is strong, and that is because recovery is in effect.
Carter did accept that eventually there will be some stagnation, but right now we are still in the post-pandemic era of a travel boom.
People are wanting to travel more, which means the aircraft are needed to make that a reality.
New or old, aircraft lessors and asset management companies make an incredible contribution in trying to ensure capacity needs are met.
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