Even as the market enters into the off peak season when some operators seek to offload surplus capacity during the Northern Hemisphere winter months, the market for lease rentals has remained stable.
There has been a notable casualty – airBerlin. The airBerlin Group comprises over 150 aircraft and is therefore not inconsequential. The fleet of some 64 A320s are mostly leased from GECAS, Macqaurie AirFinance; Aircastle, DAE, Avolon, SMBC, and others. The airline is being operated by Lufthansa who will be able to rationalize the fleet to ensure a better fit for the airBerlin operation or to use within its own operations. It is not expected that the lessors will face many handbacks although some rentals may be renegotitated if viewed as being too high. The 17 A330-200s operated by airBerlin are virtually all leased by Aercap.
With such a long lead time for new aircraft it would be expected that the lessors would be in the left hand seat. However, the lessees have become just as focussed as the lessors and RfPs are much more common althougyh relationship still has a significant role to play. The ability of the larger lessors to offer flexbility to their lessees in terms of replacing existing aircraft and offeirng accelerated delivery of new aircraft can offer a better net lease cost.
The lease rentals are provided by The Aircraft Value Analysis Company Ltd (AVAC) www.aircraftvalues.net or www.aircraftvalues.com. Rates are quoted in thousands of US dollars per month and exclude maintenance reserves. They assume a medium credit, average return conditions and an average lease term. Lease rentals for actual transactions may differ. European specification (a factor which has lesser significance due to the spread of the low cost model where galley equipment is less important), weaker credits and short lease terms may warrant a higher rental. A long-term rental to a strong credit will justify a lower rate. AVAC can privide a matrix of adjustment factors to reflect differing lease terms on request.
|Narrowbody Lease Rates (Dry) US$ ‘000s pm – September 2017|
|A318-100||2003-12||80-160||With some 25 percent of the fleet having already been parted out the type is not best placed to extract higher lease rentals from the lessors of which there are few. Whereas the A318 was perhaps seen by seen as a means of offering an adjunct to the existing fleet to serve specific routes, the type is now perhaps more viewed as a hindrance to fleet commonality. As the lessors de-risk their residual there will be greater opportunity for lease rate flexibility. The aircraft is too small for the majors and too large for the regional operators.|
|A319-100||1996-981999-092010-17||70-10090-210190-300||The A319 offers operators a direct replacement for the B737-300 while also offering the opportunity to increase the number of seats – should they be needed. The lack luster delivery rate in recent years has allowed mid life aircraft to enjoy something of a renaissance but tinged with reality. The reasonable rates allow the smaller capacity aircraft to be filled with good yielding traffic on less mainstream routes. The older examples will be most exposed to retirement being already some 20 years of age.|
|A320-200||1988-921993-971998-032004-102011-17||50-7060-9590-160140-265240-380||Rates are steady as is to be expected in the context of lower fuel prices. Had fuel prices been higher at $70+ a barrel then the situation would be considerably different. The depth and breadth of the operator base know no bounds and the demand for quality A320s remains intact. The very large number of A320s that are leased however, means that there can be competition, particularly from newer market entrants placing greater emphasis on portfolio utilization than rentals. The A320ceo is now defined by three categories CATI, CATII, CATIII with each representing a period of build. The oldest A320s are fortunate to see rentals of $50,000 per month. The high gross weight examples with sharklets and latest engines are still the most favored with those with SpaceFlex attracting higher rates.|
|A320neo||2015-17||340-410||The problems of the PW1100G are being solved though niggles remain. There exist a great number of A320neos parked awaiting suitable engines. Despite the problems, the rates for the A320neo are holding firm despite initial suggestions that the premium was less than $10,000 per month compared to the more realistic $20-30,000. The rental differential is therefore still notable. A greater proportion than ever are being delivered with 180 seats or more and the reconfiguration of existing units continues apace. Lessors may well be needing to plan ahead to ensure that more seats are installed – assuming that the seat manufacturers are equipped to furnish.|
|A321-100L||1994-971998-02||70-8075-120||The market for the A321-100 is one of little consequence for the wider leasing community. Placement on any meaningful lease term beyond the current lessee will be difficult to achieve. In view of the age profile and its lack of attraction, the type is likely to be scrapped rather than leased onwards should they enter the market.|
|A321-200H||1999-042004-102011-17||100-185180-310290-425||The aircraft may be in the midst of transition to the A321neo but demand remains strong allowing lease rentals to remain unchanged. The proportion of A321s being delivered is only marginally lower than that enjoyed by the ubiquitous A320 with the A319 nowhere to be observed. More seats means lower seat mile costs and lower seat mile costs means lower fares sufficient to stimulate more traffic. Boeing indicate that the range of the B737-10 is as good as the A321 but with lower thrust engines and a weight that is the same as for the B737-9. The longer range of the latest sharklet equipped aircraft is a bonus.|
|B717-200||1999-04||85-130||The strong market for the B717 shows no sign of abating but to some extent it is a one operator show. There is always a danger in assuming that the wider market matches the appetite of a single lessee which is rarely the case.|
|B737-600||1998-03||65-120||A reputation once lost is difficult to restore and this applies to the -600 in considerable measure. With such a limited orderbook the type failed to strike a chord with lessors and with a changing market, the -600 has fallen from grace. As both the -600 and A318 are not part of the respective MAX and neo families, this provides a clue to how much the market has transitioned to newer and larger types. The aircraft is also facing the introduction of new types not least the enlarged E195 E2 in the coming years.|
|B737-700||1997-012002-092010-17||80-105100-220200-320||Like the A319, the B737-700 has not been favored in recent years and is bereft of new order placements and indeed, deliveries. The lease rentals though remain stable having fallen by a considerable amount in recent years. Alas, such a situation is unlikely to persist for any length of time given the change in emphasis. The concentration with Southwest is both a concern and an opportunity as the carrier is still leasing additional units. Approximately 50 percent of the fleet resides with Southwest.|
|B737-800||1998-022003-082008-17||90-155140-290240-410||The -800 remains the most favored of narrowbodies for the lessors but such is the extensive production cycle and the arrival of the B737MAX that the rates are losing some of their resilience. The B737-800 remains a highly desirable aircraft assuming that it has later engine variants and a high MTOW. The lower escalation being applied to new deliveries will provide some greater lease rental flexibility in return for longer lease terms. In the next issue lease rentals for the B737MAX will be quoted.|
|B737-900||2000-04||90-140||A type dogged by negativity. The number of -900s is severely limited and the extent of the operator base is restricted to all too few. A significant number of -900s are now fitted with winglets which does something to improve remarketing opportunities. The -900 is not one of the Boeings success stories.|
|B737-900ER||2006-112012-17||140-275255-410||A good aircraft but far from representing the A321 killer that some supposed. Indeed, the type has been another compromise. If Boeing has suffered from inconsequential variants then Airbus has been decidedly variable in the execution of new types. The B737-900ER failed to establish itself and orders for the A321 continued to flood in while those for the -900ER remained elusive. The market for the aircraft is facing the prospect of further problems now that the B737-10 has been launched.|
|B757-200||1982-881989-951996-02||60-8565-9075-120||The prospect for lease rentals remains reasonable not least because lease terms may be shorter from now on. The A321 may not offer the range or seating capacity of the B757 but the Boeing aircraft was built to offer both and this comes at an efficiency penalty for those that do not need either. The B797 is nigh.|
|B757-200ER||1987-951996-02||60-9585-135||Whatever the negatives the -200ER is still the aircraft that can fly across the Atlantic and to Hawaii. The A321-200 is being used for Hawaii flights and the A321neo will offer more flexibility in terms of seating capacity and range albeit with extra fuel tanks and therefore lesser cargo/baggage.|
|B757-300||1998-03||85-150||All -300s are fitted with winglets which at least provides better efficiency but not sufficiently as to allow lease rentals any measure of improvement. The type is marginalized and finding lessees is among one of the more stressful jobs when they are released by existing operators. A stretch too far for most operators but there can be some variation in rates depending on the needs of the lessor and lessee.|
|Commentary reflects change from the last update to Narrowbody Rentals of May 2017.|