The demand for narrwbodies remains strong buoyed by traffic growth around the world and in spite of somes corporate failures such as Airberlin and Monarch.
The lease rentals for mid life aircraft therefore remains essentially stable but as lessors seek to add equipment through sale and leasebachs they have willing to accept both high prices and low lease rentals for newer aircraft. Some new A320ceos for example have been acquired for in excess of $47 million while some rentals may be at $300,000 per month instead of in excess of $350,000 per month. While the more experienced lessors would wish to lease aircraft at the rates previously seen, such has been competition from new lessors and those seeking to place aircraft to reduce the unplaced proportion, that they have had little choice but to also offer lower than desirable rates. The convergence between A320 and B737-800 lease rentals continues although this is mostly based on a few widely circulated anecdotal reports on a few transactions rather than anything more substantive.
The lease rentals are provided by The Aircraft Value Analysis Company Ltd (AVAC) www.aircraftvalues.net or www.aircraftvalues.com. Rates are quoted in thousands of US dollars per month and exclude maintenance reserves. They assume a medium credit, average return conditions and an average lease term. Lease rentals for actual transactions may differ. European specification (a factor which has lesser significance due to the spread of the low cost model where galley equipment is less important), weaker credits and short lease terms may warrant a higher rental. A long-term rental to a strong credit will justify a lower rate. AVAC can privide a matrix of adjustment factors to reflect differing lease terms on request.
|Narrowbody Lease Rates (Dry) US$ ‘000s pm – March 2018|
|A318-100||2003-12||70-150||The market for the A318 is limited as are the number in service. Availability is few and far between but such absence is no harbinger of strong rentals. Indeed, rentals are considered to have fallen. There have been a number scrapped mostly P&W powered examples. 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||65-10085-195180-300||There are a number on the market although of these a proportion have yet to be released by existing operators. The lease rentals are considered to have fallen slightly as the market considers its options in terms of opting for larger capacity aircraft. The lack luster delivery rate in recent years had 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 and parting out may be an option particularly if some $6-7 million in maintenance reserves have been accumulated.|
|A320-200||1988-921993-971998-032004-102011-18||40-9060-9590-170135-265220-380||The A320 remains in demand despite the arrival of the A320neo. There are a number on the market but the lessors will be seeking to lease to those operators that will elicit the highest rates but low risk. The rates are remaining virtually the same and there can be considerable variation depending on whether there is a sale and leaseback. Had fuel prices been higher at $70+ a barrel for any length of time 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 and expansion than rentals. 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 still higher rates.|
|A320neo||2015-18||340-410||While the PW1100G is a concern, overall the A320neo is performing well and operators are able to realize the fuel saving promised by Airbus. A longer sector length will see a greater saving. 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. Ever more operators are selecting SpaceFlex and the extra cost of this needs to be included in the lease rentals.|
|A321-100L||1994-971998-02||55-8065-110||There can be disguising the limited attraction of the -100, the values 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||1999-042004-102011-18||100-185160-310270-425||The aircraft may be in the midst of transition to the A321neo but demand remains strong allowing lease rentals to remain virtually unchanged a least for the moment. 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. The longer range of the latest sharklet equipped aircraft is a bonus.|
|A321neo||2016-18||440-500||The number of A321neos being delivered in the coming years will represent a more significant proportion of the A320 family than in the past. Lessors will find the type in demand as operators seek higher capacity and to take advantage of the longer range capability.|
|B717-200||1999-04||85-130||Much as the lease rentals of the B7217 should be changing they are not and this is because the existing operator base is making good use of the type, at least for the present. 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||55-110||The lease rentals are considered to have fallen in the face of the transition of the product line to new types and a lack of interest in such capacity from the majority of operators. The type is more marginalized than being a niche aircraft. 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||70-105100-195185-320||While there is still demand for the -700 there has to be a sense of realism as to where the market can go. Rentals are slightly weaker as the type faces new pressures from such aircraft as the CS100. 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 but there has been dispersal of the type to other parts of the world. Lessors will be looking for long rentals at reasonable rates rather than seeking short term gains.|
|B737-800||1998-022003-082008-18||90-155140-270220-410||The lease rentals have perhaps seen some weakness for the mid life and newer types but only by a modest amount. There still exists a modicum of distinction between the -800 and the A320 in favor of the latter but not as much as was once the case. Boeing is now producing the MAX in numbers and this will gradually have an impact. The lower escalation being applied to new deliveries will provide some greater lease rental flexibility in return for longer lease terms.|
|B737MAX8||2017-18||380-500||The MAX is in service in numbers and is having lesser problems than the A320neo due to the single engine choice. The fuel efficiency of the aircraft is likely to improve although how much CFM can tweak the engine remains to be seen.|
|B737-900||2000-04||80-120||The market for the -900 remains limited as the -900ER is more favored as are -800s. The rates are falling by a modest amount. 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||2006-112012-18||140-250240-410||The -900ER is faring less well than the A321 and lease rentals for the younger aircraft are perhaps the most exposed as operators consider the A321neo. 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 is under development.|
|B757-200||1982-881989-951996-02||50-8565-9075-120||The lease rentals of the B757 are stable at current levels but there exists the potential for some weakness going forward as more modern replacements are delivered in numbers. The maintenance and efficiency of the B757 is also an issue for some operators even if the performance is not.|
|B757-200ER||1987-951996-02||60-9580-135||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||80-140||There can be some variation in lease rentals depending on the lessee and the term of the lease. 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.|
|Commentary reflects change from the last update to Narrowbody Rentals of November 2017.|