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Turboprop Rentals Under Pressure

December 10, 2018

The market for the leasing of turboprops continues to center on the larger and more modern types.

In contrast to the commercial jet sector, the proportion of the turboprop fleet that can be reasonably be expected to be suitable for a vanilla operating lease is small. A significant proportion, if not the majority of the turboprop fleet comprises older and smaller types. These aircraft are therefore usually acquired via a loan or finance lease. The focus for the turboprop lease is therefore on the later Dash8s, the -500/-600 series ATRs, some of the Saab 340s and the BAe Jetstreams. Even then as aircraft age, lessors may seek to sell leased aircraft to existing lessees when current leases expire.

The lease rentals of these types are under pressure partly because of their age and the very absence of replacement. This means that the product life cycle of the primary vehicles for leasing is long and operators have lesser appetite for paying a premium for a newer example when an older one will do just as well. The effect of a rise in the availability of key leased products on lease rentals has been clearly illustrated with the ATR72-600 during the latter part of 2017 and early 2018 and other types are exposed going forward. There are a large number used Dash8s likely to enter the market in the near term which have the potential to make re-leasing that much more difficult, at least at current rental levels. The level of availability for turboprops remains sufficiently low, at least for those types that are targets for the operating lease. There are other types that continually feature a number on the market.

Nonetheless, the turboprop market in terms of leasing is reasonably robust. The number of new deliveries is relatively small and traffic levels are increasing by a steady amount. In contrast to their jet counterparts, the operators of turboprops may not be enjoying the same level of load factors which means that there is still room for traffic growth to be accommodated by the existing fleet. The lessors of turboprops are also fortunate not to be concerned about reconfiguration costs. Lease terms for turboprops can be shorter than for jets which ensures that the leased fleet is liquid. Perhaps more than ten percent of the fleet becomes available for re-lease each year.

Rentals are expressed in thousands of US dollars per month and are for indicative purposes only. Long lease terms, less credit worthy lessee, return conditions, will vary rentals considerably. Aircraft Rentals courtesy of The Aircraft Value Analysis Co. Ltd. (AVAC) www.aircraftvalues.net.

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