Widebody Rentals Still Weaker Than Expected

October 29, 2018

With above trend traffic growth widebody lease rentals should be strong but instead they appear to be weakening.

Naturally the replacement cycle is in full swing with the arrival of the B787-9 and A350 in numbers. The B777-9 is ever closer to service entry and the A330neo has just arrived. The age profile of the outgoing models as the B777-200ER, A330-200 and A330-300 is such that there can be a wide variation in rentals with the younger converging on the older. In contrast to the narrowbody segment, there is no so much of a shortage of capacity and the greater difficulty in placing aircraft with quality lessees is contributing to the weakness. The delivery rate of new widebodies may have slowed to some extent, but to some extent the new aircraft are acting as replacement rather than growth capacity. The freighter market has considerable potential in terms of soaking up any excess but to date, there is still limited interest in acquiring used widebodies for freighter conversion.

The situation of widebodies will likely become more problematical as the years progress due to the number of sale and leasebacks that have taken place over the last decade. As the aircraft are returned to owners, remarketing may be more difficult as operators move to newer equipment and owners will be willing to accept lower rentals just to place aircraft.

Sale and leaseback transactions, which constitute an increasingly large proportion of new aircraft deliveries, continue to involve higher lease rates than those attributed to vanilla dry operating lease rentals. Lease rentals are provided by The Aircraft Value Analysis Company (AVAC) (for China

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