Aircraft lessors have a fair wind, but could see turbulence
Published 20/09/2016 | 02:30
Aircraft lessors are benefiting from increased air travel, strong airline profitability, low interest rates and good access to funding markets, according to Fitch Ratings' latest assessment of the market.
However, the report warned that variables including interest rates, passenger numbers and airline profitabilty are cyclical or prone to temporary disruption, and said this limits the potential for positive rating actions in the sector.
Ireland is home to as much as half of all leased aircraft globally, and the sector employs about 1,200 people here. Fitch's Aircraft Leasing Sector Review said global passenger traffic grew 6.5pc in 2015 and 6pc in the first half of 2016, measured by revenue passenger kilometers (RPKs).
The rating agency cited data from the International Air Transport Association (IATA) which also projects a 6.2pc RPK growth rate for 2016. Fitch itself expects the range for revenue passenger mile growth is 5pc to 6pc globally. Passenger demand ultimately underpins demand for leased commercial aircraft,
"Current market conditions favour aircraft lessors given record manufacturer backlogs and capital constraints faced by certain airlines," said Sean Pattap, senior director, Fitch Ratings.
"Even as air travel increases globally, airline profits remain sensitive to oil prices and geopolitical risk in certain areas of the world, most recently the United Kingdom, Turkey and Latin America," he said. The two largest aircraft lessors are Ireland based GE Capital Aviation and AerCap, Fitch said, but noted that Asian firms are increasingly gaining market share. China's Bohai Leasing is now a top 10 global aircraft leasing firm after its deal to buy Ireland's Avolon.