Aircraft Leasing in Covid19 days

We are in the days when the Covid19 pandemic continues to affect the world. As you follow, airlines have resumed flights for a while. The sector, which came to a halt with the start of flights, has revived a little. In addition, as of mid-August 2020, approximately one third of the total commercial aircrafts still stand in parking position. As you know, companies acquire the aircraft in their fleet either by leasing or purchasing. Considering this situation, companies are trying to choose the aircraft they will operate from among the more recent aircraft that belong to them.

Approximately half of the aircraft that actually flew in January 2020 were leased aircraft. Due to the effects we have mentioned above, the rate of aircraft currently in service has dropped to forty-three (43) percent.

With the effect of these situations, there are serious decreases in the aircraft leasing market. Aircraft leasing prices are at an unprecedented level. It is said that the decrease in the leasing price of new aircraft has exceeded 30%. The second hand decrease is around 30% for both narrow and wide body aircraft. In addition, it was decided that the production of legendary aircraft such as the B747 and A380 will be stopped. For these reasons, the prices of these currently discarded aircraft have been cut by half.

First Sell and Lease Aircraft

The sale and leaseback method has been practiced in the industry for a long time for airlines which want to generate fresh cash inflows to sell and re-lease their own aircraft is common. However, at a time when thousands of planes parked on the ground, it is highly controversial how logical it would be to use such a method.

Considering the return of the Boeing 737 MAXs, which are still kept on the ground due to the flight ban and whose number is close to a thousand, it is not difficult to predict where the abundance of aircraft in the market will reach.

However, India’s largest airline company IndiGo aims to obtain at least Rupees 20 billion (USD 268 million) by using this method. EasyJet, one of Europe’s leading airlines, also takes advantage of the same method. EasyJet will generate cash of £ 608 million (US $ 771 million) by selling and leasing a total of twenty-three (23) aircrafts. For example, five of these twenty-three (23) aircrafts are of the Airbus A321 Neo type, and their ages only range from 5 to 9 months. These aircraft, with a total value of 167 million pounds as of March 31, 2020, have been leased until the age of ten (10).

As a result, Covid19 pandemic pushed companies to use their own and younger aircraft. The Covid19 pandemic still contains many unknowns. There is still no definitive and generally accepted result in vaccine and treatment studies. Therefore, we do not know when we can talk about a concept like the aftermath of the pandemic. However, we can say with certainty that the airline industry will experience some permanent changes and many issues will be different than before.