A lessor’s market: Aircraft shortages and ACMI

Amid ongoing issues of supply chain shortages and aircraft delivery delays, a ‘hot market’ for pre-owned aircraft continues to work to the lessor’s benefit, highlighted the Airline Economics fleet management panel during the Fleet Management and Asset Tradings Parts Day in Dublin. “Fleet planning is challenging in a way that unless you really prepared for this a few years ago or at least a couple of years ago, it’s really difficult to change anything right now,” explained Laura Lvaskaite, head of asset management at SmartLynx Airlines. “If anyone is willing to grow, you have to be really, really sure that you can amortise and absorb all the increased costs, and you can actually pass it on to the customer,” she added. “If that’s not the case… it’s a really big risk when the market slumps at some point in the future”. While Lvaskaite believes there are aircraft available if “you’re willing to work hard, willing to look” (noting that every aircraft added to SmartLynx’s portfolio has been repossessed from someone else in the last couple of years). Robert Fanning, vice president of fleet for Frontier Airlines, added that his company receives aircraft offers “on a regular basis”. However, a lot of the time, acquiring the asset is the easier aspect; with transitioning an aircraft into the correct specification and into an MRO facility the greater challenge. “It could take six to 12 months to get one of these aircraft into service,” he added. Fanning believes that current challenges will likely continue for the next three to four years. “Thereafter I think you will probably see some softness in the markets, and maybe some overcapacity on aircraft being available,” he added, at which points lease rates will likely more align with 2017 to 2019 levels. However, he concluded that right now is a “great time for leasing companies,” who should take “all advantages they can” of the current market conditions. Highlighting SkyCana’s different approach to airline management – first testing the market using ACMI and now incorporating the first aircraft fleet – Tito Yunda, fleet advisor to SkyCana, added a sense of the frustration the lack of readily available aircraft is causing many airlines. “It is impossible to get aircraft, because all leases have been extended,” he commented, adding that SkyCana now has to find “more innovative ways to provide additional lift” such as expanding ACMI operations. Operators buying airframes and leasing just the engines could also be a good option for high-risk and new entrants, he added.