Aircraft lease rates are on an upward trajectory, particularly for new widebody aircraft, as tight supply and a strong post-pandemic recovery offset mounting global economic uncertainty, lessor SMBC Aviation Capital noted in its latest quarterly report.
The report highlights that aircraft lease rates, especially for modern widebody jets, are rising sharply. Twin-aisle lease rates have risen 7-12% since late 2023, strengthened by a tight supply and strong demand.
The Dublin-based lessor also noted that global airline revenues are expected to reach $1 trillion in 2025, 20% higher than in 2019.
SMBC stated that despite continued growth in revenue, global yields slipped in 2024, and the lessor stated that we may see a slight decline through 2025. However, tight capacity and a low jet fuel price environment should offer upside.
While global jet fuel prices have softened - with Brent crude forecast to average below $75 a barrel - SMBC warned that the return of heavy tariffs, especially those introduced by the Trump administration in April, could shave 2.4% off US GDP and push up inflation, dealing a blow to aviation manufacturers and operators alike.
SMBC cautioned that these newly imposed US tariffs could further complicate existing supply chain issues, particularly for manufacturers like Airbus and Boeing and lower-tier suppliers, which are already struggling with delays and labour shortages.
Also highlighted is that tariffs are expected to reshape delivery patterns for Airbus and Boeing, potentially lowering the number of aircraft delivered into North America and Europe depending on how trading partners respond.
The report also looked at China, noting that the country currently has an aging fleet issue. The average aircraft age in the country has now climbed past nine years, which has raised concerns about long-term supply gaps unless new orders by the country’s airlines accelerate.
In addition to an aging fleet, nearly 60% of China's active aircraft fleet is leased, a number which SMBC expects to increase.