Airline Economics magazine - Issue 88

END OF AN ERA?

Welcome to the latest edition of Airline Economics.

In our aviation finance survey, one respondent said that this year felt like the end of the post-Covid era and the beginning of a new age for the aviation industry. That sentiment resonated with the news that Air Lease was to be sold to Sumitomo and the retirement of Steve Hazy earlier this year.

It is clear that the industry is changing. The established airline market model is being turned on its head, particularly in North America as the flag carriers take the upper hand in their ongoing battle with low-cost carriers, while consolidation in Europe is beginning to accelerate. Asia remains the unknown quantity – even though it is accepted that the region will be the engine of growth, airlines remain stunted by the past five years and are repositioning to take maximum advantage of that growth potential.

Consolidation in the aircraft leasing sector continues to expand, with all players seeking ultimate scale to compete in a marketplace filling with behemoth organisations, making profitability for smaller players difficult – saved only for the moment by high demand for aircraft and rising lease rates. The questions for the next few years include: How big can aircraft lessors become? Will the top few giant leasing companies come to dictate the entire market? As lessors become airline-makers, what does that mean for the future of the airline sector? Are lessors too powerful? And how will airlines respond to sky-high lease rates and strict return conditions? Are the OEMs watching and noting this developing market situation—and how will they respond?

In the finance sector, banks and alternative lenders are buoyed by positive traffic growth but remain wary about certain credits. The aviation asset-backed securitisation (ABS) market has not only reopened but is booming, with spreads tightening and structures evolving. This issue looks in depth at the new Master Trust structure—introduced by Carlyle Aviation and refined by Griffin Global Asset Management—as well as Ashland Place’s successful loan ABS that broke records on pricing.

The future of aviation is positive but with a strong expectation of change ahead. The boldest know that any change equals opportunities for those prepared to take risks, to innovate for longer-term gain rather than immediate satisfaction, and to shape the next chapter of an industry in transformation. Rather than the end of an era, this pivotal time in aircraft leasing history does indeed herald the beginning of a new age.