AerCap Sees Aircraft Delivery Delays Lasting ‘Several’ Years

 - March 2, 2023, 2:31 PM
AerCap's portfolio of some 1,800 aircraft includes 40 Airbus A350-900s. (Image: AerCap)

A combination of strong post-pandemic air travel and delays on new aircraft deliveries will continue driving demand for leased aircraft and higher lease rates, asserts Aengus Kelly, CEO of Dublin-based lessor AerCap. “The environment for aircraft leasing continues to strengthen,” he said during the company’s full-year results presentation on Thursday.

AerCap, which ranks as the world’s largest aircraft, engine, and helicopters lessor after absorbing General Electric’s Capital Aviation Services in a $30 billion deal in 2021, completed 895 lease transactions last year—involving 570 aircraft, 173 engines, and 152 helicopters—and signed financing agreements for $4.2 billion. The activity “is unparalleled in the industry,” according to Kelly, whose company completed 438 transactions in 2021.  

The ongoing regulatory and supply-chain issues affecting aircraft production will “likely persist for several years, resulting in strong demand and upward pressure on lease rates and values for the foreseeable future,” Kelly noted. The reopening of air travel in China and plans by airlines to boost domestic and international capacity—after Beijing abandoned its strict Zero-Covid policy and related travel restrictions—will “further exacerbate” the supply-demand imbalance for aircraft, and push lease rates higher, he said.

“I believe this will be particularly acute on the widebody side owing to a combination of severely restricted new aircraft production, continued air traffic growth, and the retirements or conversions of many widebody airliners into freighters during Covid,” he remarked. “This put a premium on the aircraft that are available today. AerCap is well positioned to address that opportunity.” The Irish lessor completed nearly 100 widebody transactions last year. “That is more than the rest of the aircraft leasing industry combined,” Kelly maintained.

Data shows that Airbus and Boeing delivered some 740 fewer new-technology widebodies in the last three years than suggested by their production run rates in 2019. They shipped 230 fewer widebody deliveries than planned in 2020 and 273 fewer in 2021 and 239 in 2022. “Airbus was targeting to deliver five A330s and 10 A350s per month in 2019 and they delivered less than three A330s and only five A350s per month in 2022,” noted Kelly. “Boeing was targeting fourteen 787s in 2019 and they delivered less than three a month in 2022, of which more than 80 percent came out of storage.” 

On the narrowbody side, the two large OEMs delivered some 1,800 fewer aircraft in the past four years than targeted in their 2018 production run rate.