IBA Insights

IBA Contributes to an Low Cost & Regional Airline Business Article, March 2018

Several reports have recently indicated that aircraft lessors are bullish about the global demand for aircraft and the relative health of airlines around the world. Despite some airline bankruptcies, mainly in Europe and other challenged areas in some parts of the world, the airline industry remains profitable and passenger demand continues to rise. This trend mirrors the International Air Transport Association’s (IATA) global passenger traffic results for 2017 showing that demand (revenue passenger kilometres or RPKs) for the year rose 7.6% compared to 2016. This was well above the 10-year average annual growth rate of 5.5%.

As evidenced by aviation consultancy IBA, the market has witnessed an unprecedented surge in aircraft leasing over the past few years triggered by low interest rates, an above average rise in passenger traffic, low oil pricing and attractive returns. New arrivals have since entered the space in large numbers, mostly from China, and the demand for deals has reached an all-time high. Looking at the general trends in the narrowbody lease market in 2018, Mike Yeomans, Head Analyst – Commercial Aircraft and Leasing at IBA signals that lease rates remain under pressure, particularly looking at new or young aircraft.

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