The challenges of leasing, July 2016

Optimism prevails in the aviation industry of late. New entrants are plentiful and the demand for debt is high.  For operating leasing, however, there may be the faintest of clouds forming. Lease rates, in general, are softening as a result of a glut of bidders on deals with no shortage of liquidity.  Extensions are creeping up and so are suspicions of troubled operators. Despite the low oil price, spring in the northern hemisphere sees the return of both blossom and cash flow problems for airlines within oil- or currency-sensitive countries desperately looking to make it to the summer season, while US domestic operators continue to reap the benefits. Lessors face many challenges not least in the decisions they are required to take on a daily basis.

A lessor with hundreds of aircraft under management might decide the management of their fleet is best handled internally. However, in many instances, the skills associated with fleet management and transition are better outsourced to specialist teams with years of operating lease experience as the cost of ill-informed decisions or errors can be substantial.

While there is a general trend for the larger lessors to manage fleets inhouse, some lessors with large fleets have deliberately followed an outsourced model with the aim of in-house resource being 100% focused on front-office activities in order to build and sell a leaner operation.

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