Fitch: Favorable Longer-Term Trends Support Stable Outlook for Aircraft Leasing Sector

NEW YORK—(BUSINESS WIRE)—Link to Fitch Ratings’ Report: Aircraft Leasing Sector Review

Fitch Ratings sees favorable long-term dynamics in the aircraft leasing sector, even though some near-term pressures will likely persist, according to the inaugural issue of Aircraft Leasing Sector Review.

Increased demand for airline travel globally, capital-constrained airlines, and the aircraft technology replacement cycle are among the trends supporting the long-term strength of the aircraft operating lease business. Growth opportunities for the next several years will be driven by large-order books at Boeing, Airbus, and Embraer.

However, in the near term, higher fuel prices and economic headwinds create challenges for the commercial aviation industry, pressuring profitability. For the lessors, this will result in additional repossessions and pressure on lease rates.

While aircraft values and lease rates have recovered from 2008 levels, some pressure remains, particularly on narrow-body Airbus models. This has resulted from recent airline closures as well as a ramp-up in production of new-generation planes. Fitch does not see either of these trends subsiding in the foreseeable future.

Many standalone lessors have improved their leverage profile over the past several years. This trend has been driven by the desire to improve access to funding markets and issue unsecured debt. Fitch believes this is appropriate, given the cyclical nature of the industry and its reliance on wholesale funding. Consistently reduced leverage metrics could lead to positive rating momentum, particularly for lower-rated issuers.

Fitch believes scale plays an important role in the aircraft leasing business. The ability to effectively repossess and re-lease aircraft benefits from sophisticated marketing and technical teams as well as geographic reach and relationships. While GECAS and ILFC are likely to remain dominant players, some smaller companies could benefit from consolidation.

The full report is available at www.fitchratings.com or by clicking on the link above.