Consolidation In Aircraft Leasing Industry To Be Accelerated By Covid-19

The Covid-19 pandemic is likely to accelerate the consolidation of the aircraft leasing industry, believes the head of major lessor SMBC Aviation Capital.

The aircraft leasing industry has control of more than 40 per cent of the total global passenger fleet.

This prediction is preceded by the mega-deal last year that combined world’s two largest aircraft leasing companies – with the acquisition of the leasing business of General Electric by AerCap in a deal worth $30 billion.

“You were always going to see increasing levels of consolidation and… I believe it is likely that the events of the last 18 months are likely to probably accelerate that a bit,” said SMBC Chief Executive Peter Barrett, one of the world’s five largest lessors, in an television interview.

Since it is one of the best capitalised firms in the industry, it is likely that SMBC will receive offers to take part in any consolidation, Barrett said and added that if any opportunities “present value and fit into our strategy, we’ll certainly have a look at them.”

These comments were made by Barrett following Barrett reporting 2020 profits of $15 million even as the company described the pandemic hit year as the worst year the industry has ever experienced as air travelling was virtually stopped due to the health crisis.

During the year, a further $1.2bn of funding from its shareholders was also received by the company which took the total shareholder support to $11.8 billion which included $3.1 billion in equity and $8.7 billion in debt.

It had $4.9 billion in available liquidity at the end of the year.

The company also announced the buying of an additional 14 Boeing 737 MAX jets. It reiterated that these planes had already been configured for usage in the low-cost sector. The company expects to get delivery of the first plane later this year.

The rebounding of the global aviation sector would “take a firmer footing” over the next 6-12 months which will be driven by strong performance of low-cost short-haul travel, Barrett said.

“The nature of the recovery is regional, its local… and it’s going to be dominated by low-cost carriers, who are the people with the capacity and the ability to stimulate traffic,” he said.

On the other hand, he believes that it will be quite some more time before there will be a recovery of long-distance travel and airlines would likely need to make aggressive pricing of tickets to fill up planes.

Over the past six months, there has been an improvement in the demand for narrow-body planes which dominate short-haul markets. That has led to stabilization of leasing rates.

Barrett said that while there will a recovery in business travel, it is unclear how much smaller it will get after Covid-19 pandemic. “Whether it is going to be 5%, whether it is going to be 15% (smaller) .. It’s hard to judge.”

(Adapted from

Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability

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