World Aircraft Leasing Industry - Investment Analysis and Growth Opportunities

Frost & Sullivan's Aerospace Financial Benchmarking and Analysis (FBA) service presents a broad financial outline of the aerospace industry, highlighting major market and financial trends in key growth segments. It provides a comprehensive financial analysis of the leading aerospace firms to support the investment and financial analysis needs of decision makers in the aerospace arena. The current study within the service focuses on the world aircraft leasing and financing industry, including the following three key growth segments: business jets, regional jets, and commercial aircraft.

Growth Driven By the Improving Health of the Airline Industry

The aircraft leasing market is largely influenced by the success or failure of the airline industry, which is highly cyclical, sensitive to slight economic changes, and highly competitive. Since 9/11, lease margins have generally declined due to surplus aircraft, declining demand for air travel, airline bankruptcies, repossessions of aircraft, declining airline revenue yields, and worldwide health concerns.

However, since the second half of 2003, the fundamental evaluation measurements for airline industry and cargo traffic, such as available seat miles (ASMs) and revenue passenger miles (RPMs), have consistently improved despite rising fuel concerns. These improvements are primarily fueled by the increase in demand for air travel.

Majority of Financing Completed Through Operating Leases

Most of the financing in today’s aircraft market is completed through either operating or financing leases. Frost & Sullivan estimates that majority of the leases provided by independent leasing companies are operating in nature. At the end of 2004, for example, ILFC maintained 667 aircraft on operating leases and only 9 on financial leases. However, the leasing subsidiaries of OEM companies, such as BAE Systems and Cesna Finance, have more exposure to financial leases.