Acquisitions will remain popular for consolidating market share
New York, NY (PRWEB) November 18, 2014
The Commercial Aircraft Leasing industry has blossomed over the past two decades. Leasing airplanes was an uncommon practice until the 1990s, but has since gained traction among carriers looking to limit large purchase costs and maintain flexibility in the number and composition of their fleet. Leasing also reduces the risks of a bad investment, such as an aircraft that proves unpopular, since the leased aircraft can always be handed back to the lessor instead of incurred as a sunk purchase. In the five years to 2014, IBISWorld estimates that industry revenue has increased. This includes more moderate growth for 2014 due to the stagnation of domestic air travel over the year.
According to IBISWorld Industry Analyst Amal Ahmad, “Although purchases remain the primary way of procuring an aircraft, leasing is becoming more popular, with one in three airplanes being leased; this share is expected to rise over the next five years, to one in two.” The most popular type of leases are operating leases, in which the aircraft is retained for about three to seven years before being returned to the industry operator (the lessor). However, operators also offer capital leases, which are typically followed by the purchase of the aircraft; in this sense, operators can also act as financing agents to aircraft carriers lacking immediate purchase capital.
Due to the range of high value-added services provided by the industry, profit is very high. Still, overall industry participation has been declining, as some smaller operators have looked to "cash out", exiting voluntarily, while others have been forcefully acquired by competitors seeking to consolidate market share. One notable acquisition occurred in 2014, when aircraft leasing giant, AerCap, acquired its even larger but financially struggling competitor ILFC, consolidating its presence in the industry.
Going forward, leasing will remain popular; however, a growing supply of leased airplanes, meant to match demand, will likely soften leasing rates and limit further profit growth. “Acquisitions will remain popular for consolidating market share and for negotiating favorable contracts with upstream plane manufacturers,” says Ahmad. Overall, IBISWorld expects revenue growth to remain strong in the five years to 2019.
For more information, visit IBISWorld’s Commercial Aircraft Leasing in the US industry report page.
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IBISWorld industry Report Key Topics
This industry leases commercial aircraft to scheduled airlines and to other commercial carriers. The carrier (lessee) pays the industry operator (lessor) for use of the aircraft over a given time period, typically a few years. This industry does not lease noncommercial aircraft, such as military helicopters or recreational jets.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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