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The cost of renting the newest aircraft has surpassed pre-pandemic levels as airlines struggle to balance demand for travel with persistent shortages and manufacturing delays.
More than half of the world’s commercial aircraft are owned by leasing companies, which have been able to increase their rates significantly for the most in-demand Airbus and Boeing single-aisle aircraft that are used for short and medium-haul flights.
Monthly lease rates for the Airbus A321neo have risen from lows of around $340,000 at the height of the pandemic in 2020 to as much as $420,000, marginally higher than before Covid-19 brought the industry to a standstill, according to aviation data group Ishka.
Rates for Boeing’s newest single-aisle jet, the 737 Max 8, have also risen above pre-pandemic levels to around $360,000-$370,000 a month.
“Air traffic is up and the manufacturers just can’t deliver fast enough,” said Eddy Pieniazek, head of analytics at Ishka. “Whatever can fly in the narrow-body market at the moment is flying.”
Demand is also growing for the more expensive widebody aircraft that are typically used for long-haul travel, which did not recover as quickly coming out of the pandemic.
Pieniazek said leasing rates could climb further, noting there was “scope for a little bit more on the narrow-body front” but that much would depend on what airlines could afford at a time when other costs, notably fuel and labour, were also on the rise.
Leasing companies also have costs to balance, especially of debt at a time of rising interest rates.
Both Airbus and Boeing have record order backlogs and their single-aisle aircraft are sold out almost to the end of the decade.
Other problems, such as a recall of more than 1,000 jet engines, have added to strains in the industry.
The manufacturers are “about six months late on everything,” said one industry executive. Many airlines are extending leases on older aircraft, often by four to six years, added the executive, noting “we will be seeing older aircraft fly for longer”.
“I never used to worry about the supply chain and contracts as they sorted themselves out — I only had to worry about finding customers. Now it is the opposite — I have plenty of demand so I spend most of my time on the supply chain,” József Váradi, chief executive of Wizz Air, told the Financial Times.
Steven Udvar-Házy, executive chair of Air Lease, a Los Angeles-based leasing company, said last month that the “production outlook” from the manufacturers was a “real problem area”. “In fact, that’s fuelling more demand, it’s driving lease rates higher,” he told a Deutsche Bank conference.
Leasing rates had increased for “good used aircraft like 737-800s, A320s, younger A330s . . . as much as 30-40 per cent in the last 12 to 15 months”, he added.
Rates are “still increasing due to the supply and demand imbalance which is driving that demand from airlines to extend virtually any and all expiring leases today and even as far ahead as 2025,” said Rob Morris, head of Cirium’s consultancy business Ascend.
“Older A320s are potentially able to realise around one-third higher monthly rental today than they were at the peak of the last demand cycle.”
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