Lessors Make Widebody Market More Complex.jpg GE Aviation

As Presence Of Lessors Grows, Widebody Market Becomes More Complex

Segment becoming more complex for airframe and engine OEMs alike, says GE Aviation's GM marketing.

In GE Aviation’s view, the growing presence of leasing companies in the widebody-aircraft market has made the market more complex for airframe and engine OEMs alike, but at the same time the lessors’ economic motivations are in close alignment with those of the engine manufacturers.

William Brown, who as commercial engines marketing manager for GE Aviation heads the engine-maker’s commercial-engine marketing activities, tells MRO-Network.com that the advent of lessors as major customers for new widebodies means that “the life of a widebody aircraft is going to be two owners now”.

The lessor is the owner of the aircraft during its first lease of up to 15 years and when that lease ends the lessor sells the aircraft to a secondary owner, usually an airline, according to Brown.

“With the leasing companies owning so many aircraft you have to look at the [lease-end] transition of existing aircraft and who is going to buy a new one”, he says. “Am I competing against myself” in selling a new widebody to a lessor, only for the lessor after 15 years to sell the aircraft on to an airline which might have otherwise been a customer for a new aircraft?

“That makes it a little more complicated for us,” says Brown. Instead of looking at the widebody market just as a market for sales of new aircraft and engines, OEMs must now take into account the requirements of the airlines which become the secondary owners of the aircraft.

In creating their overall views of the widebody market, the OEMs must also consider market factors such as MRO requirements for used aircraft and engines and the optimum economic timing for potentially converting to freighters used passenger-carrying widebodies coming off their initial long-term leases or subsequently being made available for sale by secondary owners.

But while lessors have introduced additional complexity into the widebody aircraft and engine markets, they have also provided two substantial positives for engine OEMs, according to Brown.

The first positive is that an airline buying a 15-year-old widebody may well be doing so as a low-cost introduction for it to the widebody market – and at a later date that airline will often then become a customer for a new widebody. “You have to look at the secondary owner [of the aircraft coming] off lease – that’s the customer for a [new] 777X” in the future, says Brown.

At the same time, the lessor selling a used widebody to a secondary customer may well want to replace the 15-year-old aircraft with a new widebody it can then place on a new long-term lease. Such transactions may provide an engine OEM such as GE Aviation with two separate kinds of business: continuing MRO services and sales of aftermarket parts to keep the engines on the 15-year-old widebody flying in commercial service with the secondary owner, and an order for new engines from the lessor for its newly ordered replacement aircraft.

The second positive? “One thing is nice” about lessors being widebody customers, says Brown: “It aligns everyone’s motivation, ours and the lessors’.” When widebody aircraft reach (say) 15 years old, “the lessors want to sell the aircraft and we want to keep the engines flying” – so engine OEMs and lessors alike do their utmost to support the secondary market. However, the same cannot necessarily be said for airframe OEMs: “the airframers want to sell new ones,” says Brown.

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