Rolls-Royce & Partners Finance (RRPF).jpg Rolls-Royce & Partners Finance (RRPF)

Engine Leasing In Rude Health

Lessors to play a part in servicing spare engine demand.

In the next 20 years an additional 5,200 spare engines will be required, estimates engine lessor Rolls-Royce & Partners Finance.

Of that total, at least half will be leased, says Bobby Janagan, managing director for RR&PF, in an article for Engine Yearbook 2019.

Janagan believes the engine leasing market is in good shape to service that demand, having proved an attractive target for outside investment.

“The spare engine leasing market is mature, well established and very competitive,” he writes, adding: “Spare engines are perceived as an attractive investment to many people. They have a predictable annuity stream when they are on lease and retain value longer than aircraft. This is due to the ease of moving engines between operators of aircraft as well as the large quantity of parts that are replaced during each overhaul.”

However, Janagan also warns that a downturn might be approaching and that “asset owners need to be ready to deal with aircraft being returned early due to capacity reductions as well as aircraft being returned from bankrupt airlines”.

Factors that may herald the end of the present period of high demand include rising oil prices and the potential for system-wide capacity adjustment.

Currently, though, demand for spare engines is high due to longer aircraft service lives and spare parts shortages that are extending overhaul times. Exacerbating this is limited MRO capacity.

“Teething problems linked to new generation engines, limited MRO capacity, high fleet utilization and limited aircraft retirements, have all conspired to keep the spot market very tight for spare engines, says Janagan.

To find out more about the spare engine leasing market pick up the forthcoming Engine Yearbook 2019.

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