Talk of strong—some say unprecedented—demand for narrowbody lift has been heard for some time. Empirical evidence in the wake of the recent struggles of several European carriers suggests that, if anything, the market is tightening even more.
"Despite recent airline bankruptcies at Air Berlin and Monarch, we've seen an uptick in single-aisle demand, both new and used, such that the Monarch and Air Berlin aircraft across most lessors have been rapidly placed," John Plueger, Air Lease Corp. president and CEO, told analysts on a recent earnings call. Air Lease had five narrowbodies with the two carriers.
AerCap found itself with 12 narrowbodies back in its hands. As of Nov. 2, it had firm or verbal agreements to put 10 of them in service with new airlines, and expected deals on the remaining two soon enough.
Equally importantly, the aircraft are being snapped up at what Plueger terms "normal market rates."
Strong traffic growth is the primary driver. IATA figures show that global revenue passenger kilometers were up 7.7% year-to-date through September.
The tight market is getting help from struggles that the Airbus A320neo program is facing. Both of the aircraft's engine suppliers, CFM and Pratt & Whitney, have been hit with production delays this year that have slowed the delivery pipeline. The problem is more severe with Pratt's geared turbofan; CFM executives are confident that their gap will be closed by yearend.
"The delivery delays of Airbus A320 and A321neos are causing those impacted airlines to cover their needs by extending current leased aircraft and by adding current-generation aircraft," Plueger confirms. "We've seen an overall uptick in single-aisle demand, both new and used. The single-aisle aircraft marketplace is very, very strong."
Rising demand helps lessors place aircraft, but it can create challenges for adding them to portfolios. However, one advantage that lessors with delivery slots have is that they can capitalize on inevitable delivery-schedule changes created by airline deferrals. Air Lease Corp. Executive Chairman Steven Udvar-Hazy confirmed that his company is talking to Boeing about accelerating some 737 delivery positions.