The supply-demand imbalance in the aircraft market is likely to persist for at least three to four years, believes Steven Udvar-Hazy, the executive chairman of Air Lease Corporation.
As a result, lessors are set to benefit from rising lease rates and asset values, with Udvar-Hazy noting on a recent earnings call that “the current supply-demand imbalance is more strongly in our favor than we've ever seen before during our long careers.”
Udvar-Hazy ran what was once the world largest aircraft lessor, ILFC, after co-founding the company in 1973.
He added: “This is the actual reality of the current environment, and we do not see a realistic way of changing over the short- to medium-term given the underlying trends in supply and demand. In fact, these imbalances are very likely to stay with us for at least 3-4 years in the future.”
While aircraft starting new leases today are subject to rates agreed upon two years ago, Air Lease Corporation (ALC) CFO Gregory Willis noted that 12-year lease contracts the lessor recently signed for Airbus A320neo aircraft are at rates about 15% higher than in 2022.
ALC has also been hurt by supply chain disruption when its own order pipeline is disrupted, with Hazy noting 12 new Airbus and Boeing aircraft did not arrive as it had previously expected in the first quarter of this year.
Some analysts wondered whether all this turmoil would spur the emergence of a challenger to the Airbus-Boeing duopoly, but ALC executives noted that even if this were possible in the short term—which it is not—any such competitor would face similar issues to the incumbents.
“Those [potential competitor] manufacturers have to deal with the same supply chain, the same engine guys, the same companies that make avionics, the same companies that make hydraulic pumps, the same companies that make galleys and seats,” Hazy pointed out.
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