SINGAPORE: Alton Aviation Consultancy, a global aviation consulting firm, anticipates that the cost of aircraft rental, especially narrow-body planes, will continue increasing as air traffic demand continues to recover from the Covid-19 pandemic and airlines globally continue to expand their fleet to accommodate such demand.
Alton Aviation managing director for Asia Pacific Adam Cowburn said there had been an increase in rental rates for many aircraft types in the last 12 months to 18 months as air travel demand continued to recover.
"There certainly has been an acceleration of (aircraft) rental rates driven by a few things, most notably the supply-demand environment and to a lesser extent higher interest rates.
There are more airlines now chasing the same aircraft deals," he told Business Times in an interview recently.
Cowburn added that the changing supply-demand balance has been driven by aircraft manufacturing delays attributable to global supply chain issues.
Speaking beyond the global supply chain issues that are impacting the delivery of new aircraft, Cowburn said the issues would likely continue to remain.
"The whole thing is not driven just by supply chain but there's the engine issues as well particularly on narrow-body airplanes. I think it's creating a significant disruption whose effects will continue to be felt in the coming years," he added.
Some of the engine issues have been associated with manufacturing issues with parts in certain Pratt & Whitney GTF engines, leading to the grounding of aircraft powered by such engines for inspection.
Over half of commercial airlines in the world are leasing their airplanes from aircraft leasing companies that have increased their rates mostly for narrow-body aircraft.
According to an article by the Financial Times, an Airbus A321neo (new engine option) lease rates per month rose to some US$420,000 (RM1.96 million) from US$340,000 (RM1.58 million) while Boeing's B737 MAX 8 lease cost is around US$360,000-US$370,000 (RM1.68 million-RM1.73 million) a month.
Cowburn said there is significant demand for single-aisle aircraft, including from low-cost carriers in the Asia Pacific region.
Such regional budget airlines include Malaysia's AirAsia, India's IndiGo, Vietnam's VietJet and Indonesia's Lion Air.
He shared that certain airlines had anticipated more robust deliveries of aircraft from Airbus and Boeing, or have aircraft that will be unexpectedly parked for inspection, and have sought to extend current leases of aircraft rather than return them to lessors.
This has resulted in fewer aircraft being available in the market for other airlines, driving lease rentals higher.
"Accordingly, airlines are also falling in love again with the older version of narrow-body aircraft such as the current generation 737-800, A320-200, and A321-200."
"In dynamic markets with some uncertainty, with known reliability and operating costs, I think those aircraft will continue to have, at least in the near term, strong demand," Cowburn said.