The way airlines buy aircraft today makes no sense. The current model doesn’t work for the customers, the manufacturers nor the financiers. The system has to change.
Cheers to Fortune magazine for spotting one possible solution to this problem: hedge funds! (Really.)
Here’s an excerpt, but check out the full article here:
Traditionally, airlines purchased most of their fleets, renting the rest from a few big leasing companies owned by firms like GE (Charts, Fortune 500) and AIG (Charts, Fortune 500), which could afford to ride out the industry’s ups and downs. But hedgies spotted a flaw in the model: Aircraft were financed based on the creditworthiness of airlines rather than the value of the actual planes. And with global demand for travel trending up, the funds bet that the metal could be alchemized into flying gold.