Aircastle has no plans for any new technology aircraft orders in the near future due to the long wait time for deliveries.
“We are not close to anything… unfortunately with the Airbus A320neos and 737 Maxs you are looking at the end of the decade, unless we do sale and leaseback activity,” said Ron Wainshal, chief executive officer of Aircastle on a third-quarter earnings call.
Wainshal admits the lessor is interested in all new technology aircraft, such as the Boeing 787 and Airbus A350, as well as narrowbody units.
“The issue right now is that when you look at the next generation of airplanes, you have a really, really long way to go before you get any product,” he says, adding Aircastle is “risk-averse about capital commitments going out for many years”.
According to Wainshal. the farther out the delivery from the order, “the more risk you take in terms of who will your customer be, what will the rental profile be, how you will pay for the aircraft and finance it.”
During the third quarter, the lessor impaired a mid-age Boeing 737-700 for $8.9 million, which represented about 35% of its prior carrying value.
According to Wainshal, the aircraft had gone through “a few customer bankruptcies” and during one of those transitions, the lessor invested “a fair bit of money”, contributing to a high carrying value.
The lessor’s monitoring list of aircraft, which it considers susceptible to impairment charges, consisted of 11 aircraft with a combined net book value of $208 million, or roughly 4% of its fleet and net book value at 30 September.
“Although the monitoring list is an imperfect indicator, it’s important to note that the carrying value of aircraft on this list has been trending downward as we have been growing the portfolio and actively managing it,” he says.
In the third quarter of 2011, this list consisted of 26 aircraft with a combined net book value of $388 million, or 9% of the fleet’s net book value at that time.