AerCap's chief executive officer Aengus Kelly sees market conditions in Asia favouring relatively short-haul operations with the Airbus A330-300 model.
Airbus has sold 43 new A330-300s since the beginning of the year, 31 of those to Asian carriers Philippine Airlines and Garuda Indonesia.
During an analyst call on the third quarter results, Kelly said Asian carriers, instead of operating A320 or a Boeing 737s on some routes, are updating to the small wide-body aircraft.
"The A330-300 is being utilised effectively as a short-haul aircraft in Asia. The reason is that, in Asia, it's an emerging market. Infrastructure is limited. So airlines know they can fill the airplanes, but they just don't have enough airports and enough slots to satisfy the demand," he says.
"And that's evidenced by the average stage length that an A330 flies these days is 750 - 1,750 nautical miles, which is a short-haul aircraft. But it's just that they need to operate them in Asia, because they have the passengers to fill the aircraft. And there's no sign of that demand changing."
Kelly says the A330 is one aircraft that has seen an upward movement in lease rates. "When I say upward movement, it's important to note what we're talking about is on the net interest basis, of course. Because if you go back to 2007 when interest rates were 6%, obviously the lease rate was higher than it is today when 10-year treasuries are at 1.65% or 1.67%."
The A321 is also an aircraft with an upward movement in lease rates, according to him. "This is an asset with a significant demand for at the moment. We did have a package of seven-year-old A321s, where there was competition between an Asian flag carrier and a low-cost carrier in the American hemisphere. We ended up going with the Asian flag carrier."
On the A320 model, Kelly says the lease rates have just started to flatten out at this point. "We don't see any further degradation there."
He says A319 lease rates declined between 2011 and the first half of 2012. But as the A320 lease rates firmed up earlier this year on the A320 model, Kelly sees this trend developing in the A319 market.
"This is driven by the same characteristic that underpins all aircraft value and lease rates, which is the diversity and size of the user base of the aircraft type. Simply put, if an aircraft has a large user base, it will always find a home. If it does not, then the value of the aircraft and lease rates will be highly volatile.
"As the A319 has such a large installed user base, and utilises the most fuel-efficient technology in the market, there will always be a home for the aircraft, unlike old technology assets. The tangible evidence of this is that in 2012 alone, there were 14 new operators of the A319. These include airlines such as Allegiant, Aer Lingus, Thomas Cook, and Fastjet. And we are seeing increased demand from our customer base for this aircraft type."