A “very difficult” engine releasing market due to a surplus of assets is showing signs of improvement, according to Engine Lease Finance’s chief executive officer and president.
“There definitely has been an uptick in the past six months,” said Jon Sharp, speaking at the Ascend 2020 Finance Forum in San Francisco today.
Sharp admits since 2008 there has a been a "steady delcine in the releasing market", and the lessor has approximately 8-9% of its portfolio off lease.
“This has been a very difficult market over the past three years, but prior to 2008, we were running at a lease renewal rate of around 85%, which is good. We also were running with off leases representing less than 2% of the portfolio.”
Sharp blames the difficult leasing market on a surplus of engines brought about by “better airline management” and “overproduction” by the manufacturers.
“Airlines have become a lot more clever at managing their fleets, so there are more engines in the marketplace,” he says. “As soon as there is a drop in demand, airlines takes aircraft of out of service, and take off the spare engines rather than put them through an expensive shop visit.”
Also a “distinct overcapacity” of certain engines types, such as the International Aero Engines V2500, he says, is putting pressure on the leasing market.
“These are the factors we have to deal with.”