AerCap chief executive Aengus Kelly believes that some of the aircraft leasing sector's newer investors could depart promptly if interest rates rise.
"The aircraft leasing industry has matured," said Kelly during the Airline Chiefs Strategy Round Table at the Farnborough air show today. "For the most part, it's not as risky as it was a few years ago, because there's a lot more funding, stable asset values and liquidity."
However, he questions the stamina of some market participants.
"With the absence of yield [in traditional asset classes], a lot of tourists have arrived," he says. "Those guys will stick around for a while but as soon as rates rise, an awful lot of them will head for the hills because they don't have a platform."
He notes that "people are searching for yield wherever they can get it" – as other assets classes aren't producing the desired returns. "They don't care what asset they invest in; they just care about the return."
Steven Udvar-Hazy, a speaker at the same event, says rookie financiers in the sector do not have the same relationships with customers, nor do they bring in new airlines to the OEMs. "A lot of these newcomers have one commodity: funding."
This arrival of so many capital providers has resulted in yield compression, driven by competition. This is an oft-expressed complaint of the established lessors over the last couple of years.
"You can't just be a guy with a chequebook," says Udvar-Hazy. "It's a long-term business; you have long-term commitments and you have to ride out the waves."
Source: Cirium Dashboard