Says 80 Percent Of Existing Leases Will Be Renewed

An analyst for the International Bureau of Aviation ... an independent business consultant to the aviation industry ... says that “New single aisle aircraft deliveries to China will remain at more than 150 per year for next five years and more than 80% of expiring leases will be renewed.”

David Yu, Executive Director Asia Pacific from the International Bureau of Aviation, will be discussing the emerging market outlook as monitored by IBA at the 2nd China Airfinance Development Summit in Tianjin, China on September 26th.

According to the International Bureau of Aviation’s online commercial airline database, JetData, there are approximately 800 Boeing 737 Classics and next generation aircraft in China, along with 850 aircraft from the A320 family - average age circa 7.5 and 4.8 years respectively. The majority of these aircraft are on an operating lease structure and IBA predicts that the renewal of these existing aircraft leases in China is far more likely than the aircraft being returned to lessors. IBA estimates that more than 80% of those set to expire in the next five years will be renewed.

At the same time, IBA anticipates that the deliveries of new single aisle commercial jets will average at 65 Boeing and 90 Airbus aircraft per year across the period.

“Although the average aircraft age in China is relatively low, maintenance demand is increasing, and operators are focusing attention on the associated costs," Yu said. "Most leases do not provide for maintenance reserves in the typical operating lease structure so financial provisions for these leases rely solely with the airlines rather than the lessor – they cannot run to the lessor for access to maintenance reserves."

“Lessors and the airlines are taking a much closer interest in maintenance costs now, compared to five years ago”, he adds. “We are seeing interesting strategic alliances between airlines and outsourced providers of MRO and component support with global reach and these are penetrating the Chinese aviation industry with tenacious purpose."

FMI: www.ibagroup.com