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Aircraft lessor Avolon sees supply chain issues persisting into 2025
Global Banking & Finance Review®
Company
By Padraic Halpin
DUBLIN (Reuters) -Aircraft manufacturers are stabilising production runs but problems will likely persist in the supply chain as they ramp up deliveries in the next two years, the head of the world’s third-largest aircraft lessor said on Thursday.
A rapid post-pandemic recovery in air travel has left planemakers and smaller suppliers struggling to keep up with demand amid rising costs, parts shortages and a scarcity of skilled labour.
“We continue to see increased levels of stabilisation coming to the production runs,” Avolon CEO Andy Cronin told Reuters in a telephone interview, adding not to underestimate the challenges ahead in the next two years.
“While we’re continuing to try to ramp (production) very aggressively, we’ll continue to see problems somewhere in the supply chain.”
Avolon on Thursday posted a 14% year-on-year rise in second quarter lease revenue to $613 million.
Cronin said this showed increasing demand for planes across the globe, even as parts of Asia and China recover a little bit slower than anticipated.
The Dublin-based firm committed last month to buy 20 Airbus A330neo aircraft, and said it is already in advanced talks on placing some of the new Airbus planes.
Its Airbus purchase followed another recent order for 40 Boeing 737 MAX 8 planes.
Cronin predicted lease rates would rise further after market rates for Airbus A330-300s and Boeing 737 MAX planes jumped 30% and 12% respectively in the first half of the year versus the second half of 2022. Other models rose by high single digit percentages.
Cronin said India’s fast-growing airline industry potentially faces higher leasing bills amid the bankruptcy of airline Go First.
Foreign lessors are currently blocked from reclaiming planes caught up in the bankruptcy.
Avolon has no exposure to Go First but has leased jets to fellow Indian carriers Akasa Air and Vistara.
Cronin said unless a resolution is found soon, there is a risk that sale leaseback financing in India is reduced.
“I think there will always be people willing to do it, but it will certainly increase costs for the airlines,” he said.
(Reporting by Padraic Halpin; Editing by Jan Harvey and Emma Rumney)
Aircraft financing refers to the various methods used to fund the purchase or lease of aircraft, typically involving loans or leasing agreements.
Leasing in aviation is a financial arrangement where an airline pays to use an aircraft for a specified period, rather than purchasing it outright.
Supply chain issues refer to disruptions in the flow of goods and services from suppliers to manufacturers to consumers, often affecting production and delivery.
Lease rate is the cost incurred by a lessee for using an asset, such as an aircraft, typically expressed as a monthly or annual fee.
The aviation industry encompasses all aspects of air travel and transportation, including airlines, aircraft manufacturing, and airport operations.
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