How low can LDFs fall?

Eleanor Steed
By Eleanor Steed December 11, 2017 17:55

How low can LDFs fall?

ease rates factors have fallen to the 0.5 mark as an average for an eight-year lease on a 737MAX-9 with the vast majority of deals not having maintenance reserve conditions attached – all of this on an aircraft that should have a C check in year nine. All the while, as large lessors are being outbid on aircraft on a daily basis, airlines are starting to ask the fundamental question of smaller lessors – will the company be around for the entire lease term?

As airlines force down lease rates they can see that the deals they are taking are economically unviable. One airline that has recently signed a deal on MAX aircraft described the bidding process as “incredible” with rates and conditions so low and lax that they cannot see how the lessor will make a profit. Although the airline recognises that this is good for their business, they are actively removing smaller lessors with brands that they do not know well from the RFP bidding process because they are worried they will not see out the lease terms intact.

Will the big lessors win in the long run? One thing is for sure – the deals being offered by at least one of the top five lessors indicate a wish to drive others from the market. It also indicates aircraft were without doubt purchased at airline rates or better.

Eleanor Steed
By Eleanor Steed December 11, 2017 17:55