Growing number of air passengers and increase in the volume of freight transported
Increase in the number of air passengers coupled with an increase in the volume of freight, and advancement in aircraft and airport infrastructure in less developed countries are some of the key factors likely to drive the growth of aircraft leasing market. Also, as leasing of aircraft provides tax and balance sheet advantages which is beneficial for the growth of aircraft leasing market.
Increasing trade of industrial commodities
Developments concerning aircraft leasing industry include improvements in airport infrastructure in the developing economies, globalization and increased trade of industrial commodities. Moreover, low interest and lease rates along with the rising demand of low-cost carriers, falling crude oil prices, and ease of travel are some factors that drives the growth of aircraft leasing market.
Government Regulations and Taxation Policies
The presence of stringent and vaguely defined leasing regulations and taxation policies are expected to hinder the growth of aircraft leasing market. Additionally, asset recovery risk that is associated with airline bankruptcy is also another factor that is likely to challenge the growth of aircraft leasing market.
The global aircraft leasing market is estimated to grow at a CAGR of around 5% over the forecast period i.e. 2019-2027. The aircraft leasing market is expected to maintain a steady growth rate during the forecast period attributed to the rise in low cost aircraft carriers. Another factor known to have strengthened the market demand includes set up of supportive commercial aviation rules, increase in the number of air passengers in tandem with the volume of freight transported. On the basis of leasing type, aircraft leasing market is segmented into dry and wet leasing. Out of which, dry segment is expected to witness major market share as dry leasing leads to the reduction in expenditure for training personnel and aircraft maintenance, it is contributing majorly to market growth.
The Government awarded more than 300 routes to airlines and helicopter operators under RCS-2 in January, 2018. Whilst being largely regional in focus greater connectivity will also feed additional passengers to the larger aviation centres creating a need for larger aircraft types. With the increase in the number of these new routes also expected to grow aircraft leasing market.
Lease rates for an aircraft depends upon its age, lease terms, and creditworthiness of an airline, besides the demand. Globally passenger demand continues to be on rise and lessors have not encountered difficulty in placing the used NG aircraft with carriers. According to the International Air Transport Association (IATA), the air travel industry has a long-term annual growth rate of 5.5%. Boeing, the plane manufacturer, expects air traffic growth of more than 4.5% per year over the forecast period. It also predicts that the global fleet size will double. Rising incomes and a growing middle class in emerging markets will likely continue to be the biggest drivers of growth.
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Our-in depth analysis of the global aircraft leasing market includes the following segments:
By Aircraft Type
By Revenue Sources
On the basis of region, the aircraft leasing market is segmented into five major regions including North America, Europe, Asia Pacific, Latin America and Middle East & Africa.
North America aircraft leasing market is anticipated to witness fast growth attributed to the presence of various leasing companies and recovery of economies. Moreover, in North America, the U.S is expected to lead the global aircraft leasing market followed by Canada.
Europe is also expected to witness significant growth in the global aircraft leasing market during the forecast period on account of increase in the number of low cost aircraft carriers
Global aircraft leasing market is further classified on the basis of region as follows:
In 2023, market players might incur losses due to huge gap in currency translation followed by contracting revenues, shrinking profit margins & cost pressure on logistics and supply chain.
Controlling Inflation has become the first priority for global economies from last quarter of 2022 and to be followed in 2023. With skewed economic situations, rise in interest rate by governments to control spending and inflation, spiked oil and gas prices, high inflation, geo-political issues including U.S. & China trade war, Russia-Ukraine conflict to intensify the global economic issues.
The interest rates in the U.S. may be less sensitive in 2023 as compared to 2022; sigh of relief for businesses. Positive business sentiments, healthy business balance sheets, growth in construction spending (private construction value in 2022 stood at $1,429.2 billion, 11.7 percent (±1.0 percent) above the $1,279.5 billion spent in 2021, Residential construction in 2022 was $899.1 billion, up by 13.3 percent (±2.1 percent) from $793.7 billion in 2021, non-residential construction touched $530.1 billion, 9.1 percent (±1.0 percent) above the $485.8 billion in 2021.) showcases minimal impact of recession in the country.
Similarly, spiked spending in the European and major Asia economics including, India, China & Japan to showcase less impact on the global demand.
Author Credits: Ipsheeta Dash, Sadaf Naaz