Airbus Single-Aisle Lease Rates Restored as Oversupply Eases

Airbus Group (AIR)’s lease rates for single-aisle aircraft have rebounded from a drop prompted by the collapse of Spanair SA and the grounding of Indian carrier Kingfisher, the planemaker’s head of aircraft finance said.

“Rates have substantially recovered, after an earlier overhang with the ex-Kingfisher and Spanair planes,” said Nigel Taylor, the aircraft-finance chief of Airbus’s commercial plane unit. Rising deliveries of narrow-body planes to lessors will also continue to support rates, he said.

Lessors funded 44 percent of Airbus deliveries last year, when the Toulouse-based planemaker achieved a record 626 deliveries, according to Taylor, who was speaking in an interview at an aircraft finance conference sponsored by Airline Economics in Dublin .

The improvement in A320 series lease rates has helped Airbus sell down A320 aircraft that American Airlines Group Inc. had ordered from Airbus in 2011 with the view to lease them. American ordered 130 of the current-version A320 series planes to be leased, and agreed to buy directly another 130 of the upgraded A320neo versions.

Airbus sold to lessors or other investors all 20 of the single-aisle planes it delivered to American in 2013 and has already sold forward “quite a few” of the 35 single-aisle planes to be delivered to American this year, said Taylor.

Dublin-based lessor Avolon Leasing Group bought the first eight planes to go to American in 2013, Avolon Chief Commercial Officer John Higgins said in a separate interview in Dublin.

Record Year

Last year was one of Airbus’s best ever, with record deliveries, “and very limited use” of the planemaker’s balance sheet to manage aircraft deliveries, Taylor said. There was no increase in customer-finance exposure within Taylor’s business, though Airbus did take back some asset-management aircraft including A319s and A340s that added to the balance sheet and that Airbus is now seeking to sell off, he said.

While Airbus previously offered residual value guarantees on some aircraft to encourage sales, including on four-engine A340s, that practice has been largely phased out.

Financing conditions are better now than they’ve been in several years, with commercial-bank pricing coming down and greater access by non-U.S. carriers to capital markets, or financing aircraft deliveries with bonds, Taylor said.

“Residual value guarantees given in the past often were linked into financing structures that don’t exist anymore,” he said. “Access to capital is relatively easy today. There’s a huge amount of liquidity in the market.”

To contact the reporter on this story: Andrea Rothman in Toulouse at aerothman@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.