Aercap Says Cheap Oil Helping Older Planes Headed for Scrap YardAndrea Rothman
The drop in oil prices has created a market for older jets that might otherwise have been relegated to the scrap yard, the head of the world’s biggest aircraft lessor said.
Aercap Holdings NV leased out three out-of production Airbus NV A340s in the last two weeks and two Boeing Co. 747s, both fuel-intensive four-engine models that the lessor had previously earmarked for dismantling, Chief Executive Officer Aengus Kelly said in an interview at an aircraft finance conference today in Dublin sponsored by Airline Economics.
While older planes previously regarded as too thirsty for flying attract renewed interest from operators, airlines have shown no signs of moving away from the newest generation of aircraft, as their many years in service make it too risky to count on low oil prices.
“Fuel is airline’s biggest cost item and the most volatile in their cost structure,” Kelly said. “And airlines’ horizons when they’re looking at taking planes go out over 12 years: what happened to fuel in the last three months is completely irrelevant.”
Oil prices slumped about 50 percent last year, the most since the 2008 financial crisis, as the U.S. pumped at the fastest rate in more than three decades and the Organization of Petroleum Exporting Countries resisted calls to cut production.
AerCap has assets valued at $44 billion, with 1,300 aircraft in its portfolio of managed or owned planes. It has 400 aircraft on order, including 200 Airbus A320neos. It hasn’t yet ordered any of Boeing’s next-generation 737 Max models.
The company also owns the world’s largest so-called “part-out shop” that dismantles older airliners to use components and engine parts in jets that are still flying.