Aircraft Leasing and What to Expect in 2024

About Aircraft Leasing in Ireland: Since its inception in 1975, Ireland has become a global leader in the industry managing over 60% of the world’s leased aircraft. Its resilience has been demonstrated in recent years overcoming two notable challenges, COVID-19 (which decimated air travel demand) and Russia’s invasion of Ukraine (subsequent loss of >$10bn aircraft assets). For airlines, leasing aircraft is a cost-effective way for to increase their fleet/ replace older aircraft without the need of a significant upfront capital investment.

At Genesis, our primary business is the leasing of aircraft and engines to counterparts globally. We have developed additional verticals that complement this and support the global airline customer base such as component trading platform via ReGEN which disassembles aircraft at end of life and recycles the useful material back into the supply chain as well as investment in Heston Airlines, a specialist charter airline that provides supplementary aircraft capacity to airlines globally. From my review of the industry and macroeconomic conditions, below are trends I expect to continue in 2024:

#1: Continued air travel recovery reaching 2019 levels in 2024: Revenue Passenger-Kilometres (RPKs) is a measure of passenger demand, in September 2023 RPKs reached 97% of 2019 levels (IATA) making substantial progress towards full recovery. By 2040, passenger demand is expected to double, growing at an annual average rate of 3.4% (IATA). GDP is also a fundamental proxy for air travel which is forecasted at 2.7% (Bloomberg) for 2024. About two thirds of this growth will be driven by Asia-Pacific which continues an aviation recovery trajectory albeit behind other regions (e.g., North America, Europe) owing to its restrictive air travel movements during COVID-19.

#2: Strong value recovery to current technology aircraft: This is driven by: (i) recovery of values that were noticeably readjusted during COVID-19 (e.g., narrowbody aircraft values fell between 15-30%); and (ii) the tightening of aircraft supply and demand. Aircraft manufacturers such as Airbus and Boeing (the ‘’OEMs’’) reduced production during COVID19 to align with market conditions. OEMs therefore lost two years’ worth of production and have been unable to date to ramp up production in line with rising demand. Challenges such as labour and raw material shortages, production quality issues, certification delays (effect from the MAX aircraft) and engine reliability issues persist. As a result, aircraft appraisers are returning values to current technology aircraft and future values are expected to increase as escalation take effect and supply chains remain constrained. In my view, the OEMs continue to downplay near-term supply pressure, with lead times reaching >7 years for the popular A320 family (a narrowbody aircraft used in Europe by airlines like Vueling and EasyJet). It is also likely that lease rates for mid-life aircraft are to have more upside than their values in the near term.

#3: Costs and resource issues to remain for airlines: The inflationary environment, rising fuel prices and staffing costs have eroded airline profitability despite their efforts to offset this by increasing yields. This is in addition to capacity issues (as outlined), staffing shortages and disruption events. If these challenges persist, airline’s cash flows and balance sheets will weaken. Despite this, the industry’s resilience and continued recovery trajectory is expected to return to profitability in 2023, only three years after its historic $140 billion loss in 2020.

About the author: Leanne Brolly, Senior Risk Manager at Genesis Aircraft Leasing (‘’Genesis’’) and DCU graduate of Msc in Finance and BA Accounting & Finance. Genesis is a commercial leasing platform headquartered in Dublin, founded in 2014.