Last August 27th., we talked about BOC Aviation, a Chinese commercial aircraft sales and leasing company, who has placed an order with Boeing for 80 aircraft. But who are these big spenders? How many aircraft do they have at their disposal? Who are their clients? What are the advantages of this business? How much does it cost to rent an airliner? We take a closer look at this little-known market.
The two best known companies are the American GECAS, with over 1,600 aircraft, and the Sino-American AerCap, formerly ILFC which has 1,300. The Chinese BOC Aviation, both American companies ALC. and CIT, the Irish SMBC Aviation Capital, and Kuwaiti ALAFCO also own several hundred aircraft.
Two-thirds of commercial aircraft in service around the world do not really belong to the airlines that operate them. They are rented for a set period, usually between three and four years. American Airlines, Air China, Air New Zealand, British Airways, Etihad, Emirates, Korean Air, Air France... the list is long. GECAS, for example, claims 230 customers from 75 countries around the world.
In fact, the strength of these leasing companies, is that they buy ‘planes from aircraft manufacturers by the hundreds. Today, AerCap for example, is one such company, and by far the biggest customer of Airbus and Boeing. In buying these aircraft in large quantities, these lessors benefit from extremely attractive prices from manufacturers. They then rent out these aircraft to companies who do not have the same leverage to negotiate. For the latter, this solution also provides flexibility to adjust the size of their fleet based on market demand.
THE RENTAL RATES
A Boeing 737, or an Airbus A320, can be rented at around 200,000 dollars per month, whereas an Airbus A330 will cost you between 500,000 and 900,000 dollars. If you have just a little more money lying around, why not go for a Boeing 777 ? O.K., it’s over a million dollars, but even so, that’s still 300 times less than the purchase price of a new aircraft.
All that airlines have to do is a little number crunching to see which is the most profitable operation.