WHY ARE AIRLINES LEASING MORE AIRCRAFT?
January 2018
The Role of Operating Lessors
Globally, airlines operate a fleet of more than 27,000 commercial jet aircraft valued at over $696 billion (active and parked aircraft). Airlines rely heavily on third-party debt and equity to finance these capital-intensive assets. Third-party equity to finance the aircraft has increasingly been provided to the airline industry by aircraft operating lessors which acquire and lease aircraft to airlines as their lessees.
Today, over 13,300 commercial jet aircraft, valued at approximately $331 billion, are owned by operating lessors and leased on this basis to the global airlines, representing more than 49% of the fleet by value.
An aircraft operating lease is a contract that permits airlines to use, operate and maintain the aircraft, but does not provide the lessee with ownership rights in the asset. For the lessor, the aircraft subject to lease are accounted for as assets and depreciated as such. For lessees, accounting has historically been off-balance sheet, without the recording assets or liabilities, which can improve financial ratios. An operating lease must not (i) transfer ownership to the lessee, or (ii) provide the lessee with bargain purchase options.