China is one third of global aviation leasing market
An invasion of the low-cost Chinese funding shakes up the global aircraft leasing market, with Chinese money now accounting for 28% deployed by leasing companies around the Globe, according to Flight Global.
«The flood of Capital from China has reset the marketplace, changing the dynamic not only of aircraft leasing but the airline industry as a whole», says global head of consultancy Rob Morris.
China’s efforts to be a part of the leasing nation began in 2008 with just 5 % of the market. Since then the volume of Chinese financial activity in aviation has grown by 860%. Total capital deployed by airplane lessors has grown 51% to $261 billion, with $71 billion coming from Chinese institutions, over the recent years. Without Chinese capital, the growth rate is much weaker — some 15%.
«From a modest share of the leasing marketplace 10 years ago, Chinese capital now accounts for over a quarter of it, and we forecast it will fund over a third of it in just five years’ time», adds Morris. Aircraft lessors and their clients take advantage of Chinese involvement, known to be lower rate — cheaper money, to increase the size of their fleets. A flood of Chinese capital, which is cheaper than established financial institutions, has provided airplane lessors with greater reason to make their fleets larger. Chinese capital is so cheap, the lease rates softened.
The overall number of aircrafts leased worldwide is 8,300 machines. FlightGlobal forecasts that this is to grow by around 50% to 12,300 aircraft over the next decade, related to 55% of all new aircraft deliveries over these 10 years. Leasing is the essential part of the aircraft market with 40% of deliveries going to lessors that rent them to commercial airlines, rather than carriers themselves.
China is expected to be the single fastest growing market for aircraft sales in the next 20 years surpassing the major one. International Air Transport Association has recently released its prediction for China expected to replace the US as the world’s largest aviation market.
Photo: Leonid Faerberg (Transport-Photo Images)