Used jets rents surge 44% as airlines pay up to buoy fleets

Paris: Two out-of-production Airbus and Boeing jet series have become hot commodities, with plane values and monthly lease rates soaring for airlines fortunate enough to procure the aircraft.

Used Boeing 737NG and Airbus A320ceo single-aisle models are now valued at about $20 million or more, according to analysts at Ishka, which specializes in aircraft pricing and valuation.

The decade-old planes are experiencing an unexpected surge in popularity at an age when monthly rents and resale prices usually decline. The workhorse aircraft still dominate many airlines’ single-aisle fleets, even as newer 737 Max and A320neo versions enter service.

These continue to hold back new-aircraft production, while an even more disruptive issue with popular Pratt & Whitney engines requires time-consuming rework - sidelining younger A320s and worsening repair-shop backups across the globe.

For Airbus A320ceos, the figure is under 25. There are even fewer younger jets available - about 25 across the 737 and A320 families.

Carriers like Deutsche Lufthansa and Ryanair Holdings are holding onto older aircraft to fill the gap, further tightening supplies. On Thursday, Alaska Air Group said that American Airlines Group would purchase 10 of its used A321neos.

Some 75 per cent to 90 per cent of scheduled lease expirations are currently being extended, said Rob Morris, global head of consultancy at Cirium Ascend.

As a result, lease rates on 10-year-old Boeing 737-800s, for example, are 44 per cent above January 2022 levels - an unheard-of gain - and above prices at the outset of the pandemic, according to Ishka.

The rare pricing twist has bestowed a windfall on leasing firms like Air Lease, with single-aisle rents up 30-40 per cent in the past year, according to co-founder Steven Udvar-Hazy.

At a Deutsche Bank conference last month, Udvar-Hazy described a typical situation for a 737-800 coming off of an eight-year lease. “The airline that currently has it wants to extend it,” he said. “But I’ve got five other airlines that want that airplane because they need lift.”

The shortage is set to worsen next year with large-scale groundings of newer A320s powered by Pratt’s geared turbofan. Parent RTX may provide an update with its October 24 earnings report.

Some 600 A320neos could be parked in the first half as inspections peak, Cirium Ascend’s Morris estimates. Bernstein analyst Douglas Harned, meanwhile, sees the pain spreading to GTF-powered Airbus A220s and Embraer’s E2.

“What’s driving this is the unreliability of the current technology,” said George Ferguson, an analyst with Bloomberg Intelligence. “Values are moving pretty quickly.”