Lessors navigate narrowbody freighter market challenges

Prolonged strong demand from the passenger segment for narrowbody aircraft and engines is still creating a challenging freighter leasing market, especially on 737-800s, speakers on a panel agreed at Cargo Facts Symposium 2024 in San Diego last week.

The panel on freighter aircraft and engine leasing, moderated by Mylene Scholnick, senior manager and head of worldwide fleet and carriers at Amazon Global Air, discussed recent trends and developments in the segment, including market saturation and increasing costs. The panelists were:

• Dora Alexander, executive vice president of Hamden Aviation;
• Ryan Anderson, vice president of commercial in the Americas at Aero Capital Solutions;
• Maik Falkuss, director of sales in North America at MTU AENA; and
• David Ellis, SVP and global head of asset transactions at GA Telesis.

“Right now, there are probably over fifty 737 freighters for sale currently being actively marketed,” Alexander said. “So that gives a bit of a scope of what we’re talking about in terms of creating that downward pressure on lease pricing and people making different decisions on leasing out these engines.”

Some lessors have removed engines from both A321Fs and 737-800Fs immediately after conversion and leased out the engines separately for passenger use, the panel said.

“Lessors, depending on how they’re structured, have the ability to be patient,” Anderson said. “And let’s take the -800, for example. As long as lease rates are as high as they are for the [CFM56-7B], a lessor can afford to be potentially patient with that airframe in storage while those two engines are out creating value for customers and for lessor shareholders in the market.”

GA Telesis’ Ellis said that the industry has not yet seen 737NG freighters replacing 737 Classics in large numbers, while operators are deferring shop visits for their engines and turning to engine leasing instead.

“Couple that with a high volume of aircraft converted, the Classics staying in service longer — it’s sort of a perfect storm of the freighter values suffering while at the same time, engine values have gone up,” he said.

Tune in to this week’s “Cargo Facts Connect” to hear more from the panel at Cargo Facts Symposium 2024.

Follow Cargo Facts’ coverage of Cargo Facts Symposium 2024 on our dedicated page.