Despite the current attempts to stabilize production, Avolon, the third largest aircraft lessor globally, foresees that challenges in the supply chain will likely continue into 2025. The prediction comes from the company’s head during a telephone interview with Reuters, in which he also stressed the difficulties that lie ahead in the next two years. “We’re continuing to try to ramp up production very aggressively, but we’re likely to continue seeing issues somewhere in the supply chain,” Avolon CEO Andy Cronin stated.
The Impact of the Post-Pandemic Recovery
The recovery of air travel post-pandemic has been swift, leading to a surge in demand that aircraft manufacturers and smaller suppliers find difficult to meet. Rising costs, a scarcity of skilled labor, and parts shortages add to the complex challenges these businesses face. However, signs of increased stabilization in production runs provide some optimism.
Leasing Demand and Revenue Growth
In another positive turn, Avolon reported a 14% year-over-year increase in lease revenue for the second quarter, reaching $613 million. Cronin suggests this upswing indicates a growing global demand for planes, despite some regions like parts of Asia and China recovering slower than expected.
The Dublin-based firm has shown commitment to its growth, as evidenced by its agreement last month to purchase 20 Airbus A330neo aircraft. The company is already engaged in advanced discussions about placing some of the newly-acquired Airbus planes. This follows Avolon’s recent order for 40 Boeing 737 MAX 8 planes.
Cronin anticipates further increases in lease rates following the observed market rates surge for Airbus A330-300s and Boeing 737 MAX planes by 30% and 12% respectively in the first half of the year. Other models experienced high single-digit percentage increases.
Uncertainty in the Indian Market
Meanwhile, the fast-growing airline industry in India faces potential hurdles. The bankruptcy of airline Go First could lead to higher leasing bills, as foreign lessors are currently blocked from reclaiming planes involved in the bankruptcy process. While Avolon has no exposure to Go First, it has leased jets to other Indian carriers like Akasa Air and Vistara. Cronin warns that unless a solution is found soon, there’s a risk that sale leaseback financing in India might be reduced, increasing costs for the airlines.
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