Root causes of diminished interest predate the pandemic

In truth, long before the pandemic, there was a dip in capital-intensive investments, such as aircraft.

In the wake of the 2008 Financial Crisis, most of the world’s markets got super cautious, and this wariness has never fully dissipated, with regulators imposing much stricter capital requirements on banks before they make capital-intensive investments.

ESG regulations have also dampened interest. Investors can no longer be sure an aircraft will fulfil its life-cycle. The industry is busy plotting a new course where there will be no room for fuel inefficiency.

Huge numbers of the aircraft grounded in 2020 never returned to the skies because their owners thought it more prudent to scrap them for spare parts or sell them on – bad news for the investors who were banking on 20-30 years of full service.

This level of caution continues today: some investors fear new aircraft purchases could potentially become stranded assets as innovation accelerates towards the industry's goal of achieving net-zero emissions by 2050.

It could be argued, therefore, that leasing is a sensible option while they wait it out for the ‘future aircraft’: the fuel-efficient, aerodynamic fleet that will help the industry achieve its 2050 goal.

Besides, the lessors tend to have a much stronger credit rating than the airlines. This gives them easier access to financing, as well as debt and hybrid equity, at much lower rates than the airlines.

Will supply chain crisis stop aviation industry recovery in its tracks?

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