High Liquidity Need Anticipated For New-Gen Engine Leasing

LONDON—Engine lessors see opportunities in the influx of new-generation engines anticipated to enter the market over the next two decades but tapping into these will demand a high level of liquidity from relatively few market players.

Speaking at Aviation Week’s Engine Leasing, Trading & Finance conference in London on Wednesday (June 4), Darren Wormald, Chief Operating Officer of Engine Lease Finance Corporation (ELFC), said that the industry is entering a period of “gradual but significant” worldwide fleet renewal between now and all the way to 2042, with around 42,000 new aircraft deliveries projected in that period by Boeing and Airbus forecasts. “It’s going to be a relatively long period of transition,” Wormald said. “This is a major event as an industry to transition from post-production fleets into new technology fleets and new aircraft deliveries across the globe.”

ELFC projects around 1,900 new technology spare engines – engines that support the existing fleet and installed engines on aircraft already delivered - were in service at the end of 2024, with another 3,400 to be delivered by 2033. “That’s around $85 billion worth of new equipment to be delivered into the spares market – that’s roughly about $10 billion a year. That’s a huge demand for liquidity in just the spare engine market,” Wormald said.

Wormald expects around 800 of those engines to be financed through sale and leaseback. “That’s still around $20 billion so that’s a significant liquidity demand in this market,” adding that the engine sale and leaseback market segment is comprised of a limited number of players compared to the aircraft leasing market with few new entrants in the market over the past decade. “Airline customers are going to need liquidity and there are a small number of players at the moment able to provide that liquidity.”

ELFC focuses on mid to long-term lease agreements with a customer based comprised of airlines, MROs, OEMs and aircraft lessors. The Shannon-headquartered engine lessor’s portfolio is comprised of current and new generation narrowbody and widebody powerplants.”