ISTAT Jetrader - Winter 2020 - 12

PERSPECTIVES

Leisure passengers may not be
too eager to accept the risks and
discomfort of crowded airports and
high-density economy cabins, while
business travelers have gotten used
to WebEx, Zoom, etc.
RW: Yes. We will have structural
change in the air transport market
depending on the outcome of the
pandemic. Politics will determine
interim support from governments.
Fortunately, for the most part, people
want to travel and interact in person
for many commercial reasons and
leisure travel.
Jetrader: Do you expect some
structural changes in the leasing
community? Already a few smaller
and/or specialized lessors are in
trouble. Will we see some names
disappear, and what could happen to
the fleets of these players?
RW: Consolidation will occur among
leasing companies most likely by
trading aircraft portfolios. I also expect
new entrants on equity or debt who
have no legacy issues. Most legacy
lessors are investing management
time in restructurings or managing risk
positions. SKY Leasing is ready to bid

Jetrader: Already before the crisis
hit, there was a clear softening of
the twin-aisle market, especially
A330s and 777s. Are larger twin
aisles suitable for operating leasing?
RW: International travel will be the
last to rebound from the pandemic.
A330 and B777 widebody aircraft
were already in oversupply prior to the
pandemic. The new generation B787,
A330neo and A350 deliveries were
already causing pressure on A330 and
B777 values and remarketing time.
Airlines will return these legacy aircraft
types when possible or return through a
restructuring. It is possible the airlines
will retain A330 and B777 if lease rates
are low enough. I always remind myself
" You can always rent an aircraft; it just
does not care what price you paid for
the asset. "
Jetrader: Some observers see
smaller planes like E-Jets or
A220 as " optimal " for the current
market. Do you agree, and will this
change again (back to the A321neos
and maybe MAX 10s) once the
recovery starts?
RW: SKY Leasing and my previous
companies have not invested in E-Jets

Airlines will, in the long term, place tremendous
value on aircraft that have the most attractive revenue
per available seat mile, which means the A321neo and
B737MAX9/10 will remain highly desirable assets.
on these aircraft portfolios when they
begin to appear in early 2021. Lessors
who have ABS models will suffer lower
fee income and will need to reduce
overhead. Unfortunately, fixed costs
will need to remain at a certain level
to continue as a fully managed aircraft
leasing entity.
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* T H E O F F I C I A L P U B L I C AT I O N O F I S TAT

or the A220. The SKY view is to stay
focused on the core narrowbody
aircraft and new widebody deliveries.
Our current fleet has over 80% invested
in A321neos and A330neos with an
average age under one year. The
average lease term is over 10 years
remaining. We believe the A220 will

continue to grow market share and
ultimately replace the current A319.
As such, we are evaluating the aircraft
for investment. However, as aircraft
investors, we are making decisions for
the long term, and airlines will, in the
long term, place tremendous value on
aircraft that have the most attractive
revenue per available seat mile, which
means the A321neo and B737MAX9/10
will remain highly desirable assets.
Jetrader: Delays in the neo and
MAX programs extended the lives of
ceo and NGs and kept lease rates at
relatively high levels. Do you expect
a market correction with older kit
being scrapped and midlife ceos
and NGs seeing significant lease
rate reductions?
RW: SKY Leasing predicts that the
older current generation narrow and
widebody aircraft will experience
significant reductions in rent and value
as airlines adjust capacity and return
older less fuel-efficient aircraft. SKY
Leasing has seen these lowered values
during previous aviation cycles, and
during the current pandemic where
rentals and aircraft values can only be
supported by significant traffic growth
from passengers going forward.
Jetrader: What would be the
composition of the ideal lease
portfolio, equipment wise?
RW: The SKY Leasing target portfolio is
70% narrowbody and 30% widebody.
The age is under four years from
manufacturing date. Concentration
upon achieving a mature portfolio will
be under 20% to any one airline.
Jetrader: Prior to the crisis,
lessors were complaining the
market was overheating and sale/
leaseback transactions were done at
" ridiculous " lease rate factors. Will
this change?
RW: Both the sale and leaseback and
order book business models were
under stress prior to the pandemic.
The management teams at each
ISTAT Jetrader - Winter 2020

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