The Future of Aircraft Lease Returns

Aircraft leasing has been a staple in the aviation industry, involving many different players from lessors, airlines, MROs and the OEMs. Ever since Aer Lingus started the idea of leasing out their 747s in the 1970s, the leasing industry has grown significantly compared to where it first started.

With the advancement of technology in recent years, business practices have also taken a change, together with the leasing industry. Much of the practice now has change significantly over the years, and for the future years to come too. Looking from that perspective here are some insights on how the future of aircraft lease returns will be.

1. Technological Advancements:

• Artificial Intelligence (AI) and Machine Learning (ML):?The bulk of time spent during lease returns is managing an asset that has not been properly tracked during its lifetime This includes overage parts, aircraft/engine components and loose engine LLPs such as fan blades. AI and ML will play a significant role in predictive maintenance, optimizing lease return schedules, and enhancing decision-making processes. These technologies can analyse vast amounts of data to predict maintenance needs, reducing downtime and unexpected costs – speeding up and making the decision-making process more accurate.
• Blockchain Technology:?Taking a leaf from fintech, blockchain can provide a secure and transparent way to manage and verify maintenance records, lease agreements, and transaction histories. This can make data and information sharing much easier and secure – eliminating potential disputes and maintaining data privacy between lessors and lessees.

2. Sustainability and Environmental Impact:

• Green Leasing Practices:?As the aviation industry moves towards sustainability, there will be a greater emphasis on green leasing practices. This includes the use of more fuel-efficient aircraft, sustainable materials, and practices that reduce the environmental impact of aircraft operations and maintenance. Engine OEMs have started green lighting the usage of sustainable aviation fuels (SAFs) and it can be a norm in the coming decades sooner or later for extensive usage of such fuels.
• Carbon Offsetting and Reporting:?In some cases, current lease agreements have already included engine derate and engine wash requirements with the idea of lowering the thermal stress on the engines, which indirectly in turn makes the engine more efficient and burn less fuel. To build on this, future lease agreements may include clauses related to carbon offsetting and detailed environmental impact reporting, aligning with global sustainability goals.

3. Regulatory Changes:

• Stricter Compliance Requirements:?As regulations evolve, there will be stricter compliance requirements for aircraft maintenance and lease returns. Lessors and lessees will need to stay updated with the latest regulations to ensure compliance and avoid penalties.
• Global Standardization:?As leasing becomes a global norm, efforts towards global standardization of lease return processes and documentation will simplify international leasing and reduce complexities associated with cross-border transactions.

4. Market Dynamics:

• Increased Demand for Leasing:?With an increase in aircraft orders and the large backlogs airframe OEMs are struggling to meet with the output. This has caused operators to look into bringing out aircraft from retirement and retrofitting their fleet. Airlines are also looking into leasing to support a sharp increase in demand from passengers post-pandemic with aircraft delivery delays hampering fleet growth in the short-term. The demand for aircraft leasing is expected to grow, driven by airlines seeking flexibility and cost-efficiency. This will lead to more competitive leasing terms and innovative lease structures to create more win-win situations.
• Emergence of New Players:?New entrants in the leasing market, including fintech companies and non-traditional lessors, will bring fresh perspectives and innovative solutions to the industry.

5. Digital Transformation:

• Digital Twins:?The use of digital twins—virtual replicas of physical aircraft—will become more prevalent. These digital models can be used to monitor the condition of aircraft in real-time, predict maintenance needs, and streamline the lease return process. Couple this with AI and ML, financial and technical models can be even more accurate.
• Enhanced Connectivity:?Improved connectivity through IoT and advanced communication networks will enable real-time data sharing and collaboration between lessors, lessees, and maintenance providers.

6. Customer-Centric Approaches:

• Personalized Leasing Solutions:?Lessors will offer more personalized leasing solutions tailored to the specific needs of airlines, including flexible lease terms, customized maintenance packages, and value-added services.
• Improved Customer Experience:?Enhancing the customer experience will be a priority, with lessors focusing on providing seamless and efficient lease return processes, transparent communication, and proactive support.

7. Financial Innovations:

• Innovative Financing Models:?New financing models, such as pay-per-use and power-by-the-hour agreements, will provide airlines with more flexible and cost-effective leasing options.
• Risk Management Tools:?Advanced risk management tools and insurance products will help mitigate the financial risks associated with aircraft leasing and lease returns.

By embracing these trends and innovations, the aircraft leasing industry can navigate future challenges and capitalize on new opportunities, ensuring a more efficient, sustainable, and customer-focused approach to lease returns.

This article is based on the personal views of the author and does not reflect the opinions of any organisation or corporation. All technical information is available in the public domain. This article may not be reproduced without written permission from the author.