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Usually the term of stagnation confers negative connotations on an aircraft type. However, in the context of the torrid market conditions stagnation is positive, potentially signaling the start of an improvement in fortunes.
The market for newer widebodies is improving although yet again there continues to be concern over the number of new aircraft being delivered which is serving to slow the pace of improvement. Over recent months LIBOR has continued to fall such that there now exists the potential for a rate rise. With the international market beginning to enjoy a measure of improvement in terms of premium traffic, operators are once again considering their options. While the acquisition of additional capacity from the used market is still relatively muted, the previous contraction of fleets has become less apparent. The remarketing of aircraft has become slightly easier but lessees are still able to push for lower rentals. The window of opportunity for lessees is however, closing and lessors will soon be able to dictate rates once again, at least for the more desirable aircraft.
The predicament of the B747-400 in the wake of the JAL restructuring is all too notable. The type was beginning to extricate itself from the recession as some were returned to service but the actions of JAL will now once again cause considerable weakness for lease rentals.
The first quarter is traditionally a more difficult time for operators but the second quarter usually sees the start of an improvement. As the economy climbs further out of recession, then lease rentals should start to improve. With airlines have cut on orders over the last eighteen months, there will be a need to find capacity from the used market, thereby improving the position of lessors.
Sale and leaseback transactions, which constitute an increasingly large proportion of new aircraft deliveries, have involved higher rates than those attributed to vanilla dry operating lease rentals. There continues to be danger of using sale and leaseback data as the basis for normal lease rentals. The relative strength or weakness of lease rentals is often measured against the one percent rule where the monthly rental is expressed as a percentage of the current value. With the lease rental factor often below one...