Aercap Notes Strong Engine Leasing Prospects

Shannon Engine Support (SES) is performing “well ahead of expectations” according to co-owner Aercap, the world largest aircraft and engine lessor.

Aercap, which owns 50% of SES alongside joint venture partner Safran Aircraft Engines, recorded $74 million of lease rental income from the Irish company, a steep rise from $12 million the year before.

Partly this reflects the post-pandemic resurgence in flight and maintenance activity for the CFM56 engines that SES specializes in, being the world’s largest lessor of CFM56 and Leap spare engines.

However, the company has also benefited from supply chain challenges that have held back deliveries of new narrowbody aircraft. This forces airlines to use and maintain older equipment such as the CFM56 for longer, and also limits the flow of new-generation engines that they can own—rather than lease—as spares.

“SES has been generating a strong performance this year driven by the ongoing engine supply and demand factors,” confirmed Aercap’s chief financial officer, Peter Juhas.

The supply-demand imbalance will only worsen this year as China enjoys its belated air travel recovery, which will push lease rates higher, believes Aercap chief executive Aengus Kelly.

"This will be particularly acute on the widebody side, as the combination of severely restricted new aircraft production, continued traffic growth and the retirement and cargo conversion of many widebody aircraft that took place during COVID puts a premium on aircraft available today,” he said during an earnings call.

Aercap also leases engines from the portfolio it acquired as part of its merger with GECAS. Together with SES, it owned or managed 995 engines on Dec. 31, 2022.

Overall the firm said it conducted 173 engine transactions in 2022: 98 leases, 28 purchases and 47 sales.