Lessors should exploit aviation market

11 July 2008
The tide in aircraft leasing is turning away from the former strongholds of Europe and the US, and towards the emerging market of the Middle East.

Airlines are under severe and increasing pressure as their fuel costs continue to mount, but their suffering has presented fresh opportunities for other players in the market, not least aircraft leasing firms.

Regional lessors have not been slow to pick up on the potential as airlines consider leasing as a way to manage their costs. Dubai’s DAE Capital, Kuwait’s Alafco and Waha Leasing in Abu Dhabi are all expanding beyond their existing markets to compete on a global basis.

As in the aviation market itself, these stateowned, cash-rich enterprises have the financial muscle to compete with any of their more established peers in the US or Europe.

Perhaps unsurprisingly, the most grandiose and entrepreneurial moves into the leasing market in the region have come from Dubai. DAE Capital stunned the industry with a $29bn move into the sector at last year’s Dubai Airshow, and now has 200 planes on order.

Meanwhile, Dubai-based Lcal has acquired a place near the front of the queue for the Boeing 787 Dreamliner, basing its strategy around a single aircraft whose fuel-efficient design has made it the most popular model in aviation history.

It seems only a matter of time before Middle East companies join the top tier of international leasing groups.

While their fleets are far smaller than those of the more established firms in the US and Europe, their planes are newer and less thirsty at a time when fuel-efficiency is king.

DAE in particular looks set to match its global rivals in the coming years, mirroring the anticipated dominance of Emirates in the international market.

As in so many other areas of the aviation industry, the tide in aircraft leasing is turning away from the former strongholds of Europe and the US, and towards the emerging market of the Middle East.

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