Now is time to expand aviation fleets

27 June 2008
Once the belt tightening ends in the West, leasing companies will be in an even stronger position.

With Middle East aviation booming, the ambitions of the region’s aircraft leasing groups are starting to match those of their customers. Alafco, a Kuwaiti firm, is accelerating its plans to build up a fleet of 100 aircraft, making it larger than most Gulf airlines. It is a good time for it to expand.

The mounting fuel crisis is already badly hurting the global aviation sector but, so far, the Middle East has been largely unaffected. Fuel costs may have doubled, but the growth plans of regional carriers have not been dented.

In particular, short-haul travel around the region is booming and the preferred aircraft for low-cost or business operators - the Airbus A320 and Boeing 737 - are in huge demand.

Alafco will buy as many of these planes as it can, aware that local demand shows no sign of weakening.

In fact, the fuel crisis makes it easier to build up its fleet. The same thing that is hurting airlines around the world is benefiting regional aircraft leasing companies.

While Gulf aviation continues to perform well, the US and European markets are struggling, with the low-cost and premium sectors the hardest hit.

Keen to defer adding fresh capacity while their future is uncertain, airlines are delaying or cancelling orders for new aircraft, making it easier for companies who are still in the market to pick up new aircraft.

So it is unsurprising that Alafco should seek to boost its order book, bringing forward some of its purchases and promising to buy up to $4.2bn worth of new aircraft over three years.

Once the belt tightening in the West ends, Alafco and its rivals will be in an even stronger position to find customers for their planes.

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