Long Haul

At US$250m apiece, owning an airplane is to airlines what owning a home is to millennials. Many choose to lease instead.

At any one moment, there are roughly 12,000 planes in the air. Multi-million dollar pieces of machinery are able to transport tourists across continents from barely over US$50 (yes we’re talking exclusively about RyanAir). At the higher end of the scale, a brand new Boeing 787 Dreamliner comes with a US$250m price tag attached. While some major airlines make revenue in the billions, aeroplanes are still unaffordable to buy outright a lot of the time. This is why they are increasingly being leased… now 51% of the global fleet in fact.

There are two types of leases: dry and wet. A dry lease entitles the airlines to the plane itself and nothing else. It’s up to the airlines to organise routes, find pilots, staff and maintain the plane. A wet lease includes all route clearances, pilots, staff and insurance. This is less common but used to circumvent airline sanctions or to quickly increase capacity.

For airlines, leasing makes sense. A lease avoids adding incredible levels of debt to the balance sheet in order to finance a brand new, 9 figure plane. Moreover, airlines avoid the depreciation expenses associated with ageing heavy duty machinery. Also, a sudden need to increase the supply of planes can more easily be accommodated.

No company owns more aeroplanes than AerCap with over 2,000 planes on its books. That’s about US$38b worth. The biggest commercial carrier is American Airlines, with a fleet of 956 (not all owned). Delta, Southwest and United Airlines are the next 3 biggest services by fleet size… all based in the USA. The country handles 45,000 flights across 20,000 public and private airports daily.

Hartsfield-Jackson Airport in Atlanta is in fact the busiest airport in the world. Interestingly, Korea and Australia host the two busiest domestic air routes in the world. The Sydney to Melbourne route handles almost 55,000 flights annually. For comparison, there are roughly 11,000 flights between London and New York each year.

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