In an industry dominated by fluctuating fuel costs, constant regulatory change, and mergers and acquisitions; more and more airline companies have begun to lease their airplanes instead of purchasing them. We turned to our panel of Zintro experts and asked them to share their opinions on, “how the increased use of airplane leasing impacts the airlines industry” Here’s what they had to say:
Ira Gershkoff, President and CEO of SlipStream Aviation Software, explains that aircraft leasing has made the market much more liquid than it was before. The availability of leased aircrafts is crucial because now airlines can lease the aircraft “for the portion of its life cycle that fits its route structure at the time of the lease” instead of buying the aircraft. Thus, if the airline’s fleet needs to change, the airline has the option to let the lease expire and return the aircraft to the lessor, and choose to re-lease a different aircraft that more closely fits its current needs. Gershkoff asserts that just like with car leasing, the cost of operating a leased aircraft is slightly more than the cost of owning the airplane, the difference resulting in the lessor’s profit margin. However, the tradeoff is “increased flexibility in changing fleets as the airline’s needs evolve,” which makes it easier for airlines to enter new markets with less risk. If these new markets then prove to not be profitable, the airline either has the choice to deploy the airplanes elsewhere or return them. The ability to return an aircraft is especially important in the event of an economic downturn, which allows the airline to remove unprofitable capacity when traffic is slow.
Ragavendran Padmanab, an expert in Microsoft CRM and airline functionalities, believes that in today’s fast paced world pricing for any type of product plays a crucial role. In airlines this is no exception, because passengers who travel have the ability to easily compare the pricing of tickets. If the pricing is too high compared to the competition, an airline might lose customers, damaging their customer service management (CRM). Therefore, leasing airplanes allow airlines to keep their pricing competitive. Faheemh65, an experienced airline sales professional with a specialty in promoting the growth and profitability of companies, understands that the aviation business has boomed in recent years regardless of the recent recession. These upward trends point to the need for airline companies to expand their businesses in order to cater to demand for more space and routes. Faheemh65 continues by saying that leasing comes in handy “when it is difficult for airlines to come up with huge amounts of money” that is needed to purchase an aircraft. Leasing provides an easy and relatively inexpensive solution, allowing customers to enjoy more space, better aircrafts, and reduced prices.