Air Transport World

Operating lease firms proliferate. (airplane leasing companies)

Operating lease firms proliferate

The operating lease is in--for now. Within the U.S. and abroad, for small companies or large, profitable or not, big planes or commuters, the operating lease is an increasingly popular way to obtain new or used equipment.

This year, predicts International Lease Finance Corp. President Steven F. Udvar-Hazy, the top four operating lease companies will purchase $1.2 billion worth of new aircraft. Next year, such companies will take 14-15% of commercial aircraft production. He expects ILFC and others will buy $1 billion worth of planes in a single year by 1998 or 1989.

ILFC has been writing operating leases since 1973 (ATW, 10/85). At first the planes were used. Now they are brand-new and up to the Boeing 767 in size. Notwithstanding ILFC's success and recently high profile, it did not invent the mechanism. Operating leases have been around for years. But everyone sat up and took notice when McDonnell Douglas' Douglas Aircraft used the operating lease on a massive scale to stimulate business for its new MD-80s in the depths of the recession (ATW, 4/86). Now, with U.S. airline competition dictating flexibility of operations and finances, operating leases are taking on greater significance.

Willing third parties?

The only problem seems to be lack of willing third parties. "There's enough business for 10 ILFCs,' Hazy told ATW recently. Perhaps, but GATX Air President James Robertson's view of one of his customer's current status shows why the field is uncrowded: "We eat well but we don't sleep well.'

But things are changing slowly. As Federal Express established the pattern in small packages, ILFC has shown how a company can make a good living from arranging operating leases. …

Log in to your account to read this article – and millions more.