Plane Rentals Soar, Fares May Be Next

Older aircraft see sharper jump in lease rental rates over a year

- Anu Sharma

Aircraft rentals have leapt in the last year as airlines scramble to service soaring demand, with every available plane witnessing demand from four to five carriers.

In the popular narrow-body, single-aisle category, the increase has been steeper for older aircraft, portending higher fares as they come with higher operating costs. The rise in lease rates comes at a time the airline industry is struggling with a shortage of aircraft worldwide.

The average market lease rate for a 10-year-old Airbus A320 surged 14% to $177,000 per month in January from $155,000 per month a year earlier, showed data from UK-based aviation research firm Ishka. For a used Boeing B737-800, it was around $194,000 per month, 13% up from last year's $171,000.

Even though newer aircraft cost more than twice as much, the rate of increase has been more muted. The monthly rate for a new aircraft such as an A320neo (new engine option) was up 8% to around $375,000, and that of a Boeing 737-MAX8 was up 7% to $365,000.

The increase in rentals is set to impact Indian airlines like IndiGo, Air India Express and SpiceJet, which mainly operate fleets of Airbus 320s and Boeing 737s. Among the three, IndiGo and Air India Express have large domestic expansion plans.