Summary

This commentary reviews the 2024 Aircraft leasing outlook detailing a stable aircraft lessor environment with certain financing requirements and high aircraft deliveries expected.

Key highlights include:

— Morningstar DBRS’ outlook for aircraft lessors is Stable. For 2024, we see industry fundamentals remaining supportive of sound aircraft lessor performance and credit ratings.

— With airline profitability improving across most regions, we expect a low level of airline defaults in 2024.

— Lease rates and aircraft values continue to improve underpinned by a notable imbalance of new aircraft deliveries from the OEMs and demand from airlines to increase capacity. This market dynamic should keep asset impairments at the lessors modest in 2024 and readily absorbable through earnings.

— We expect that the lessors will remain disciplined on leverage, despite the necessary debt funding to be raised in 2024.

“Lessors have meaningful financing requirements in 2024, including the financing of new aircraft deliveries as well as the refinancing of maturing debt. With asset-backed securities (ABS) markets remaining dormant, we expect the large lessors will continue to lean on the unsecured corporate debt market, as well as bank facilities to meet most financing requirements.” said David Laterza, Senior Vice President – Global FIG Head of Non-Bank FIG and David Petu, CFA Senior Vice President – US Structured Finance.