The head of aircraft leasing giant AerCap (AER.N) predicted on Wednesday that tightness in global jet markets would last through the rest of the decade, fuelled by supply chain issues and conservatism on production among engine makers.
Demand for air travel has rebounded since the pandemic, while planemakers are struggling to get back to production levels seen before the health crisis badly disrupted markets.
"I believe it will take until the end of the decade before the airframers and the supply chain get together and work it out; that will be 2030, I suspect," CEO Aengus Kelly told a company investor conference.
He was speaking after the world's largest leasing company gambled on continued bottlenecks in aircraft repair shops by agreeing to buy 150 new spare LEAP engines made by CFM, which powers all Boeing (BA.N) and some Airbus (AIR.PA) narrow-body jets.
The engines will be managed by Shannon Engine Support, a spares joint-venture between AerCap and France's Safran (SAF.PA), which co-owns CFM along with GE Aerospace (GE.N).
Shortages of spare engines, especially those made by CFM rival Pratt & Whitney (RTX.N), have forced airlines to ground jets while waiting for repair slots, which are already scarce due to faster than expected wear-and-tear in harsh climates.
Kelly, who has overseen AerCap's gradual transformation from a rump containing the bad assets of defunct Irish leasing empire GPA to the world's largest lessor through acquisitions, spelled out the stakes involved in managing maintenance delays.
AerCap says more is spent on maintaining a plane in MRO or repair stations than it costs to buy it in the first place.
"The MRO shops are like dentists. They only get paid when they open something up, take something out and put something back in. The difference with these engines is it's a million bucks to put something back in every single time," Kelly said.
"And if you don't know what you're doing, you will find yourself spending millions more. You will find yourself going to MROs that you don't have leverage with, where you're at the back of the queue."
Despite announcing an inaugural cash dividend, Kelly said the Dublin-based leasing company's primary method for returning resources to shareholders would remain share buybacks.
AerCap said its board had approved a new $500 million share repurchase programme through Dec. 31.
