More than 50 per cent of the world’s commercial aircraft are now leased rather than owned by airlines, with a significant majority of them being owned or managed by Irish aircraft lessors. That’s quite a startling achievement for an industry that barely existed 50 years ago.
According to SMBC Aviation Capital head of strategic and market analysis Shane Matthews, the popularity of leasing is due to a combination of factors. “Firstly, the airline typically wants to conserve cash, and leasing is one of the few products that offers a 100 per cent advance rate,” he says. “Leasing rates can be quite attractive and cheaper than the cost of funding an aircraft purchase.”
Leasing also offers flexibility. “Airlines developing new routes who don’t want to commit to buying aircraft can use leasing.”
Another factor is delivery schedules, Matthews points out. “The order books for narrow-body aircraft from Boeing and Airbus are full and you won’t get anything from them until 2030 or 2031 but there are lessors with earlier delivery dates.” If an airline is growing faster than its business plan and doesn’t have the aircraft to sustain that growth, leasing can be a very good way of accessing additional aircraft.
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Financial flexibility, operational flexibility and aircraft supply are the key advantages for airlines leasing aircraft, according to A&L Goodbody partner Maria McElhinney. “Aircraft are very expensive assets and the capital cost required to expand or upgrade an aircraft fleet may not be readily available for many airlines,” she says. “Third-party funding may not be accessible or may be too expensive, and therefore leasing can be a more affordable option. This is particularly true for smaller or start-up airlines where operating costs to run the business result in capital constraints on fleet development.”
Aircraft leasing also allows for operational flexibility, she adds. “While commercial aircraft can have a 20-plus- years life expectancy, airline fleet requirements can change dramatically during that time span. Furthermore, airlines operating in high-income countries often wish to upgrade aircraft after about 10 years of the aircraft’s lifespan to access leading-edge aircraft technology. As the average lease of a commercial aircraft is eight to 12 years, leasing allows for greater flexibility for airlines to optimally address their operational requirements for their fleet over time. It also enables airlines to keep their fleet young.”
The supply issue has led to changes in airlines’ policies regarding fleet ownership. “To meet business and fleet demands, some airlines, who in the past would have typically sought to own a large proportion of their fleet aircraft, have increasingly accessed aircraft through the leasing market,” says McElhinney.
One factor that doesn’t really come into play is the size of the airline. “Most airlines will have some leased aircraft in their fleets,” says Matthews. “Don’t think about size. Twenty years ago, Ryanair was quite lease heavy. Now it’s not a major user of leasing. EasyJet is much more lease heavy.”
McElhinney agrees. “Aircraft leasing is not size specific, and different types of airlines, big and small, leverage aircraft lessors in different ways,” she points out. “The commercial reasons behind why an airline will lease rather than buy an aircraft will differ from airline to airline. Smaller airlines may lease due to the huge upfront costs associated with aircraft ownership. On the other hand, the more established and larger airlines may lease aircraft for more operational flexibility and to gain access to newer and more efficient aircraft. Most airlines will operate a mixed fleet, leasing some aircraft and owning others, with the decision to buy or lease aircraft being a continuous strategic decision.”
Leasing also relieves airlines of the need to manage the disposal of the aircraft. “Sometimes airlines take the view that it is not their job to manage the residual value of aircraft or currency risk,” Matthews notes. “It’s a US dollar business and airlines can have a bunch of aircraft on their balance sheet requiring them to manage currency risk. There can also be market volatility when it comes to selling the aircraft. They say their job is to fly people around the world and give customers the best experience. They can take risk off the table by introducing some level of leasing.”
Ultimately, both airlines and lessors need to fund their aircraft acquisitions and there are a variety of options available to them. “These include traditional commercial bank lending, bond issuances, asset backed securitisations, enhanced equipment trust certificates (EETCs) and pre-delivery payments (PDPs),” says McElhinney. “Government support can also be available where agencies such as US EXIM Bank and UK Export Finance make funds available to support domestic aircraft manufacturers, making it easier to buy those aircraft.”
Alternative lenders and private equity investment are continuing trends of funding within the industry, she adds. “Asset-backed securitisation transactions have also been a key form of funding for several well-established lessors and alternative lenders throughout 2025, and we expect this trend to continue in 2026. As the industry matures, funding types and structures have evolved and become more innovative to meet the growing needs of the industry.”
The relationship between airlines and lessors is another important factor. “One of the things we say is that this is a long-term business,” says Matthews. “The average lease term is eight to 12 years and we working with people building relationships over a very long period of time. The nature of an airline’s needs can change over time. The relationship can start with us providing older aircraft and move on to newer more fuel-efficient aircraft as we help the airline to grow their business. We can also provide different funding products via our shareholder.”
