Major aircraft lessor SMBC Aviation Capital has said that airlines are grappling with multiple rising costs, such as insurance, fuel, labour and lease rates.
Despite a rebound in air travel as countries open up post-pandemic, airlines will have to skilfully manage the rising costs over the next 12 to 24 months, said SMBC Aviation Capital CEO Peter Barrett, speaking at the Airfinance Journal conference in Dublin, Ireland.
“If I had to pick one topic that's going to be a challenge for the industry over the next 24 months, it will be the cost base and how elastic will demand be relative to that,” he said.
For years, airlines’ growth enjoyed a boost due to low interest rates. However, with interest rates and inflation on the rise, these airlines are now facing a headwind.
The Russian invasion of Ukraine has also placed additional pressure on airlines, in terms of fuel and insurance costs. According to Barrett, higher insurance rates for lessors can affect lease rates, making operations costly for airlines.
With many airlines still in the red due to pandemic-related losses, these airlines are more likely to lease aircraft from firms such as SMBC rather than have their own fleet.
