In recent years many engine lessors have added technical capabilities to their core offering in a bid to drive maintenance efficiencies and maximize the value of their assets.
“Moving into the parts side of the business was a natural evolution of ELFC’s model,” says Joe Hussar, head of portfolio for the lessor, in an interview with Inside MRO.
“Prior to entering this business, after monetizing the on-wing value of the engine through leasing, we would sell the unserviceable engine to the wholesale parts market," says Hussar. "By vertically integrating with a parts subsidiary, we have the in-house ability to capture all possible value out of our asset investment.”
Another independent engine lessor, Willis Lease Finance, has a long pedigree in the technical side of the business, offering module changes and used parts among other services.
More recent entrant FTAI Aviation has designed its platform from the ground up around the integration of its leasing and module exchange businesses, and it was suggested at Aviation Week Network’s Engine Leasing, Trading and Finance Europe conference in June that more companies may follow this model.
Yet not all lessors have pursued vertical integration. Amsterdam-based SMBC Aero Engine Lease (SAEL) is now a pure-play engine lessor, after launching in 2013 as a partnership with German engine specialist MTU Maintenance.
Now owned solely by Japan’s Sumitomo Mitsui Financing and Leasing, the lessor has a portfolio of roughly 100 engines worth more than $1 billion.
“We have adopted a highly focused approach so far and I believe being a pure leasing player has been key to making what SAEL is today,” says Roger Welaratne, SAEL's managing director. “I also believe that the focused approach was what helped us navigate through the biggest crisis in our industry when we were still a small lessor.”
That said, Welaratne leaves the door open to a shift in approach, commenting: “As SAEL looks into writing the next chapter, we definitely need to look at adjacencies and we will be seriously evaluating which of those segments are aligned with our strategy. But, we are not going to add different services just for the sake of playing everywhere.”
To find out more about vertical integration among engine lessors, see the next issue of Inside MRO.
