Macroeconomic factors have weighed heavily on aviation this year, with inflation and interest rates of particular concern.

Government policy has also caused ructions, with Qatar chief Akbar Al Baker stating at a recent IATA forum that governments were “misleading” the public about aviation’s climate change impact and were putting unnecessary restrictions on the sector.

In the UK, meanwhile, several airline leaders are calling on the British government to reverse an economic plan that has provoked a savage reaction from markets, forcing the pound to unprecedented lows.

Critics included the Virgin Atlantic and Ryanair bosses, with Ryanair CEO Michael O’Leary saying: “The Truss government has poured petrol on a bonfire with a budget that does not really make a lot of sense and is likely to drive inflation further.”

For aircraft and engine lessors, the cost of borrowing is key to their business, and higher inflation risks further interest rate rises.

“As a capital-intensive business, the interest rate movements are probably of most concern,” confirms Tom Barrett, president and CEO of Engine Lease Finance (ELFC), an engine lessor, in an interview with Engine Yearbook 2023.

Barrett also notes that financing will become more expensive for ELFC’s airline customers, who may also have to deal with higher labor costs, although he believes several factors may soften these headwinds.

“I feel with the pent-up demand for travel after the last few years and the fact Asia is just now reopening will work against what might be expected to be a normalized fall off in demand as a result of inflationary factors,” says Barrett.

Another global trend working against aviation is the tight supply chain, although Barrett notes that engine lessors are one of the few aftermarket actors that stand to benefit from this. 

“Anything that creates more demand for spare engines does have a direct positive impact on ELFC," says Barrett. "Therefore, the delays in shop visits brought about by supply chain problems are only good for our current technology equipment.”

For a wide-ranging interview with the head of ELFC about the engine leasing market, see the Engine Yearbook 2023, out later this year.