• Avolon's CEO, Andy Cronin, expects supply chain challenges to persist as delivery rates rise in the upcoming two years.

  • Avolon reported a 14% year-on-year increase in Q2 lease revenue, indicating strong global demand for aircraft.

  • Cronin warns that unless a solution is found, there's a risk of decreased sale leaseback financing, which could, in turn, increase operational costs for airlines.

Despite a stabilization in aircraft production, issues within the supply chain are likely to remain a hurdle as delivery rates increase over the next two years, according to Andy Cronin, CEO of Avolon, the world's third-largest aircraft lessor. He shared these insights with Reuters recently.

The swift rebound in air travel after the pandemic has thrown a curveball to aircraft makers and their suppliers, as they navigate challenges like rising expenses, lack of parts, and the dearth of qualified workers.

Cronin emphasized the importance of recognizing the looming challenges, stating, "As we ambitiously aim to elevate our production levels, disruptions in the supply chain will inevitably occur."

The recent financial report from Dublin-based Avolon revealed a 14% year-on-year uptick in its Q2 lease revenue, standing at $613 million. This growth indicates a global uptrend in aircraft demand, even though some regions like China and other parts of Asia are lagging slightly behind in their recovery.

Following its decision to purchase 20 Airbus A330neo aircraft last month, Avolon confirmed that negotiations to position some of these new planes are already at an advanced stage. This move comes on the heels of their prior order for 40 Boeing 737 MAX 8 aircraft.

An observation of the leasing market suggests an upward trajectory. Lease rates for the Airbus A330-300s and Boeing 737 MAX planes saw a surge of 30% and 12% respectively in the year's first half, compared to the latter half of 2022. Meanwhile, other aircraft models experienced growth in the high single-digit percentages.

Turning to India's aviation landscape, Cronin highlighted potential challenges. The recent bankruptcy of Go First may escalate leasing expenses for the nation's burgeoning airline industry. Currently, international lessors are hindered from retrieving aircraft embroiled in the bankruptcy. While Avolon has no stakes in Go First, it has leasing arrangements with other Indian airlines such as Akasa Air and Vistara.

Addressing this situation, Cronin commented on the possibility of a reduction in sale leaseback financing in India unless a swift resolution emerges. "While there'll always be stakeholders ready to invest, it's undeniable that airline costs might escalate," he added.