In recent years, Low Cost Carriers like Ireland’s Ryanair or India’s IndiGo, have been able to grow at a spectacular pace. One of the key success factors for their profitable expansion strategies is their choice of aircraft type and the financing obtained for their fleets as shown in the most recent study by Swiss airline industry intelligence provider ch-aviation.
Similar to new cars bought from your local dealership around the corner, new aircraft lose a significant percentage of their market value in the first year after delivery from the manufacturer, despite typically being operated for at least two to three decades if not longer. Airlines like easyJet or Ryanair in Europe or for example India’s largest low-cost carrier IndiGo have made use of this aspect and built their fleet strategies on this.
“These well financed low-cost carriers can almost completely compensate the loss in current market value thanks to the discounts they receive for major aircraft orders from manufacturers placed at the right time. Then some years later, they are able to sell the aircraft again at an attractive price, either close or even above the initial price paid to Boeing or Airbus. This puts them in a unique position relative to their competitors as they can finance young aircraft at low capital costs“ said Thomas Jaeger, ch-aviation’s Managing Director.