The aircraft engine leasing sector is currently navigating a delicate balance between supply and demand. According to Roger Welaratne, CEO of SMBC Aero Engine Lease (SAEL), the recent surge in spare engine ratios is linked to temporary technical disruptions and supply chain issues. These high ratios, while reflective of current market conditions, are not expected to persist, and a reversal could lead to an oversupply of engines.
Welaratne emphasizes that rapid normalization of these ratios may cause the market to overshoot, resulting in lower lease rates and decreased asset values. He urges industry participants to exercise caution, noting that historical patterns demonstrate markets tend to overcorrect in both directions.
SAEL maintains a conservative investment outlook, avoiding aggressive bulk acquisitions of spare engines and instead focusing on long-term leasing. Its portfolio includes models such as CFM56, Leap-1A, Leap-1B, V2500-A5, PW1100G, PW1500, CF34-10, GE90-115B, GEnx-1B, and Trent XWB-84.
Furthermore, Welaratne warns that some investors are considering large orders of new-generation engines, which carry risks related to delays and market timing. The industry must remain vigilant and avoid assuming today's abnormal spare engine demand is a permanent trend, as history suggests markets often overshoot in response to current conditions.
