Liquidity has been abundant in air finance during the past few years, but will not remain so for long, in the view of CDB Aviation Lease Finance chief executive Peter Chang.
"The market is not rational," Chang told FlightGlobal in Dublin on 24 January. "People want to get in, but it doesn't make sense. The market has tipped."
He adds: "It's a tough time, and yields are low." Chang doesn't see yields returning to decent levels even next year, expecting them to remain on the "low side" through 2019.
"I don't think the sky is falling," he stresses. "The traditional indicators paint a very stable picture."
Analysts and industry leaders alike point to rising global GDP, increasing traffic, and the successful redeployment of equipment after the high-profile insolvencies like Air Berlin and Monarch.
But why isn't everyone in leasing making money? There has been a lot of capital pumped into the industry originating from China which some, including Chang, have argued is driving yields to extreme lows because the returns expected by Chinese investors are much lower than those required by traditional investors.
"I think it's changing because the yield is so low," says Chang. "If there's too much of a good thing, eventually, it disappears. I think we've reached a tipping point or passed it.”
CDB Aviation Lease Finance will look to sell around 50 aircraft this year. "We're taking a disciplined approach to clean up our portfolio." In 2017, the lessor sold 19 aircraft.
Nevertheless, Chang – who has led the lessor since the start of 2017 – is also openly seeking opportunities to grow the portfolio.
"We are stepping up our intention to grow this year," he says. "We're letting the industry know that we're actively seeking M&A and portfolios for scaling up our fleet."
The lessor last year placed orders for 105 aircraft, comprising 45 Airbus A320neo-family aircraft, 52 Boeing 737 Max jets and eight 787s.
Flight Fleets Analyzer indicates that it has a total of 214 aircraft on order. These include another 45 A320neo-family jets, another 26 Max aircraft, eight 737-800s, 20 Comac ARJ21s and 10 C919s.
Source: Cirium Dashboard
