Lessor SMBC says will take time for fuel to boost lease rates on new-generation planes

FILE PHOTO: An Airbus A320neo 'quiet jet' comes in to land at the ILA Berlin Air Show in Schoenefeld, south of Berlin, Germany, June 4, 2016. REUTERS/Hannibal Hanschke/File Photo

DUBLIN (Reuters) - Rising oil prices are increasingly focusing airlines’ attention on new, more fuel-efficient Airbus and Boeing planes, but it will take time for lease rates to improve, lessor SMBC Aviation, a major owner of the planes, said on Thursday.

A spike in fuel costs has prompted airlines to slash forecasts for industry profits in 2018, and has also increased interest in new-generation planes such as the Airbus A320neo and the Boeing 737 MAX, which promise fuel-efficiency savings of between 10 and 20 percent.

“I certainly think the chip-up in fuel prices over the last six months has focused attention in airlines on that space,” said Peter Barrett, chief executive of SMBC Aviation Capital, one of the world’s top five aircraft leasing firms.

“Assuming a pretty steady state of demand, which is what we see at the moment, and an increasing fuel price, we would expect that to flow through into lease rates,” Barrett told Reuters in an interview. “That said, I think it will take a bit of time.”

When its current orders are delivered, SMBC will have a fleet of 142 A320neo and 114 Boeing 737 MAX planes.

SMBC reported a record profit of $319 million on Thursday, although profit growth fell from 48 percent in 2017 to just 2 percent in 2018, a slowdown Barrett attributed to a transition as the firm sells off older aircraft in anticipation of deliveries of the newer planes.

Overall, Barrett said lease rates in the aircraft finance sector, which owns around 40 percent of the global commercial aircraft fleet, have been pretty stable, with a lot of airlines opting in recent years to extend existing leases.

While global growth prospects for aviation remain positive, the industry is concerned about the prospect of a possible trade war following the U.S. government’s announcement of tariffs on aluminum and steel imports from Canada, Mexico and the European Union.

“It’s something we keep a close eye on and something we would be concerned bout in terms of its potential affect,” Barrett said. “But it is impossible to predict how that may play out.”

Reporting by Conor Humphries; Editing by Mark Potter