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Electric aircraft unknowns spur new approaches to leasing

Traditional leasing models will be challenged by novel aircraft like eVTOLs, at least in the early years of electric flight.

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Release Date
December 15, 2022
Electric aircraft unknowns spur new approaches to leasing
At some point in the not-too-distant future, whether in two years or 10, radically new types of aircraft will begin arriving on the market. They may take the form of electric vertical take-off and landing aircraft, hydrogen-electric regional planes or hybrid-electric cargo drones. If you believe the hype, they will include all of the above. But you don’t need to subscribe to the promises of any particular investor deck to acknowledge that a wave of innovation is poised to reshape the lower end of the aviation market.

Beyond the immediate questions surrounding certification and business models, there is another unknown looming over these novel aircraft: How long will they last? For new versions of conventional aircraft designs, there are decades of operational experience to inform estimates of maintenance schedules and economic useful life. For electric aircraft, it’s essentially a blank slate. While original equipment manufacturers can make projections, these will be subject to the vagaries of real-world operations as well as the broader pace of technological progress.

Related: Visualizing eVTOL startups’ cash burn

All of this would seem to discourage the near-term involvement of lessors, whose business models generally depend on accurate estimates of aircraft lifespans and residual values. Yet, lessors have been leaning into advanced air mobility in a big way. Azorra Aviation, Falko Regional Aircraft, Avolon, Aviation Capital Group, LCI Aviation and Lobo Leasing are all among the companies that have announced notable partnerships with developers of passenger eVTOLs or other AAM aircraft.

There are valid reasons for lessors to be exploring the space now, and some of them will likely gamble on deals involving electric aircraft even before having a full understanding of their life cycles. Nevertheless, the inherent uncertainty associated with new technology will pose a significant challenge for traditional operating lease models in the early years of electric aviation, opening the door for innovative approaches to leasing and financing.

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