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Reading 2022-03-24

Metadata

  • Ref:: Stake weekly newsletter 2022-03-23
  • Title:: The Wrap: Long Haul
  • Author:: Stake
  • Year of publication:: 2022
  • Category:: Blog
  • Topic::
  • Related::

Notes from reading

At any one moment, there are roughly 12,000 planes in the air. Multi-million dollar pieces of machinery are able to transport tourists across continents from barely over US$50 (yes we’re talking exclusively about RyanAir). At the higher end of the scale, a brand new Boeing 787 Dreamliner comes with a US$250m price tag attached. While some major airlines make revenue in the billions, aeroplanes are still unaffordable to buy outright a lot of the time. This is why they are increasingly being leased… now 51% of the global fleet in fact.

There are two types of leases: dry and wet.

  • A dry lease entitles the airlines to the plane itself and nothing else. It’s up to the airlines to organise routes, find pilots, staff and maintain the plane.
  • A wet lease includes all route clearances, pilots, staff and insurance. This is less common but used to circumvent airline sanctions or to quickly increase capacity.

For airlines, leasing makes sense. A lease avoids adding incredible levels of debt to the balance sheet in order to finance a brand new, 9 figure plane. Moreover, airlines avoid the depreciation expenses associated with ageing heavy duty machinery. Also, a sudden need to increase the supply of planes can more easily be accommodated.

No company owns more aeroplanes than AerCap with over 2,000 planes on its books. That’s about US$38b worth. The biggest commercial carrier is American Airlines, with a fleet of 956 (not all owned). Delta, Southwest and United Airlines are the next 3 biggest services by fleet size… all based in the USA. The country handles 45,000 flights across 20,000 public and private airports daily.

  • Hartsfield-Jackson Airport in Atlanta is in fact the busiest airport in the world.
  • Interestingly, Korea and Australia host the two busiest domestic air routes in the world.
  • The Sydney to Melbourne route handles almost 55,000 flights annually. For comparison, there are roughly 11,000 flights between London and New York each year.