AGE AND SIZE IMPORTANT

The balance of aircraft supply and demand often determines market rates with older, less economical jets offering the cheapest rents. They may be a bargain to lease, but the trade off is usually high operating costs, high fuel consumption, and the need for heavy maintenance during the term of the lease. Moreover, there can be significant costs to reconfigure leased aircraft to ensure they are compatible with the local market profile. Premium cabins, for example, have rarely been successful on regional routes.

Are regional airlines in India doomed to be dumping grounds for old airplanes? Flying those fuel-hungry, high-maintenance low-rent jets to domestic Tier-II and Tier-III cities may seem like an inexpensive way to provide seats, but scheduling all their excess capacity in low-demand markets encourages fare dilution and weak, unsustainable yields. Even though smaller, newer aircraft may command premium rents, their lower operating and obsolescence costs and ability to generate higher unit revenue (up to 30 per cent higher, according to Embraer) often make them more economically viable.

May 2016 valuations and sample average lease rates for regional and narrow-body jets published on MyAirlease.com (referencing recent transaction history and manufacturer-