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Aviation Shake-Up: Engine Recalls Propel Asset Management to $291bn Horizon by 2032.

In what’s poised to be a turning point in aviation history, the industry grapples with significant engine recalls, leaving a trail of disrupted travel plans in its wake. And yet, from this chaos emerges an unprecedented opportunity for aviation asset management companies, with estimations hinting at a sector boom worth a staggering $291 billion by 2032.

Over the summer, travellers bore the brunt of the aviation sector’s vulnerabilities. The UK, among other countries, had to navigate around a mire of flight cancellations and delays, as reported by the CAA. High-flying airline giants like Lufthansa, Qatar Airways, and Silver Airways faced a daunting challenge with an acute spare parts shortage, resulting in grounded planes and countless operational hiccups.

Further complicating matters, about 1,200 Pratt & Whitney engines designed for Airbus A320neo jets were flagged for inspections. This setback sent ripples across the industry, stressing an already strained aircraft supply. However, it’s not all doom and gloom. Enter the aviation asset management firms.

AIP Capital, a titan in the aviation asset management landscape, shed light on this tumultuous scenario. They underline how this supply squeeze has unlocked a veritable treasure trove of prospects for aircraft leasing and aviation asset management entities. Notably, with consumer aviation demand skyrocketing, these firms have swooped in, offering solutions when they’re needed the most.

Shockwaves continued as US engine manufacturer RTX disclosed a concerning manufacturing flaw that threatens to ground hundreds of Airbus jets in the foreseeable future. This revelation, combined with the aviation sector’s labor shortages, sets the stage for an intense clash over engines, with a grim forecast of approximately 650 jets idling away in 2024’s first half.

However, alternative investment companies are stepping up to untangle these supply chain knots, chiefly engine repairs, ensuring the aviation industry’s ambitious growth story remains intact.

Adding weight to this optimistic projection, Spherical Insights LLP unveiled a report suggesting the global aviation asset management market might burgeon from $177.79 billion in 2022 to a jaw-dropping $288.34 billion by 2032.

For insights into the industry’s transformative journey, there’s no one better to turn to than Jared Ailstock, AIP Capital’s Managing Partner. He emphasized the plethora of untapped opportunities dotting the aviation landscape – spanning aircraft leasing, repairs, and a spotlight on burgeoning markets, including APAC. Ailstock predicts a surge in private investors in these emerging markets in the coming years.

The domain has witnessed a paradigm shift with the pandemic-induced retreat of traditional bank-led aviation financing. Alternative investment platforms and private equity firms are capitalizing on this void, taking the reins and investing in new aircraft, reshaping aviation financing’s DNA.

A testament to this evolution is AIP Capital. Launched in May 2023, the firm boasts an enviable $1.6 billion portfolio, complete with 30 aircraft and 68 more Boeing 737 Max models awaiting their orders. The firm’s endeavours span aircraft management, operating and acquisition finance, and private credit investing. The AIP team has a proven knack for leveraging industry relationships, previously steering about $5 billion across 119 aviation assets.

Ailstock encapsulates this seismic industry shift, remarking, “The landscape offers a myriad of avenues for significant yield. And while some investors once shied away from aviation, many now recognize its lucrative potential, whether they’re industry newcomers or stalwarts.”

The narrative is straightforward – aviation’s future is ripe with potential, and asset management firms are leading the charge.