Air Lease's Udvar-Hazy Offers Predictions on Airline Consolidation

The head of an influential aircraft lessor expects more airline consolidation in Europe, naming Scandinavia’s SAS, Italy’s ITA, and TAP Air Portugal as possible takeover candidates.

"Those are the main targets," said Air Lease Corporation’s Steven Udvar-Házy on Wednesday at the Skift Aviation Forum in Dallas. Udvar-Házy is often called the founder of the aircraft leasing business.

Europe is already heavily consolidated, he explained, citing the three large groups that dominate European long-haul travel, namely International Airlines Group, Air France-KLM, and the Lufthansa Group. Regarding the continent’s low-cost carriers, Udvar-Házy is more skeptical about mergers.

"The egos are pretty strong," he said.

He separately spoke of current strength in demand for aircraft, especially narrowbodies, following the many difficulties airlines had in trying to meet a sudden surge in demand following the Covid crisis.

"Airlines grossly underestimated the resurgence in demand as the pandemic died out in the early part of this year," Udvar-Házy said.

At the same time, Airbus and Boeing have been unable to meet demand, constrained by their own supply chain and regulatory challenges. At Air Lease itself this year, “we haven’t gotten one airplane on time.” Especially bad are delays in getting Airbus A321neos. For those popular planes, delays have been as long as six to seven months, Udvar-Házy said.

He separately spoke about Asia’s lagging recovery, about exceptional strength in transatlantic markets, Latin America’s rapid pace of air traffic growth, and the future of EVTOLs, or electric airplanes. He also said labor relations are a growing challenge for the world’s airlines, as unions are “flexing their muscles” in response to strong demand and tight supply for pilots and other aviation workers.

Asked about the likelihood of Airbus and Boeing building a next-generation narrowbody plane to succeed the current A320 and B737 families, respectively, Udvar-Házy responded with skepticism. The technology simply doesn’t yet exist to make it economical for airlines. There hasn’t yet been “a meaningful step-change improvement.” Turning to the next-generation of widebodies, he said Boeing’s new and long-delayed B777-X faces difficult prospects. “They will lose money on every airplane.”

Nor is he especially optimistic about aircraft delivery delays easing any time soon. "They will get worse before they get better,” Udvar-Házy said.