By Jamie Carter, executive vice president commercial at Stratos

What a roller-coaster lease rates have been on over the last few years. In what seems like an age ago during the COVID-19 pandemic period in 2020, 2021 and the early part of 2022 we saw demand for air travel evaporate worldwide as passengers largely shunned air travel. Airlines parked much of their fleet to accommodate this sudden lack of demand whilst constrictive travel regulations further constrained the small pool of passengers still willing to fly.

Unsurprisingly, this led to a sharp decline in lease rates with per-by-the-hour lease structures becoming commonplace, with many airlines returning lease aircraft early, and in some cases renegotiation of existing leases with rent holidays and deferred lease payments.

As a result, narrowbody lease rates plunged by around 30%, and widebodies by as much as 60% compared to 2019 – assuming, of course, that you could find a lessee willing to add aircraft to their fleet.

Fast forward to 2022, after the worst of the COVID-19 pandemic, we saw a relatively rapid rebound in passenger demand as travel restrictions eased. Airlines initially reactivated parked aircraft, but soon began sourcing additional capacity – initially to replace aircraft that had been returned and those that had been permanently retired (or that they were unable to reactivate swiftly enough).

However, we also started to see airlines seeking to add capacity in order to take advantage of the sudden rebound in demand as it materialised and increases in demand looked to be more stable. As a result, passenger lease rates trended upwards during this period, led first by narrowbodies as domestic and short-haul travel demand surged, then widebodies as medium-haul and then long-haul demand also returned.

Supply-chain disruptions also contributed to the recovery in lease rates as OEMs and MROs struggled to scale back up after the pandemic-induced slowdown.

So, after such a tumultuous period, and on the back of positive initial signs of a recovery, how did lease rates trend in 2023 and 2024?

The continuation of strong passenger demand, supply chain issues, in-service fleet issues (mostly around engine reliability), increased numbers of lease extensions and dwindling supply of aircraft all contributed to rates over this period generally trending upward – both in new deliveries as well as mid-life aircraft. In some cases, lease rates jumped by 25% in 2023 with some aircraft types starting to match or exceed the lease rates seen prior to the COVID-19 pandemic. This upward trend was visible across both narrowbody and widebody types and applied to new-generation models such as the 737 MAX, A320neo, 787, and A350, as well as to legacy types like the 737-800, A320/1ceo, 777-300ER, and A330 – all of which saw this upward momentum.

In Q4 2024 and 1H 2025, as market dynamics stabilised and geopolitical factors evolved, we saw passenger demand soften a little in some regions with capacity growth also more restrained in those regions. However, we also observed other regions, such as Asia Pacific, continue to show strong passenger demand.

Whilst year-on-year passenger demand increased worldwide, it did so at a lower level compared to the double-digit passenger demand growth seen up until this point. This moderation is natural given the ‘bounce back’ increases post-COVID-19 pandemic could not realistically be sustained.

While underlying demand remains healthy in most regions, any surge in supply – combined with any slowdown in growth – will likely temper further lease rate increases. Any supply increases will most likely come in three main forms: an uptick in OEM output rates (swifter than currently forecast), a perceptible easing of engine and supply-chain induced ground times, and lower volumes of lease extensions (i.e. higher levels of transition-available aircraft).

While these dynamics will affect the various aircraft types differently, we are already observing more typical lease rate patterns developing. Unlike during the 2022–2024 period where most aircraft demand was driven by a lack of supply and strong passenger demand pushing lease rates higher, we are starting to see (as was the case pre-COVID-19 pandemic in what we would call a ‘normal’ market) a separation in lease rate trends depending on the airframe/engine combination and the supply and demand dynamics for that aircraft type which is a sign that lease rate trends are becoming more predictable.

Looking ahead

We expect lease rate behaviour to continue trending toward historical norms, much as we’ve seen over the past six to nine months – although this could very well take a further 24 months to normalise completely.

Airframe and engine combinations which have sizeable operator bases and healthy supply and demand dynamics will maintain relatively stable lease rates, while more niche or less efficient types may see increased volatility. We believe that supply limitations will continue to support lease rentals in the near-term, however we expect these pressures to ease in the short- to medium-term as OEMs resolve production/delivery bottlenecks and current in-service issues are gradually resolved.

While the last few years have been shaped by exceptional market forces – in some cases unprecedented – we may now be finally seeing indications that we are on the path to more stable, predictable lease rate trends. If that is the case, many in our industry will certainly welcome the chance to finally get off the roller-coaster.

Article written on July 22, 2025.

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