Regarding supply, Sum notes that aircraft availability continues to tighten, with adjusted storage levels at 3% in April, 120 basis points (bps) y-o-y below the 2019 level of 3.4%.
The ageing of the global fleet has also not slowed, with airlines deferring retirement amid delivery shortfalls, now averaging 1½ to two years above 2019 levels.
Sum writes: “This ageing trend highlights the persistent mismatch between supply and demand and further validates the durability of near-term aircraft leasing demand as airlines prioritise fleet availability over age.”
“Looking ahead, we expect retirements to pick up in tandem with rising production rates, helping to rebalance the fleet as original equipment manufacturer (OEM) output improves,” adds the analyst.
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Structural supply challenges have also extended lease placement timelines, increased lease extension tenures, and raised lease rates by around 5% and 25% for next-generation and previous-generation aircraft, respectively, over the past year.
While there has been a recent dip in lessors’ market share, Sum explains that this is a reflection of supply constraints and not underlying demand weaknesses.
“The share of leased aircraft declined modestly to 51.7% in 2024 from 52.1% the year before, a second consecutive year of decline despite a wider gap in funding costs between lessors and airlines,” writes the analyst.
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He also notes that OEMs are prioritising placements with more creditworthy airline customers, resulting in a market where demand remains healthy, but access to new feedstock is becoming increasingly polarised.
“In 2018, lessors held 23% of the total orderbook, but this fell to 14% in 2024 and is projected to drop further to just 9% by 2028. This trend reflects a strategic decision by Airbus and Boeing to work more closely with a smaller group of large-scale, well-capitalised lessors,” writes Sum.
Nonetheless, the analyst is confident that the demand outlook remains highly supportive. He notes that lessors have already placed their entire 2025 delivery pipeline and a vast majority of their 2026 delivery pipeline, with fewer than 40% of slots available for 2027, with some airlines even securing placements as far ahead as 2028.
With stable long-term lease contracts and globally redeployable assets that have supported outperformance during past downturns, Sum views the sector as resilient and secure.
On that basis, two names stand out to the analyst: Bank of China Aviation (BOCA) and China Aircraft Leasing Group (CALC). Sum points to strengthening earnings momentum, driven by rising aircraft deliveries, the repricing of Covid-19-era leases with uplifts of 30% to 50%, easing funding costs, and solid asset trading gains, as key reasons for a bullish view on both stocks.
On BOCA, Sum has kept his “buy” rating with a target price of HK$84 ($13.85), as he expects the company to deliver 15% to 20% profit growth through FY2026.
As for CALC, he has upgraded his call to “buy” with a target price of HK$4.90, and he anticipates the company will rebound from a core net loss in FY2024 to a net profit of HK$557 million by FY2026.
He notes that both stocks trade at more than 1 standard deviation (s.d.) below their historical price-to-book value ratio (P/BV) averages and at a steep 20% discount to US peers despite similar return on equity (ROE) profiles.
“Accordingly, risk-reward has turned increasingly favourable, though we prefer BOCA at this stage given its stronger asset quality and more stable funding profile,” writes Sum.
