How much does it cost airlines to lease aircraft engines?

Running an airline is notoriously difficult and expensive. External factors like demand, seasonality, and weather can immediately change route planning and operations. In contrast, internal factors like business model, company leadership, and cost structure all play a role in determining an airline’s profitability.

Given the capital-intensive nature of running an airline, leasing aircraft instead of purchasing them has become a popular choice, particularly for startup airlines with fewer financial resources. However, airlines and operators can lease various aircraft parts beyond the aircraft itself, including engines. These pieces of equipment are vital but famously expensive to acquire.

But if an airline chooses to lease an engine, how much will it have to pay? And in today’s economy, why are aircraft engine leasing rates exceptionally high?

Leasing aircraft engines has become an increasingly popular and widespread choice among aircraft operators. According to Aeroreport, in 2023, over 50% of the world’s airline and cargo aircraft utilized leased engines. This is an impressive rise over the year 2000 when this figure was less than 25%.

One reason leasing engines is attractive is the lessors' often strong experience with different engine types. Many lessors perform maintenance, repair, and overhaul services for customers, so they have staff with the technical knowledge to safely, reliably, and quickly diagnose issues or perform routine checks.

This can be especially helpful when older aircraft are in service. Many aircraft deployed by US carriers are aging. The Boeing 757, for example, is still heavily utilized by Delta Air Lines and United Airlines . Both fly their 757s on domestic and international routes and need reliable support for aircraft engines to ensure smooth daily operations.

Lessors that provide maintenance services can have a more extensive stock of used parts built for older and less popular engines. Offering used parts with service life can be a big selling point to airlines worried about having the proper parts to replace engines on older aircraft.

Leasing aircraft engines has some clear benefits, which explains its popularity among airlines today. However, leasing involves significant costs for airlines to receive engines from a lessor. While these fluctuate based on the provider and engine type, this section will focus primarily on leasing engines for narrowbody aircraft, such as the CFM 56 and LEAP 1A and 1B engines.

Before discussing costs, it is important to note that leasing rates for narrowbody aircraft have been rising. For example, the popularity of the Airbus A320neo has seen a major rise in the leasing rates for the LEAP-1A and PW1100G engines. The value of these models has continued to rise consistently over the past years.

According to IBA, the LEAP-1A has seen a rise in leasing rates partially due to its limited supply. Operators have been forced to contend with earlier-than-expected removal drivers. As a result, fewer spare engines are available for leasing and buying.

These factors have a widespread impact on the airline industry, as the Airbus A320 family is one of the best-selling aircraft programs of all time and is used extensively worldwide.

Meanwhile, the LEAP-1B engine model has not seen the same rate rise. This is partially due to the model's lower service time compared to engines that power the A320. The LEAP-1B powers the Boeing 737 Max family, the primary competitor to the A320neo.

Boeing has been facing major constraints in its aircraft production capabilities, making both the aircraft and the LEAP-1B less popular and widespread than they otherwise would have been.

Engine models powering older mainline, narrowbody aircraft have seen mixed performance, with some rates remaining strong while others falling. The IAE V2500-A2, which powers the previous generation of Airbus A320 aircraft (A320ceo), has continued to experience high demand and, thus, higher rates.

Alternatively, the CFM56-5B, the other engine that powers the A320ceo, has seen falling rates. There has been less demand for the engine, resulting in stagnant pricing and fewer leases. Despite this, the model with a higher thrust rating, the CFM56-5B3, has continued to perform well. This engine type powers the larger A321ceo.

Meanwhile, the CFM56-7B has proven to be a consistently popular model in the market. The engine powers the Next Generation Boeing 737 family, including the -600, -700, -800, and -900 variants. Thanks to high utilization and the fact that it's the only engine model that can power the aircraft family, demand for this model remains healthy.

The cost of leasing an aircraft engine depends on many factors, including the lessor, the terms of the leasing agreement, and the type of engine involved in the transaction. The leasing rates can be a massive expense for an airline, even for just one month.

Engines that power the A320neo family have among the highest leasing rates for narrowbody aircraft. On average, the LEAP-1A engine is leased for between $145,000 and $155,000 monthly, but the exact rate depends on factors like thrust rate. Meanwhile, the PW1100G is typically around 5% higher than the LEAP-1A.

Meanwhile, engines that power previous generations of aircraft tend to have lower rates than newer technology but still require massive airline payments. For example, the CFM56-7B, which powers the Boeing 737 NG, is usually leased for around $95,000 monthly.

The V2500-A5, meanwhile, typically leases for over $80,000 monthly. The CFM56-5B, meanwhile, has more availability and is usually acquired for $60,000 monthly.

Given the equipment's larger size and enhanced capabilities, the market for widebody aircraft engines looks slightly different and more expensive. One of the most popular commercial widebody aircraft currently in service is the Boeing 777 family, which the GE90 powers. The GE90-110/-115 model specifically powers several 777 models:

• 777-200LR
• 777-300ER
• 777-F

According to IBA, the rates for the GE90-110/-115 have spiked recently. In early 2024, the typical leasing rate for the engine was nearly $120,000 monthly. This has since risen to $160,000, partly due to increased utilization of the 777-300.

Meanwhile, the Trent 700 and CF6-80E1 have also seen strong market performance. These engines, which power the previous generation of Airbus A330 aircraft (A330ceo), have seen strong performance aided by new orders and a strong aftermarket.

The Trent 700 leases for around $120,000 monthly, while the CF6-80E1 trails its alternative at around $100,000 monthly. By comparison, the PW4000, which powers widebody aircraft like the A330 and Boeing 767, has lower lease rates. The engine tends to be acquired at a monthly rate of $70,000.

According to Aviation Week, aircraft engine leasing rates have spiked significantly. Demand is high, but engine lessors operate in a very complex environment. Engine Lease Financial Corporation CEO Darren Wormwald explained:

“We’re seeing a fairly unique set of circumstances. We’ve got a very strong demand for our product, the engine piece, but we’ve also got a difficult geopolitical environment. We’ve got interest rates at their highest relative to recent history, and I think in terms of the investment strategy that dictates, that really is the question of looking at your customer base and working back from that.”

Airlines and lessors alike are forced to absorb higher costs, but the challenges with engine leasing do not end there. Recent trends have had airlines searching for longer lease times as they aim to hold on to their engines longer.

Prior to the C.O.V.I.D.-.1.9 pandemic, airlines usually searched for leases ranging from four to six months. However, more recently, airlines have been looking for leases that last as long as three years.

To make matters worse, airlines have faced engine challenges with their newest aircraft. An issue with Pratt & Whitney’s engine for the A320neo family has been forcing airlines to ground fleets worldwide. Airlines like Wizz Air are forced to forfeit large portions of their fleet while waiting to resolve the issue.

As a result, demand for replacement engines has risen, pushing lease rates up even further. Jeff Lewis, CEO of Hanwha Aviation, summarized the problem clearly, explaining the difficult position many airlines are stuck in today:

“You have to feel bad for the airlines right now. “[They’re] faced with an impossible scenario. You have brand new airplanes or newer generation airplanes with engine issues, and to keep those airplanes flying … you’re going to be desperate to go source engines on lease. When lessors see that and the phone rings on Saturday night, the price is higher than on Tuesday. It’s very challenging for the airlines and it really skews the market.”

As the airline industry continues to navigate its current challenges, engine leasing will continue to play an important role in keeping the industry aloft. How quickly the industry can address today’s issues can notably impact leasing rates in the coming years.