Hear more from Nicholas during the panel ‘Ishka Horizon | Plotting the Future of Flight’

Starburst sits at the intersection of startups, corporates, and governments across Southeast Asia - which new propulsion technologies are you seeing attract the most serious investment right now, and which are still struggling to find backers?

We are seeing serious flow of investments into propulsion technologies which have a credible path of certification and near-term deployment. Especially around hybrid-electric propulsion systems, hydrogen-electric for smaller aircraft and more efficient next-generation engines. Hybrid systems are particularly attractive because it improves fuel burn and emissions without requiring the industry to change all infrastructure at one go.

Technologies which are still struggling are mainly pure battery-electric powered passenger aircraft beyond short routes. They are suitable for eVTOLs, short commuter flights and small cargo payloads but become much more difficult to employ once you move into longer routes, larger payload operations.

Singapore is positioning itself as a hub for aerospace innovation, but Southeast Asian airlines operate very different route networks to their Western counterparts. How does that shape which zero-emission or advanced propulsion solutions have a viable path to market in this region?

Southeast Asia’s aviation market is very different from Europe or US. We have dense short-haul routes, island connectivity, secondary cities and fast growing low-cost carriers. Indonesia, the Philippines, Malaysia and Thailand all have route networks where short-sector aviation matters but the aircraft need to be affordable, robust and easy to maintain.

Our impression is that the earliest opportunities in this region will likely be in short-range island hopping, cargo and unmanned aircraft operations. Any new propulsion technologies will need to fit these operational realities and not just zero emission or global decarbonisation objectives.

The Ishka Singapore audience is largely made up of aircraft financiers and lessors - how should ‘traditional’ aviation finance professionals be thinking about new propulsion technologies, and where do you see the earliest commercial opportunities for them to get involved?

Traditional aviation finance professionals should think about new propulsion less as a single aircraft replacement trend and more as a question of asset risk, residual value, infrastructure readiness and timing. These technologies will change maintenance models, energy supply, airport infrastructure and secondary market liquidity.

Our take is that the earliest opportunities may be found in airport infrastructure, SAF and hydrogen eco-systems, MRO services and data platforms that help make new aircraft commercially bankable.

Hear more from Vicente during the panel ‘Financing the Future Fleet: Who Funds the Next Wave?’ and Investor Forum session ‘Aviation vs Shipping vs Infrastructure’.

You're again leading the private Investor Forum comparing aviation, shipping, and infrastructure – what are the questions you typically face from institutional investors in the region? What could help unlock deeper investment for aviation as an asset class?

Investors in the APAC tend to be more credit and risk focussed and regard aircraft assets as a more volatile asset class when compared to shipping or infrastructure. Traditionally airlines have been seen as a loss making industry and aircraft viewed as maintenance intensive and cyclical assets. The reality is that this is not the case as has been demonstrated in particular after the Covid crisis driven by a long-term positive demand for air traffic and increased disposable income globally. Shipping compared to Aviation is much more cyclical while infrastructure maybe more stable but offers also lower upside potential and is subject to ongoing deregulation making it an increasingly riskier industry.

I believe more education and transparency about airlines' and aircraft value performance would help Asian investors better understand the industry. This should include independent aircraft appraisers, OEMs, lawyers, lessors and banks presenting regularly at conferences and investors forums where other asset classes play a dominant role. Also, publishing real aircraft trading data but anonymized to comply with confidentiality and data protection requirements would go a long way to support a better understanding of what aircraft trades can generate in terms of profits. Finally, like in other asset classes, understanding that timing of your trade is crucial for making an aircraft investment a success or not.

You've spent significant time building aviation finance markets across APAC - how has the regional leasing landscape evolved, and which markets do you see as the most promising growth opportunities for aircraft investors right now?

APAC has become a much more mature aviation finance market over the last 10 years where good performing airlines even in more challenging jurisdiction have now good access to multiple sources of financing, i.e. India, Philippines and Vietnam. The main challenges in APAC continue to be a sometimes underdeveloped legal framework and significant currency exchange fluctuations which can affect airlines profitability significantly. In these situations dealing with established airlines who are well supported by their shareholders, governments and house banks tend to be the safer bets for investors. I personally see Indonesia with a population of 287m people and a geography of more than 17,000 island having the largest growth potential in the APAC region. India is already on a significant growth trajectory driven by a growing middle class having sufficient disposable income and an economy which has been pushing its full potential only recently. Both countries have to overcome the aforementioned main challenges (legal framework and currency fluctuations) to fully experience its potential as a long term growth market in aviation finance.

The industry needs around $150bn a year to finance new aircraft deliveries - from GOAL's vantage point, where do you see the biggest funding gaps, and which financing structures are best placed to fill them?

The aviation finance markets are fully functional and liquid so that there should be no foreseeable funding gap. The Capital Markets are funding lessors, asset managers and better rated airlines at levels seeing during record years pre- and post Covid, the lending markets are as active as ever and the share of leasing is taking a significant share in funding new deliveries, although the better credit airlines are rebalancing their balance sheets to have more equity in the aircraft where possible. What we have seen is that for weaker credits pricing will reflect the higher risk but if it includes liquid aircraft, in particular narrowbody aircraft, lessors will be willing to step in and fund these aircraft deliveries. As such I don't see any funding gaps to occur in the near term future unless another black swan happens. The Iran war was not such an event as it was regionally contained with the exception of higher fuel prices affecting airlines globally, especially weaker credit airlines.

Hear more from Graeme during the main stage panel ‘Maintenance as a Strategy: How is MRO Pressure Reshaping Asset Management?’

When you're underwriting an aircraft or structuring a lease, how do you build MRO risk into the pricing today versus five or ten years ago?

For new tech asset leases, the Lessor will tend to use the OEM data that both parties will have access to. On EIS kit, this will always be notoriously understated but there will not be anyway to substantiate higher rates. It is the escalation that will be the other problem – most airlines will insist on a lower rate than what is a reasonable number or forecast. This compounds any issues of shortfall.

Has the current environment (engine reliability issues, parts shortages, extended shop visit durations) changed the assumptions lessors are willing to rely on?

Long term leases will depend on the credit and (increasingly) political exposure of the Lessee but generally the expectation will be that the Lessee will take all mechanical risk during a long term lease. Most of these types of leases today will not have a monthly cash maintenance payment unless the Lessee is a lower tier airline with inherently more risk exposure.

Short term leases however are all about cash and cashflow exposure and payments and “as is” return conditions which has been a significant development over the last 10-15 years. Coinciding, the length of lease has gone from 5 years on average to 7-8 years and now 10-12 years for long terms, perhaps 3 years for green time stub leases but I would think this will migrate to 5 years for this type going forward. Which is a significant amount of risk for a lessor / financier. This could only be done with the CEO narrow body fleet as the NEOs are simply too expensive and not mature enough to forecast reliably. The current leasing situation is a trend for mid/end of life finance which most mainstream leasing companies are not really structured to do (something they will reject but is essentially a fair assumption).

New technology engines such as the NEOs have been significantly less reliable that the CEO variants due to the more difficult operating levels such as 30% faster rotation speeds and around 10% hotter design limits (much closer to melt zones at take off). Manufacturing flaws as well as a very large ramp up in delivery numbers have compounded any failures on wing. I am sure the OEMs will sort these issues out but it will take a significant amount of time to influence new deliveries plus retro fit the existing fleets. Most airlines (but not all) have some form of OEM care package which insulates them from the MRO costs to some extent but this isn’t forever.

Airlines increasingly describe a mismatch between maintenance reserve mechanics and their actual cash outflow - reimbursement timing, documentation requirements, and eligibility rules that don't line up with when the bills actually land. From where you sit, is that tension something lessors can realistically solve, or is it a structural feature of how reserves are designed?

I have some empathy for airlines, having worked for one for 15 years and responsible for engine forecast and budgeting. Airlines have accrual issues – they can only accrue for the MRO work in the year of that work starting. This is due to the accounting standards they are required to comply with. To accrue earlier would require holding back nett cashflow from previous years which most CFOs would reject. The lease agreements are a two way negotiation, so there is a remedy available. It is not in the interests of the Lessor to have the Airline go bankrupt but also the Lessors are not a revolving credit bank facility. Some airlines that do a lot of leasing and have a decent amount of commercial understanding have better outcomes than Airlines that do less leasing due smaller fleets or a different philosophy for finance. I have negotiated leases with airlines that both side knew the MRs were less than cost plus escalation less than inflation. Both parties take risk in this situation.

With delayed deliveries and parts constraints pushing operators to hold aircraft longer than originally planned, how does that change the way you think about residual values, redelivery conditions, or asset management more broadly?

We are in a pretty unique situation that not many in the industry (lessor, financiers nor airlines) have been in before. Long forecast new kit deliveries with timelines pushing out to the right – all with no control by anyone including the OEMs (design problems, tech problems, supply problems, military actions etc), so existing asset extensions seem to be very normal now. From the time an OEM forecasts a demand for parts, its approximately 3 years until that part hits the shelves and IMO, the OEMs have been notoriously poor at forecasting. I can’t see an improvement on the situation in the foreseeable future, so strong residual values will remain in vogue for the next 4-5 years. I note that the USM market is now charging 80% new CLP plus the MRO handling fee of 8-10%, which is outrageous to my mind. The only reason they can do that is the new parts are just not available and some people are desperate for some form of saving. Redelivery conditions for the CEO fleets are more likely to be “as is” which allows a lot of latitude to Airlines and does allow the Lessor or financier more risk – usually built in to some extent by slightly higher rent rates. End of life asset managers are not necessarily very good at actually managing the assets from what I am seeing today.

Nadeera made a direct call for lessors to move away from fixed assumptions and standard redelivery terms toward collaborative risk-sharing. Is that commercially workable from where you sit, and what would it actually look like in practice?

A little naive in outlook. The Lessor doesn’t have a pot of funds sitting around to top up operator expenses. The only way something like this could happen is where the Lessor refinances with a lower interest rate and or the Lessee absorbs the Lessors depreciation on the asset. The Lessor has zero control on the scope of work being undertaken as well as where the work is carried out, so there is very little likelihood that some kind of top up or exposure guarantee being agreed unless there is something for the Lessor as part of the settlement.

The best lease with variable conditions I have been part of to date was with Robert Fanning and Frontier Airlines a few years ago. There was a variable set of clauses that allowed for actual escalation whether they be up or down over time but did not include cash MRs, just a EOL condition.

Nadeera is concerned about the cash MRs being reimbursed and not being sufficient to pay the actual costs incurred as well as the timing of said payments. This a normal situation and not an exceptional situation. There is a remedy and this is the lease agreement. If a party wants change, then that is a possibility but Lessors or financial institutions do not have buckets of money available to top up MRs.

If there's one thing you want investors, lessors, and airlines in the room in Singapore to take away from this conversation about MRO, what would it be?

Both parties in the negotiation be more realistic to the future exposure – I haven’t seen an airline who thinks they are not a credit risk – even the ones one step away from Chap 11. Be realistic with the escalation rates agreed and what you are trying to achieve. The Lessee knows their actual costs of maintenance so any negotiations should be based on reality not screwing down to a lower value and compound the problem with poor escalation rates. As we know, costs never come down, so the remedy is in the hands of both parties but the Lessee has the final decision as the successful bidder is part of a competitive process.

Hear more from Ambalik during the main stage panel ‘Maintenance as a Strategy: How is MRO Pressure Reshaping Asset Management?’

InAMP Aero operates across both the parts trading and asset management sides of the industry. How much has the MRO capacity crunch changed the way airlines and lessors approach engine material sourcing, and are you seeing that shift the balance of power in negotiations?

As a parts supplier, the biggest change is who's buying and what they're asking for. Airlines and lessors that never touched surplus material five years ago are now serious USM buyers, because a shop visit built around new OEM parts is both slower and dramatically more expensive. When a full CFM56-7B visit runs five to seven million dollars, serviceable used material is often the difference between an economic workscope and one that isn't. USM went from a cost-savings play to a turnaround-time play. The first question we get is no longer price, it's "is it tagged, is the trace clean, and is it on the shelf."

On negotiating power, the leverage sits with whoever holds serviceable inventory in the shortage categories. On the CFM56 right now that's the hot section, HPT blades especially. If you own that material with clean paperwork, you're not really negotiating, you're allocating. But the constraint runs the other way too: we can't buy what doesn't exist. Feedstock is scarce and expensive because everything that can fly is flying, so traders are competing hard upstream for teardown assets and whole engines. The margin in this business has moved from the sale to the sourcing.

With shop visit slots relatively scarce, how are lessors and airlines deciding which aircraft and engines to prioritise, and what does that mean for the residual value of assets that can't get to the front of the queue?

What I can tell you is what the parts market sees, because every one of those decisions shows up in our order book. The engines getting full restorations are the ones on critical tails or hard deadlines. Everything else is being managed to condition, and that's driving a boom in the light workscope: module swaps, hospital visits, green-time LLP replacements. The whole point is to buy time without buying a full shop visit, and every one of those solutions is built out of used material. That's the aftermarket's moment. We're not the cheap alternative anymore, we're the supply chain that keeps the queue moving.

For the asset at the back of the queue, here's the trader's view: it doesn't lose value, it changes form. An engine that can't economically reach a shop becomes feedstock, and part-out values on CFM56 and V2500 material are exceptional right now precisely because so few engines are being torn down. The disks, the blades, the LLPs with real cycles remaining, that material is worth more disassembled today than a lot of owners realize. The engine is worth the sum of its parts, and right now the parts are winning.

The Ishka Airfinance Singapore audience knows aircraft finance well but MRO is often treated as a back-office concern. What's the one thing you'd want lessors and investors in the room to understand about how maintenance pressure is now directly affecting asset values and returns?

That your asset's value now depends on a parts market most of you have never priced. The appraisal says the engine is worth X, but realizing X requires a shop visit, and the shop visit requires material that may not exist when you need it. Turnaround times aren't long because shops are lazy, they're long because engines sit half-assembled waiting for parts. So when you underwrite a transition or an end-of-lease event, underwrite the material path, not just the reserve balance. Who supplies the hot section? Is it new OEM at list price and a long lead time, or is there USM available, and does your maintenance agreement even allow it?

And one more thing from the trading side: the paperwork is the part. After AOG Technics, material without airtight back-to-birth trace is getting progressively harder to sell no matter how good the metal is. If you own inventory or you're taking material in a redelivery, documentation quality is a real component of the value. We slim, verify, and rebuild trace packages every single day because that's what makes material liquid.

Hear more from Nadeera during the main stage panel ‘Maintenance as a Strategy: How is MRO Pressure Reshaping Asset Management?’

When a lessor prices an aircraft lease, what MRO factors do they most commonly underestimate?

From an airline engineering perspective, the biggest gap is that MRO is still treated as a static financial model, when in reality it is highly dynamic and operationally sensitive.

The first area that is underestimated is engine shop visit variability. While lease pricing typically assumes standard intervals and costs, actual engine maintenance is heavily influenced by operating conditions such as environment, cycle/hour ratio, and utilisation profile. Small deviations in these assumptions can materially change both timing and cost of shop visits, making maintenance reserve modelling inherently uncertain.

Secondly, lessors often underestimate the complexity of maintenance reserves and recovery mechanics. While reserves are designed to protect asset value, in practice:

• Reimbursement depends on documentation quality,
• Eligibility rules differ by lease,
• And timing of cash recovery rarely matches airline cash outflow.

This leads to a real mismatch between accounting assumptions vs. operational reality, often creating cash flow strain for operators.

Finally, lessors tend to underestimate the non-routine work scope risk. A shop visit is rarely just a “planned event”  findings, LLP replacements, and material condition variability can drive costs significantly beyond modeled assumptions

The parts shortage is well-documented at a macro level - but what does it actually mean today for a carrier like SriLankan Airlines?

At a macro level, parts shortages are discussed in terms of supply chain disruption — but for an airline, it translates directly into operational, financial, and strategic constraints.

First, it means longer turnaround times (TATs). Engine and component repairs are increasingly delayed due to piece part availability and labor constraints, which directly impacts fleet availability and reliability.

Second, it results in aircraft-on-ground (AOG) risk and forced operational inefficiencies. Airlines are increasingly:

• Leasing spare engines / landing gears at higher cost
• Cannibalising parts from other aircraft

This is driving a structural increase in operating costs across the board.

Third, it fundamentally changes fleet strategy. Because of delayed aircraft deliveries and limited parts availability, airlines are forced to retain older aircraft longer, which increases maintenance burden and cost exposure.

Fourth, from a commercial standpoint, it shifts risk allocation. What used to be predictable shop visit cycles now becomes: uncertain induction timelines + extended shop visits + higher material escalation.

“For us, parts shortage is not a supply chain issue – it is a fleet availability issue, a cost issue, and in some cases, a schedule integrity issue.”

The Singapore event will gather financiers, lessors and aircraft operators. If you could ask your counterparties to change one thing about how they approach MRO when structuring a deal, what would it be?

The one change I would ask for is a shift from purely financial modelling of maintenance to integrated operational modelling. Today, most deals are structured around:

• Maintenance reserves,
• Fixed assumptions on shop visit timing,
• And standard redelivery conditions.

But the operational reality is far more complex. I would encourage counterparties to move towards: “Collaborative MRO risk-sharing rather than static risk transfer.”