I think this is one of the most interesting questions, right now. They were producing 60 odd planes a month, a huge oversupply of planes now. If you’re managing a fleet, do you upgrade to new planes? Do you scrub the old ones? Do you run the old ones now, because the fuel is cheaper? How do you look at minimizing your variable costs?

You’ve raised another really interesting question, because there’s been this massive, unbelievable, improvement in technology, in aircraft, over the last 50 years. A lot of people say that the airplanes look pretty much the same. There’s a lot of truth in that. If you look at a 777 produced now, compared to 30 years ago, you could put them up against each other and they are very similar. But the efficiency of those aircraft is just staggeringly different, in terms of the amount of fuel per passenger that they burn. What’s happened that is so extraordinary is the cost of oil – and in the aviation industry, we call it Brent Crude – has gone down from a period of about 2008 to 2012, where we were paying $110 a barrel, to now, where you can buy it for about $25 a barrel. That is incomprehensible. It’s like taking the price of fuel back 25 years.

Everything that justified that extraordinary capital investment in jet engines, composite materials, amazing sophistication, to get the drag down of the aircraft, has gone. If I’m sitting there, running an airline now, I’m going to think, I can almost use anything because, as long as it can actually make the mission and back, it will work, because the fuel isn’t going to be the difference that it once was. What a lot of airlines are doing now, and how they’re making dollars, is that they are using passenger aircraft, believe it or not, as cargo planes.

What they do is, in the hold of the aircraft, like a 777-300, you could probably put about 20 tons of cargo. Originally, we’d have about 12 tons of cargo and eight tons of people’s baggage and other stuff like that. So you stick all that in cargo, and they don’t take the seats out. You either just put boxes down and tape them onto the seats, believe it or not, and these things have been converted into semi-freighters. When you talk about flexibility, you’ve got to be prepared to do anything.

What you suddenly start getting your crew to do is operating all these services for freight. As long as you can cover the variable costs, you’re ahead. So anything goes.

As you said, you’d rather own older planes, today, than the newer A320neo, or newer planes, which are more expensive?

There are a lot of people making some pretty incredible claims about a vaccine, at the moment, including Oxford University and some people in the States. Let’s just say, for argument’s sake, that happened, and oil didn’t go up, materially, and it stayed at this $25 mark, Brent, approximately. I wouldn’t be in a hurry to buy anything new, that’s for sure. If I had aircraft that were, eight, 10, 12, 14 years old, I would think, I’ve paid it off, I’ve got a higher maintenance bill, like your car – you pay more maintenance as it gets older – but I’d say, I’m going to go with that. I can’t afford the capital, anyway. I’m pretty broke. So I’d rather just use my old planes. If anything, put some nice seat covers on. I wouldn’t bother to paint them, because not too many people look at the paint outside, unless it’s an ad. I would just get people on and focus on the service for the customer. That’s what I’d do, bearing in mind what the guy actually sees, when he or she is sitting in the seat.

Most people’s interaction is defined by a tiny amount of space. It’s what do you see on the back of the seat in front of you, which is the in-flight video and who is that crew member coming down the aisle? How are they interacting with you as that personal skill is a big deal? What do they give you to eat and drink? Increasingly, and I imagine when you go on an airplane, you probably take something like an iPad, and you watch movies you’ve already downloaded and you skip whatever is on the screen in front of you, anyway. You’ve probably got a bottle of water. A lot of people, if it’s short haul, have brought something to snack on, anyway.

It’s very important that you make whatever is there acceptable to people and that’s probably where I’d put the bit of money that I’d spend, if I spend anything.

As an airline executive, how do you look at the role of lessors, in this industry and how that, potentially, is going to now change, going forward?

I fear that a number of them won’t be around, in every industry. They’ve got this ongoing, massive obligation, to financiers. They’ve played an incredible role and you often get the question of, why do you lease an airplane? If you put a middle man into anything, it’s going to add a cost. If I rent from William Leasing, over time, I’m going to pay you more than if I’d bought the aircraft from Boeing or Airbus, as a general rule. There are a lot of circumstances that affect that, like how good a negotiator you are, how desperate the manufacturer has been to sell, how aware am I and all the rest of it. But why people lease is because they haven’t got the capital. They can’t raise the capital. The capital amount is too great. They don’t want the encumbrance of owning the aircraft. They might be attracted to a deal where you come along and say, hey, Wayne, I’ve got a great A320. It’s only 10 years old. I’ll lease it to you for six years and, instead of the market rate of half a million, I’ll give it to you for 250. I’ll say, I can afford 250 a month, but I can’t afford $40 million for an airplane.

So I think they’ll always be there and they provide a valuable service.

But they’ll be leasing the older planes to you, that you can afford? Not the new planes?

They often lease you new planes.

But today, would you take that new plane or would you say, actually, I’d rather lease the old plane, at a much cheaper price, because the fuel price is much cheaper now?

You’ve got it. I’d go for something like eight, 10, 12 years old. It’s a good price, maintenance isn’t bad, you’ll get a cycle of four to six years out of it. Give it back or renegotiate a better deal. When they get past 16 years, they get pretty cheap. It’s the end of life, because aircraft last about 18 to 20 years. Sometimes they fly a bit longer than that, but usually, the maintenance bill is getting pretty high. I’d go for those older airplanes. I wouldn’t be attracted to the new ones, with fuel as it is at the moment.

This is a tricky spot for the lessors, who have huge orders and a huge fleet, today.

Their big issue, right now, like everybody else, is that they fund all that by somebody having loaned them the money. They can’t get the money off the airlines and the banks want the money off them. Are Airbus and Boeing going to get some money? There’s been a lot in the press about Boeing getting money from the American government. Are leasing companies going to be able to get money off governments, to stay alive, because some of them are very, very big? Some of these guys own several hundred aircraft. If they go down, what’s going to happen to all of those airplanes? Let’s hope that that doesn’t happen. Let’s hope that everybody finds a way through it.

But you can see the ramifications of it going through the industry, already. Boeing had been in a lot of financial trouble, because of the 737 MAX. It had made this gigantic deal to buy into Embraer, for $4 billion. That came about a year after Airbus bought into Bombardier, out of Canada. Boeing has just walked away from the at $4 billion deal and said, we can’t afford it, because they are already in so much trouble. The longer this goes on, how many of those sort of deals are we going to start seeing going on? In Europe, this has been since the start of March. We’re towards the end of the second month. Imagine if it goes on for another six months. It’s going to be pretty hard, for everybody.

Sign up to read the full interview and hundreds more. No credit card details required.
Sign up to read