ALLOCATIVE EFFICIENCY AND SOCIAL VALUE OF THE AIRCRAFT LEASING INDUSTRY

The leasing of aircraft has become an increasingly important tool for airline financing. This paper considers the effects of the aircraft-leasing market on the efficiency of the airline industry, as the leasing market adds to the costs of aircraft financing. This paper shows that the aircraft-leasing market serves a valuable social function by improving the allocative efficiency of the airlines. The leasing market allows airlines the opportunity to adjust capacity so that the shadow value of capacity can be aligned with the cost of capacity. This is difficult to achieve without the leasing market due to the substantial delivery lag with the aircraft manufacturers. As a result, use of aircraft leasing may increase the expected profits of the airlines even though the airlines are paying higher capacity costs. The effects of aircraft-leasing on aggregate demand for aircraft by the airlines are also discussed.

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  • Corporate Authors:

    Instituti Editoriali e Poligrafici Internazionali

    Via Giosue Carducci 60, Ghezzano
    La Fontina,   Italy  56010
  • Authors:
    • Oum, T H
    • Zhang, A
    • Zhang, Y
  • Publication Date: 2000-6

Language

  • English

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Filing Info

  • Accession Number: 00798659
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Sep 2 2000 12:00AM