Aircraft leasing activity is becoming more robust due to favourable interest rates, but some lessors are warning of the potential for a downturn in the market.

Speaking at Airfinance Journal's 9th Annual European Airfinance conference in Dublin , Jetworks Leasing executive VP David Thompson said there is "good demand" from airlines for aircraft manufactured between 1992 and 2002, and "strong demand" for new and nearly new aircraft, but warns of a possible downturn in the leasing market.

"The caution light is starting to come on," says Thompson. "Things have been too good and it may be time to dust off the contingency plan."

However, this view is not shared by everyone. ORIX Aviation managing director David Power says there is "certainly not a bubble" in the market, and notes that aircraft lessors have been greatly assisted by favourable interest rates.

The narrowbody leasing market is "very segmented", according to Power, who believes portfolio deals are exciting for companies with large cash reserves, but single aircraft deals are a "steady way to grow a portfolio" and avoid the bidding process.

Another non-believer in the prospect of a downturn in the aircraft leasing market is Thomas Cook Airlines director of leasing activities Shaun Monnery, who says the operating lease is an "essential part of acquiring aircraft" for charter airlines and start-ups. Monnery wonders what impact the introduction into service of the Boeing 787 and Airbus' A350 XWB and A380 will have on the widebody leasing market.

He predicts that this will mean the Boeing 767's life will "come to an end", although there will "still be a future" for leased Airbus A330s.

"The future in leasing is absolutely phenomenal and the volumes of short-haul aircraft that will be required will also be phenomenal," he notes.

Ron Wainshal, CEO of US lessor Aircastle - which recently entered into a purchase agreement with Guggenheim Aviation Partners for 38 aircraft - also says favourable interest rates have had a "dramatic effect" on the amount of opportunities for aircraft lessors, as has the desire of airlines to avoid the "residual value and disposal risks" associated with owning aircraft.

Wainshal says growth prospects for the aircraft leasing market are "very robust". He points to the declining number of aircraft owned by airlines versus the growing percentage of aircraft owned by lessors. In 1987, notes Wainshal, 72% of aircraft were owned by airlines, compared to 8% owned by lessors. This has since declined to 48% owned by airlines, while the percentage owned by lessors has risen to 31%.

"I wouldn't be surprised if this becomes 50/50 in the future," he says, adding that there has been a "resurgence of traditional lessors and new entrants" in the leasing market.