The plane was right there

Our flight was cancelled.

The plane was right there. I could see it through the window, parked at the gate, twenty feet away.

The agent said the aircraft was missing an engine. The engine was in a repair shop. The shop was full.

I've heard a lot of reasons for a cancellation over the years. That one was new.

So I went looking… and the money side of it is stranger than the delay.

A spare jet engine now rents for more than $6,500 a day. In 2022 and 2023 the same engines went for about $5,000. Those are completed deals over the past year, priced by the appraiser IBA and reported by Reuters in August.

At that rate one engine collects almost $2.4 million a year in rent. Two of them hang under a single narrowbody jet.

The airframe has become the cheap half of the airplane.

The cause isn't a shortage of engines. It's a shortage of places to fix them.

An engine comes off the wing for overhaul and waits for a shop slot. Turnaround times run months longer than they used to. The airline still owes its passengers a schedule. So it rents somebody else's engine.

Then it pays twice. Once for its own engine sitting in a shop. Once for the rented one on the wing.

And the rent doesn't stop when the repair finishes. Airlines took three-year replacement leases to protect their schedules. Austin Willis, who runs the biggest engine lessor, told Reuters that the short contracts often get extended. Air New Zealand's chief executive said it could take his airline 12 to 18 months to shed the extra leases it signed.

A full overhaul of a CFM56-5B, the engine on older A320s, runs past $10 million. That's more than some of those airplanes are worth.

So the sensible owner does the unsentimental thing. He pulls the engines, rents them out, and lets the airframe sit in the desert.

I have no idea when this turns. Repair capacity is being built. The engine makers say the worst is behind them.

But I know who pays the rent now. And I know who's borrowing money to collect it.

When a piece of machinery gets scarce enough to earn rent, money finds it. That's what has happened here.

On January 5, Willis Lease Finance and Blackstone Credit & Insurance announced a partnership to put more than $1 billion into commercial aircraft engines over two years. Both companies published it. Willis filed it with the SEC.

Blackstone's infrastructure and asset-based credit group manages more than $100 billion. It calls this asset class a hard asset with strong downside protection.

Willis is the biggest engine lessor in the world. At the end of last year it held $2.80 billion of equipment on lease, 363 engines and 20 aircraft, with customers in 37 countries. Rent brought in $291.6 million.

Now the part that made me stop. Willis typically finances its equipment with 80% debt and 20% equity. Its chief financial officer said so in January, and said Blackstone is expected to supply much of the credit.

Fifteen aircraft securitizations came to market last year, raising just over $10 billion. So the rent gets borrowed against, four times over, and sold on.

And here's where it spreads.

IATA counts a global order backlog above 17,000 aircraft. That's close to 60% of every jet flying today. The historical range was 30% to 40%.

At current production rates, the backlog represents nearly 12 years of output. Deliveries have fallen at least 5,300 aircraft short over the past five years.

IATA doesn't expect the mismatch to sort itself out before the early 2030s.

Airlines are keeping planes they meant to retire. There's nothing to replace them with.

So an old jet that should be in a scrapyard keeps flying, and keeps needing repairs, and keeps competing for the same shop slot as a new one.

Aircraft lease rates now run 20% to 30% above 2019.

IATA put the industry's extra costs from all of this at over $11 billion last year, including $2.6 billion of engine leasing alone.

Meanwhile, Spirit Airlines stopped flying on May 2.

It went into the wind-down with 114 Airbus A320-family jets, 66 of them leased, plus 18 spare engines. The court let it sell or abandon what it owned.

By early August, 84 of those aircraft sat at AerSale's field in Goodyear, Arizona, held for the banks and lessors that took them back.

The airframes are still parked. The engines are already gone, out on lease somewhere else.

A freshly overhauled V2500 with new life-limited parts was worth roughly $11 million to $13 million in the first half of this year. A worn airframe underneath it is worth a small fraction of that.

But IBA's update this month says V2500 prices have come down, and it describes that part of the market as softening. The reason is the supply that Spirit's collapse released.

One airline failed, and a shortage that was supposed to last until the 2030s loosened. That's how deep it goes.

Three more things worth keeping track of…

Spain spent 596 hours in the first half of this year with wholesale power prices below zero. Portugal spent 462. France, 370. In April the exchanges had to move the floor down from minus €500 a megawatt-hour to minus €600, because prices were hitting the limit. Solar keeps getting built. The midday hours keep paying less than nothing. S&P Global says negative hours across five big European markets ran about 2% above last year's record.

The Bank of Japan spent 13 years buying stock funds and ended up with ¥37 trillion of them at cost. In January it started selling. The first month came to ¥5.3 billion. At the planned pace of about ¥330 billion a year, the sale runs past a century. Governor Ueda has said as much out loud. A central bank owns a large slice of its own stock market and has no realistic way out of it.

And London's silver vaults hold tens of thousands of tonnes, but the World Silver Survey found that by the end of last September, 83% of it was locked inside exchange-traded products, leaving about 136 million ounces actually available to borrow. That's the lowest free float on record. It's why the cost of borrowing silver for a month went to roughly 39% last October, against a normal rate under 1%. The metal is there. Very little of it can move. We'll see.

In 1970 America decided it had a boxcar shortage.

Shippers waited weeks for a plain freight car. The railroads were broke. Several of the big ones were already in bankruptcy.

So the Interstate Commerce Commission created a rule called incentive per diem. Whoever owned a boxcar collected an extra daily fee for every night that car spent on somebody else's railroad.

Own the car, earn every day. That was the whole idea.

Finance companies read the rule and understood it at once. National Railroad Utilization Corporation. Brae. Itel. Emons. They bought new boxcars by the thousand and leased them to tiny shortline railroads, then registered the cars as free-runners so they'd always be out on the network collecting.

Some of those railroads ended up with more boxcars in their name than miles of track.

As many as 40,000 cars were built this way.

The shortage was in the repair shops, not in the boxcars.

The country had plenty of boxcars. A large share of them sat out of service waiting for repairs the big railroads didn't want to pay for. Building specialty cars paid better, so that's what got built.

Nobody owning those daily fees was thinking about that.

Then 1980 arrived. The ICC ended the program. The recession cut freight. The cars came home to owners who had nowhere to put them.

Several of the finance companies went bankrupt.

The cars themselves were fine. Well built, most of them, and plenty ran for another twenty years under new paint.

What failed was the rent.

Steel doesn't break. Rent does.

We'll see.