Aircraft export modes with MRO integration: leasing vs. direct sales

Exporting newly developed commercial aircraft remains a complex challenge for emerging manufacturing countries. This study develops a multi-echelon aviation supply chain game model to compare the economic performance of two key export channels: direct sales and aircraft leasing. The model explicitly incorporates differentiated Maintenance, Repair, and Overhaul (MRO) service arrangements, addressing the constraints faced by developing countries lacking strong MRO capabilities, and analyzes how export mode selection shapes airline competition in target import markets. The study proposes an innovative leasing mode wherein a domestic lessor from the manufacturing country provides bundled MRO services. Results show that, within this bundled MRO mode, the leasing channel outperforms direct sales in export volume under both “small market with high engine tariffs” and “large market” conditions. Furthermore, under strong MRO scale economies, the leasing airline consistently earns higher profits. Relative to the unbundled MRO mode, the bundled mode increases total aircraft exports when the lessor's initial MRO costs are sufficiently low, or the target market size is large. These market scale effects also shape social welfare: while both countries eventually prefer bundled MRO, importers benefit from it at a lower market size threshold than exporters, revealing a structural incentive misalignment. The study also examines two extensions on capacity leasing and airline service differentiation. Numerical analysis highlights trade-offs for exporting countries between export volumes and industry profits, and for importing countries between social welfare and consumer surplus, depending on how export mode selection, airline rivalry, and service differentiation interact. These findings offer theoretical and policy insights for designing export strategies and improving supply chain integration in emerging commercial aircraft industries.