On September 16th, with a unanimous 12–0 vote, the Federal Reserve Open Market Committee raised the federal funds rate a quarter point to a range of 3.75%–4.00%, its first hike since 2023[1]. The reasoning was straightforward: inflation remains elevated and the committee prioritized price stability. With the Fed now making pre-tax financing more expensive, the tax side of the ledger becomes more important. The One Big Beautiful Bill Act’s (July 4, 2025) 100% bonus depreciation for qualified property and the restored business interest deduction reverting back to EBITDA, §163(j)[2], which effectively allows leveraged lessors to deduct more of their interest expense, result in a meaningful reduction in the after-tax cost of financed fleet growth. The ‘permanence’ of these tax changes has reduced uncertainty when pricing the after-tax cost of acquiring ‘new’ Aero and Rail equipment.
Aero OEM delivery constraints remain, keeping mid-life aircraft values firm and lease rate factors elevated. But the cost of crude (WTI climbing to $96.08 to $100.30, Brent at $103.87)[3] is forcing a capacity response. It’s become a two-tier market. Air carriers will pay a premium for more fuel-efficient technology (early A320neo and 737MAX) over previous-generation midlife A320ceo/NGs, a split confirmed by lessors at the September 13-15 ISTAT EMEA Copenhagen conference where conversations centered on jet fuel near $100 a barrel and the cost of money. The Copenhagen conference confirmed the market is not slowing across the board but bifurcating by aircraft vintage and technology. American is adjusting capacity to manage the roughly $1 billion additional Q4 fuel costs; United is pulling “some December flights” with more cuts flagged for Q1 2027; Southwest is cutting its 2026 growth target from 2-3% down to roughly 1-1.5%[4]. Position your investment toward the younger end of mid-life equipment, treating older-generation units as a shorter-duration trade. A midlife plane is often worth more parted out for its green-time engines and components, which establish a valuation floor. Consider placement (with risk-adjusted returns) in emerging markets, which act as a natural ‘second home’ for older midlife aircraft. Tailor your investment with upfront security deposits and strict maintenance cash reserves to protect asset values. Maintain a transition cash liquidity buffer to cover potential ferry costs, legal, and technical transition management. Residuals should be priced with upside on exit.
A diversified rail portfolio spreads investment risk across multiple car types and credits. An example: Trinity Industries reports its fleet investment generates its highest returns, driving the firm to actively transition from manufacturing to a leasing-centric business model (fee income from rail investment partnerships provided an average of 100bp to adjusted ROE over the last five years)[5]. At Morgan Stanley’s 14th Annual Laguna Conference in Laguna Beach, California (September 14-15), Norfolk Southern’s chief commercial officer, Ed Elkins, reported that higher trucking costs were causing freight to shift from highway to rail. CPKC CEO Keith Creel provided a constructive assessment of underlying freight demand, with revenue ton-miles up 4% year-to-date, quarter-to-date revenue ton-miles approaching a positive 7%, grain and intermodal traffic strong, and coal headwinds moderating. Excluding coal, CPKC revenue ton-mile growth was approximately 6%. CN’s CEO Tracy Robinson followed up with enthusiasm on CN’s new access to Mexico through its haulage rights agreement with the UP, calling the agreement a “once-in-a-generation opportunity.”[6]
Put the pieces together. The business is straightforward even if executing it is not. While the Fed has signaled it isn’t finished raising rates, available tax base is particularly important. Evaluate the equipment’s remaining ‘economic’ life, lease rates, utilization, maintenance, financing costs, the depth of the secondary markets, and how technology and changing jet fuel prices are affecting residual values.
Investment discipline is key. Take care of business. Call RESIDCO.
David Kolber 312-635-3152
dkolber@residco.com
[1] September 18, 2026, Yahoo Finance, “Fed Keeps the Door Open for More Rate Hikes”
[2] Grant Thornton – OBBBA restores 163(j) EBITDA benefits
[3] WTI climbs to $96.08/$100.30, Brent to $103.87, September 18.
[4] Prolonged Fuel Spike Prompts US Airlines to Reevaluate Q4 Capacity Plans
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