Aviation Finance

Developments

The latest edition of Aviation Finance is published
December 13th 2018: In the latest issue of Aviation Finance: What 2019 may bring for aviation finance: Joe Gill reviews the year ahead looking at the issues of special focus for aviation financiers and investors, with questions around new aircraft programmes and technical questions figuring prominently in concerns. Against a backdrop of increasing lease returns, the secondary lease market for the 777-300ER is developing and some interesting trends are emerging, writes Mike Yeomans, IBA’s Head of Valuations who explores the secondary leasing market for the aircraft. He cautions that the achieved lease rates on early placements are below base expectations and that rates and values may soften further with an increase in supply; also: the importance of whale customers to OEMs; and, in assessing the capital markets outlook we review Boeing Capital’s latest Current Aircraft Finance Market Outlook (CAFMO) and its insights into how the industry is sourcing and deploying finance.

Leasing to gain further market share as airline business models shift away from ownership
The future is bright for global aircraft leasing and it looks set to grow its share of the global aircraft fleet further as airlines increasingly follow a business model prevalent in another asset-heavy industry, the international hotel industry, according to Avolon CEO Domhnal Slattery.

 

Perspectives

'Current pricing is unsustainable'

IBA's Stuart Hatcher give his view on 2018 to date, focusing on airline failures, transaction trends, values and lease rates.

Goshawk's Ruth Kelly on its growth plans
Marsh's Bob Morin on AFIC's first year
ELFC's Jon Sharp on the engine leasing market
FLY's Colm Barrington on its AirAsia deal

Analysis

AerCap CEO: leasing sector better prepared for a downturn now than it was 10 years ago
Aercap, the world's largest owner of commercial aircraft, released financial results for the quarter ending September 2018. Net income was relatively flat year on year at $263.4m while earnings per share grew 10%, boosted by a share repurchase programme that commenced in July 2017. Book value per share was also boosted by 11%. Since June 2015 Aercap has repurchased 35% of outstanding shares, an important lever to drive eps momentum for investors.

Lessor paradox: Rising interest rates could moderate intense competition
The highly competitive landscape in the aircraft leasing industry is likely to remain a theme for the near-term and drive further consolidation. However, rising interest rates, while not good for funding, could help slow the inflow of capital into the industry and moderate some of the negative effects of intense competition stemming from the abundant liquidity, particularly for established players who have maintained underwriting discipline, according to a new report from KBRA.

European airline CEOs talk up further market consolidation
A number of key European airline leaders are flagging further consolidation in the airline industry as the sector grapples with fragmentation, high oil prices and excess capacity. These features are especially pronounced in Europe where demand growth rates lag those of markets such as Asia.

 

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Singapore sovereign fund GIC takes stake in NAC
In an announcement made jointly by Nordic Aviation Capital, its founder Martin Moller and investor EQT VI, it has been disclosed that GIC, Singapore’s sovereign wealth fund, is to become a significant minority investor in the world’s largest lessor of regional aircraft. The transaction will involve a partial sale by the existing shareholders and the introduction of new capital to further strengthen NAC’s balance sheet, the parties said.

Performance of Delta's A220 roll out significant for plane's commercial success
The US carrier Delta has revealed plans for the operational deployment of its new Airbus A220 aircraft. In so doing it is providing a platform within a large established mainstream carrier in which the A220 can be assessed from an economic and customer experience perspective. Delta is the most significant US customer for the former C Series aircraft, having ordered a minimum of 75 units.

Carlyle Group's purchase of Apollo Aviation reflects sector's growth prospects
The Carlyle Group is the latest big name institutional asset manager to make a substantive, long-term commitment to the aircraft leasing and finance sector. In a move which reflects confidence in the underlying prospects of the sector's future growth, and in the strength of an existing well-established platform, the global alternative asset manager is acquiring Bill Hoffman and Robert Korn's Apollo Aviation Group and its affiliates for an undisclosed sum.

 

Analysis

Optimum ownership structure for leasing platforms
The question of ownership models emerged at the Aviation Finance Conference 2018 as an interesting side theme to which executives from a number of the leading aircraft lessors contributed their thoughts writes Aviation Finance's John Stanley.

Zephyrus launches with $337m ABS of 21 ex-CIT airplanes
A group of former CIT Aerospace executives have established a new business, Zephyrus Capital Aviation Partners, to build and manage a fleet of mid to late life narrowbody and widebody aircraft. It is commencing its operations with the acquisition and securitisation of 21 aircaft, part of the CIT portfolio sold to Avolon and now being disposed of by the Chinese/Japanese-owned aircraft leasing company.


Thank you to everyone who attended the Aviation Finance Conference 2018
The Aviation Finance Conference 2018 took place on October 2nd-3rd in Dublin, Ireland, and which heard from CEOs, CFOs and aircraft trading chiefs representing over half of the world's leased fleet on how the aviation finance eco-system is set to evolve in the context of potential demand patterns for aircraft financing amidst record order backlogs and increasing OEM run rates. We look forward to seeing you next year - October 15th & 16th, 2019 at Dublin Castle.

Investec set to deploy initial $150 million from new equity fund
Investec Aviation Finance is set to deploy up to $150 million on the acquisition of latest generation Boeing and Airbus aircraft as it embarks on the second round of funding for its new Investec Aircraft Syndicate (IAS) equity fund, which is capped at $500 million. To date it has raised cornerstone investment of about $150 million from UK and German financial institutions and it now plans to close an expected $350 million in a second round of funding by the end of Q1 next year.

Variations in features mean not all aircraft ABS are equal
An insightful review of aircraft ABS transactions over the past five years, by S&P Global Ratings' Directors Jing Xie and Betsy Snyder, identifies some of the factors being raised by investors seeking opportunities in this area.


GECAS orders 35 additional 737-800 Boeing converted freighters
July 17th 2018: GECAS and Boeing have reached an agreement for 35 additional 737-800 Boeing Converted Freighters at the 2018 Farnborough International Airshow. The deal, which includes 20 firm orders and an option for 15 more, would take GECAS’ 737-800BCF order book from 15 to 50 and enable GECAS to serve the growing express air cargo market.