The background to Japan's resurgence in aircraft financing
Foster Arata, Vice President, Asia, China and India Region, Aircraft Financial Services, Boeing Capital Corporation, on why, and how Japanese financiers are behind a doubling of financing in 2013, with total capital provision estimated at $5.5 billion this year.
Japan's resurgence in aircraft financing
"Japanese financiers are a key source of financing for airlines in Japan and around the world. While always a significant source of domestic aviation financing, Japanese banks with strong dollar positions are again returning to the global aviation market looking to finance aircraft as a way to obtain higher returns for the banks with less risk then traditional corporate lending. Significantly, in 2013, Japanese financiers are expected to provide $5.5 billion of financing representing 12 p.c. of Boeing deliveries. This is up from $2.6 billion in 2011.
Japan has once again demonstrated its leadership in the aviation leasing industry with the recent acquisitions by Sumitomo Mitsui Financial Group for $7.3 billion of the world's 4th largest lessor, RBS Aviation Capital, and Mitsubishi UFJ for $1.3 billiob of the Jackson Square platform. Both acquisitions closed when the JPY/USD exchange rate was in the 70s. With the rate near 100, the acquisitions were very timely.
On the JOL front, the market for Japanese Operating Leases (JOLs, or a variant that is closer to a finance lease, the JOLCO) remains a limited but still relevant source of financing for both domestic and selected better credit international airlines.
Since 2004, NEXI and EXIM have been working together to co-finance Boeing aircraft, providing additional important support of the aviation finance industry. Accordingly, Japan in a short period of time is quickly transforming itself back into one of the major sources of global aviation financing.
"Japan is a key country for Boeing Capital's investor outreach activity, in close coordination with our Boeing Japan office and Boeing Commercial Airplanes. Boeing Capital has significantly increased its engagement with Japanese financiers. This includes the recent first Financiers and Investors conference in Tokyo in April (~130 participants) as well as bank round tables and meetings for key customers. We are also working closely with the new lessors, traditional major banks, and Development Bank of Japan to ensure that they are ready to take advantage of the unique aviation finance opportunity presented to Japan", he says.
The market for Japanese Operating Leases (JOLs, or a variant that is closer to a finance lease, the JOLCO) remains a limited but still relevant source of financing for both domestic and selected better credit international
Aircraft Financing in Asia
"Asia has been for the last decade, and will continue to be for decades to come, the aviation industry's fastest-growing market. It's clear that the economies in Asia Pacific will continue to grow faster than the rest of the world. The airlines in Asia Pacific have ordered, and will order, more aircraft. The airlines there have, and will continue to take, more aircraft. The region will have more and more new LCCs, the legacy carriers continue to surprise and find ways to reinvent themselves, and regional governments will continue to invest in infrastructure and build more new airports far outpacing their global peers.
Within this environment, Asian banks and lessors, which in the past have, in general, been predominantly focused on domestic and regional aviation financing, are now once again poised to become a critical source of global aviation financing.
Over the last decade, China's aviation banks and lessors have emerged as important players in the aviation industry and will continue to do more in coming years. Japan, once a major source of aviation financing for the world in the 80s is again showing signs of its reemergence as an important player, both from domestic and international aviation financing with the banks moving back into international aviation financing, and the recent acquisition of major Western leasing platforms.
"In addition, the regional banks in Korea, Indonesia, Singapore and elsewhere continue to be a reliable source of local airline financing. With over 34,000 commercial aircraft to be delivered over the next 20 years, worth approximately $4.5 trillion, Asia's banks and lessors will certainly be a critical part of the finance solution for regional and global airlines as they seek to finance these aircraft", he says.
This article was first published in Aviation Finance, April 25th 2013.