Aviation Finance

Aviation Finance - Vol 2 No.4 February 16th 2012
Public Markets Pulse

The Aviation Complex kicks 2012 off strongly

The "Aviation Complex" of publicly quoted stocks tracked by Aviation Finance has started strongly on global stock markets in 2012. In 2007-2008 stock market-quoted aviation assets proved useful barometers of looming economic crisis and maybe now they are telling us something more optimistic about the world economy.

Manufacturing

The supply and demand equation for aircraft

The prevalent view in the market that developing market growth will offset any weakness in developed markets and will ensure that the global marketplace expands, has driven OEMS to increase monthly production rates. However, data shows that demand in emerging markets is much more moderate than the supply of aircraft would indicate says JOE GILL, consulting editor of Aviation Finance.

Risk Management

Asset impairment takes centre stage as residual values come under pressure

Aircraft values have fallen significantly for many older aircraft over the last two to three years. New factors such as the introduction of the NEO (New Engine Option) into the Airbus A320 family, the fastest selling ever commercial aircraft, and the Boeing 737-Max once delivered in the next 5-6 years may over time affect prices on existing aircraft. JOHN McCORMACK looks at the primary asset impairment considerations in the present market and puts forward an approach for impairment analysis.

Airline financing and developments

Asian and Middle Eastern markets figure at Singapore Air Show

Indonesian airline LionAir signed Boeing's biggest ever order at the Singapore airshow, in a drive for growth that was also evident in Garuda's acquisition of 24 Bombardier jets. Middle Eastern sources also feature as a source of funding as Emirates turns to Islamic banks to finance the purchase of three new aircraft. At the same time the US Ex-Im bank has declared that a 'golden age' for business jet ECA financing lies ahead.

Ireland's Finance Bill 2012

New incentives announced by Ireland for organisations with internationally mobile employees

The Irish Finance Bill published on 8 February 2012 introduces a number of employment focused initiatives; most notably some very welcome news for internationally mobile employees and employer organisations seeking to attract key talent. There are two key areas which are likely to be of most interest to the aircraft leasing industry and indeed, were lobbied for specifically on behalf of the industry. The questions we now ask ourselves are whether these initiatives go far enough?, say PwC's GEAROID DEEGAN and JEAN COLEMAN.

  
Aviation Finance Vol. 2 No.4

This issue

We are currently seeing an intensification of debate among potential investors in aviation, in particular through the medium of the aircraft leasing industry as analysts and investment banks ramp up their coverage of the sector, a welcome reflection of a growing interest in public and private markets of the commitment of risk capital to the sector. This issue carries several articles highlighting these themes.

Perspectives

'History shows that human ingenuity has always come up with financing sources and that aircraft for reasonable credits always attract finance' - Colm Barrington

Aviation Finance editor KEN O'BRIEN interviews COLM BARRINGTON, CEO of quoted aircraft lessor FLY Leasing, and non executive chairman of Aer Lingus, the Irish carrier, on the 'funding gap', the financial economics of aircraft leasing, and the business model of NYSE-quoted lessor FLY. He says there may be a lack of appreciation of the value of certain types of aircraft assets in the public markets in particular.

The Cutting Edge

Norwegian Air Shuttle plans dynamic asset management

Norwegian Air Shuttle is setting out on a voyage that is composed of a complex and extensive aviation financing task while effectively quadrupling the size of its fleet. If Norwegian can successfully dispose of its existing fleet at a profit and massively expand its short and long haul footprints it will be a huge success story.

Lessor financing and developments

Helicopter leasing firms in growth phase

The helicopter leasing sector has seen several recent developments as Lease Corporation International placed a substantial helicopter order with AgustaWestland for their new helicopter division and Milestone, the helicopter financing company, announced several large orders notably with Eurocopter. ICBC Leasing and ALAFCO also signed large Airbus orders, COMAC, the Chinese manufacturer, secured more contracts for its hotly-anticipated C919 and rating agencies assessed ILFC's €900 million secured term loan.

Banking Regulation

Banking regulation burden cited as cause of Helaba exit from Dublin to Frankfurt

German bank Helaba is to move its aircraft financing unit along with some other lending activities from Dublin to its Frankfurt office. Speaking to Aviation Finance Helaba's JOERG SHIRRMACHA, and PATRICK SMYTH said that while regulation is not the only reason for the closure it is a contributory factor following 'extra administration' and costs incurred at the company as a result of a new regulation regime that have been introduced by the Central Bank of Ireland (CBI). 'The extra administration required means it is no longer economically reasonable to stay in Ireland'.