Aviation Finance

Developments

Natixis Investment Managers acquires stake in Airborne Capital
January 18th 2018: Natixis Investment Managers has acquired a minority stake in aviation asset manager Airborne Capital in a move that is expected to accelerate the company's plans to reach it initial target of $5 billion of aviation assets under management. Update: launched in late 2017 Airborne is led by industry veterans Cian Dooley, founding partner; Anand Ramachandran, CFO and Ramki Sundaram, CEO and has already received substantial backing from Irish financial services group FEXCO.

The latest edition of Aviation Finance is published
January 11th 2018: In the latest issue of Aviation Finance: Dick Forsberg delivers his iconic 'Fearless Forecast' for 2018; 10 things aircraft investors should be looking out for in 2018; What 2017's leasing and trading stats mean for the aircraft financing industry; Why Boeing and Embraer is a good idea; EY Special Report: what global tax changes mean for leasing companies; Safety record reinforces the attractions of aircraft as an asset class; OEM competition: what do record orders and deliveries mean for the OEM duopoly?

 

Perspectives

Dick Forsberg's Fearless Forecast for 2018

Avolon's Dick Forsberg gives his iconic forecast for the new year
Deloitte's Pieter Burger on the tax attractions of leading jurisdictions
SMBC AC's CFO on its approach to growth
Goshawk's Ruth Kelly on the lessor's growth strategy
Cowen's Helane Becker on aviation deals
GECAS' Diarmuid Hogan on demand for aircraft assets
IBA's Phil Seymour on the business of aircraft appraisals

See the Aviation Finance Perspectives Series here.

Analysis

EY Special Report: The Future of Flying
The international tax landscape is changing rapidly, and there are a variety of tax and accounting changes on the horizon that lessors should be aware of. EY's John Hannigan outlines some of these tax developments including Anti-Tax Avoidance Directive (ATAD); Multilateral Instrument (MLI); Common Consolidated Corporate Tax Base (CCCTB); IFRS 16; Transfer Pricing (TP) and US Tax Reform. The report also contains a timeline for the major changes that will affect aviation finance companies over the coming years.

IBA provides detailed view of new operating leases and secondary trading volumes in 2017
In its first published review of operating leasing and secondary trading volumes, IBA's new aviation industry service, IBA.iQ, reports strong growth in new operating leases in both narrowbody and widebody aircraft markets. Overall narrowbody trading levels increased slightly in 2017 compared to 2016 but secondary trading of widebodies has remained flat over the past two years, although there are some differences based on aircraft model.

Forsberg's 'Fearless Forecast' for 2018
The global aviation industry head into 2018 in rude health says Avolon's Dick Forsberg. 2017 saw over 4 billion passengers travel on 36.8 million flights while air freight also grew strongly. Despite a steady rise in aircraft deliveries, he says, capacity is still increasing more slowly than traffic and load factors continue to rise as a result. Forsberg analyses the industry fundamentals, the aviation industry cycle, aircraft deliveries, OEMs strategies, financing trends in the 2018 edition of his widely respected 'Fearless Forecast'.

 

From Our Latest Issues:

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Financing & Risk Strategies

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Aviation Finance Special Features

Ireland: International Aviation Finance Hub


Life cycles: will 25 years still apply to new technology aircraft?
Life cycles are an integral part of the financial returns from an aircraft. The traditional assumption has been that aircraft have economic lives of up to 25 years and that generates a stream of operating revenues which reward investors in these assets as they depreciate over time. While investors can take their own views on projected actual lives assessors and bankers tend to use the 25 year life as a central pillar in calculating values and especially residual values.

Lessor share price performance points to a greater understanding of aircraft as an asset class
Momentum behind stockmarket listed aircraft lessors continues to be good as 2017 comes to a close. The combined stockmarket value of the five key listed lessors has reached almost $19bn, making the sector more visible to investors compared to twelve months ago.

Commercial UAVs a new frontier in aviation leasing
The aviation investment group Irelandia has established a new leasing platform focussed on unmanned aerial vehicles (UAVs), otherwise known as drones. AerDrone International (AI) will be set up along the lines of operating lessors that focus on commercial aircraft. It is being launched in Dublin to leverage the air finance and leasing eco-system that supports over thirty leasing companies in Ireland.

 

Analysis

Dubai orders show industry in rude health
Record breaking orders placed at the 2017 Dubai Airshow indicate an industry in rude health with no suggestion that cyclical factors are constraining the medium to longer term enthusiasm of airlines for growth. New order highlights include Indigo Partners' $49.5 billion order with Airbus and Flydubai's $27 billion order with Boeing.

C Series still faces big headwinds in narrowbody marketplace
Even with the new backing of Airbus, the future for Bombardier's C Series is likely to be turbulent, according to a new report by Moody's Investor Services. It identifies a number of headwinds for the new aircraft, including limited demand for planes of 100 to 150 seat capacity, the continued focus of airlines on achieving acceptable returns on capital and the relative youth of the world's small narrowbody fleet. The rating agency concludes that it is extremely unlikely sufficient numbers of the aircraft can be sold to recoup its $6 billion development costs.


Maturing 787 market underlined by Emirates order
Boeing secured a major advance for its 787 programme by winning orders for 40 units of the -10 variant from Emirates at the Dubai Airshow. Aside from replacing a prior order for Airbus A350s the US manufacturer will be pleased to see such vindication for a programme that began with difficulty but has matured in to a key cash generator for the business.


Are NEO delays supporting CEOs?
The ongoing engine issues with Airbus NEO aircraft remind us of the challenges posed when Boeing struggled to deliver early Big Twin 787s. At that time delays in 787 deliveries created short term demand for lift which supported in particular A330 values and lease rates.


Air freight experiences a fifth straight month of double digit growth
Air freight markets continue to power through 2017 and posted another double digit percentage growth clip during August. Demand rose 12.1% and according to IATA this is the fifth month when double digit gains were achieved. That pace reflects better global economics and growing capacity. The rates being achieved in 2017 significantly outpaces the average 4.4% growth rate attained in the past five years. For investors in freight aircraft this represents a material improvement in the environment in which their assets operate.


Monarch collapse speeds up the consolidation of European airline industry
The collapse of the UK airline Monarch is yet another signal of consolidation in the European airline industry. It will have a series of effects on various parts of the aviation complex and creates opportunity for the strongest carriers to advance their positions further. Monarch carried over 6m passengers last year and operated 35 short-haul A320/A321 and B737 aircraft. All of these assets were leased and will now have to find a new home inside or outside Europe. Employees of the airline, including over 400 pilots, will be searching for employment opportunities. Given the age of the airline many of these are seasoned pilots who will be of value to growth carriers.