Aviation Finance

Developments

The latest edition of Aviation Finance is published
April 19th 2018: In the latest issue of Aviation Finance:US EXIM Bank's reinsurance transaction which shares risk on the majority of its aviation related guarantees and analyse the latest moves in Washington in relation to returning US EXIM's ability to support larger deals, including commercial aircraft. We also look at how the economics of aircraft transitioning can be improved and analyse IAG's decision to take an equity stake in low cost carrier Norwegian; the effect of rising fuel prices.

GECAS and PK AirFinance in 51 aircraft financing deal with Lion Air
April 13th 2018: GECAS and its wholly owned subsidiary, PK AirFinance have a agreed a significant aircraft financing transaction covering a total of 51 current and new technology narrowbody aircraft operated by Lion Air Group, which is the lessor's largest customer in Southeast Asia. GECAS has also agreed a 12 aircraft deal with India's Jet Airways.

 

Perspectives

Deep pockets and short memories

ELFC's Jon Sharp on the current state of the engine leasing market and what might happen in a downturn.

FLY's Colm Barrington on its AirAsia deal
SMBC AC's Brian McArdle on the JOLCO market
Goshawk's Ruth Kelly on aircraft trading
CDB ALF's Peter Chang on its new model platform

See the Aviation Finance Perspectives Series here.

Analysis

China tariffs: low impact on Boeing, a likely prelude to serious trade talks
As the threat and counter-threat of tariffs between the US and China continues, the aviation industry is coming to terms with what the longer-term implications might be. Boeing was quick to pour oil on troubled water, pointing out that as currently proposed China's aircraft weight related tariffs would only affect one model in its 737 MAX family.

Despite increasing run rates a glut of narrowbody aircraft unlikely to materialise
As Airbus and Boeing continue to ramp up their narrowbody run rates to new record levels IBA's Lewis Leslie analyses how this may affect the attractiveness of certain narrowbody models, values, aircraft supply, retirements and lease rates. He says 'overall an increase in production rates is positive and we support this high backlog however, the rate of new aircraft entering into service needs to be steady to ensure an oversupply in the market does not occur.'

A321LR lays down another marker
The Airbus A32LR has laid down another marker for its credentials as a long haul narrowbody asset by completing a near 11 hour direct flight between the Seychelles and Toulouse, France. The flight covered a distance of 4,700 nautical miles on March 29th and was configured as if carrying 162 passengers. The long distance flight follows hot weather testing in Sharjah.

 

From Our Latest Issues:

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Financing & Risk Strategies

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Aviation Finance Special Features

Ireland: International Aviation Finance Hub


BBAM negotiates 132 aircraft deal with AirAsia
In a deal which demonstrates that the appetite for aircraft portfolio acquisitions evident last year has continued into this one, BBAM and its capital partners, Fly Leasing Ltd., Nomura Babcock & Brown and Incline Aviation, are acquiring a total of 132 aircraft from AirAsia Berhad and its Asia Aviation Capital subsidiary. AAB's options on 50 new A320neo family aircraft and a $50 million investment in Incline Aviation by AAB are also part of the deal.

Air Canada issues Can$ denominated EETCs
For the first time Air Canada has priced a private offering of enhanced equipment trust certificates (EETCs) in Canadian dollars. The CAD$237.74 million Class A certificates will have an interest rate of 3.67 per cent p.a. and the CAD$63,679 million Class B certificates will have an interest rate of 4.19 per cent p.a., giving a combined aggregate face value of approximately CAD$301 million and a weighted average interest rate of 3.76 per cent.

Global GDP momentum underpins aviation expansion
Nothing matters more to demand for air passenger and cargo travel than GDP growth rates. Long established statistics prove a positive correlation between air travel and GDP so if the latter is building momentum the prospects for aviation are good. Moreover, because global airline load factors are near all time highs any expansion in demand should feed through in demand for more aircraft, a positive trend for investors in aviation assets writes Joe Gill.

 

Analysis

IATA identifies potential future megatrends
IATA has published a valuable contribution to the debate about the future of air travel in which it has identified a number of mega themes that could evolve as aviation develops. It puts new technology, data, unmanned aircraft, smart regulation and infrastrucutre at the the head of the list of these potential future megatrends.

Max 10 reaches next design phase ahead of 2020 introduction
Boeing has announced that all design requirements are now in place to proceed with the largest version of the 737 MAX, the -10. This will bring a version of the narrowbody to the market that offers seat density which is being increasingly demanded by low cost carriers in particular as they migrate towards larger single aisle aircraft.

A380 order welcome but customer base remains narrow
Having secured a critical order in January for its superjumbo Airbus must now focus on broadening the depth and breadth of the aircraft customer base. To this end it must find more strategic buyers than can showcase the aircraft in markets where volume and density count. IAG, and in particular British Airways, is an intriguing prospect in this regard. The UK flag carrier already operates 10 A380s and these ply high volume routes from the carrier’s base at Heathrow, London. Heathrow is a tightly constrained airport which is technically full, especially at peak operating times. The planning process to advance additional capacity appears mired in elongated political and environmental reviews which could push new capacity out by ten years or more.

With 1,300 aircraft coming off lease in 2018, IBA outlines 12 key themes for the year
IBA outlines the 12 key themes it has identified for 2018 and takes a closer look at the prospects for c.1,300 aircraft due to come off lease in the coming 12 months, and asks whether 2018 will be another 'year of extensions'.

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.

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. EY also analyses the comparative features of the leading jurisdictions from a tax point of view here.