Aviation Finance

Developments

The September 22nd edition of Aviation Finance is published
September 22nd 2016: In the latest issue of Aviation Finance: Interview: GECAS EVP and GM Sean Flannery on right-sizing the aircraft leasing giant; Int. Bureau of Aviation on current aircraft lease rates and value trends; 'Big data' inventor OAG on key aviation data, real time and historic; All eyes on Singapore Air's position on A380s; KGAL closes €400m 6.5% aircraft fund; Fitch: market conditions indicate further lessor growth, but beware the cycle;

GECAS delivers first A320neo to AirAsia
September 15th 2016: GECAS has delivered its first A320neo to AirAsia. This isthe first aircraft in a 5 aircraft sale/leaseback transaction that GECAS has agreed with AirAsia for the new technology narrowbody. Significantly, this is the first A320neo to enter GECAS' portfolio and also the first A320neo to enter AirAsia's fleet (of the circa 400 it has on order). Separately GECAS has purchased two Airbus A320s powered by IAE engines from AirAsia and leased to the AirAsia Group two Airbus A320s powered by CFM engines.

 

Perspectives

GECAS' strategy

GECAS' Sean Flannery on the lessor's business model, the aircraft leasing market and new technology aircraft

Astro's Johnny Lau on Chinese lessors' global ambitions
ELFC's John Sharp on the engine MRO market
Embraer's John Slattery on the launch of the E2
Amedeo's Mark Lapidus on future leasing returns
Howard Millar on alternative financing for airlines
See the Aviation Finance Perspectives Series here.

Analysis

AerCap delivers its first Airbus A320neo on lease to Volaris
September 12th 2016: AerCap Holdings N.V. (NYSE: AER) today announced the delivery of its first Airbus A320neo on lease to Volaris, making the airline the first carrier in North America to operate the aircraft type. This is the first of 10 A320neo aircraft to deliver to Volaris by AerCap, with a further 6 A321neo aircraft on order, delivering through 2018.

Air Asia could sell its $1 billion leasing arm by December
August 30th 2016: Air Asia CEO Tony Fernandes has said that the airline group could sell its aircraft leasing arm, Asia Aviation Capital Ltd before the end of this year. The board of AirAsia has approved the sale of the leasing operations that were established in 2014.

BOC Aviation net profits rise 21% to $239m in first six months
August 29th 2016: BOC Aviation increased its pre-tax profits in the first six months of 2016 by 21 per cent to $239 million against the corresponding period last year. Net profits after tax improved by 24 per cent to €212 million. Total revenues and other income rose 8.2 per cent to US$579 million, while total assets at end June were US$13.6 billion, up 9 per cent over the end December 2015 figure.

 

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Aviation Finance Special Features

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CALC's second bond issuance in four months 'priced significantly lower'
August 16th 2016: Hong Kong-based lessor CALC has followed up its debut 3-year $300 million bond issuance in April with a 5-year $300 million bond issuance which has 'priced significantly lower' than its April issuance. Asian investors bought 93 per cent of the issuance which had a peak order book of $1.2 billion. China Everbright Bank Co., Ltd., Hong Kong Branch and DBS Bank Ltd. are engaged to act as the joint global coordinators, joint bookrunners and joint lead managers of the unsecured bonds issuance.

ALAFCO acquires 9 aircraft portfolio from GECAS
August 8th 2016: GECAS has disposed of a 9 aircraft portfolio to Kuwaiti lessor Aviation Lease and Finance Company (ALAFCO). The portfolio is made up of Boeing and Airbus narrowbodies and is the second aircraft portfolio that GECAS has sold in recent weeks following the sale of a 45 aircraft portfolio to Avolon.

GECAS closes $280m senior debt financing deal with Aerolineas Argentinas
August 4th 2016: GE Capital Aviation Services has completed a 10-year, $280 million senior debt financing agreement with Buenos Aires headquartered airline Aerolineas Argentinas. The debt is secured on four A330-200s powered by GE’s CF6 engines and three B737-800s powered by CFM56 engines. GECAS said in a statement the four A330s are scheduled to fund in 2016 and the three B737-800s in 2018.

 

Analysis

CALC completes new 'rental realisation transaction' on three aircraft
August 3rd 2016: In a 'first-of-its-kind' arrangement for a Chinese lessor, China Aircraft Leasing Group Holdings has entered into a 'rental realisation transaction' on three aircraft structured into senior and junior tranches to meet the different risk appetites and return expectations of investors. Winnie Liu, Deputy CEO and CCO of CALC, said the new structure also keeps the all-in-costs at a lower level for CALC.

SMBC AC issues $500m senior notes, reveals operating profit of $530 million
July 20th 2016: SMBC Aviation Capital has closed its long-awaited $500 million senior unsecured notes offering and disclosed selected financial results for the first time. These show that in the year to end March 2016 it made an operating profit of $530 million, up 22 per cent on the preceding financial year, on revenues of $1,046 billion, up 15 per cent year-on-year.

Chinese lessor IPOs struggle
July 14th 2016: Two Chinese lessor IPOs completed in the past two months are struggling to perform on the Hong Kong stockmarket. BOC Aviation has dropped from HK$42 on its debut in early June to HK$38.6 at the time of writing. CDB Leasing, which was priced at HK$2, fell 7 per cent to HK$1.86 on its first day of trading on July 11th.


USD currency movements - a key short term indicator of the impact of 'Brexit' on the UK and eurozone aviation finance sectors
June 24th 2016: Sterling dropped by as much as 11% compared with its pre poll level, as the Brexit vote became evident overnight, but recovered to a net fall of c.7% off following the Bank of England's announcement of a £250bn intervention fund to calm markets. The selloff is a measure of the economic impact of the vote*, on aviation financing ultimately in sterling, but another aspect is the impact on euro sources, as the euro has fallen also, but by a lesser amount against the US dollar than the pound. After an initial tumble of c.8%, the euro recovered along with the pound to trade c. 5% off.


Delta Airlines and Burnham Sterling close $450 million in private placements, reaching over $1 billion in total transactions
June 8th 2016: Greenwich, Connecticut-based Burnham Sterling & Co. LLC (Burnham Sterling), the financial advisor specializing in asset financing, announced that it closed a $450 million private placement for the world’s second largest airline, Delta Air Lines (NYSE: DAL).


BOC Aviation IPO could pave way for other Asia lessor IPOs
The take private of Avolon by Bohai Leasing earlier in 2016, shrunk the universe of publicly listed pure play lessors back but with the upcoming IPO of BOC Aviation, the visibility and appeal of aircraft assets to investors should improve. BOC Aviation, aircraft leasing unit of Bank of China, is arranging an IPO currently, which has attracted China’s sovereign wealth fund and Boeing as anchor investors.