Aviation Finance

Developments

The latest edition of Aviation Finance is published
October 5th 2017: In the latest issue of Aviation Finance: We speak with CDB Aviation CCO Patrick Hannigan ahead of his address to FCS2017 Dublin, on 17th October next; Growing pains - pilot shortages are simply a very public example of the difficulties the entire aviation complex is experiencing in meeting global demand for air travel; Analysis; Aviation assets continue to attract investment from Asia: Analysis: The Monarch collapse and how it will help speed up the consolidation of the European airline industry


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. The routes on which Monarch operated, and the airports it served, will now be looking for other airlines to provide such flights. This gives leverage to airlines that are financially strong and have capacity to deploy in negotiations for new services.

 

Perspectives

Strong growth balanced by prudence

SMBC Aviation Capital's Barry Flannery on the lessor's latest financial results and its approach to growing its business
Goshawk's Ruth Kelly on the lessor's growth strategy
Cowen's Helane Becker on the coming aviation deals
GECAS' Diarmuid Hogan on demand for aircraft assets
AVi8's founders on its clearing house leasing model
SMBC AC's Barrett on chasing returns, not scale
IBA's Seymour on the business of aircraft appraisals

See the Aviation Finance Perspectives Series here.

Analysis

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.


Tokyo Century to pay $600m for 20% of ACG
Tokyo Century Corporation is expected to put up just under $600 million for a 20 per cent stake in the US-based lessor Aviation Capital Group, which has been 100 per cent-owned by Pacific Life Insurance Co since 2005. This puts a notional value on the US-based lessor of $3 billion.

 

From Our Latest Issues:

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Financing & Risk Strategies

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Financial Centres Summit, Dublin, October 2017

Financial Centres Summit, Dublin, 17th October 2017


Melgaard joins Investment in Aviation Assets session at the Global Financial Centres Summit, Dublin, on 17th October
FPG Amentum's executive chairman Jan Melgaard joins the panel discussing the hot topic of investment in aviation assets at the Financial Centres Summit, Dublin, 17th October 2017. Aviation Finance presents this focus on the key themes being addressed in Aviation Finance currently. It will be held in Dublin Castle, Dublin, Ireland, on October 17th 2017. Booking Details: here.

DAE agrees to acquire AWAS
April 25th 2017: Dubai Aerospace Enterprise has agreed to acquire AWAS, the Dublin-based whose majority shareholder is UK private equity Terra Firma. The combined entity will have an owned, managed and committed fleet of 394 aircraft, valued at more than $14 billion. The move by Terra Firma to sell AWAS follows its decision to sell a portfolio of 90 aircraft to Macquarie in 2015. DAE will become a top 10 lessor when the deal completes in Q3.

Avolon closes CIT deal
Avolon has closed its $10.38 billion acquisition of the aircraft leasing business of CIT Group, encompassing approximately 320 aircraft, of which some 72 per cent are in-production narrowbodies. The price represents represents a 6.7% premium on the net assets of $9.4 billion. Avolon said the transaction gives it an owned fleet of 551 aircraft at end December last year, with an average aircraft age of 4.7 years. The combined business serves 149 customers in 62 countries with approximately one third of in-service aircraft leased 
into each of the Americas, EMEA and Asia-Pacific regions.

 

Analysis

Avianca opts again for EAIV to finance three aircraft
March 21st 2017 Investment bank Burnham Sterling has closed its third privately placed EETC for Colombian airline Avianca, this time financing three aircraft - two Airbus A320s and one Boeing 787 – as it did with its first in December 2014. The transaction, again made using the bank's proprietary EAIV (Enhanced Aviation Investment Vehicle) structure, is its first multi-currency EAIV, providing both US dollar and Euro funding for Latin America’s second largest airline.

CDB Aviation Lease Finance delivers one Airbus A320-200neo to SAS
2nd March 2017 CDB Aviation Lease Finance, which is a wholly owned Irish subsidiary of China Development Bank Financial Leasing Co., Limited, announced today the delivery of one Airbus A320-200neo aircraft to flag carrier SAS. The Airbus A320-200neo represents CDB Aviation’s first delivery of a six aircraft sale and leaseback transaction with SAS, the largest airline in Scandinavia. Patrick Hannigan, CDB Aviation Chief Commercial Officer commented, "It's our first deal with SAS. CDB Aviation has ambitious growth plans and we look forward to doing more business with them'.

Juneyao makes its first widebody order as it plots global reach
February 22nd: China's Juneyao Airlines has finalised an order for five Boeing 787-9 Dreamliners. The order is valued at $1.3 billion at list prices and comes as Boeing rolls out the first 787-10, the largest variant of the 787 which is due to enter into service in 2018. Juneyao's new order includes options for five more 787-9s. It is the airlines first Boeing order and first widebody airplane order as the privately-owned airline looks to spread its network beyond China.

Avolon prices $3 billion senior note offering as part of CIT acquisition
January 20th 2017: Avolon Holdings is issuing $3.0 billion through its Park Aerospace wholly-owned subsidiary. Both $1.75 billion 5.25 per cent senior notes, due 2022, and $1.25 million of 5.5 per cent senior notes due 2024 are being offered at par. Avolon will fully and unconditionally guarantee the notes and the offer will close 'on or about' February 3rd.

SpiceJet's 737 MAX order indicates this could be the year of the MAX
January 13th 2017: Indian low cost carrier SpiceJet has announced a deal with Boeing for up to 205 Boeing 737 MAX 8s. 2017 is a crucially important year for the MAX with Boeing keen to avoid any teething problems as the re-engined 737 enters into service with Norwegian in May. The order from SpiceJet adds further momentum to the programme, which has has already beaten test flight targets during 2016.

Peter Chang to lead CDB Aviation Lease Finance
January 12th 2017: Industry veteran Peter Chang, who has been appointed President and CEO, will lead CDB Aviation Lease Finance into the next phase of growth as the lessor aims to build a world-class, industry-leading management team and expand its focus beyond China.