Jetrader - Winter 2017 - 30

dealing with the agencies, each one is
different. Each one thinks about the sector
in a different way. Each one has a different role to play in the capital markets.
The first and most important thing is to
have ongoing regular dialogue with the
agencies and absolute transparency on
all issues. I would say dealing with the
agencies is primarily science, so it's primarily metrics, and there's a little bit of
art, and atmospherics is very important
to the agencies. For example: continuity
of management, team succession planning in an organization, nature of the
relationship with your shareholder - your
strategic shareholder - that sit outside,
if you like, the financial metrics but are
very important. So, it's impossible to say
we'll be investment grade by month X or
quarter Y. The key point, and I think what
the bond investors are seeing and hearing is we run the business to investment
grade metrics.
We would be optimistic of reducing our
cost of borrowing in the capital markets.
Saying that, we continue to be a very active
borrower in the bank market, and we continue to borrow there at pure investmentgrade metrics in terms of pricing.
GB: You touched on the management
team; you've had the ability to retain
all of your senior management team or
executive management team throughout this process. How do you keep
them motivated?
DS: What motivates me as an executive
and my senior colleagues and teams and
partners - and these were the founders of
the firm - what excites us and interests
us with the Avolon story is that when the
legacy is written, when the book is written
in 20 or 30 or 40 years' time, that there'll be
a chapter on us that says 'these guys built
the best business in the aircraft leasing
space,' not just in terms of the quality of
the shareholder returns and the financial
metrics, but they built a business where the
best and brightest wanted to work. They
enjoyed it; they treated their colleagues
with respect; they had a culture, which
we call our "deep-learning culture." So my
philosophy is if you come to work at Avolon,
my job as the CEO is to ensure you become
a better and more rounded person.

If we were asked once we're asked a thousand
times, 'What are you going to do next?"
Well, what I'm going do next is take Avolon
from $30 billion to $60 billion.
A lot of people in this industry would
have expected the management to move
on. If we were asked once we're asked a
thousand times, 'What are you going to do
next?" Well, what I'm going do next is take
Avolon from $30 billion to $60 billion. You
get an opportunity like this maybe once in
your life, so you take it, you run with it, and
it's very exciting. We built this business and
even though it's not owned by us anymore
it's our company, and we are associated
by it reputationally and emotionally connected to it.
GB: On growth, you have intimated that
you would like Avolon to be number one in
the world in terms of scale and size. How
are you going to achieve that?
DS: This is a very difficult market to get
to number one, because most of our bigger
competitors are growing and have aspirations for growth. Getting to number one is
quite the challenge. So again, we go back
to the facts. The facts at the moment are
that we have locked-in growth, so in terms
of our future order book with the manufacturers - give or take $4 to $5 billion
a year for the next five to six years - but

30 The official publication of the International Society of Transport Aircraft Trading

most of our big competitors have also
locked-in growth that's not dissimilar, so
it doesn't move the needle.
In my mind, for us to get to number one,
two things have to happen. One is, we've
got to achieve an investment-grade credit
rating, because you simply can't finance
a business of that scale unless you're
investment grade. You can't be aspiring to
investment grade. The second is, I think,
there will be one other major acquisition,
rather than a series of small acquisitions.
Then we'll supplement that by organic
growth, whether it's our direct orders with
manufacturers or a large portfolio or two
when we see opportunity. The question is
when will that happen?
The CIT transaction came at the perfect time from our perspective in that it
wasn't a distress play, but you had a willing seller. We haven't seen a distress play
in this industry really since the ILFC/AIG
trade, and we work in a cyclical industry.
So if you're pragmatic and you're looking
at it over the next number of years, your
experience will tell you there will be distress eventually. I can't actually see it at
the moment, but it will come.

Jetrader - Winter 2017

Table of Contents for the Digital Edition of Jetrader - Winter 2017