ISTAT Jetrader - Summer 2024 - 37

industry challenges, noting a deficit
of 4,000 aircraft not produced during
COVID-19 from an expected 24,000,
a situation exacerbated by all OEMs
relying on a common supply chain.
Traffic recovery varies by region;
for instance, routes between China
and Singapore have fully recovered,
whereas those to Vietnam and
Cambodia lag. Additionally, the share
of flight capacity between China and
Europe has shifted from a dominance
of European carriers to now being more
evenly operated by Chinese carriers.
Townend commented on the
structural changes within the leasing
industry, foreseeing a division into
two main groups: larger lessors with
investment-grade ratings and smaller,
niche-specific lessors. He predicts
that mid-sized lessors may face
consolidation as the industry matures,
similar to other sectors.
The discussion also touched on
the asset-backed securities market,
which Townend noted as significant
but of lesser importance to BOCA,
stating that it typically closes about
50% of the time during downturns. A
major opportunity highlighted was the
potential air travel market between
India and China, driven by their large
populations and the current lack of
direct passenger flights.
Trading Panel
During the Trading Panel, moderated by
aircraft leasing and finance specialist
Sarah Conway, insights were shared
by Barbara FitzGerald, senior vice
president of portfolio management
and origination at High Ridge Aviation;
Jeff Lewis, CEO of Hanwha Aviation;
Michael Littleton, head of aircraft
trading at SMBC Aviation Capital; and
Paraic Quinn, head of capital markets
and trading at Avolon, regarding the
current dynamics in aircraft trading.
FitzGerald noted a decrease in
trading transactions, as evidenced by
some manufacturer serial numbers
reappearing for trade after several
months, indicating they had not been
moved. Lewis pointed out that many
assets available in the market currently
come with complications, such as
requiring additional maintenance,
leading to caution among traders.
The panelists agreed that
transactions are generally taking longer
to close, often due to delays in airline
negotiations. They also observed a
trend of breaking up large portfolios
into smaller packages for sale, which
helps in reducing the ticket size and
concentration risks.
From SMBC Aviation Capital's
perspective, there remains strong
interest from Japanese investors in
aircraft for tax deferral purposes,
although concerns about the yen's
exchange rate and the necessity for a
strong likelihood of lease extensions
when purchasing mid-life aircraft
are present.
Lewis gave an example of a CFM56
engine deal that highlighted challenges
with unrealistic residual value
projections for the future, cautioning
that the market dynamics, particularly
the engine shortage, are expected to
shift in the coming years.
Lessor CEO Panel
During the Lessor CEO Panel,
moderated by Robert Martin, key
insights were shared by executives
from leading aircraft leasing
companies: Robert Korn, CEO of Carlyle
Aviation Partners; Ted O'Byrne, CEO of
AviLease; Mike Poon, executive director
and CEO of CALC; and Firoz Tarapore,
CEO of DAE Capital.
O'Byrne highlighted AviLease's
strong presence in Asia, where about
a third of its fleet is based with an
average aircraft age of around four
years. AviLease aims to double its fleet
size to 300-350 aircraft within the next
five years, indicating an aggressive
growth strategy in the region.
Poon discussed CALC's strategy
to maintain a balance between US$8
billion in assets and an US$8 billion
orderbook, continuing to engage
in active trading and ordering. He
expressed confidence in the Chinese
market, predicting strong summer
traffic and significant growth
contributions from Asia.
Tarapore shared insights into DAE
Capital's diversified portfolio, which
does not focus solely on narrowbodies,
with the production 777F being a
top profit contributor. DAE has set a
growth target of 800 aircraft without
a fixed timeline, adapting swiftly to
opportunities as they arise. Tarapore
noted that India's market dynamics
have shifted from cutthroat price
competition to more orderly competition
among three main airlines.
Korn noted that Carlyle Aviation
Partners also has a significant portion
of its book in Asia, particularly in
Southeast Asia and India, supported
by both debt and equity investors
from the region. Carlyle's strategy
includes cautious investments in
less risky regions or avoiding airlines
that have previously underperformed
during downturns.
Panel discussions also touched on
the increasing attraction of leasing due
to superior credit ratings compared to
airlines and diversification benefits.
However, concerns were raised about
emerging technologies such as eVTOLs
due to residual value risks, while
interest in investing in COMAC aircraft
and potentially helicopters was noted
by AviLease.
Networking
ISTAT Asia event featured an array of
networking opportunities designed to
foster connections and discussions. A
highlight was Women@ISTAT, which
provided a platform for discussing key
industry trends and the role of women
in shaping the future of aviation.
The conference also included
a dinner held at The Arches at the
Murray and closed with a happy hour
at The Grill.
* SUMMER 2024 * 37
ISTAT Jetrader - Summer 2024

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