Jetrader - May/June 2010 - 23

deploying its surplus accounts generated from its petroleum and natural gas exports. “The challenge for the Middle East may be more pronounced, as the countries in the Middle East have much smaller populations and smaller economies than China, that cannot consume the surpluses from their sizeable exports,” Zolotusky said. Their challenge, he added, is to effectively manage these resources to preserve and grow the wealth resulting from their natural resources abundance. One result is that banks in the Middle East are also entering the lucrative global airplane ﬁnance market. After initially ﬁnancing deliveries within the region, Middle East banks have started to partner with Western aircraft ﬁnanciers. The partnerships of ACG/CIAF and DVB with the National Bank of Abu Dhabi are recent examples. “We continually try to tap in the region’s liquidity and get more players involved,” said John Matthews, Boeing Capital managing director for the Middle East and Africa. Matthews and his team have been holding banker and ﬁnancier roundtables throughout the region for several years. Recently they held their ﬁrst such event in Qatar that attracted twice the typical turnout. “Bahrain has historically been the most active in the region. The United Arab Emirates are also active. Qatar also is beginning to enter the space. Our efforts have revolved around getting ﬁnanciers in the region more comfortable with aircraft as an asset class and to encourage ﬁnanciers to fund more aircraft rather than real estate or other things,” Matthews said. The Middle East air travel market continued to grow during the downturn unlike other parts of the world. With recovery now underway or beginning, Matthew’s message to the region’s ﬁnanciers is straightforward: “Financiers willing to take advantage of the short-term market dislocations with a view toward creating a long-term aircraft portfolio should ﬁnd themselves generously rewarded, as aircraft remain a great asset.”

Evolution of Aircraft Banking
The 90s – Today T

PK AIR FINANCE

The 60s – 80s The Next Generation

The 80s

NISSHO IWAI

Aircraft finance continues to attract new debt providers

Evolution of Aircraft Banking – Since the early days of the Jet era when U.S. banks predominated, the sources for aircraft ﬁnancing have followed those regions in economic favor, moving from Japan, to Europe to today’s emerging markets, led by China.

Islamic bond market
First aircraft secured sukuk
30 25 20

$Bn

15 10 5 0 2001 2002 2003 2004 2005 2006 2007 2008 YTD 2009

Total Sukuk issuance - growing again

Sukuk Aviation Leasing Inc $500M; five year term @ 3.875% 16 aircraft collateral “Ijara” Sale Lease-back structure

Islamic bond market is evolving rapidly

Boeing has believed for some time that aircraft are perfectly suited for Islamic ﬁnancing, a market based on Shariah (Islamic law) compliance, in which one requirement is that investments be asset-based. 2009 saw the ﬁrst Islamic bond (sukuk) deal secured by aircraft. About $500 million worth of bonds were issued, secured by 16 airplanes. (See “Islamic bond market” chart)

“This is a landmark deal and a very important development in expanding global aircraft capital markets. It’s also a signiﬁcant step forward for aircraft ﬁnancing in the Islamic ﬁnance market, which is estimated to be approximately one-half trillion dollars,” Matthews said. Thanks to Boeing for supplying editorial content for this article. Jetrader 23

Jetrader - May/June 2010

Table of Contents for the Digital Edition of Jetrader - May/June 2010