Jetrader - November/December 2012 - 7

However, new products evolve, like the 787 and the A350 and the neo and the MAX, so we are constantly reviewing what the market is doing and making plans accordingly. Our objective is not speciﬁcally to have a ﬂeet of 737s and A320s — it is to have a ﬂeet of young, modern and liquid, fuel-efﬁcient aircraft. So we will continue to be guided by those criteria, and that will drive our ﬂeet strategy. JT: There has been some downward pressure on narrowbody lease rates and values over the last two years. What are your views for that segment of the market going forward? PB: Lease rates have been reﬂecting interest rates and have therefore obviously dropped accordingly. One of the things that is important to know about our business is that we are a very active aircraft trader. We’ve traded close to 200 aircraft over the last seven or eight years, and we’ve seen prices and values of aircraft go up and down during that time. Today we continue to sell aircraft and the values are reasonable and acceptable – not as high as they might have been three or four years ago, but still pretty good. The market is still resilient and proﬁtable and is still broad and deep. We think the narrowbody sector will continue to be a sweet spot for aircraft ﬁnancing, leasing and trading, and we’re very conﬁdent about the long-term prospects for this part of the market. JT: Where do you think are the best opportunities in the market, both by aircraft type and region? PB: There are lots of opportunities across the industry. Given manufacturer production rates and demand from airlines, as well as requirements for ﬁnancing, we see a lot of potential in the narrowbody

market and over time, in the widebody market as well. Different regions present different types of opportunities. For example, in the U.S. market there is a period of opportunity for re-ﬂeeting as the ﬂeet ages. In the European markets, as the effects of the eurozone crisis continue, airlines will look more and more to leasing to provide for their aircraft needs as the challenging economic circumstances require more ﬂexibility in terms of their balance sheet and ﬂeet strategy. And clearly, in markets like Asia and Latin America there continues to be good opportunity for growth. So every market really brings opportunities and the challenge is to make sure you’ve positioned yourself right in terms of your ﬂeet offering, your customer offering and your customer relationships to make sure that you can take advantage of them. JT: There are various types of ownership structures in the leasing space, including public companies — what do you feel are the particular advantages of your structure as a wholly owned subsidiary of a large ﬁnancial institution? PB: There are a lot of advantages, but three that I would focus on. First of all, being part of a large ﬁnancial institution gives you a great source of conﬁdence in terms of your access to capital and your cost of capital. So we can say with a reasonably good degree of certainty what the cost capital structure is going to look like for the next number of years. For any business, a degree of constancy and set predictability of cost capital is a real beneﬁt. The second thing I would say is that ﬁnancial institutions are, by their nature, long-term players. I think this is increasingly so through the changes and challenges

of the sector globally in the last couple of years. This is not a short-term game that our shareholders are playing, and the nature of an aircraft leasing business means we are buying and investing in 20 to 30-year assets. In that context, having a shareholder who has a similar time horizon makes a lot of sense. It allows you to be much more long term and strategic. The ﬁnal thing I would say in relation to our ownership structure is that it means we can offer a broader range of products and services. We’re part of a group that can also offer, for example, investor products, debt products, ECA ﬁnancing, commercial ﬁnancing, and fuel hedging. This broader and richer composition of offerings is clearly only going to be a strength and a beneﬁt to our business. JT: What has been the change in culture moving from a UK-based parent to Japanese? PB: I don’t think there has been a signiﬁcant change in culture, per se. We do some things differently and we do some things the same. The aircraft leasing business is an industry that is well accustomed to doing business with different types of owners and cultures. We do business all over the world, and we’ve got over 100 customers in more than 40 countries. I’ve been going to Japan for the last 20-something years, so it’s not that big of a difference or that big of a change. SMBC is a global, international, sophisticated, modern ﬁnancial institution and our business is a global, international, sophisticated, modern aircraft leasing company. That’s what we do for a living — managing the broad range of different cultures and different economics as we do business around the world. So, frankly, it’s business as usual.

We think the narrowbody market will continue to be a sweet spot for aircraft financing, leasing and trading. I’d be very confident of the long-term ability of the market.
Jetrader 7

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Jetrader - November/December 2012

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