Building muscle China Aircraft Leasing aims to be a top-five lessor by 2025, CEO Mike Poon explains - Bird & Bird
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July/August 2019 Building muscle China Aircraft Leasing aims to be a top-five lessor by 2025, CEO Mike Poon explains 2019 Legal Guide | Paris Air show review Airfinance Journal Awards 2018
Real Assets: Korea 24 September 2019 Seoul, South Korea Real Assets: Korea is designed to explore and explain infrastructure and aircraft role as high-yielding assets in the portfolios of Korean investors, whether LPs, GPs or direct/equity investors. Organised and informed by the market-leading news and data sources Airfinance Journal and IJGlobal, this event aims to arm Korean investors with the knowledge and relationships they need to seize opportunity and avoid pitfalls of these alternatives. Get more info: http://bit.ly/realassetskorea Sponsorship opportunities Contact Kenneth Yu at kenneth.yu@airfinancejournal.com or +852 2842 6960 airfinancejournal.com afjnews @AirfinanceNews Airfinance Journal
Editor’s letter
Fightback starts for 737 Max
IAG’s commitment stole the Paris air show, but concerns remain, including those
about the Boeing aircraft’s residual values, writes Olivier Bonnassies.
I n many ways the 53rd Paris air show was similar to
previous years: it featured orders and launches of
new models, including the Airbus A321XLR and the
adding: “Willie Walsh [IAG chief executive officer]
has been a loyal Boeing partner and is not afraid
to go against the grain. And he felt for the good
ATR42-600S. A few days earlier, Mitsubishi Aircraft of the industry and for his airlines, it was worth
had officially announced its SpaceJet family of announcing now, when people are doubting the
aircraft, which features the M90 (previously known Max.”
by the developmental designation of MRJ90) and a Financiers, recently briefed by Boeing over an
new member, the M100. update on the 737 Max programme, have growing
However, two things stood out this time: fewer concerns on two points: this year’s budget capacity
firm orders and the increasingly complicated (short term) and residual values (long term).
and confusing terminology used by the original One banking source says it has a pipeline of
equipment manufacturers (OEMs) and their more than 10 aircraft, which had been mandated for
customers. Keen to demonstrate as strong a deal 2019. According to the banker, the Max deliveries
as possible, OEM PR departments are wielding the were part of different structures. Because of the
term “commitment” very loosely. grounding and no deliveries since March, the bank
This is probably because there have been fewer is now “under budget” for the year.
firm order announcements at air shows over the Another banking source is in the same position.
past three years. In the past it was reasonably Both banking sources agree that the situation is
clear what was an order and what was something serious but have confidence in the US manufacturer
else, be it a memorandum of understanding, letter to come up with a solution.
of intent or options and purchase options – terms Assuming the Max returns to service this year
we are used to. But this year’s announcements or early next year, the main question is now on
have featured new constructions, such as “plan to residual values.
extend… by adding”, “commitment to purchase”, “Risk is an issue for bankers,” says another
“intent to acquire” and “memorandum of source. “Managing the risk of an aircraft whose
agreement”, leaving the community mystified as to future is potentially uncertain could be problematic,”
what has actually been agreed. he says.
The A321XLR may have recorded lots of “The banks have financed the 737 product line
commitments in Paris but the talk of the show was over the years. This has led to a high degree of
the meaning of the International Airline Group (IAG) comfort because of the market acceptance and
commitment for up to 200 Boeing Max aircraft, a orderbook of the programme,” he says. “It also led
mix of 737 Max 8 and Max 10 aircraft delivering to higher loan-to-values,” he adds.
between 2023 and 2027. The banker has exposure through a lessor’s
In fairness, no one saw this coming. There portfolio, but is more concerned about residual
were rumours, before the air show, that one values, especially if a new Boeing product comes to
announcement could feature the Max model. market by 2035.
Boeing’s top priority is to “fix” the Max problems Another banker is also worried about the
and make sure it gets recertified soon. Therefore, effect on the residual values. “We have different
an order announcement (or commitment, as it scenarios: one, the US authorities recertify the
seems to be the fashion these days) at the air aircraft first and only US carriers start to operate the
show, if any, had to send a strong message to aircraft, in which case values will be impacted; two,
the marketplace: top-tier group of airlines, huge all authorities recertify the aircraft at the same time
number of aircraft. so the impact on values will be less; and three, all
Boeing did even better to make sure it will be authorities recertify the aircraft but then a question
the “announcement of the air show”: stealing remains on an accelerated transition to a new
an Airbus narrowbody customer. Airfinance narrowbody aircraft. In that scenario, values will be
Journal understands that Airbus was not aware impacted,” he says.
of this and no request for proposal was sent to The banker adds: “The Boeing Max family has
manufacturers. Terms on the pricing and the Boeing sold very well and assuming that deliveries resume
commercial service agreement were no doubt soon and Boeing delivers its orderbook, the
attractive, but one source was not surprised by the deliveries timeframe will be not before 2030. But
announcement. “It was not a desperation move by how about if some customers cancel, or switch part
Willie Walsh but a critical move,” says the source, of their orderbook to a new-generation aircraft?”
www.airfinancejournal.com 3
Contents
Cover story Features
Building Muscle
Mike Poon, chief executive officer of China
Aircraft Leasing (CALC), tells Dominic Lalk
8 New name, new targets
41 Aircraft comparison: The 70-
seat market, a crowded niche
Embraer is confident it will secure more
that the group aims to be among the top The market for 70-seat aircraft is modest in
orders in the Asia-Pacific region after
five lessors by 2025. size, but there is no shortage of competitors.
rebranding as Boeing Brasil, chief executive
Geoff Hearn looks at the prospects for the
officer John Slattery tells Dominic Lalk.
various models on offer.
34
11 Airfinance Journal Global
Awards 2018 43 Data
Airfinance Journal reveals the winners of
our prestigious annual awards, recognising
the most innovative deals, individuals and
46 Pilarski
teams in aviation finance. Valued for their
independence and transparency, our awards
represent the market-leading deals rated on
innovation, timing, size, complexity, ability to
47 Guide to Aviation
overcome obstacles and setting new industry
benchmarks.
Lawyers 2019
28
Airfinance Journal China
Awards 2018
48 Legal moves 2018/19
50
Airfinance Journal reveals the winners of
our China awards, recognising the most Legal Survey 2019
innovative deals, individuals and teams in
aviation finance. Airfinance Journal Legal Survey is the
most comprehensive survey of its type and
crucially offers real insight into the aviation
37 CSAL sets sights on mature
aircraft
market.
As an airline-background lessor, China
News analysis Southern Air Leasing has a natural
responsibility to serve its parent, its general
61 Rising Stars
6 Liquidation and consolidation
are unavoidable
manager, Feng Xu, tells Elsie Guan. Airfinance Journal recognises seven of the
most promising legal associates for 2018.
Hopes of a Jet Airways revival are fading after
lenders launched bankruptcy and insolvency
proceedings. Experts are saying flag carrier 39 Airbus focuses on safety and
Air India could be next.
environment
The European manufacturer is prospering,
65 An introduction to the Global
Aircraft Trading System
(GATS)
but challenges loom. Geoff Hearn reports
9 Paris 2019 round-up on the company’s efforts to future-proof its
business.
By David Berkery, partner, A&L Goodbody
Asia finance editor Managing director, The Airline Analyst Divisional CEO No part of this magazine can be reproduced
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News analysis
Liquidation and consolidation
are unavoidable
Hopes of a Jet Airways revival are fading after lenders launched bankruptcy and
insolvency proceedings. Experts are saying flag carrier Air India could be next.
The leasing community is bracing for impact, reports Dominic Lalk.
B emoaning an abnormal supply of
cheap capital and a growing reliance
on sale and leaseback (SLB) transactions,
an 85% haircut from the Rs85 billion ($1.2
billion) debt. Other potential investors,
including Indigo Partners and Hinduja
CDB Aviation chief executive officer Group, decided not to get involved.
(CEO), Peter Chang, is convinced that It does not stop there. Indian flag carrier
consolidation and liquidation in the Asia- Air India could be next to go. The state-
Pacific are unavoidable. controlled carrier is short by Rs90 billion
“The leasing sector is too crowded. Just to service debt maturing this fiscal year. Air
because you like food you don’t need to India’s total debt exceeds Rs540 billion,
own a restaurant,” says Chang. “It’s shark- although the government has already
infested waters. offloaded more than half that amount to
“We are avoiding SLBs because we Air India Asset Holdings, a newly-formed
can. The concept of ‘must win at any cost’ special purpose vehicle, to reduce the flag
is still very much alive but this corrupts Nick Seah, head of commercial, CDB Aviation carrier’s annual debt servicing.
the rental rates for everyone else,” he Air India keeps up to 25 aircraft on the
says, adding that abnormally low interest ground, including Boeing 777s and 787s,
rates of 0.5% are a “very risky situation; a because the airline lacks the funds to pay
disaster”. for their scheduled maintenance.
Other leasing experts agree, arguing “If it’s any consolation, at least the
that it will be “incredibly difficult” to find Jet collapse showed that assets are still
second homes for thousands of aircraft relatively moveable at this point,” a lessor
that will be coming off lease in the region source tells Airfinance Journal. “That was
over the next three to five years. A primary just for Jet though. It won’t be this easy if
concern is a lack of technical capabilities, the flag carrier collapses too, let alone one
particularly among mainland Chinese of the big players in South-East Asia.”
lessors and their limited relationships with Budget carriers IndiGo and SpiceJet are
carriers outside China. relishing Jet’s demise. The latter has taken
Of equal concern is a proliferation over countless Jet routes and aircraft,
of “non-tradable assets”: aircraft with while IndiGo notes that revenues “have
poor documentation and sub-par end of Peter Chang, chief executive officer, CDB Aviation been strongly affected by the Jet Airways
lease return conditions. “These assets shutdown”.
are very difficult to trade or bear serious Having learnt their lesson from
impairment,” says Chang. The leasing sector bankruptcies such as Air Berlin, Wow Air
The CDB Aviation CEO believes the and Avianca Brasil, the leasing community
industry will see “a couple more” airlines is too crowded. Just gave short shrift to Jet. More than 20
collapse over the summer months. “The
default rate is set to rise,” he says.
because you like food affected lessors moved in very quickly to
repossess their assets when it became
“I fully agree with my boss. We need you don’t need to own a clear that Jet would go down. Their
to get ourselves ready for repossession fastidiousness paid off, as asset values
and remarketing. The cycle will come to restaurant. remained relatively unaffected.
an end. The music will stop. Are we ready BOC Aviation and Castlelake quickly
is the question,” says Nick Seah, CDB Peter Chang, chief executive officer, CDB placed former Jet 737s with SpiceJet, Fly
Aviation’s head of commercial for greater Aviation Leasing put 737s with Vistara and GECAS
China and North Asia. “We must be found new homes for their narrowbodies
prepared for winter to come; to be cash- in Russia, to name just a few.
flow ready when winter comes.” Yet, a significant portion of the former
India is of particular concern. Jet consortium of creditors, led by State Bank Jet fleet remains unplaced, giving rise
Airways is continuing to face a negative of India, decided to seek resolution under to those who maintain that the leasing
streak since collapsing in April. After local insolvency and bankruptcy laws after community is in for a rude awakening
the possibility of a quick sale has slowly only a conditional bid was received for Jet. over the next 18 months. Or, as Chang
slipped away, it seems more unlikely than That bid was placed by Etihad Airways, puts it: “We will see more airlines collapse.
ever that Jet will fly again. In late June, a which expected Jet’s creditors to take Default will increase.”
6 Airfinance Journal July/August 2019
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www.airfinancejournal.com 7
OEM interview
New name, new targets
Embraer is confident it will secure more orders in the Asia-Pacific region after
rebranding as Boeing Brasil, chief executive officer John Slattery tells Dominic Lalk.
I n March, John Slattery took over the
reins of the world’s third-largest aircraft
manufacturer, Embraer. The Irishman is
countries. The aircraft’s performing well, the
residual values are performing well, kind of
mapping 737 residual values.
poised to lead the original equipment “We’ve been very careful and diligent
manufacturer (OEM), which has its around the number of lessors we have
headquarters in São José dos Campos, in the programme so we don’t flood that
Brazil, to new heights in the Asia-Pacific distribution channel because in the end I
market after Boeing agreed to pay $4.2 uniquely appreciate that aircraft are bonds
billion for an 80% stake in Embraer’s with wings. They’re flying bonds. So if I
commercial aircraft manufacturing overly impact the yield on the bond, if I push
business, valuing the Brazilian company at it down by selling too much inventory into
$5.25 billion. the market my lessor customers will feel that
Embraer’s commercial aircraft business pain and then ultimately so will I because I’m
was officially rebranded as Boeing Brasil John Slattery just pushing down the capital value of the
Commercial in late May, prompting asset,” says Slattery.
many in the industry to suggest Boeing “When we brought in AerCap, Aircastle
forced Embraer’s hand to rename the demanding point-to-point service. You can’t and ICBC Leasing I said to the market place
company. Nothing could be further from do that profitably with an [Airbus] A320 or that I don’t see the need for a fourth lessor
the truth, chief executive officer Slattery [Boeing] 737. People now for the very first at that moment. I have no desire to bring in
tells Airfinance Journal in this exclusive time are saying we need the right size, not a fourth lessor until I see a significant portion
interview at the International Air Transport asset-abuse the narrowbodies. The way it of the current inventory placed. We have
Association annual general meeting in works in that region is that you start with honoured that. AerCap has now placed 47
Seoul. narrowbodies, you very quickly move to out of their 50 and those aircraft are years
“I think the characterisation that Boeing widebodies and then when you go through away from being delivered,” says Slattery,
wanted to drop the Embraer name is that cycle then you come to the large adding he believes the E2s of Aircastle and
inappropriate. I’m not pleased with how regionals. So our time will come,” says ICBC will be placed by the second half.
the media has characterised that. The Slattery. “I come from a leasing background.
new name – Boeing Brasil Commercial Again, Boeing is expected to help We’ve spent a lot of time when we were
– emerged from our employees, from Embraer sell. “It’s physically sometimes building the business case on making sure
their employees and from our customers. hard to get in front of an airline in that the E2 would be super easy to reconfigure
Everybody was involved. It was an organic region because they have to run their day- from a lessor perspective. Frankly,
process. There seems to be a desire to to-day business, so our Boeing branding reconfiguring an E2 will be quick and
portray that the name was pushed on us,” will be big leverage. cheap relative to the E1,” he says.
says Slattery. Key industry influencers are predicting On AerCap’s 50 E2 options, Slattery says
The Brazilian OEM believes the that the E-Jet family will be next in line for he is “hopeful but not arrogant enough to
rebranding will result in greater brand rebranding. Slattery cautions that this is say” they will be converted into firm orders.
equity and improved sales, particularly definitely not a done deal. “We have invested a lot of time in each
in Asian regional markets dominated by “We haven’t made a decision on that. other, into developing this relationship. In
Airbus and Boeing. If they come up with a great new name our business trust is everything. It takes
“Boeing is the largest aircraft and we like it then we’re going to rename years and decades to build. When I think
manufacturer. It’s got enormous brand the programme and if they don’t then we about how I interface with people like Gus
equity around the world. We need access won’t. All we want is a name that makes Kelly [AerCap chief executive officer] and
to that brand equity, particularly in regions sense and helps sales, not hinders sales. Phil Scruggs [AerCap president and chief
like South-East Asia and China, to help us We’d like it done by year end, but hopefully commercial officer], things are done on a
sell our aircraft. We are very well known in much sooner,” says Slattery. phone call now that in the past could have
North America – we’ve sold almost 600 The E-Jet E2 family is slated to become taken a month or a year. Just because we
aircraft in that market over the past five the OEM’s bread-and-butter business. The know and trust each other,” he says.
years – but we need to get better in Asia,” family comprises the E175-E2 (80 seats in Embraer received orders for nine
says Slattery. dual configuration), the E190-E2 (96 seats) commercial aircraft in the first quarter
As Airfinance Journal went to press, and the E195-E2 (120 seats). Firm orders ended 31 March and delivered 11 aircraft,
there were about 150 E-Jets in operation have been placed for 170 E2-family aircraft comprising 10 E175s and the first E190-E2.
with Asia-Pacific carriers. Embraer’s only, with more than 50% of that backlog Its target is to achieve 85 to 95 commercial
backlog lists fewer than 20 aircraft, belonging to lessors. AerCap has 50 E2s deliveries in 2019. At the beginning of June
including two Embraer E190-E2s for Hainan in its orderbook (plus 50 options), Aircastle the OEM’s backlog stood at 359 aircraft
Airlines and Air Kiribati, respectively. got orders for 25 and ICBC Leasing has and its customer base comprised 76 global
“Our backlog in the region is not where signed for 10 E2s. operators.
it needs to be, no doubt about it. Those “As AerCap, Aircastle and ICBC Leasing This is not good enough, according to
secondary and tertiary cosmopolitan looked at the E2 they discovered an Slattery. “I want to get to 100 operators
areas need to be connected – they’re aircraft with over 75 operators in over 50 around the world. Nothing short of that.”
8 Airfinance Journal July/August 2019
Paris 2019 roundup
Airlines grab the headlines
Lessors place fewer firm orders at this year Paris air show, which saw the launch
of the A321XLR.
T his year’s Paris Air Show started
with an expected announcement:
Airbus launched the A321XLR first thing
rear centre tank (RCT) for more fuel
volume; a modified landing gear for an
increased maximum take-off weight
that the E1 will be traded in, as part of
the commitment. Bombardier and de
Havilland of Canada did not record
in the morning on the first day to achieve of 101 metric tonnes; and an optimised any new orders at the air show. Their
maximum impact. Air Lease, which wing trailing-edge flap configuration to combined total for the year remains at 15
was also the launch customer for the preserve the same take-off performance aircraft: nine CRJ900s and six Q400s.
A321neo, was the first to commit to the and engine thrust requirements as
new variant, signing a letter of intent (LOI) today’s A321neo. ATR banks on lessors
for 27 A321XLRs. In particular, the new optimised RCT Turboprop manufacturer ATR arrived
The European manufacturer booked holds more fuel than several optional in Paris with only three orders but
43 firm orders for the type at the show, additional centre tanks did previously, announced a total of 75 aircraft at the air
commitments for a further 79 aircraft and while taking up less space in the cargo show.
99 conversions from A321 to the XLR. hold – thus freeing-up underfloor volume The Franco-Italian airframer chief
Airbus says the A321XLR is the next for additional cargo and baggage on long executive officer Stefano Bortoli disclosed
evolutionary step from the A321LR. It is range routes. deals covering 23 more aircraft including
designed to become the world’s most- Airfinance Journal has recorded a a follow-on order for one ATR42-600
efficient and longest-range single-aisle total of 810 aircraft announcements from Colombian carrier EasyFly and a
aircraft, which will enable operators in during the air show week, comprising further 22 ATR72 commitments from
this segment to access markets requiring 140 firm orders placed by all-airline undisclosed customers.
more range and payload. customers. Those included only 140 firm These follow the letter of intent for 35
From 2023, the A321XLR will deliver an orders, all made by airline customers. turboprops, spanning both ATR42-600
unprecedented narrowbody range of up Airbus booked 114 firm orders, while and ATR72-600 models, from lessor
to 4,700 nautical miles – 15% more than Embraer had 24 firm orders. There were Nordic Aviation Capital (NAC) – which
the A321LR. no firm orders from Boeing. expects to firm the commitment shortly –
With this added range, airlines will On the “other commitments” side, and the 17 commitments secured for the
be able to operate a lower-cost single- airline customers represented 65% of the new short take-off and landing variant of
aisle aircraft on longer and less heavily announcements. the ATR42-600 variant.
travelled routes – many of which can now Embraer announced two E1 orders Those commitments include 10 aircraft
only be served by larger and less-efficient (United Airlines and Fuji Dream), as for launch customer Elix Aviation Capital,
widebody aircraft, says the manufacturer. well as one E2 order (Binter Canarias, two aircraft for Air Tahiti and five for
This will enable operators to open new exercising two purchase rights). undisclosed customers.
worldwide routes, such as India to Europe Airfinance Journal understands that a ATR is finalising the process for
or China to Australia, as well as further fairly large order for the E195-E2 was to the official launch of the ATR42-600S
extending the family’s non-stop reach be announced in Paris but got postponed and received authorisation to take in
on direct transatlantic flights between at the 11th hour. That order for 25 orders for the aircraft, subject to the
continental Europe and the Americas. E195-E2s followed a fiercely-contested final confirmation for launch from the
Changes on the A321XLR vis-a-vis the battle with Airbus, which offered the company’s board of directors, expected
A321neo(LR) include: A new permanent A220. Airfinance Journal understands before year-end.
www.airfinancejournal.com 9
Paris 2019 roundup
The variant offers capabilities to take-off
from and land on runways as short as 800
metres. The ATR42-600S has a bright
commercial outlook, says ATR, with 1,200
in-service turboprops of between 30 and
50 seats needing to be replaced in the
coming years.
Thanks to its economic performance
and operational flexibility, the ATR42-600S
is ideally placed to meet this requirement.
Beyond its performance on short runways,
the aircraft offers 50 seats at the same
operating costs as 30-seat aircraft.
Elix Aviation Capital commitment
represents the first time the lessor has
placed a strategic order directly with an
aircraft manufacturer.
The lessor’s chief operating officer NAC’s chairman Martin Moller with ATR’s CEO Stefano Bortoli
John Moore says the new aircraft fits “well
into Elix’s long-term strategy” to offer a aircraft deal, we are making a strategic becomes a new LEAP customer, having
wide range of specialised and complete decision to ensure that airlines can lease until now used the Pratt & Whitney
solutions to regional turboprop operators. and operate the most modern and eco- PW1100G to power its A320neos.
The NAC commitment for up to 105 responsible regional aircraft available in the Peach Aviation selected the CFM
aircraft represents a very successful and market.” LEAP-1A for its 2016 A320neo order. The
long-standing collaboration between CFM International stole the headlines Japanese low-cost carrier ordered 20 LEAP
the parties as well as a long-term vote in at the show with a total of 1,060 LEAP engines.
confidence in the ATR products. engines ordered. The Franco-US Pratt & Whitney announced SMBC
Since 2010, NAC has taken delivery of manufacturer secured 370 orders from the Aviation Capital and an undisclosed lessor
in excess of 100 speculative ATR aircraft. leasing community with ALAFCO, Avolon, for 55 aircraft. Its airline customers included
During that time, NAC has risen to become Macquarie Airfinance, and CDB Aviation all VivaAerobus for for 41 A321neo aircraft
the number one regional aircraft lessor with placing significant orders in Paris. AND JetSMART for 85 A320neo-family
a portfolio of almost 500 regional aircraft. AirAsia finalised a deal for 200 LEAP- aircraft on firm order. An undisclosed airline
“To plan for a successful future, it is vital 1A engines to power 100 A321neos. The selected the PW1100G for 28 A320neo-
for us to invest in the very best technology aircraft order and intent to purchase the family aircraft.
so that we can offer flexible and efficient engines were announced in July 2016. General Electric announced orders for
solutions to our clients,” says NAC chairman IndiGo ordered CFM International 110 engines from United Airlines (40 CF34-
Martin Møller. “Aviation is moving towards LEAP-1A engines to power 280 A320neo 8Es), Qatar Airways (10 GE90s), Korean Air
a sustainable future, and with this 100+ and A321neo aircraft. The Indian carrier and ALC (60 GEnx engines).
GECAS boosts 737-800 conversion market
Operating lessor GECAS strengthened year to West Atlantic Group. Greener, senior vice-president and
its relationship with Amazon’s all-cargo The 737-800BCF features a rigid cargo manager, GECAS Cargo. “It’s enabling
airline Prime Air with the announcement barrier and 12 maindeck pallet positions, operators to replace ageing freighters
of 15 additional Boeing 737-800BCFs with a maximum structural payload is and meet the rapidly growing express
(Boeing Converted Freighters) under 23.5t (51,800lb) and a maximum range in cargo market.”
lease agreements. The lessor already excess of 2,100 nautical miles – providing Orders for the 737-800 freighter are
has an order with the US carrier for five capability to open new markets. It also beginning to take off as operators and
aircraft that will be delivered by the end offers operators newer technology, lower lessors look for alternatives to the 737
of this year. fuel consumption and better reliability freighters, which are seeing feedstock
Alex Burger, the GECAS chief executive than other standard-body freighters. It begin to dry up.
officer, says the new commitment is the primarily will be used to carry express GECAS has delivered 13 converted
beginning of a new relationship. The cargo on domestic and short-haul routes. cargo aircraft to customers since the
15 additional aircraft will be delivered At the show, GECAS exercised 10 second quarter of 2018. West Atlantic and
through 2021. purchase rights to firm orders and Amazon Air have four units, Ethiopian
Prime Air says it will base some of its adding 15 more purchase rights. The Airlines and ASL Airlines Holdings have
737-800BCFs in Cincinnati, a new hub announcement marked the third time two, while Atran has one. Another six
it hopes to have in operation by 2021. GECAS had purchased Boeing’s newest units are scheduled for delivery in the
By then Prime Air will have 70 aircraft, freighter aircraft. It has commitments for second part of this year.
comprising 50 767 freighters and 20 55 firm orders and 10 options for the “Many airlines are now operating the
737-800BCFs. GECAS was the launch type. aircraft. The performance and reliability
customer for the 737-800 passenger-to- “Our leasing customers are very of the 737-800 freighter is the key reason
freighter conversion programme in 2016. pleased with the versatility and reliability why they are transitioning to this aircraft
The first 737-800BCF was delivered last of these freighters,” says Richard type,” says Greener.
10 Airfinance Journal July/August 2019Airfinance Journal Global Awards 2018
Airfinance Journal’s
2018 deals of the year awards
Airfinace Journal reveal the winners of our prestigious annual Awards and China
Awards, recognising the most innovative deals, individuals and teams in aviation finance.
Asia Pacific Deal of the Year: Project Melville Macquarie AirFinance –
$4bn unsecured revolver and term loan
Borrower/Issuer: Macquarie AirFinance T wo companies, Macquarie Aerospace
Finance and Macquarie Aerospace
Holdings acted as the borrowers of this
bookrunners on the term loan. Wells Fargo,
Westpac, DBS, Societe Generale, ING
and ABN Amro were the mandated lead
Structure: $1bn unsecured revolving
combined $4 billion financing for a total of arrangers on the term loan.
credit facility and $3bn term loan 135 aircraft leased to 67 airlines. On the revolver facility, BNP Paribas, Citi,
Assets financed: 135 aircraft The transaction is believed to be the Deutsche Bank, HSBC, National Australia
largest non-recourse aircraft secured Bank acted as mandated lead arrangers,
Lawyers (and role): Vedder Price
portfolio term loan globally. It represented underwriting banks and bookrunners. BNP
acted for the borrower; Clifford Chance
the refinancing of the entire business Paribas, J.P. Morgan, Mizuho and Natixis
represented the lenders
moving to a wholly-independent funding were the mandated lead arrangers of the
Banks (RCF): Citi, Deutsche Bank, structure. With this transaction, Macquarie RCF.
National Australia Bank, BNP Paribas, J.P. AirFinance achieved significant goals, The $3 billion term loan has a seven-
Morgan, Mizuho, Natixis as mandated including the diversification of funding year tenor with a margin of Libor + 150
lead arrangers sources, allowing the company to efficiently basis points. It successfully refinanced and
Banks (Term loan): Citi, Deutsche Bank, fund the expansion of its businesses. upsized a previous $1.8 billion 2016 Spitfire
National Australia Bank, BNP Paribas, The financings were widely syndicated term loan, which was set up to complete the
HSBC, ABN Amro, DBS, ING, Societe among Macquarie’s core relationship acquisition of a portfolio from AWAS.
Generale, Wells Fargo, Westpac as banks, specialist aviation banks, and Asian The term loan facility is paired with the
mandated lead arrangers commercial banks. $1 billion unsecured revolving credit facility
BNP Paribas, Citi, Deutsche Bank, HSBC, that is supported by existing unencumbered
Date closed: 30 June 2018 National Australia Bank acted as mandated assets and provides funds for future growth
lead arrangers, underwriting banks and over the next five years.
Europe Deal of the Year: Nordic Aviation Capital $227m 12 Embraer 190 Jolco
number of aircraft, the largest lessor Jolco. multiple jurisdictions and short timeframe in
Borrower/Issuer: Nordic Aviation Capital The transaction involved an innovative which to complete the transaction.
Structure: Japanese operating lease cross-collateralised structure whereby The Jolco structure required security to
with call option (Jolco) the aircraft were divided into batches be granted in three separate jurisdictions.
Assets financed: 12 Embraer 190 aircraft and owned and leased by four Japanese The Jolco nature of the structure
Lawyers (and role): White & Case acted borrower/lessors, leased to NAC owned allowed NAC to raise significant additional
for the underwriter; Clifford Chance special purpose vehicles SPVs and financing against the aircraft (100%) while
represented the sponsor’s counsel, subleased to various airlines. uniquely maintaining operational flexibility
Nishimura & Asahi represented the The transaction involved 12 aircraft when combined with the portfolio features
equity underwriter leased to three airlines (three to Kenya relating to covenants and events of
Airways, seven to Air Europa and two to defaults, which the transaction entailed.
Banks (and role): Deutsche Bank as
AeroMexico). In addition to the jurisdictions It provided Nordic Aviation Capital a
debt arranger, sole structuring agent and
in which the aircraft were registered, diversification of its financing sources.
sole underwriter
English, Irish, Japanese and California law Deutsche Bank successfully syndicated
Lessor: Financial Products Group were all relevant to the transaction. The part of the debt to new lenders thereby
Amount: $227 million size and complexity of the transaction was diversifying the lessor’s international debt
Tenor: Nine years significant given the number of aircraft, investor profile.
Date mandated: 1 April 2018
Date closed: 21 September 2018
T he transaction marked the first ever
lessor Jolco financing for regional
jets and features the first ever cross-
collateralisation within a lessor Jolco
structure. It also represented the largest
The Nordic Aviation Capital deal team, collecting their award from AFJ’s managing director Olivier Bonnassies
regional aircraft Jolco and, in terms of
www.airfinancejournal.com 11Airfinance Journal Global Awards 2018
Latin America Deal of the Year: Avianca UKEF-guaranteed
Jolco financing for one Boeing 787 aircraft
Borrower/Issuer: Avianca A vianca mandated and successfully
closed a loan guaranteed by UK Export
Finance (UKEF) to finance one Boeing 787-8
based in New York, acted as the arranger
of the UKEF loan, initial lender and facility
and UKEF agent. Burnham Sterling acted
Structure: UKEF-guaranteed financing delivery. as adviser to Avianca for the Jolco equity
structured as a Jolco The UKEF loan was the debt portion of a structure.
Assets financed: One Boeing 787-8 Japanese operating lease with call option The transaction marked Avianca’s first
(Jolco), and was arranged by Burnham UKEF-backed Jolco financing.
Lawyers (and role): White & Case Sterling with Sumitomo Mitsui Finance and It was also the first UKEF-guaranteed
acted for Avianca; Allen & Overy Leasing (SMFL) providing the equity on the financing structured as part of a Jolco for a
represented ING and UKEF, Nishimura transaction. Latin American carrier.
& Asahi, Tokyo represented Sumitomo The Jolco equity combined with the UKEF This was ING’s first Jolco financing under
Mitsui Finance and Leasing debt provided Avianca with 100% financing a UKEF guarantee, and also the first time
Banks (and role): ING as UKEF debt for the aircraft at an attractive all-in cost. that ING could book Jolco debt outside of
arranger, initial lender, and ECA facility ING’s structured export finance team, Japan.
agent
Jolco arranger: Burnham Sterling
Equity provider: Sumitomo Mitsui
Finance and Leasing
ECA: UK Export Finance (guarantor)
Tenor: 11 years
Date mandated: 1 August 2018
Date closed: 28 September 2018
The Avianca UKEF deal team, winners of the Latin America deal of the year award
Middle East & Africa Deal of the Year: Ethiopian Airlines
$670m AFIC-supported financing for eight Boeing aircraft
$230 million loan facility covered by Aircraft were structured with $137 million ANPI-
Borrower/Issuer: Ethiopian Airlines Non-Payment Insurance (“ANPI”) to finance covered loan. The senior loan had a 12-
five Boeing 737 Max 8 aircraft - Ethiopian year tenor, the junior loan was seven years.
Structure: ANPI-insured loan facility Airlines’ first aircraft of this type. The 777 facilities were negotiated and
The 737 Max 8 senior loan facility was closed on short timetables (approximately
Assets financed: Five Boeing 737 Max 8s structured with ANPI cover under the AFIC one month from start of documentation to
and three 777 freighters programme and was coupled with a seven- closing).
year $25 million junior loan facility from Four of the six aircraft delivered over a
Lawyers: Pillsbury, White & Case,
Investec Bank to provide Ethiopian Airlines weekend requiring the lenders to make
Milbank LLP and Vedder Price
with 95% financing for the aircraft at an special arrangements to pre-position the
Banks: ING Capital, Investec, Societe attractive all-in cost. funds with Boeing to allow the delivery to
Generale and SMBC Europe Ltd Each of the Boeing 777 freighter facilities occur during non-banking hours.
Credit Enhancer: Aircraft Finance
Insurance Consortium (AFIC)
Date mandated: 1 May 2018
Date closed: 29 June 2018
E thiopian Airlines became the first African
carrier to raise financing through the
Aircraft Finance Insurance consortium
(AFIC) structure.
The financing also marked the first AFIC
structure with a commercial junior debt.
The Ethiopian Airlines AFIC deal team, collecting their award
The transaction consisted of a 12-year
12 Airfinance Journal July/August 2019Airfinance Journal Global Awards 2018
North America Deal of the Year: Zephyrus Aviation
Partners ZCAP 2018-1 $336.6m 21 aircraft ABS
Borrowers/Issuers: Zephyrus Capital
Aviation Partners 2018-1 Ltd and
T he transaction involved a newly-
launched company acquiring a
substantial portfolio of mid-life aircraft
Journal. “For doing an ABS out of the
box, that’s a really favourable outcome,
especially when you consider the age of
Zephyrus Capital Aviation Partners directly into an asset-backed securitisation the portfolio - 13.3 years is slightly higher
2018-1 LLC (ABS) structure. touch.”
Structure: Asset-backed securitisation Zephyrus Aviation Capital was The $336.6 million single A-tranche
established in 2018, staffed by experienced deal was used to finance a portfolio of 21
Assets financed: 21 aircraft executives from CIT and supportive aircraft, comprising 18 narrowbodies and
equity backers: Virgo Investment Group three widebodies. The aircraft – seven
Lawyers (and role): Clifford Chance (majority) and Seabury Capital (minority). Airbus A320s, three A319s, eight Boeing
acted for the lead arranger; Vedder The transaction is a tremendous start for 737NGs and three A330s – have a
Price represented the issuer; A&L a new company. It also marks the first weighted average age of 13.3 years and
Goodbody as Irish counsel for the time a newly-formed company launched are on lease to 19 airlines.
issuer, Maples Group its inaugural aircraft portfolio acquisition “The book was more than two times
directly into an ABS. oversubscribed which I think was also a
Banks (and role): Deutsche Bank
The pace of the transaction saw most of nice outcome,” he adds. “The investors
as sole structuring agent and lead
the aircraft close into the structure within who bought into this deal are very
arranger
three months of the initial close of the ABS. sophisticated players who know the space.
Adviser: Seabury Capital Zephyrus Aviation Capital priced its debut That was also a very nice endorsement.”
ABS at 98.52% of par value, according to Under the $336 million ZCAP 2018-1, ZAL
Rating Agency: KBRA Damon D’Agostino, the new lessor’s chief Limited is the seller and Zephyrus Aviation
executive officer. Capital is the servicer.
Date mandated: 4 June 2018
“We came in at 210 over swaps, which is The single Class A tranche of loans has
Date closed: 9 October 2018 within 10bps of other first time issuers,” says a fixed coupon of 4.605%, yielding 5.153%.
D’Agostino in an interview with Airfinance The loan-to-value (LTV) is 74.07%.
Bank Loan Deal of the Year: Limited recourse financing of four
777-300ERs leased to British Airways for Novus Aviation Capital
provided by Mitsubishi UFJ Financial Group MUFG says the large underwriting (total
Borrower/Issuer: Novus Aviation Capital and BNP Paribas. Novus Aviation Capital is deal size was $416 million) was successfully
the overall arranger. sold down to incoming participant banks.
Structure: Limited recourse facility The transaction was structured to allow The financing from the banks allowed
for financing terms to be agreed almost two Novus to secure end of line 777-300ERs
Assets financed: Four Boeing 777-
years ahead of delivery in 2020 - which was that are to be placed with British Airways
300ERs
a requirement for Novus. Total tenor of the Bertrand Dehouck, head of aviation for BNP
Lawyers: Milbank LLP, Stephenson risk is effectively 14 years from signing to Paribas said: “There are three key elements
Harwood final loan repayment. that make this deal significant: One, it marks
The financing is a combination of Shariah a substantial transformational phase for
Banks: BNP Paribas, MUFG compliant and conventional lease-in lease- Novus Aviation Capital; two, it helps Boeing
out structure. MUFG Bank and BNP Paribas secure a new direct customer; and three,
Date mandated: 6 September 2018 structured the transaction into an amortising it supports the fleet expansion of a major
tranche and balloon tranche. European airline.”
Date closed: 21 December 2018
T
OEM.
he transaction represents the first direct
order by Novus Aviation Capital with an
Novus Aviation Capital announced
the four 777-300ER order at the 2018
Farnborough air show. The announcement
also marked the first lessor order for the
777-300ER model since 2014 at the time of
announcement.
The aircraft were placed under a long-
term lease agreement with British Airways.
This transaction will be financed through
The Novus Aviation deal team, winners of the Bank Loan deal of the year award
a senior secured limited recourse facility
www.airfinancejournal.com 13Airfinance Journal Global Awards 2018
Export Credit Deal of the Year: Aeromar
ECA-guaranteed loans for eight ATR aircraft
Borrower/Issuer: Aeromar T he export credit deal of the year
features takeout of manufacturer
financing with export credit agencies
BNP Paribas acted as senior agent and
security trustee on five aircraft while Apple
Bank for Savings was lender on those
Structure: ECA-backed loan support for turboprop aircraft into Mexico. aircraft. Export Development Canada
The manufacturer financing was made acted as senior agent, security trustee and
Assets financed: Two ATR42-600s and available to the Mexican carrier on an original senior lender on three ATR72-
six ATR72-600s interim conditional sale basis. 600s.
The transaction is an export credit The transaction was disrupted on several
Lawyers: Watson Farley & Williams, agency-guaranteed debt that refinanced occasions by the eruption of the Fuego
Norton Rose Fullbright, Matheson, manufacturer supported sales of a batch of volcano in Guatemala and a number of
Mason Hayes Curran, Carillo & relatively new ATR42/72 aircraft. incidents relating to the aircraft.
Asociados, Patton Moreno & Asvat, The collateral includes two 2016-vintage
Ritch Mueller ATR42-600s as well as six 2016/17-vintage
ATR72-600s that were ordered by Mexican
Banks: Apple Bank for Savings, Export carrier Aeromar in November 2016. The
Development Canada order also included six options for the
ATR72-600 model.
ECA: Bpifrance Assurance Export, This deal was particularly complex as it
SACE, Export Development Canada involved the refinancing of sales finance,
with export credit agency guaranteed
financing (Bpifrance/SACE and Export
Date mandated: 1 December 2017
Development Canada) separately
supporting different aircraft. It also included
Date closed: 25 July 2018 commercial debt in respect of aircraft that
The Aeromar deal team
were all in operation.
Tax Lease Deal of the Year: Virgin Australia $120m Jolco
financing for six used Boeing 737-800s
The debt portion was provided in Zealand Banking Group (ANZ).
Structure: Japanese operating lease Australian dollars while the equity was DVB Bank, IBJ Leasing and Standard
with call option disbursed in US dollars. Chartered Bank were the debt underwriters
Amount: $120 million The transaction was executed in strict for four aircraft in the transaction. DVB Bank
Tenor: 57 months application of the Australian and Japanese was facility agent and security trustee on
tax scheme to avoid any withholding tax those aircraft.
Lawyers (and role): K&L Gates under the Japanese lease. Standard Chartered Bank acted as debt
(borrower), King & Wood Mallesons The deal’s originality also came from the underwriter, facility agent and security
(lenders), Herbert Smith Freehills (airline) combination of financing complex assets in trustee on the remaining two aircraft.
Jolco arranger: Asset Brok’Air local currency (vintage aircraft) and having King & Wood Mallesons advised the
International introduced a new name to the Jolco market. lenders, Herbert Smith Freehills advised
Equity underwriter: JP Lease It closed in a unique context following the Virgin Australia and K&L Gates advised the
company’s recent business turnaround plan. lessor.
Lessee: Virgin Australia
The overall transaction was co- Asset Brok’Air International acted as
Banks (and role): Australian and New arranged by Jolco specialist Asset Brok’Air overall arranger and JP Lease Products &
Zealand Banking Group (debt arranger). International and Australian and New Services as equity advisor.
DVB Bank, IBJ Leasing and Standard
Chartered Bank as debt underwriters
Date mandated: 15 August 2018
Date closed: 31 October 2018
V irgin Australia’s Japanese operating
lease transaction with a call option
(Jolco) for six Boeing 737-800s marked the
carrier’s debut for this financing product.
The transaction involved a portfolio of six
aircraft, manufactured between 2003 and
The Virgin Australia deal team, collecting their award
2007, for a total amount of $120 million.
14 Airfinance Journal July/August 2019Airfinance Journal Global Awards 2018
Islamic Finance Deal of the Year: DAE Capital $800m
revolving credit facility
Al Ahli Bank of Kuwait was the mandated The Dubai-based lessor signed a four-
Borrower/Issuer: DAE Capital coordinating lead arranger and joint year unsecured revolving credit facility
bookrunner of the transaction. First Abu worth $535 million, which can be increased
Structure: Unsecured revolving credit Dhabi Bank was a mandated lead arranger up to $600 million in December, to support
facility and joint bookrunner as well as global agent its future financing needs. The RCF
and Islamic Investment Bank. Noor Bank was arranged by Emirates NBD as sole
Amount: $800 million
acted as a mandated lead arranger. mandated arranger and bookrunner.
Tenor: Four years The transaction closed in October 2018 In November BNP Paribas and Credit
and eight additional banks entered the deal Agricole were involved in another new
Lawyers: Clifford Chance, Clyde & Co using the accordion feature to bring the revolver for a total of $720 million. The
facility to $800 million. unsecured revolving credit facility has a
Banks: Ahli Bank of Kuwait, First Abu The facility is atypical. It features a maturity of five years.
Dhabi Bank conventional tranche of debt combined The previous month DAE Funding,
with an Islamic tranche, the first of its kind the wholly-owned subsidiary of Dubai
Date mandated: 1 May 2018 amongst lessor financings. Aerospace Enterprise, priced $500 million
The facility has very limited covenants aggregate principal amount of senior
Date closed: 1 October 2018
and does not have the standard unsecured unsecured notes due 2021 and $500
revolving credit facility covenants such million aggregate principal amount of
D ubai Aerospace Enterprise (DAE) signed
an unsecured four-year revolving credit
facility with an initial commitment of $480
as interest coverage, leverage ratio or
unencumbered assets test, making it very
unique. It provides a good execution of the
senior notes due 2023. The net proceeds
from those offerings was to refinance
existing secured indebtedness and to pay
million in May 2018. The financing has an deal and full flexibility to the borrower. the related fees and expenses, and to use
accordion feature that allows the facility to The DAE Capital treasury team had a busy any remaining net proceeds for general
grow to up to $800 million. year in 2018. corporate purposes.
Operating Lease Deal of the Year: airBaltic $72.4m
two A220-300 sale and leasebacks
previously and remained thinly capitalised. going forwards. The success of this
Borrower/Issuer: airBaltic The deal achieved a $36.2 million per transaction was also crucial to the future
Structure: Sale and leaseback aircraft sale and leaseback price – a figure success of the aircraft type.
that was rejected by major lessors as being The two A220-300s formed part of a
Tenor: 12 years ‘unrealistically high’. total sale and leaseback package of six
Skyteck-AIC said the winning leasing aircraft conducted by Skytech-AIC on
Lawyers: Clyde & Co
party, Avation plc, showed real flexibility, behalf of airBaltic in early 2018 with the
Adviser: Skytech-AIC understanding and creativity to win finance of the balance of four aircraft
the competition and build an excellent awarded to CMB Leasing.
Debt provider: Export Development
relationship with the airline. Since the transaction closed, Avation
Corporation of Canada
The Latvian airline was seeking to has been mandated another four A220-
Lessor: Avation plc diversify its sources of funding away from 300 deliveries under a similar transaction
a concentration on Export Development arranged by Skytech-AIC. The first two
Date mandated: 16 February 2018 Corporation of Canada supported debt/ aircraft closed in March and April 2019
Date closed: 12 June 2018 finance leases and adding the flexibility while the remaining two aircraft are due in
of operating leases to its funding options the third quarter of this year.
L easing company Avation agreed
a 12-year purchase and leaseback
transaction with airBaltic for two Airbus
A22-300s (formerly Bombardier CS300
aircraft), in a transaction arranged by
Skytech-AIC.
The transaction represented the first
open market sale and leaseback for the
type: up to that point the asset was derided
by competitors and shunned by investors
with just 249 sales accumulated over eight
years.
It also represented the first open market
sale and leaseback for the Latvian carrier,
The airBaltic deal team, collecting their award
which had narrowly escaped bankruptcy
www.airfinancejournal.com 15Airfinance Journal Global Awards 2018
Structured Lease Deal of the Year: Smartwings Euro-equivalent
$140m AFIC supported financing of three Boeing 737 Max 8s
in aviation finance, which is growing in lessor or payments of interest by the
Borrower/Issuer: Smartwings popularity but prior to this deal, no airline borrower under the loan agreement. Ireland
had structured an AFIC deal through was selected as the optimum jurisdiction for
Structure: AFIC supported finance
Ireland. The structure demonstrated that incorporation and Irish tax residency of the
Amount: $140 million airlines could avail of the AFIC support borrower/lessor.
and maximise Ireland’s extensive double- The transaction was completed in a very
Lawyers: A&L Goodbody, Clifford taxation treaty network. short timeframe notwithstanding the fact that
Chance, Norton Rose Fullbright, The structure also ensured that no the structure was different to previous AFIC
Pillsbury withholding tax would apply to payments transactions and for some of the lenders this
Credit enhancer: Aircraft Finance of rent by the Czech carrier to the finance was their first AFIC-supported transaction.
Insurance Consortium (AFIC)
Banks: Credit Agricole-CIB
Date mandated: 10 November 2018
Date closed: 19 December 2018
T he Smartwings Aircraft Finance
Insurance Consortium (AFIC)-supported
multi-aircraft transaction wins the structured
lease deal of the year.
The financing represents the first time
the Czech carrier had availed of the AFIC-
supported financing product.
It was also the first time an Irish structure
has been used for an airline AFIC deal. The The Smartwings deal team, collecting their award from AFJ’s managing director Olivier Bonnassies
AFIC product has been a recent innovation
Engine Deal of the Year: Willis Lease Finance Corp.
WEST IV $373.4m ABS for 55 engines
of 55 engines and one Boeing 737-800 The Series A notes priced at 99.99504%
Borrower/Issuer: WEST IV airframe only on lease to Scandinavian of par and the Series B notes priced
Structure: Asset-backed securitisation Airlines. at 99.99853% of par. Bank of America,
The Series A notes have a fixed MUFG and Wells Fargo acted as active
Amount: $373.4 million coupon of 4.75%, an expected maturity of bookrunners in the transaction.
approximately eight years, an expected Willis Lease posted a record annual pre-
Lawyers: Millbank LLP, Pillsbury
weighted average life of 6.3 years and a tax profit of $56 million last year, up 56%
Rating Agencies: KBRA, Fitch Ratings final maturity of 25 years. from $36 million in 2017.
The Series B notes have a fixed coupon The engine lessor’s 2018 pre-tax results
Banks: Bank of America, Wells Fargo, of 5.438%, an expected maturity of were driven by 27% revenue growth, to a
MUFG
approximately eight years, an expected record $348 million, from its core leasing
Date mandated: 10 November 2018 weighted average life of 6.3 years and a business and higher spare parts and
final maturity of 25 years. equipment sales.
Date closed: 19 December 2018
E ngine lessor Willis Lease Finance closed
an asset-backed securitisation debt
offering covering 55 engines in the second
half of last year through the Willis Engine
Structured Trust IV (WEST IV), a subsidiary
of, Willis Lease.
The $373.4 million 144A transaction was
the largest engine financing of the year.
The fixed-rate notes were issued in two
series, with $326.8 million of Series A notes
and $46.7 million of Series B notes.
The notes are secured by WEST IV’s
The WEST IV ABS deal team, winners of the Engine deal of the year award
direct and indirect interests in a portfolio
16 Airfinance Journal July/August 2019You can also read
