The year is shaping up to be an eventful one for aviation and aviation finance. Here's what we have observed since January's Global Airfinance Conference in Dublin.
At January's global Airfinance Conference market players were very sanguine. Certainly, there has – and will continue to be – turbulence in the short-to-medium term as fuel price hikes and higher interest rates continue to impact the sector. The second fatal crash of the 737 MAX in months sparked a sharp fall in Boeing's share price and resulted in a global grounding of the jets. However, the industry is optimistic that demand for aircraft will continue to increase, largely due to the growing market for personal air travel in Asian countries.
Manufacturers, who were given a notably brighter spotlight at this year's conference, have significant order books, and may have their work cut out to find time and space to innovate with the much-discussed supersonic aeroplanes. Such a technological breakthrough would break a 30-year drought in the improvement of long-haul flight speeds; it is anticipated that these would be popular with millennials and the generation z customer demographic who highly value their time.
Much of the talk among conference delegates and on panels was around market consolidation, and we have seen some M&A movement in the months since: Mitsubishi is set to acquire the aviation finance business of DVB Bank and there was particular buzz around the rumoured sale of GECAS to an unknown buyer. However chief executive Larry Culp soon poured cold water on that talk.
Appetite to invest in the aircraft space is still prodigious, and conference session panellists highlighted various options for financing new aircraft, including a resurgent and cleaned-up aviation securitisation market – which of course TMF Group can assist with.
Of particular note was a discussion about how aviation assets stack up against other investment assets and potential issues for investors. The general consensus was that although yields are still marginally higher than other asset classes, investors expect a higher margin and may start to look at other mobile assets. However, as planes are able to be easily re-deployed if a particular jurisdiction becomes problematic or a lessee fails, they are likely to remain attractive. Emerging countries and regions such as China, India, Africa and Latin America are in the spotlight with the Argentinian and Bolivian markets being of particular interest to conference participants.
TMF Group is present globally with offices in all major aircraft leasing hubs (including Ireland, Singapore and Hong Kong). We provide a full suite of corporate services – corporate secretarial (including a registered service address for domiciliation), accounting and tax – and we have extensive experience in providing directors and administrating for both LILOs and asset-owning companies.
We also offer extensive capital markets services (including fund services). And for securitisations we can be your one-shop-stop, with SPV admin, trustee, cash management, loan agency and facility agent services.
The aircraft market is fast-moving and players need quick responses and turnaround times from their providers. With our experience and suite of services, we are able to meet and exceed our clients' expectations.
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