The airline sector is once again back in favour with investors, with plenty of financing available and an increasing number of initial public offerings coming to market
It seems hard to believe that it was just a few years ago that airlines were struggling to find willing investors. Following on from the recovery in lease rates and residual values seen in 2004, airlines and aircraft are back in favour with the banks, attracted by the popularity of the low-cost sector, healthy traffic growth and, perhaps above all else, a confidence that they will be able to place assets back in the market if anything goes wrong.
Against this background, capital seems to be flowing freely. As Finnair chief financial officer Lasse Heinonen puts it: “There is a lot of liquidity in the market.†And, perhaps GECAS president Henry Hubschman sums up the fear of many, when he says “there is a lot of liquidity in the air finance market, much of it chasing poor deals that may have implications down the road.â€
Even in North America, where over half the industry is in Chapter 11 bankruptcy protection, airlines are still able to attract money. “The Chapter 11 mentality of North American airlines is getting a lot of large banks that have traditionally been airline financiers for aircraft and working capital shifting to being debtor-in-possession [DIP] providers,†says Steve Udvar-Hazy, chief executive of ILFC. “They might previously have Âprovided capital for aircraft and/or working capital, but are finding it more profitable to lend to distressed carriers. Their loan is secured on the pledge of the remaining assets in the business, therefore the risk is low.â€
Flight International
It seems hard to believe that it was just a few years ago that airlines were struggling to find willing investors. Following on from the recovery in lease rates and residual values seen in 2004, airlines and aircraft are back in favour with the banks, attracted by the popularity of the low-cost sector, healthy traffic growth and, perhaps above all else, a confidence that they will be able to place assets back in the market if anything goes wrong.
Against this background, capital seems to be flowing freely. As Finnair chief financial officer Lasse Heinonen puts it: “There is a lot of liquidity in the market.†And, perhaps GECAS president Henry Hubschman sums up the fear of many, when he says “there is a lot of liquidity in the air finance market, much of it chasing poor deals that may have implications down the road.â€
Even in North America, where over half the industry is in Chapter 11 bankruptcy protection, airlines are still able to attract money. “The Chapter 11 mentality of North American airlines is getting a lot of large banks that have traditionally been airline financiers for aircraft and working capital shifting to being debtor-in-possession [DIP] providers,†says Steve Udvar-Hazy, chief executive of ILFC. “They might previously have Âprovided capital for aircraft and/or working capital, but are finding it more profitable to lend to distressed carriers. Their loan is secured on the pledge of the remaining assets in the business, therefore the risk is low.â€
Flight International
