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Keynote address

Keynote address

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Keynote address

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  1. Keynote address Christian McCormick Director of Finance China Aircraft Leasing Company

  2. LessorRisk versus AirlineRisk WhyLessors have more options with a focus on the Chinesemarket Your Speaker: Christian Mc Cormick ManagingDirector Finance

  3. UnderstandingLessor versus Airlinerisk How Lessor’s Finance theirfleets The ChineseMarket ChineseLessoraccess to financing

  4. UnderstandingLessor versus Airlinerisk How Lessor’s Finance theirfleets The ChineseMarket ChineseLessoraccess to financing

  5. UnderstandingLessorversus Airlinerisk The great  « Secret Bancaire » (Bank-ClientSecrecy): Its not whatyouthink! Today’sRevelation: The Real Secret: Bankers and financiers and financialinvestors are not as smart as youthinkthey are For theirriskanalysistheyrely on a very basic principle. The old adage: Never put one’sEggsintojust one basket

  6. UnderstandingLessorversus Airlinerisk WhatisAirlineRisk: • A Single corporaterisk • A Single Jurisdictionrisk • Limited aircraft types and manufacturers (Although for majors thisis not always the case). • Most airlines are not in good financial condition, many are virtuallybankrupt, have been in the past, willlikelybe in the future • Many are loosing money • They are highlyleveraged

  7. UnderstandingLessorversus Airlinerisk WhatisLessorRisk? Lessorsoffer financiers and investors the ability to spreadriskaccross multiple airlinesaround the world

  8. UnderstandingLessorversus Airlinerisk WhatisLessorRisk? Lessorsoffer financiers the ability to spreadriskaccross multiple aircraftmanufacturers

  9. UnderstandingLessorversus Airlinerisk WhatisLessorRisk? Lessorsoffer financiers the ability to spreadriskaccross multiple assets types

  10. UnderstandingLessorversus Airlinerisk WhatisLessorRisk? Lessorsoffer financiers the ability to spreadriskaccross multiple countries and jurisdictions

  11. UnderstandingLessorversus Airlinerisk WhatisLessorRisk? Lessorsoffer financiers the ability to put theireggs in multiple baskets and in the hands of people who have experience in placingaircraft, and managingaircraftassets Commercial Manager Technical Manager Lease Manager

  12. UnderstandingLessorversus Airlinerisk The World LessorMarket in a Nutshell • 156Lessorsworldwide • Early 2015, Lessorshad 8660 aircraft in service (out of a world total of 38 050) • That’s 22,75% of the World’sFleet • Lessorshad 2382 Airbus and Boeing aircraft on order (out of a world total of • 12 000; 6300 for Airbus and 5700 for Boeing) • That’s 20% of the World’sAircraftorder book Thesenumbersexclude future Sale and Leaseback transactions in which a Lessorbuysaircraft to bedelivered to an airline and thenleasesthem back to the airline.

  13. UnderstandingLessorversus Airlinerisk The World LessorMarket in a Nutshell • Percentage of Aircraftoperated in a regionmanaged by lessors 78% 24% 43% 75% 35% 59% 48% 40% 59% 48% 33% Source: Ascend and Boeing

  14. UnderstandingLessorversus Airlinerisk The World LessorMarket in a Nutshell • Top 20 LargestCustomers by Deliveries over the last 20 years Ryanair Southwest Airlines GECAS AerCAP/ILFC American Airlines ANA China Southern Airlines Lion Air Delta Air Lines Continental Airlines GOL Air China Japan Airlines Corporation Alaska Airlines Hainan Airlines Emirates Airlines BOC Aviation Virgin Australia Xaimen Airlines Air Berlin AerCap/ILFC Easyjet GECAS China Eastern Airlines China Southern Airlines CIT Leasing Group Air Asia Air China Lufthansa BOC Aviation Qantas Jet Blue Airways Indigo Lan Airlines Turkish Airlines TAM US Airways Iberia Air Berlin Avianca Source: Ascend and Boeing

  15. UnderstandingLessorversus Airlinerisk The World LessorMarket in a Nutshell • Top 15 LargestCustomers by orders of WidebodyAircraft Emirates 198 Etihad Airways 93 Qatar Airways 75 All Nippon Airways 71 ILFC 59 United Airlines 57 Air Lease Corporation (ALC) 55 Fedex 44 American Airlines 39 Korean Air 36 British Airways 34 Singapore Airlines 32 Air Canada 31 Aeroflot 25 Air France – KLM Group 25 Air Asia X 97 Qatar Airways 83 Emirates 78 Singapore Airlines 75 Etihad Airways 70 Delta Air Lines 58 Air Lease Corporation (ALC) 50 Cathay Pacific 46 United Airlines 35 CIT 33 Asiana Airlines 32 JAL 31 TAM LinhasAéreas 27 Lufthansa 25 Air France-KLM Group 25 Source: Air Finance Journal Deals Database, Orders and Deliveries Report Q2, 2015

  16. UnderstandingLessorversus Airlinerisk The World LessorMarket in a Nutshell • Top 15 LargestCustomers by orders of NarrowbodyAircraft Ryanair 263 Southwest Airlines 262 Lion Air 261 American Airlines 150 Norwegian 142 Air Lease Corporation (ALC) 140 GECAS 131 United Airlines 119 Aercap 96 SMBC Aviation Capital 95 FlyDubai 88 Turkish Airlines 86 Westjet 78 GOL 78 BOC Aviation 77 Air Asia 312 Lion Air 226 ILFC 214 American Airlines 190 Indigo 180 Easyjet 153 Avianca 147 Air Lease Corporation (ALC) 142 Lufthansa 137 GECAS 132 SMBC Aviation Capital 119 CALC (China Aircraft Leasing Corp) 118 Qantas 104 Norwegian 100 JetBlue 97 Source: Air Finance Journal Deals Database, Orders and Deliveries Report Q2, 2015

  17. UnderstandingLessorversus Airlinerisk • Boeing and Airbus have projectedthat 40-50% of aircraftwillbeowned or managed by lessors in the next 10 years...

  18. UnderstandingLessor versus Airlinerisk How Lessor’s Finance theirfleets The ChineseMarket ChineseLessoraccess to financing

  19. How Lessor’s Finance theirfleets Through a parent with a big balance Sheet:

  20. How Lessor’s Finance theirfleets Through a parent with a big balance Sheet: SomeExamples of Japanese financiers entering the leasing market Aquisition 2012 Aquisition 2012 Aquisition 2012

  21. How Lessor’s Finance theirfleets Through a parent with a big balance Sheet: Purchase of Pool of Assets March 2015 90 Aircraft 40 Airlines $4 Billion November 2014 45 Aircraft $1,9 Billion

  22. How Lessor’s Finance theirfleets Through a parent with a big balance Sheet: Merger/Takeover September 2015 260 Aircraft $7,6 Billion

  23. How Lessor’s Finance theirfleets With public listedequity:

  24. How Lessor’s Finance theirfleets Through a privateInvestment Bank:

  25. How Lessor’s Finance theirfleets Withstructuredfinancingsthroughbankdebtincluding: PDP financings Export CreditFinancings Finance Leases Operating Leases Commercial Debt CorporateDebt TaxLeverageLeases OptimisedLeases ...

  26. How Lessor’s Finance theirfleets Withstructuredfinancingsthroughthe capital markets Warehouse structures, ABS, Jointe Ventures, Takeovers... $680M ABS Joint Venture $516M ABS Joint Venture $640M ABS Takeover $7.6B $556M ABS $260M ABS

  27. UnderstandingLessor versus Airlinerisk How Lessor’s Finance theirfleets The ChineseMarket ChineseLessoraccess to financing

  28. The ChineseMarket • Over 42% of global air traffic (measured in RPKs) now routes through the Asia Pacific regionwith APAC carriers nowresponsible for 33% of total passengerscarriedgloballywith the five busiest international and domesticcity-pair air routes all in the APAC region. Four of the top five city pairs are out of/to Hong Kong with Hong Kong-Seoultrafficshowing the mostgrowth. • Boeing considers more Chinese Boeing • CEO Dennis Muilenburg has indicatedthat more 737 workcouldbeplacedinto China following on from the company’s plan to set up a facility in China to paint, finish and deliver 737 aircraftmanufactured in Seattle. • Thursday 24 September: Boeing announcethat CAAC has ordered 300 B737... • CAAC stats show double digit growth for Chinese aviation: Statisticsreleased by the Civil Aviation Administration of China (CAAC) show thatChina's civil aviation industry total turnover grew 12.5% to 7.39 billion tonne-kilometers in July 2015 compared to the year-agoperiod.Some 39.15 million people traveled by air during July – a year-on-yearincrease of 9.2%. The number of passengers travelling on domestic and international flightsincreased 7.6% and 26.7% respectively to 35.5 million and 3.65 million... • Source AirlineEconomics 23/9/15

  29. The ChineseMarket • China Aviation Supplies Holding Companyorders 30 A330 Family and 100 A320 Familyaircraft • Chengdu Airlines in talks for 10 aircraft leasing deal • Source Air Finance Journal 29/10/15 • CALC delivers last of five A320 to Air Indiadeliveringits 56th aircraft • CALC delivers first of 100 aircraftorder to Air Macauwith KDB financing • Source CALC

  30. The ChineseMarket 74% of population in emerging countries willtake a trip annually in 2034. PRC, the mostpopulous country in the world willmake 1.09 trips per capita in 2034, showingitspromising future in the aviation industry. Source: Sabre, HIS Economics and Airbus GMF 2015

  31. The ChineseMarket Source: Global MarketForecast 2015-2034 By Airbus

  32. The ChineseMarket Source: Global MarketForecast 2015-2034 By Airbus

  33. The ChineseMarket In the coming 20 yearsfrom 2015 to 2034, the RPK traffic of Asia Pacific willundergo a sustainable and steadygrowth, with an annualgrowth rate of 5.7%. The Asia Pacific world marketsharewillincreasefrom29% to 36% in 2034.

  34. The ChineseMarket 17% of leasing backlogresides withChineselessors (394) 194 aircraftorders in 2014 were by Chinese leasing companies (22%) 262 aircraftdeliveries to China in 2014 (19%) 100 to CALC, China’slargestlessor

  35. UnderstandingLessor versus Airlinerisk How Lessor’s Finance theirfleets The ChineseMarket ChineseLessoraccess to financing

  36. ChineseLessoraccess to financing Chinese Banks: Lowmargins Massive amounts of dollars ViewChineseairline and lessorrisk as corporaterisk Regional Banks and Investors: Korea, Japan, Singapore... Good margins Massive amounts of dollars Are developingsophisticatedaircraftassetvaluation techniques

  37. ChineseLessoraccess to financing Good Profitability

  38. ChineseLessoraccess to financing But ConcentratedRisks • Tend to befocused on Chineseairlines and airlines in the APAC region • Limited aircraft type variety • Single or not very multiple Jurisdiction For the moment limitedaccess to US and European Capital Markets

  39. ChineseLessoraccess to financing CHALLENGES & OBJECTIVES • Internationalisation of lessee portfolio: • More international airlines • More jurisdictions • Expandorder book to othermanufacturers • Become a full value-chainaircraft solution provider To becomeeven more attractive targets for US and Europeaninvestors and the Capital Markets

  40. Today, the world’s best investmentopportunity for aviation financiers and investors in Asia