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AFJ Q & A – Leasing Through the Hard Times
Airfinance Journal talks to Jon Sharp, Chief Executive Officer,
Engine Lease Finance Corporation
Airfinance Journal: “Last year we saw new entrants enter the engine-leasing world. How is the market performing?”
Jon Sharp: “The market is as tough as it ever has been. The air travel world continues its very slow and long climb out of recession (and still has some way to go, by the way), and the airlines have become very clever in reacting to reduced demand by reducing frequencies and parking aircraft. That means less flying, and
less flying means less demand for spare engines.”
AFJ Editorial – The Cycle Again!
“Too many planes, not enough passengers. That’s the story of the airline industry as the economy slouches toward recession. Airlines and manufacturers are headed for tough times.”
Engine Lease Finance Corporation signs MOU for new CFM Portable Maintenance program
FARNBOROUGH, England 9 July 2012 Engine Lease Finance Corporation has become the first spare engine lessor customer for CFM International’s (CFM) new product offering for leasing companies called Portable Maintenance for Lessors (PML). The two companies signed a Memorandum of Understanding (MOU) with plans to sign a definitive agreement by year-end.
The product will be the first of its kind in the industry and will enable leasing companies to control maintenance costs throughout the life of an aircraft, regardless of the operator to which it is leased. Under the terms of the agreement, CFM would provide engine maintenance, repair and overhaul services for leased fleets. The PML is designed to be transferrable between lessees, which will enable them to more accurately predict maintenance costs.
“Our leasing company customers have been asking us for a product like this for along time,” said Jean-Paul Ebanga, president and CEO of CFM International at today’s signing ceremony. “There were a lot of challenges to developing this kind of program offering, but we are very pleased with where we have ended up and we anticipate more and more lessors to take advantage of the flexibility the PML provides.”
CFM International is a 50/50 joint company between Snecma (Safran group) and GE and the world’s largest supplier of commercial aircraft engines. To date, more than 23,600 CFM56 engines have been delivered to more than 500 operators around the globe. This fleet has achieved more than 585 million flight hours as the most reliable engines in the air.
Engine Lease Finance Corporation Wins Major Award
The leading financial intelligence source for the airline industry, Airfinance Journal, has recognized BTMU Capital Corporation’s subsidiary, Engine Lease Finance Corporation (ELFC), for its leadership in industry financing.
On April 23, the journal presented ELFC with the Engine Deal of the Year Award for 2011. The award recognizes ELFC’s acquisition of aircraft engine leasing assets from Macquarie Bank Ltd., in a deal that strengthened ELFC’s global top-three industry position.
With no boom in the world economy likely any time soon, the existence of an oversupply of equipment and enhanced uncertainty regarding residual values, ‘sell or hold?’ is the question at individual asset level. You are damned if you do, damned if you don’t, says pioneer of the engine leasing industry JON SHARP, CEO and president of Engine Lease Finance Corporation. He writes exclusively for Aviation Finance about the key challenges facing engine lessors.
The engine leasing industry has steadily matured since its entry into the mainstream of aviation finance some twenty to twenty five years ago. The airlines now have a rich choice of how they can source their spare engines, including long and short term leasing, with or without maintenance attached; providers include a variety of OEMs, MROs and financial institutions scattered across the globe, some in collaboration with each other. Whilst engine leasing has never been a huge market, the principal participants have been largely successful through reliance on a trusted business model and a set of certainties underpinning that. However, now is a time when those certainties are being questioned, leading us to reconsider that tried and trusted business model.
Another Major Deal for Engine Lease Finance
Engine Lease Finance Corporation (ELF), a wholly owned subsidiary of BTMU Capital Corporation, recently co-financed a $367-million transaction for Etihad Airways, the national airline of the United Arab Emirates. This is the second large transaction for the company in a short period. In December, ELF closed a deal to acquire substantial engine assets from Macquarie Bank Limited.
The current deal, co-financed with Sanad Aero Solutions (Sanad), finances 16 in-service spare engines for Etihad Airways and seven future spare engine deliveries. ELF will purchase and lease back to the carrier six Rolls Royce Trent 700 engines and six International Aero engines. Sanad will purchase and lease back five General ElectricGE90 and six Trent 500 engines. Both transactions are for a 10-year operating term.
The spare engines are for Etihad Airways’ entire fleet of passenger and cargo aircraft.
“We are particularly pleased to extend our already strong relationship with Etihad Airways, which continues to set the pace for airline performance,” says Jon Sharp, President and Chief
Executive Officer of ELF. “This transaction is a perfect illustration of how two innovative companies can work together to mutual advantage.”
James Hogan, Etihad Airways President and CEO, says: “These spare engine sales and lease back transactions provide the airline with a long-term financing solution for its entire spare engine fleet while mitigating residual value risk and providing competitive cost of ownership over the long term.”
ETIHAD AIRWAYS SEALS $367 MILLION SPARE ENGINE SALE DEAL WITH SANAD AND ELF
Etihad Airways, the national airline of the United Arab Emirates, has mandated sale and lease back transactions to the value of $367 million to Sanad Aero Solutions (Sanad) and Engine Lease Finance Corporation (ELF), for the financing of its 16 in-service spare engines and seven future spare engine deliveries.
Sanad will purchase and lease back to Etihad Airways five GE90 and six Rolls Royce Trent 500 engines and ELF will purchase and lease back to Etihad Airways six Rolls Royce Trent 700 and six IAE V2500 engines. Both transactions are for a 10-year operating lease term.
The spare engines are for Etihad Airways’ entire fleet of passenger and cargo aircraft.
James Hogan, Etihad Airways President and Chief Executive Officer, said: “These spare engine sales and lease back transactions provide the airline with a long-term financing solution for its entire spare engine fleet while mitigating residual value risk and providing competitive cost of ownership over the long term.
“We are delighted with the support that we were shown by the market in a very competitive bidding process, and we are pleased to mandate such strong partners as Sanad and ELF.”
Troy Lambeth, Sanad Chief Executive Officer, said: “We are excited to expand our relationship with Etihad Airways through this transaction. It is another significant milestone in our shared mandate to establish Abu Dhabi as a global aerospace hub and expands the foundation for further cooperation and partnership between our companies.”
Jon Sharp, President and Chief Executive Officer of ELF, said: “We are particularly pleased to extend our already strong relationship with Etihad Airways, which continues to set the pace for airline performance. This transaction is a perfect illustration of how two innovative companies can work together to mutual advantage.”
to Acquire Aircraft Engine Leasing Assets from Macquarie
Engine Lease Finance Corporation (ELFC) has entered into an agreement with Macquarie Bank Limited (Macquarie) to acquire 47 aircraft engine assets. Upon completion of the transaction, ELFC’s owned and managed portfolio will include close to 300 modern aircraft engines. The transaction will also extend ELFC’s existing customer base to more than 80 airlines and maintenance, repair, and overhaul companies. Subject to the necessary consents, ELFC will also assume the servicing of a portfolio of seven additional engines owned by a third party, which will further enhance ELFC’s substantial portfolio of managed assets. ELFC President and CEO Jon Sharp said, “The acquisition of these engines allows ELFC to immediately enhance our near-term strategies for growth. We continue to pursue revenue and portfolio growth through sale and leaseback transactions, engine order positions, and other portfolio opportunities in line with our strategic business objectives. We are also pleased to note the continued and substantial support ELFC enjoys from our parent companies.”
Deal Strengthens BTMU Subsidiary’s Global Top 3 Industry Position
NEW YORK, September 27, 2011 – Bank of Tokyo-Mitsubishi UFJ (BTMU) today announced that its leasing and structured asset-based financing subsidiary BTMU Capital Corporation (BTMUCC) – through BTMUCC’s subsidiary Engine Lease Finance Corporation (ELFC) – has entered into a definitive agreement with Macquarie Bank Limited (Macquarie) to acquire certain aircraft engine assets. The transaction is expected to be completed in the fourth quarter of 2011