Jetrader - September/October 2008 - 11

J: Where do you see the banks lining up in the relationship? TM: Banks have become more cautious and have retreated to supporting only their established clients, so we are among the lucky ones. Whilst I question the ability to finance the current order book, there is clear evidence of new players entering the market, especially in areas less affected by sub-prime or who are benefiting from high oil prices. I see the Middle East, Russia and China as aggressive players going forward. They have the financial resources and will buy and develop the necessary expertise to establish themselves. Most have avoided buying someone else’s problems but have invested in some used assets to gain the necessary invitations to approach airlines. I also see the German KG market as a growing area, if those promoting such schemes act with caution and restraint. In the shipping world this market suffered for some years when lessthan-quality transactions were sold to investors and a herd mentality took over. Manufacturers also have a duty to simplify the processes of assignments of warranties an engine care agreements, which often are bogged down in bureaucracy. We realise that there are often special deals with airlines, that manufacturer may not want to be made public, but do manufacturers honestly believe we do not know the details of these special arrangements? My last comment on this subject relates to step-in rights for banks supporting PDP payments. Manufacturers must realize that without bank support they may as well plan the permanent closing of the factory gates. The support of the banking world is of the utmost importance to us in the leasing world, and manufacturers must do more to accommodate our bankers. Selling aircraft is easy but finding someone to fund is not. J: What are your views of the U.S. Market? TM: I am often asked if we would lease to U.S. operators. The answer is that we often look at what was the most developed aviation market in the world regularly and often try. I am more saddened and disappointed by what I see than negative about the situation. Those who know me know that I am the eternal optimist, but I see a bleak future for the U.S. airlines unless foreign investment rules, Chapter 11 protection and tax rules are radically overhauled. I see dire strains, and if you fly internally in the U.S. you cannot help but see the strain on the faces of the men and women for whom aviation is their life. I cannot see how manufacturers alone can shoulder the burden of financing the U.S. airline industry. The banks that have traditionally been the white knights of the industry, propping up the industry through recession, can no longer put caution to the wind with the argument that airlines create lots of cash flow and fees. The reality is that the balance sheets of the banks themselves are severely weakened. Fleets are aging at a pace I have never seen before, and the airlines that wish to court the leasing community will have to change their attitudes to attract us. The idea of below-market lease rates, no deposits, no reserves, no guarantees and by the way we will hand you your aircraft back with half life remaining are non starters. The top airlines in the world are more realistic and U.S. airlines infrequently fit into this category in recent years. There will have to be consolidation, and government will have to resist obstructing those airlines that are fighting to ensure their survival by consolidating or seeking foreign assistance. Government could just take the path of bringing parts of the industry into state ownership, but that would just be sweeping the problem under the carpet. J: What’s your investment strategy? TM: I don’t like older aircraft, and our investments have for the most part been in new or nearly new, modern and efficient assets. I have been told that an MD80 burns $5,000 more fuel per hour than its modern counterpart. If you take a modest ten hours of use per day and calculate the cost per month, you will not need your in-house analyst to tell you that both the investment and the continued operation of the aircraft is economic suicide—leaving aside the environmental guilt. Whilst I have never subscribed to the super cycle theory, I believe that modern assets are Jetrader 11

Table of Contents for the Digital Edition of Jetrader - September/October 2008

Jetrader - September/October 2008
A Message from the President
Contents
Calendar/News
Q&A: Tasos Michael
Growing Green
Farnborough Wrap Up
Sweet Dreams, Nightmarish Travel
Boiling Points
Aircraft Appraisals
From the ISTAT Foundation
Aviation History
Jetrader - September/October 2008 - Jetrader - September/October 2008
Jetrader - September/October 2008 - Cover2
Jetrader - September/October 2008 - A Message from the President
Jetrader - September/October 2008 - 4
Jetrader - September/October 2008 - Contents
Jetrader - September/October 2008 - 6
Jetrader - September/October 2008 - Calendar/News
Jetrader - September/October 2008 - Q&A: Tasos Michael
Jetrader - September/October 2008 - 9
Jetrader - September/October 2008 - 10
Jetrader - September/October 2008 - 11
Jetrader - September/October 2008 - 12
Jetrader - September/October 2008 - 13
Jetrader - September/October 2008 - 14
Jetrader - September/October 2008 - Growing Green
Jetrader - September/October 2008 - 16
Jetrader - September/October 2008 - 17
Jetrader - September/October 2008 - Farnborough Wrap Up
Jetrader - September/October 2008 - 19
Jetrader - September/October 2008 - Sweet Dreams, Nightmarish Travel
Jetrader - September/October 2008 - 21
Jetrader - September/October 2008 - Boiling Points
Jetrader - September/October 2008 - 23
Jetrader - September/October 2008 - 24
Jetrader - September/October 2008 - 25
Jetrader - September/October 2008 - 26
Jetrader - September/October 2008 - Aircraft Appraisals
Jetrader - September/October 2008 - 28
Jetrader - September/October 2008 - From the ISTAT Foundation
Jetrader - September/October 2008 - Aviation History
Jetrader - September/October 2008 - 31
Jetrader - September/October 2008 - 32
Jetrader - September/October 2008 - 33
Jetrader - September/October 2008 - 34
Jetrader - September/October 2008 - Cover3
Jetrader - September/October 2008 - Cover4
Jetrader - September/October 2008 - 37
Jetrader - September/October 2008 - 38
Jetrader - September/October 2008 - 39
Jetrader - September/October 2008 - 40
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