Jetrader - September/October 2011 - 15

to ﬁ x the balance sheet, but it was also opportunistic with respect to the timing of this order. Had Airbus launched the neo a year ago, we would probably not have been able to act on it. The longterm vision is to have a fuel-efﬁcient, modern and diversiﬁed ﬂ eet balanced between the aircraft and engine manufacturers, and leased to a diversiﬁed customer base. JT: Are you looking into entering the engine lease business at all? HC: A key member of the new ILFC management team is Heinrich Loechteken, our Chief Portfolio Ofﬁcer. We are in the process of reassessing what we’re doing well and what else we could do. We’re challenging the historical assumptions: Are we in the right business? Should we look at something else? I cannot tell you if we will or won’t go into the engine lease business, but we’re looking at lots of possible options. JT: With the recent A320/A321neo order completed, it seems to be Boeing’s turn for an ILFC order. Would ILFC’s customers prefer an updated, re-engined 737 or a brand-new design? HC: It really depends. You have some airlines that are interested in shorterterm beneﬁts and quick and easy ﬁxes. They are quite happy with the 737-800— just do it a little better and that will be good enough. Then you have airlines that, as you expect, are a lot more aggressive, have a longer term ﬂeet plan or are currently less committed to the current technology. Of course they would rather have an all-new airplane that is a lot more efﬁcient. But that is kind of assuming the problem away. In an unconstrained world, everybody always wants what’s best, and they want it yesterday. But this is not the world we live in. [When asking] the question of which one would you prefer, you’d need to immediately ask, when would you like it, what’s the price you would be willing to pay for it, and how would you ﬁnance it, and on and on. And then the answer is not as obvious anymore. JT: Do you see any shift from the previous ILFC market where the majority

ILFC does not buy airplanes for ILFC’s sake. We buy airplanes to lease them to airlines. So what matters most is not what ILFC thinks—it is what the airlines need and how the air traffic patterns are evolving and what would be the best tool for the airlines to extract the best value out of this air traffic pattern.
of the leases are international? There is a huge replacement need in the U.S. Do you think that is something ILFC will be more focused on? HC: That is something that we are investigating. Historically, ILFC has done very little business in North America. We are open-minded and as long as the transactions make sense for ILFC, I would certainly not object to doing more business in North America. JT: What is your view on a twin-aisle, narrowbody that is under discussion for the Boeing 737 replacement? HC: My view is that they have not made a decision yet. It is a complicated decision. I don’t think we should speculate. When they are ready to share with the public what they think about doing, then we’ll form a view. But for us to judge on rumors or what people say or don’t say or balloons that are ﬂoated by Boeing to see how the market is reacting, I think is premature. JT: From an ILFC perspective, what would you rather see Boeing do—a 737 “neo” or a new design? HC: Let’s keep in mind, ILFC does not buy airplanes for ILFC’s sake. We buy airplanes to lease them to airlines. So what matters most is not what ILFC thinks— it is what the airlines need and how the air trafﬁc patterns are evolving and what would be the best tool for the airlines to extract the best value out of this air trafﬁc pattern. That’s what we’re interested in. If you look back, we were very quiet on the debate raging at the end of last year on whether Airbus should do a neo or not. Everybody has an opinion. Guess what? Airbus did what they wanted to do, and we got some very good feedback from airlines, thinking that was a good solution for them. Then we moved and we placed a signiﬁcant order with Airbus. We need to support Boeing and give them input and help them make a smart decision. JT: What do you foresee will happen to the A320neo residual values should Airbus decide to launch a brand new A320 replacement within about 10 years after the ﬁrst A320neo rolls off the production line? HC: Then you are three levels into speculation territory here. This just assumed that Boeing does a new airplane and then Airbus responds with a new airplane. You can spend your time worrying about the future or you can do what we’re doing, which is act on what you know. You take actions to manage the situation. We’re managing the situation. The A320neos are not going to come into any signiﬁcant number any time soon. For the residual value of airplanes to be impacted, you would have to see A320neos come to the secondary market and compete with the used airplanes. This isn’t going to happen for years. The neo production line is going to be sold out very quickly into the ﬁrst two years of the program. Therefore, if you still want an Airbus between now and 2020, the most available product is going to be a used, current technology A320. Jetrader 15

Jetrader - September/October 2011

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