Jetrader - Summer 2015 - 15

JT: What are some of the other challenges
ahead for the leasing market?
RS: Right now, it is a sellers' market,
and as such, there is a danger of new
entrants, and/or people, buying aircraft
and overpaying. People need to think
about their cost base. There are a lot of
new lessors who have come into leasing
space on the back of large new orders or
significant purchase and leaseback acquisitions of aircraft on their first lease to
high-quality carriers. But those lessors
have never transitioned aircraft or managed older aircraft after the first lease.
We think there's going to be some real
challenges as they transition aircraft
globally. This is the hard work of aircraft
leasing. There's nothing wrong with a
business model that involves buying new
aircraft from the OEMs, financing and
leasing them to good credit. But it's not
the hardest thing we do. The hard work
really comes in the transitions as aircraft
age and managing the aircraft as they
get older.
Put aside a sellers' market where people
can overpay, along with a lack of experience in transitioning aircraft, and the aging
transition process can be quite challenging
for some lessors. But that's where we think
AWAS has a competitive advantage and can
help as we step in and buy the aircraft,
and we manage them for the remainder of
their useful lives. But we're not going to
buy every aircraft in the world.
There are going to be big new lessors
out there that are going to have to rethink
their business models as they understand how to manage aircraft beyond the
first lease.
It's a cyclical industry, so you need to
be prepared for a downcycle. A lot of these
new lessors have only been in the industry
for the upcycle. You can make money pretty
easily in an upcycle but can get hit hard
when a downcycle comes.
Think about the massive number of
orders of aircraft (over 12,900 jets on order
right now). If you were to start a leasing
company right now and order from Boeing
or Airbus, you're looking at a six- to eightyear wait, in terms of getting a meaningful
number of aircraft. That's an extraordinary
long amount of time to gaze at a crystal
ball and guess what the market is going to
be like in the years when you take delivery
of those aircraft.

The airlines are really catering for every
price point and for every customer, which is
quite impressive.
For people who have placed very large
orders, it will be interesting to see when
the next downcycle comes, how those orders
play out.
Another challenge is the growth of the
airline lessors: Norwegian, Lion Air, AirAsia.
It will be interesting to see how they fare
and what the lessors' and OEMs' competitive response is to people taking aircraft
orders at airline prices and then leasing the
aircraft out. I think that is an interesting
development; watch and wait and see how
that affects new aircraft prices.
The last challenge is a longer-term challenge. With the development of new OEMs, I
think the aircraft leasing industry could, in
time, look much more like the ship leasing
industry-more fractured with more players
focused on specific aircraft types or aircraft
sizes. It's easy to maintain stability with a
duopoly. When you have a lot of manufacturers coming out with a lot of different types
of products, it's much more akin to ship
leasing where you can have relatively quick
spikes in supply and a bigger challenge in
terms of managing your supply and demand
equation over time.
JT: ISTAT just completed another successful ISTAT Asia event. What do you
expect from the Asia-Pacific region in
the years ahead?
RS: That's an enormous market.
Historically we've seen very strong demand
for new aircraft in this market, but we're
seeing a growing demand for midlife aircraft-both to expand capacity and replace
end-of-life aircraft for more efficient models. Most airlines are looking for fairly
immediate fleet solutions to respond to
demand, especially the low-cost carriers in
the Southeast Asia region, and the six- to
eight-year time horizon for OEM new orders
is going to create a challenge there that I
think we are going to be able to meet with
midlife aircraft.
We have a deep knowledge of that region
and a good customer base. Over 40 percent
of AWAS' portfolio is in Asia. The current
value of airlines' order books for current
and NextGen aircraft is more than $900
billion-over 12,900 jets. That's larger than

the entire global fleet in 1994. Almost onethird of all those orders are from Asia. That's
an enormous amount of new aircraft going
into Asia-Pacific.
So, why have they ordered all these
aircraft? The distribution of middle class
in Asia-Pacific will grow from its place at
28 percent of the world's middle class in
2009 to 66 percent of the world's middle
class in 2030, according to the OECD. There's
going to be significant additional demand
for aircraft.
From a macro level, in the next 20 years,
nearly half of the world's traffic growth will
be driven by travel to, from or within the
Asia-Pacific region.
Today, LCCs account for only about
15 percent of Asia's fleet (slightly over
20 percent of seat capacity). However, their
LCCs account for approximately 60 percent
of orders of aircraft.
As a lessor and a financier, you have to
be there, and you have to be there in a
meaningful way.
JT: Talk about your involvement with
ISTAT. Why is it important to AWAS?
RS: It's incredibly important to AWAS
because of how strongly we play in the secondary markets. Buying and selling aircraft
correctly-both commercially and technically-is incredibly important to AWAS and
is a key pillar of our growth plan. ISTAT is
the organization that supports this growing
and important market for buyers and sellers.
ISTAT helped form the glue by which we all
understand and speak a common language.
Being a leader in the aircraft trading
market is core to AWAS' business plan. Aside
from our continuing to buy $1-1.5 billion
capex in new to midlife aircraft, we recently
agreed to sell a portfolio of 90 nearly new
narrowbodies with leases attached. This
$4 billion deal is one of the largest trading
deals ever, and well-positions us to achieve
our aggressive future growth plans.
ISTAT's value to aircraft traders becomes
only more important as we go forward and
aircraft become more liquid and tradeable.
As these new orders get delivered and then
traded, it increases ISTAT's importance. It's
the critical organization for AWAS.
Jetrader  *  Summer 2015 15



Jetrader - Summer 2015

Table of Contents for the Digital Edition of Jetrader - Summer 2015

A Message from the President
Calendar/News
Q&A: Raymond Sisson, Chief Executive Officer and President, AWAS
Customer Service and the Passenger Experience
State of the Regions: Asia
ISTAT Asia Draws Record Attendance
Thank You from the ISTAT Foundation
ISTAT Americas 2015
The Top 5 Reasons to Visit Prague
Aviation History
Aircraft Appraisals
ISTAT Foundation
Advertiser.com
Advertiser Index
Jetrader - Summer 2015 - cover1
Jetrader - Summer 2015 - cover2
Jetrader - Summer 2015 - 3
Jetrader - Summer 2015 - 4
Jetrader - Summer 2015 - 5
Jetrader - Summer 2015 - 6
Jetrader - Summer 2015 - A Message from the President
Jetrader - Summer 2015 - 8
Jetrader - Summer 2015 - 9
Jetrader - Summer 2015 - Calendar/News
Jetrader - Summer 2015 - 11
Jetrader - Summer 2015 - Q&A: Raymond Sisson, Chief Executive Officer and President, AWAS
Jetrader - Summer 2015 - 13
Jetrader - Summer 2015 - 14
Jetrader - Summer 2015 - 15
Jetrader - Summer 2015 - Customer Service and the Passenger Experience
Jetrader - Summer 2015 - 17
Jetrader - Summer 2015 - 18
Jetrader - Summer 2015 - 19
Jetrader - Summer 2015 - State of the Regions: Asia
Jetrader - Summer 2015 - 21
Jetrader - Summer 2015 - ISTAT Asia Draws Record Attendance
Jetrader - Summer 2015 - 23
Jetrader - Summer 2015 - 24
Jetrader - Summer 2015 - 25
Jetrader - Summer 2015 - 26
Jetrader - Summer 2015 - 27
Jetrader - Summer 2015 - 28
Jetrader - Summer 2015 - Thank You from the ISTAT Foundation
Jetrader - Summer 2015 - ISTAT Americas 2015
Jetrader - Summer 2015 - 31
Jetrader - Summer 2015 - 32
Jetrader - Summer 2015 - 33
Jetrader - Summer 2015 - 34
Jetrader - Summer 2015 - 35
Jetrader - Summer 2015 - 36
Jetrader - Summer 2015 - 37
Jetrader - Summer 2015 - The Top 5 Reasons to Visit Prague
Jetrader - Summer 2015 - 39
Jetrader - Summer 2015 - Aviation History
Jetrader - Summer 2015 - 41
Jetrader - Summer 2015 - 42
Jetrader - Summer 2015 - 43
Jetrader - Summer 2015 - 44
Jetrader - Summer 2015 - Aircraft Appraisals
Jetrader - Summer 2015 - 46
Jetrader - Summer 2015 - 47
Jetrader - Summer 2015 - ISTAT Foundation
Jetrader - Summer 2015 - 49
Jetrader - Summer 2015 - Advertiser Index
Jetrader - Summer 2015 - cover3
Jetrader - Summer 2015 - cover4
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