Jetrader - July/August 2013 - 8
"The theory that markets always function and
the price mechanism will balance supply and
demand turned out to be only a theory. No price
can compensate a fundamental mistrust in a
system—a lesson worth remembering."
- Wolfgang Driese
JT: Bertrand, the DVB business model
is somewhat difﬁcult to understand. On
the one hand, DVB is a normal bank. But
it is also an equity investor in aircraft,
involved with an engine part-out company (TES), and also sells asset management and consultancy services. Can you
explain this mixed model?
Bertrand Grabowski: Though I would
never label DVB as a “normal” bank, I
hope that our model is not too difﬁcult
to understand, as we feel we have created
a comprehensive platform of airfinance
services. I hate to use a cliché, but we
are indeed a “one-stop-shop” for aircraft
ﬁnance. Yes, we are a ﬁnancial institution—
but one that prides itself on its unrivalled
understanding of the industry it serves and
the assets it ﬁnances, invests in, manages
and advises on. Yes, we are a bank, but we
have a hybrid culture, with team members
coming from an interesting, unprecedented
blend of banks, operating lessors, appraisers, manufacturers and private equity ﬁrms.
We are the only institution in aviation that
can truly claim to be at the crossroads of
metal and money. And this is why we pride
ourselves on our renowned asset focus,
knowledge and expertise.
JT: Wolfgang, you often say that DVB is
not the cheapest provider of funds. How
can you still be competitive and aren’t you
forced to take higher risks because of this?
WD: Well, it can be argued that what
is regarded as cheap, obviously has no real
value. If a customer factors in our competence in assets and markets, our creativity
in ﬁnding the optimal ﬁnance solution or
reliability to deliver in time, and ﬁnally
our willingness to support the client at
all times of cycle, then the customer will
receive value. DVB’s decision-making process
guarantees a minimal execution risk and
taking this into account, we believe we
provide value for money. Higher risks I am
not willing to accept, but our risk focus is
different, more on assets than on corporate.
JT: Wolfgang, with a trend towards capital markets, operating leases and ECA
funding, is commercial bank funding at
risk of being marginalized for commercial
WD: First of all, operating lessors demand
leverage, an important customer segment
for DVB and one we understand very well.
As I already mentioned, markets open
and close, government support through ECA
changes, non-specialist banks come and
go, but DVB has no other options. We are
exclusively in ﬁnancing of transport assets.
Consequently, we are a stable source of
funding at certain terms.
JT: Bertrand, DVB is known for its
active role as ﬁnancier of used aircraft.
This seems a risky marketplace at the
moment. How can DVB be comfortable
with this, and what has been the experience in terms of defaults?
BG: I feel that DVB is known for ﬁnancing aircraft of all ages at every stage of
their economic lives. In our vast portfolio
in excess of 800 aircraft, 5 percent of these
aircraft are yet to be built, 10 percent are
less than a year old, and 22 percent are
between one and three years old. Indeed,
less than 5 percent of our portfolio is older
than 15 years, but this remains a stable and
modest portion. However, it must be said
that our signiﬁcant asset expertise yields
best when dealing with older equipment
and for such clients whose business model
depends upon residual value management,
and perhaps this is also why DVB has
become the “darling” bank of many operating lease companies. As for our experience
of defaults, it is fortunately very limited,
and I wouldn’t build on that small series
to draw conclusion.
JT: DVB is only active in ﬁnancing commercial jets and jet engines. Why not turboprops, helicopters or corporate jets?
BG: The secret to DVB’s success in aviation includes the concept of “deal teams”
8 The ofﬁcial publication of the International Society of Transport Aircraft Trading
involved in each transaction. This amalgamation of asset and industry expertise
is utilized to optimize the result of each
deal—with knowledge pooled from each
area of our platform—structured lending,
credit risk, asset management, investment
management, research, etc. Helicopters,
corporate jets and, maybe to a lesser
degree, even turboprops are markets where
we have no qualms admitting we do not
know them too well and therefore, quite
simply, we do not deal with them. That may
change, though, and there are currently
some discussions taking place to look at
a precise class of turboprops.
JT: How do you see the current commercial jet market? Huge backlogs, generation change (NG to MAX, CEO to NEO),
etc.? Are manufacturers producing too
many aircraft? Will we see further pressure on lease rates and aircraft values?
BG: Indeed we cannot remain blasé
with the avalanche of orders that we have
recently seen. All operating indicators
remain in the green—load factor, utilization—and liquidity is abundant. So there
is money around to fund the current huge
book order. Nonetheless, DVB is one of the
few that fears that in the medium terms,
the extreme ease of buying new-built
aircraft can have—and almost certainly
will have—a very signiﬁcant effect on
the second-hand market, both in values
and lease rates. The generation change,
by bringing new efﬁcient toys, is probably
going to accelerate obsolescence and reinforce that trend. Already many operators,
airlines and lessors ﬁnd it challenging to
sell "old" aircraft at levels close to the
so-called base values. Is this a sign? Watch
that space carefully.
JT: DVB has been in the press because
of a problem in India with some exKingﬁsher aircraft? Can you elaborate?
BG: DVB is, to the best of our knowledge, the only bank/lessor to have successfully repossessed all of the aircraft it has
ﬁnanced (two A320s) and is subject to a
default scenario in India! The problem here
was getting the Indian aviation authorities,
the Directorate General of Civil Aviation
(DGAC), to recognize our absolute right
to deregister, which was further hindered
by considerable pressure from Kingﬁsher.
However, in the end, the court supported
Jetrader - July/August 2013
Table of Contents for the Digital Edition of Jetrader - July/August 2013
A Message from the President
Q& A: Up Close with DVB Bank SE
Boeing’s Twin-Aisle Strategy Emerges with Customer, Financier Support
The Last Merger?
ISTAT Asia 2013
Jetrader - July/August 2013 - cover1
Jetrader - July/August 2013 - cover2
Jetrader - July/August 2013 - A Message from the President
Jetrader - July/August 2013 - 4
Jetrader - July/August 2013 - Calendar/News
Jetrader - July/August 2013 - Q& A: Up Close with DVB Bank SE
Jetrader - July/August 2013 - 7
Jetrader - July/August 2013 - 8
Jetrader - July/August 2013 - 9
Jetrader - July/August 2013 - Boeing’s Twin-Aisle Strategy Emerges with Customer, Financier Support
Jetrader - July/August 2013 - 11
Jetrader - July/August 2013 - 12
Jetrader - July/August 2013 - The Last Merger?
Jetrader - July/August 2013 - 14
Jetrader - July/August 2013 - 15
Jetrader - July/August 2013 - ISTAT Asia 2013
Jetrader - July/August 2013 - 17
Jetrader - July/August 2013 - 18
Jetrader - July/August 2013 - Aircraft Appraisals
Jetrader - July/August 2013 - 20
Jetrader - July/August 2013 - 21
Jetrader - July/August 2013 - Advertiser.com/Advertiser Index
Jetrader - July/August 2013 - cover3
Jetrader - July/August 2013 - cover4