Phoenix Aircraft Leasing is a small leasing company based in Singapore that has six aircraft on lease to TRIP, Air Bagan, Myanmar Airways International, Régional and Adria Airways. In a wide-ranging interview, Managing Director Tony Griffin spoke to CAPA about his "wish list", the C Series and COMAC 919 and the possibility of the A321neo replacing the B757.
2009/10 saw the increased participation of export credit agencies (ECAs) in financing aircraft. What is your take on the current state of the aircraft financing market, the players in it, and the impact of the OECD’s Aviation Sector Understanding (ASU)?
The worldwide financial crisis had the immediate effect of bringing most major banks’ trade lending to a halt in every sector and when the banks started lending again, several of them did not return to the commercial aircraft financing market. Even those that did curtailed their lending, particularly for smaller airlines and smaller lessors and reduced the loan to value ratios that had been previously enjoyed. In that climate, it was inevitable that ECA financing would increase substantially to protect the sales of the aircraft manufacturers of their countries. This increased participation has been, however, primarily directed towards the financing of new aircraft and to major companies. I feel that it is too early to realistically assess the impact of the ASU so far.
The LCC aircraft leasing market is almost totally dominated by the acquisition of new aircraft and mostly involves large numbers of aircraft at extremely competitive price levels. For these reasons it is a market that is dominated by the major leasing companies and not a Phoenix target market.
What instruments do you use to finance your aircraft?
Phoenix uses a mixture of corporate and private equity coupled with regional bank debt.
Do you agree with ILFC’s comments that the A321neo could potentially replace the B757?
Yes we agree with ILFC’s comments. Currently Boeing have left a significant gap in this market segment and the A321 with the new engines will offer an excellent, economic solution with a proven airframe to plug this gap.
Can you comment on the idea of the B787-10 being a candidate to replace the A340-300 or B777-200?
Realistically the A340 both as the 300 and even the 600 have economically run out of steam in the mid to long-haul market. The B777-200 both ER and LR and the 777-300ER have provided a more economical and viable platform for the same market segment and new orders for the A340 have long reflected this. The B787-10 would certainly impact Boeing’s own B777 market in several areas not limited to the 200 series.
Do you see the C Series and the COMAC 919 becoming serious contenders in the narrowbody market?
I believe that the C series will be a good aircraft that will be highly competitive in its lower capacity sub types but I do not feel that Bombardier will be able to compete against Airbus and Boeing in the A319 and B737-700 capacity aircraft. The two majors are just far too well established in every aspect of the larger narrowbody market from pricing through to support. The COMAC 919 will clearly do well in its own enormous home market but I believe that most Western airlines will be very cautious and reluctant to commit to this first major Chinese foray into the highly competitive narrowbody mass market. It will come in time but I feel that it will be much later and with a successor to the 919 after it’s manufacturer has been able to demonstrate a track record of product integrity, stability and most importantly, support.
Phoenix currently has no aircraft on order, are there plans to change this? What aircraft types are at the top of Phoenix’ wish-list? Is Phoenix interested in any Boeing aircraft?
Phoenix’s role in the market place is really dictated by its customers’ requirements. Our customers are predominantly the smaller, growing private airlines whose revenue yield dictates good used aircraft rather than new. We specialise in turbo-props and narrowbody jets and these are primarily the ATR range and the A320 family. Good used ATR 42-500s and 72-500s are becoming very scarce on the used market and this will almost inevitably drive Phoenix into buying new aircraft of this type in order to be able to continue our growth. One aircraft which is high on our “wish list” is the Embraer E jet range, particularly the E190 and since there are very few of these available on the used market, again we may well be driven to buy new.
Does Phoenix plan on targetting new markets, or expanding its established ones?
Our established markets are growing rapidly and we are very fortunate in having a good percentage of repeat customers. Having said that, our target markets are those of Southeast Asia and Asia but despite this we have aircraft on lease in Brazil, Africa and now, Slovenia so the real answer must be that while specialising in our region, we will always happily lease aircraft anywhere in the world to good, solid customers!
Have your clients’ capital needs changed much over the 12 months?
Yes, there has been an inevitable increase in our customer’s requirements for younger and hence more expensive aircraft and this in turn has driven up our own capital requirements at a time when the available capital markets have shrunk. Our clients and our own growth is constrained by the availability of funding and not by any market restraint.
What do you think about the competition in the aircraft leasing industry? Do you think this may impact profitability?
The number of leasing companies is increasing again currently but at the same time, the demand for aircraft leases is growing very fast and I believe that the leasing market is well able to expand more than sufficiently to accommodate these new players without impacting profitability for the incumbents.
What lessons did you learn from the recession of 2009?
We found that the demand for aircraft leases increased rather than reduced and this has been my experience during several recessions in the airline industry over the years.
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