San Francisco-based Jackson Square Aviation officially launched operations in Mar-2010 after the former Pegasus management team, led by CEO Richard Wiley, founded the company and got up and running. Mr Wiley talks exclusively to CAPA about the smooth injection of their new brand into the sector, the 2011 budget, the evolution of the LCC model and the challenges the company saw during the global economic recession.
CAPA: Jackson Square Aviation is a relatively new name in the leasing space, although the partners in the venture, Sky Holding Company and Oaktree Capital Management have huge experience in the sector. What have been the challenges and opportunities that accompany putting a new brand into an increasingly crowded space?
Well to begin, we don’t view it as a crowded space – certainly not when considering the OEMs are delivering around 1,000 aircraft a year and the new ASU will most likely tighten up the availability of export credit. We have always focused on what the airlines’ capital needs are, and tried to respond quickly and with a competitive commitment. I’m not sure that having a new brand name and physical address presented much of a challenge for us, since our customers and lenders know our management team quite well.
CAPA: How flexible are your growth plans and do you expect to recalibrate in the near term?
We originated about $2 billion in transactions in 2010, and have a similar budget for 2011. Where we are recalibrating a bit is on the liability side, as the capital markets are robust and we are spending a lot more time focused on that channel this year. Likewise we’re moving into a couple of new asset classes, most notably the -900ER and the -8F, so there have been quite a lot of JSA resources committed to those projects.
CAPA: What is the financing target for 2011? Did you meet the USD2 billion target of 2010?
We did, having built out a great portfolio of about 60 aircraft with about 20 airlines. On the financing side we put together a warehouse facility and a number of bilateral loans with commercial banks. Bilaterals will most likely be at least half of our balance sheet, with a mix of secured bonds and warehouse lines filling out the rest. We are also exploring unsecured debt and export credit for small portions of our balance sheet.
CAPA: What is your assessment of the outlook for the global economic conditions and aviation industry performance in 2011?
The airlines, broadly speaking, have proven to be remarkably resilient over the past 2-3 years and are enjoying the fruits of that hard work now. Let’s just hope that oil over $100/bbl doesn’t ruin the party.
CAPA: What aircraft types are you focusing on, in terms of acquisition?
We aim to more or less mirror the Airbus/Boeing backlogs, with maybe a slight tilt in favor of narrowbodies but we will always have 25-40% of our fleet in the widebody arena. We are particularly excited about our fleet of A330s and B777s.
CAPA: What particular opportunities are driving your expansion in the Europe and Asia markets?
We seek out the airlines which have high growth profiles in their fleet plans, and try to offer large financing packages to support their order books. We look for markets which have only 1 or 2 entrenched carriers and above average GDP and traffic growth. Right now we’re seeing that all over Asia and in a handful of European markets, particularly in Northern and Eastern Europe.
CAPA: What is the future of the LCC model and how will the sector’s evolution affect lessors?
The evolution of the LCC has been great for all of us lessors. These airlines generally bring high growth and liquid assets to the market, and since they’re generally smaller they have a higher lease content in their portfolio. There are quite a few markets out there where LCC penetration is still low and JSA plans to support a number of them.
CAPA: Do you see the C Series and the COMAC 919 becoming serious contenders in the narrowbody market? Would Jackson Square be interested?
It’s not core to our business, so we don’t generally comment on those OEMs.
CAPA: Are you (as a lessor or investor) in favour of or against a re-engined A320 or 737NG product?
We want to own what the airlines want to fly, it’s as simple as that.
CAPA: Are you interested in participating in future consolidation in the leasing space?
As always, any opportunity we can get to expand our business will be considered.
CAPA: What were some of the best and most challenging experiences at Pegasus Aviation (which you sold in 2007) and the financial crisis of 2008-2009?
The best experiences always come from helping our customers grow and making large commitments in new markets. The toughest part for us was trying to raise capital in 2008-2009 while our customers struggled to finance their deliveries amidst such difficult markets. The time between when we sold Pegasus in 2007 and when we capitalized JSA in 2010 was fascinating but frustrating the same time.