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Financing Regional Jets The GECAS Perspective

Todd Freeman Senior Vice President & Manager Regional Aviation GE Commercial Aviation Services (GECAS) China Regional Aviation Forum 2007 Urumqi, Xinjiang September 11, 2007. Financing Regional Jets The GECAS Perspective. Agenda. Leasing GECAS & China Regional Jets Perspective

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Financing Regional Jets The GECAS Perspective

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  1. Todd Freeman Senior Vice President & Manager Regional Aviation GE Commercial Aviation Services (GECAS) China Regional Aviation Forum 2007 Urumqi, Xinjiang September 11, 2007 Financing Regional JetsThe GECAS Perspective

  2. Agenda • Leasing • GECAS & China • Regional Jets Perspective • Conclusion

  3. Aircraft Leasing Continues to Grow 2007 21,800 Aircraft 6,500 OP leased 2000 17,500 Aircraft 4,400 OP leased • Lease Penetration Has Increased • ~85% of Airlines Lease 30% Op Ls 25% Op Ls Source: AirClaims CASE database, August, 2007

  4. Financial Considerations • Preserve working capital, optimizing cash flow • Residual risk mitigation and transfer • Harvesting equity value in owned equipment • Tax, foreign currency considerations • Hedge / manage asset risk when expanding into new sectors and new aircraft types

  5. Operational Considerations • Rapid rate of change • Competitive, deregulated markets • Need flexibility as the market moves • Ease of upgrade • Reduce average fleet age • Keep pace with technological changes • Newer aircraft models without significant down payments Flexibility as airline grows Access to ancillary products and services

  6. GECAS & China

  7. GECAS Overview • Over 1750 owned and managed aircraft • ~230 airline customers in over 70 countries • 16 airline customers in China • Worldwide presence with 26 offices • Product breadth – lessor, financier & solutions provider • Deep domain expertise

  8. Toronto Baltimore Stamford New York Phoenix Mexico City Shannon London Austin Toulouse Miami Luxembourg Delhi Oslo Dubai Memphis Sao Paulo Frankfurt Cincinnati Moscow Singapore Tokyo Vienna Beijing Shanghai Hong Kong Broad Global Footprint Since 2001, seventeen new offices

  9. Extensive Product Offerings From aircraft to airports Regional Jets Narrowbodies Widebodies Freighters Airport & Cargo Facility Financing StructuredFinance/Debt Engine Leasing & Financing Parts Trading, Financing & Optimization

  10. 1990’s Pioneer 1998-2006 Growth Leader 2006+ Innovator GECAS in China...200+Aircraft/$5.6B Assets(Includes Commitments) First China deal in 1988 Expanded to key regional players and low cost carriers Broadening product offerings to parts financing and airports with ongoing LCC focus Long Standing relationships with China’s Aviation Sector

  11. Today, GECAS has 16 Customers in China 103 66% 62 Delivered Aircraft 2007 2000 Airlines 6 16

  12. Regional Jet Perspective

  13. GECAS has long Regional Jet history • Placed our first order in 2000 • Currently own 380+ RJ Aircraft with assets over $4B • 130+ Embraers, 250+ CRJs GECAS RJ Fleet – Current Market Value by Model

  14. Regional Jet Evolution • 50 Seaters exploded in late 90s • US Labor Scope Clauses • Manufacturing Support • Export Agencies (~10b) • Embraer ERJ-145 • Bombardier CRJ200 • 70-90 Seaters introduced: • Relaxing US scope clauses • Down gauging by the Majors • Up gauging by the Regionals • Increased focus on Yields • EJets (170/75/90/95) • Bombardier CRJ700/900 • Today: • EJets & CRJs continue to sell briskly • Variety of RJ new entrants on horizon • ARJ • Mitsubishi RJ • Russian RRJ • Bombardier C Series

  15. Regional Jet New entrants • Multiple new RJ entrants have added uncertainty to a relatively static segment, previously dominated by two established players • Industry forecasts indicate solid demand for 60–120 seat jets (~250/year through 2026) • But hard to support five players…. • Boeing & Airbus? • Bombardier C Series • Timing: EIS of 2013 at earliest • Configuration: 110-135 seats • AVIC I agreed to invest $$ in C-Series in exchange for reciprocal investment in ARJ21 • Chinese ARJ • First Flight Mar ‘08, EIS in 2009 • Configuration: 90 and 110 seat versions • Order book: 65 firm; Shanghai Electric, Shandong, Shanghai, Shenzhen Leasing; • Russian RRJ • First Flight ’08, EIS ’10 • Configuration: 5 abreast, 95 seats • Evaluating 75 / 110 seats • Alenia partnering with sales and product support • Aeroflot & ItAli only customers at present • Mitsubishi Heavy Industries • First flight ‘11, EIS: ‘12 – ’13 • Configuration: 5 abreast, ~72-92 seats • Building momentum, mockup unveiled at Paris • Generational improvement in operating economics? • Embraer • Taking ARJ, Mitsubishi, & SuperJet threats seriously • Has publicly stated EMB could respond with enhanced EJet ~ 2011 if necessary Source: Manufacturer Specifications & various press reports

  16. Drivers of RJ Demand…Global & China World CHINA • Global RJ Demand • Weak revenue environment requires better match of demand & capacity for low-load factor NB flights • LCCs driving new opportunities in medium density segments & long/thin routes • Replacement of old & inefficient fleet • Chinese Sector Demand • Governmental policies focused on fostering inland economic development • Regional airports gaining importance in government investment planning • Well-suited for low-yield,high-frequency route development to Western cities RJs ideal for new route development in emerging markets

  17. General Observations re Regional Sector • RJ 50 Segment stabilized • In previous two years, 136 CRJ200/100 were parked; today ,~24 available • Opportunities for short-term bridge lift prior to ARJ (i.e. Mesa & Shenzhen) • 50-seat segment shift to short-term operating leases to meet demand • 50+ CRJ200 Op Leases done in last two years • Alternate usages expanding – corporate shuttle & freighter conversions • Turboprops making comeback • Escalating fuel prices & environmental concerns  focus on turboprop efficiency • Strong competition for RJs on per-seat cost basis • Confluence of the commercial Airlines & private aviation (air taxis & VLJS) • New Very Light Jets (VLJs) enabling new point-to-point “air taxi” business models • Promise of minimal airport hassles, flexibility could lure high-net worth segment RJ demand will continue to grow with increased point-to-point flying

  18. Conclusions of a Regional Jet Lessor • The regional jet sector is strong • High demand for 70-120 seat products; but getting crowded • A strong secondary market for 50-seat jets has emerged • RJs will play a key role in developing China’s Aviation Sector • Infrastructure constraints & emerging small jets pose challenges and new opportunities • GECAS believes in the future of RJs • Will continue to invest in regional jet assets

  19. GECAS believes in the future of RJs

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