Vivek Kaushal.
What are Global Jet Capital’s most popular financing options?
Vivek Kaushal: Our flagship product, the operating lease, is popular with our client base because it is a simple way in which to have and operate an aircraft. You pick the aircraft, we acquire it on your behalf, and we lease it back to you. When the lease is up, you give us the plane, you move into your next one, or if during the lease your needs change, then we work with you and get you into your next aircraft. We take the old one back or we find a different solution. If the lease is up and you love your plane, we extend the lease. Leases provide benefits of an aircraft without tying up your cash in a depreciating asset, they insulate you from the vagaries of the market.
We also offer traditional loans and finance leases. How we differentiate is that dollar for dollar we will always put more money on the table for an aircraft, because it’s an asset class that we understand very well, it’s our bread and butter, and again, it helps clients minimize the amount of money that they have to invest in aircraft ownership. Given the 2-3 year lead times to acquire a new aircraft, and you make progress payments to the OEM for a plane you don’t yet have, we provide pre-delivery payment financing.
We’ve got deep ties to the OEMs, to the leading brokers and dealers, to the leading operators, and we do business with all the major MROs, so we can work seamlessly across these parties so the customer experience goes more smoothly than it would with a traditional financier who isn’t as familiar with this ecosystem.
How long are typical aircraft leases?
Kaushal: Typically 7-10 years.
What is your mix of financing used and new aircraft?
About 60% new and 40% pre-owned each year. We are relatively agnostic, but we don’t like to go too old so anything up to about 12 years of age is fair game.
Do you stipulate maintenance requirements in the lease, or are you close to MROs because of pre-buy inspections and the like?
The latter. We don’t interfere at all in the maintenance, but we do care about the condition in which the aircraft is returned. We do business with the MROs during pre-buys and post-lease inspections.
You mentioned that Global Jet Capital’s business is global, but is most in North America, given the market?
Our portfolio spans 16 countries across Latin America, Europe, India, Asia-Pacific, Australia and New Zealand, but 60-65% of the portfolio is U.S. based.
What financing structures and trends are you seeing?
Aircraft are tending to skew larger, but this is a trend that has been developing for at least 10 years. It’s a function of typical S&P 500 customers having a business footprint that is significantly wider than it used to be. It’s expanded from regional to national to international. Same thing with our principals, who are founders of large private enterprises. They’ve got suppliers, investors and stakeholders to visit. That calls for longer range, wider and more spacious cabins, lower cabin altitude and all the important things that make it possible for them to maintain in a very busy travel schedule but get to where they need to get to on time. The portfolio has shifted over time to more super-mid and large cabin aircraft.
The company announced its ninth asset-based security on June 16, which raised about $659 million. How will this impact your business?
The securitization program started in 2018. We have a warehouse facility provided by our bank lenders, and that provides us with ready capital at the time that we need to enter into a transaction. Periodically we roll up those loans and leases into a pool and securitize them, which means that we have bondholders who have a right to receive a portion of the cash flows with a certain set of priorities from that pool of loans and leases. It’s an important way in which companies like ourselves finance ourselves in the capital markets. We have issued $5.5 billion dollars in notes to date over nine separate issuances.
Our business was the first aviation securitization to come back to market after the COVID-19 pandemic, in October 2020. We stood apart from the rest of the aviation universe because our clients, which are large corporates and ultra-high net worth individuals, didn’t skip a beat as the events unfolded. Our securitizations and portfolio performance were outstanding during that time, which bolstered investor confidence in the business and permitted us to go back to market. This is our sixth issuance post pandemic. The issuance helps us meaningfully tighten the spreads at which we’re issuing that debt, and that in turn makes our business more competitive and lowers the costs that we pass on to our customers.
Has the reinstatement of 100% bonus depreciation driven business?
It certainly is a positive, but the primary driver is the proposition of business aviation, which delivers unparalleled speed, flexibility and security. Bonus depreciation just eases the path for somebody to acquire an aircraft.
What’s your business mix between operator types?
Our focus has always been whole aircraft ownership. About 95% of our portfolio is with large companies, principles of very large companies and ultra-high net worth individuals who’ve got significant wealth in their own right, so a relatively small portion of our business is with charter and jet card operators.
Fractionals are a big force in the market, a growing force in the market, and the players had the foresight to tie up deliveries years before it became clear to others that you’re going to have to wait a while if you want an aircraft. Equally we’re seeing people whose utilization of fractional gets to a point where they feel like a whole aircraft is the right solution for them. When you look at flight activity, it seems like fractionals have the lion’s share, but as you dig into the data, you realize that the other market segments also are generally doing quite well.
How much interest do you get for your Clean Flight Offset program?
This is a pathway for clients to acquire high-quality carbon offsets for their business aviation activity. They can buy offsets for the full duration of the transaction, or one year at a time. They can roll up the cost into the lease or the loan so the cost doesn’t come out of pocket, if they choose. It’s not meant to be a bread and butter revenue product—we don’t make any margin on it—it’s really a convenience we provide to our clients.
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