Jefferson Ding, team leader, aircraft technical asset management, at Singapore-based Dragon Aviation Capital, talks to James Pozzi about the effects of the novel coronavirus on the business and how it has looked to enhance flexibility during the crisis. 

How has coronavirus impacted the business? Have these circumstances brought about changes?

The virus didn’t really require us to change our strategy but merely reinforced the strategy that we had always had. Our aim was always to be as flexible as possible and to have our team based across the region to minimize extraneous costs for our customers, but, more importantly, to offer a team of consultants with local knowledge, local contacts and an awareness of the way in which people work in the different regions. 

The result was that we were able to offer services to our clients, including quick engine turns, end of lease, management of engine changes and aircraft end of lease transitions, without the travel restrictions having much of an effect.  

On the rare occasions where travel restrictions did become an issue, we were able to support our customers auditing engine and aircraft records remotely to such an extent that we were trusted to do the same for assets outside of the region. We have our engine storage and preservation facility at Singapore Changi and, in response to customer requests, we have added supply chain solutions and worldwide shipping and logistics for the engines under our care. 

Finally, during this period, we have entered into a strategic partnership allowing us to offer borescope services across the region with both FAA and EASA release. It is our intention, where it makes strategic sense, to enter into more agreements allowing us to manage CAMO, aircraft storage solutions, EASA airworthiness review and other services.

What are some trends you are seeing from airline customers during the pandemic?

The immediate trend was to ground the majority of their fleets, obviously. We believe the final outcome remains to be seen. Southeast Asia and China appear to be returning to some form of normality relatively quickly. Our market intelligence tells us that, in the last week, China now has two-thirds of its airline fleet operating revenue flights with countries like Vietnam, South Korea and Hong Kong catching up. More than half of re-activated aircraft have returned to the skies in Asia. 

Future trends will be dictated by various factors. A number of aircraft remain grounded and are subject to discussions with lessors, governments and financial institutions as to what their fate will be. Once the restructuring of these airline fleets is complete, there will be aircraft returned to lessors, placed into storage or dismantled across the region.

Where are you seeing other opportunities?

One area where we will see major activity is the passenger to freighter (PTF) market. Dragon has been in discussions with a number of lessors and has recruited specialists to manage these projects for our customers. We will recruit at least three more project managers in Singapore and Taiwan. 

Do you expect pricing for assets (aircraft, engines) to change after COVID-19?

Yes; in the immediate period as COVID hit the industry there were reports of sale and lease back transactions at 30-40% lower prices as airlines grabbed whatever cash they could. In the longer term, different classes of assets will come back to normal levels faster than others. For instance, we believe the Airbus A321 will regain value and remain constant due to its suitability to a variety of markets, including the passenger to freighter market. Other airframes and engines will have a huge surplus in storage, keeping the prices low for the immediate future. 

Where will Dragon be looking to invest after COVID-19? Will this be different to your intentions before the pandemic?

Our intentions will be to concentrate on our core business for the immediate future—that is full airframe or engine asset management. We are already planning to open representative offices in a number of countries in the region to ensure greater access for our customers locally. Our management team in Singapore will oversee our expansion into new markets where we will provide a range of technical services and asset management. We will focus to a large degree on engines, where we have had a great deal of success recently.