Avolon

Avolon Aerospace

Industry	Aircraft leasing

Avolon is an aircraft leasing company based in Ireland.^[1] It was founded in May 2010 by Domhnal Slattery,^[2] and a team from RBS Aviation Capital including John Higgins, Dick Forsberg, Tom Ashe, Andy Cronin, Pat Hannigan, Simon Hanson and Ed Riley with initial capital of US$1.4 billion.^[3][4] The equity commitment of US$1.4 billion was from four leading international investors: Cinven, CVC Capital Partners, Oak Hill Capital Partners and the Government of Singapore Investment Corporation. Between 2010 and 2014, Avolon also raised US$6.1 billion in debt from the capital markets and a range of commercial and specialist aviation banks including Wells Fargo Securities, Citi, Deutsche Bank, BNP Paribas, Credit Agricole, UBS, DVB, Nord LB and KfW IPEX-Bank.

In December 2014, Avolon listed on the New York Stock Exchange under the ticker symbol AVOL. At listing, Avolon was the largest ever listing of an Irish founded company on the NYSE.^[5]

In September 2015, Avolon announced that Bohai Leasing Co., the Chinese leasing and financial services company affiliated with HNA Group, made a cash offer for 100% of Avolon's common shares at a price of US$31 per share. The transaction was approved by both Avolon and Bohai shareholders.^[6]

In January 2016, Avolon announced the completion of its acquisition by Bohai Leasing. Avolon is now the core aircraft leasing brand for Bohai Leasing and its parent, HNA Group, having assumed management of the Hong Kong Aviation Capital (HKAC) business, another Bohai subsidiary.

Avolon’s owned, managed and committed fleet, at 30 September 2016, comprised 432 aircraft including a portfolio of 45 aircraft acquired from another lessor. In October 2016, Avolon announced an agreement to acquire the aircraft leasing assets of CIT Group. The transaction will create the world's third largest aircraft leasing business with a fleet of 910 aircraft with a value in excess of $43 billion.^[7]

Avolon Milestones

• In April 2012, Avolon also announced it had been awarded 2011 ‘Equity Deal of the Year’ by Airfinance Journal for its US$300 million equity commitment from the Government of Singapore Investment Corporation (‘GIC’).^[8]
• In September 2012, Avolon published an analysis of commercial aircraft economic lives and retirement patterns.^[9]
• In September 2012, Avolon announced it was sponsoring the 2012 Mark Pollock Cycle in support of the Mark Pollock Trust.^[10]
• In January 2013, Avolon announced the formation of a joint-venture aircraft leasing business with leading US bank, Wells Fargo. The joint-venue, called Avolon Capital Partners, will have a target aircraft portfolio size of US$500 million.^[6]
• Following on from the Avolon Capital Partners announcement, Dave Hoyt, head of wholesale banking at Wells Fargo, said "This is an interesting opportunity for us to understand the business better".^[11] In July 2013, all regulatory approvals were received and Avolon Capital Partners (ACP) was formally launched. ACP took delivery of its first aircraft, a Boeing 737-800 NG on lease to Ryanair, in August 2013.^[12]
• In February 2013 Avolon published an analysis of, and investor guide to, the expected market impact of the transition to new generation Airbus (320Neo) and Boeing (737MAX) single aisle aircraft families.^[13]
• In April 2013, Avolon was awarded the Airfinance Journal 2012 ‘Equity Deal of the Year’ for the formation of a joint-venture aircraft leasing business with Wells Fargo: Avolon Capital Partners. Launched in January 2013, Avolon Capital Partners will build an aircraft fleet primarily through sale and leaseback transactions with an initial target portfolio size of US$500 million.^[14]
• In July 2013, Avolon Capital Partners (ACP), the joint venture between Avolon and Wells Fargo received all regulatory approvals and was formally launched. ACP took delivery of its first aircraft, a Boeing 737-800 NG on lease to Ryanair, in August 2013.^[15]
• In July 2013, Avolon, welcomed changes to Irish legislation announced by the Irish Government to allow Ireland adopt a new insolvency regime in relation to the financing of aircraft and aircraft engines, equivalent to the regime known as Alternative A under the Cape Town Convention. The Irish Department of Transport issued a statement at http://www.dttas.ie/pressRelease.aspx?Id=818 ^[15]
• In July 2013, Avolon welcomed changes to Irish legislation announced by the Irish Government to allow Ireland adopt a new insolvency regime in relation to the financing of aircraft and aircraft engines, equivalent to the regime known as Alternative A under the Cape Town Convention. The Irish Department of Transport issued a statement at http://www.dttas.ie/pressRelease.aspx?Id=818 ^[15]
• In September 2013, Avolon announced the pricing and issue of US$636m Fixed Rate Asset Backed Notes by Emerald Aviation Finance. The proceeds were used by Emerald Aviation Finance to acquire a fleet of 20 aircraft from Avolon. Avolon, in turn, will use the net proceeds of the sale of aircraft to refinance existing debt.^[16]
• In October 2013, Avolon announced that its third quarter of 2013 was its most active period since the formation of the business and that total aircraft delivered and under management had exceeded US$6 billion.^[17]
• In October 2013, Avolon announced it successfully closed and funded an Emerald Aviation Finance US$636 million Asset Backed Securitisation to acquire 20 aircraft from Avolon. The proceeds were used to refinance existing debt and further extend Avolon’s debt maturity profile. All 20 aircraft novations were completed within 60 days of closing.^[18]
• In November 2013, Avolon issued a detailed analysis of the financing requirements for the airline industry’s new aircraft deliveries over the coming decade. The results are published in a discussion paper entitled “Funding the Future – Matching the Demand of Aircraft with the Supply of Capital”.^[19]
• In November 2013, Avolon announced it had commissioned a documentary on the history of Irish Aviation titled: "Pioneers and Aviators, A Century of Irish Aviation".^[20]
• In July 2014, Avolon announced an order for six Boeing 787-9 Dreamliners and 15 Airbus A330neo aircraft bringing its total fleet to 222 aircraft.^[21]
• In December 2014, Avolon listed on the New York Stock Exchange under the ticker symbol AVOL. At listing, Avolon was the largest ever listing of an Irish founded company on the NYSE.^[5]
• In March 2015, Avolon published an updated analysis of the key factors that influence the economic life of commercial jet aircraft building on the analysis issued in September 2012.^[22]
• In September 2015, Avolon announced that Bohai Leasing Co., the Chinese leasing and financial services company affiliated with HNA Group, made a cash offer for 100% of Avolon's common shares at a price of US$31 per share.^[6]
• In January 2016, Avolon announced the completion of its acquisition by Bohai Leasing and the company's stock was delisted from the New York Stock Exchange on 8 January 2016. Avolon then assumed control of Hong Kong Aviation Capital also owned by Bohai.^[23]
• In July 2016, Avolon announced the acquisition of 45 aircraft from another lessor in what is the company's largest portfolio acquisition to date.^[24]
• In October 2016, Avolon announced an agreement to acquire the aircraft leasing assets of CIT Group. The transaction will create the world's third largest aircraft leasing business with a fleet of 910 aircraft with a value in excess of $43 billion.^[25]

Ireland and Aircraft Leasing

Ireland is one of the world's leading jurisdictions for aircraft finance and leasing. The Irish industry traces its roots back to the foundation of Guinness Peat Aviation in Shannon, County Clare in 1975 and in the intervening period the aircraft leasing, trading and brokerage industry has proved to be one of Ireland’s greatest success stories. As one of the world’s major centres for aircraft lessors, a survey conducted by the Federation of Aerospace Enterprises in Ireland estimated that aviation leasing companies in Ireland manage assets worth in the region of €82.9 billion.^[26]

It is estimated that in excess of US$100 billion of capital will be required every year to finance all the aircraft delivered by manufacturers and aircraft leasing is approaching 40% of the global aircraft financing market. The market has grown as more airlines have concluded that it is better to lease (rent) aircraft which provides for greater flexibility in the aircraft fleet. Some lessors expect the leased component share of the global aircraft fleet to rise to as much as 50% in the next several years.^[27]

The Economic Life of Aircraft

In September 2012, Avolon published an analysis of commercial aircraft economic lives and retirement patterns. The purpose was to test whether the current assumptions made by airlines, aviation investors and aircraft financiers, on the economic life of commercial jets - that aircraft should be depreciated over a useful life of approximately 25 years - remains valid. The reason this analysis is so relevant today is that approximately 8,000 aircraft are due to be retired over the next 10 years. This is more than the total number of aircraft retired since commercial aviation began in the 1960s.^[28]

The Avolon analysis considers how trends in aircraft retirement have changed over time and identifies key differences between the behaviour of specific aircraft types. The paper also considers the likely impact on retirement trends and aircraft economic values of the retirement of newer fleets, including current Airbus A320 and Boeing 737NG aircraft.^[22]

The Transition to Neo and MAX Aircraft

In February 2013 Avolon published an analysis of, and investor guide to, the expected market impact of the transition to new generation Airbus (320Neo) and Boeing (737MAX) single aisle aircraft families. This was Avolon’s second white paper on industry issues and considered how the transition from A320ceo/737NG aircraft to A320Neo/737MAX aircraft will influence the single aisle aircraft market over the rest of the decade and beyond.^[15] The Avolon paper found that the effect of the Neo and Max models on the value of their predecessors will be limited by the sheer number of current-generation craft in use today and the high portion of the global aircraft fleet approaching retirement. The authors predict that sharper rises in passenger numbers in developing countries will fuel demand for both Neo and Max models, but also, importantly, current-generation aircraft as airlines seek to add capacity but find themselves at the end of long lines for the new models. Both Airbus and Boeing currently have record-high order backlogs, making the second-hand market an appealing option for fast-growing carriers.^[29]

Aircraft Retirement and Storage Trends

In March 2015, Avolon published an updated analysis of the key factors that influence the economic life of commercial jet aircraft building on the analysis issued in September 2012. The 2015 analysis also addresses aircraft retirement and storage trends. The paper concluded that the patterns of retirement behaviour had not materially changed since the 2012 analysis, with the average aircraft retirement age stable at or around 25 years and more than 50% of fleets remaining in service beyond 25 years.^[22]

Documentary on Irish Aviation: 'Pioneers and Aviators'

In November 2013, Avolon announced it had commissioned a documentary on the history of Irish Aviation titled: "Pioneers and Aviators, A Century of Irish Aviation. The documentary tells the story of the remarkable, pioneering individuals whose vision, passion, successes and failures helped forge Ireland’s unique aviation landscape. The documentary traces this story from its humble beginnings when Alcock and Brown made the first transatlantic flight, landing in a field in the West of Ireland, through the evolution of Aer Lingus and the development of airports at Foynes, Shannon and Dublin, the pivotalemergence of Tony Ryan, the meteoric rise and fall of GPA, the enduring dominance of Ryanair, culminating in a focus on the contemporary story of Ireland’s leading role in aviation today.

The documentary Writer and Director, Alan Gilsenan, is an award-winning film-maker, writer and theatre director. His film work has appeared on the BBC, ITV, Channel 4, RTÉ, the History Channel and CNBC among others. The score for the documentary was written by renowned Irish composer Mícheál Ó Súilleabháin working with the RTÉ Concert Orchestra.

The premiere of the documentary took place in the Irish National Concert Hall, Dublin on Wednesday 22 January 2014. The documentary was screened in two 52 minute episodes on RTÉ Television on 20 and 27 February 2014^[20]

In June 2015, Avolon launched a commemorative photographic book of the same name - Pioneers and Aviators, A Century of Irish Aviation. The book was formally launched by An Taoiseach Enda Kenny T.D. together with Domhnal Slattery, Avolon CEO; Eamonn Brennan, Chief Executive of the Irish Aviation Authority; and Brigadier General Paul Fry, GOC of the Air Corps at an event at Casement Aerodrome, Baldonnel, Co. Dublin.^[30]

Europe's First MSc in Aviation Finance

In April, 2016, Europe’s first MSc in Aviation Finance was launched at the UCD Michael Smurfit Graduate Business School. Avolon, together with a number of other leading aircraft leasing firms, is an industry partner of the new master's degree.^[31]

The course is intended to sustain Ireland’s position as the world’s largest centre for aviation finance and leasing.^[32]

Initiatives with the Royal Hibernian Academy

In October 2015, as part of its corporate and social responsibility programme, Avolon announced two initiatives with the Royal Hibernian Academy (RHA):^[33] The Avolon Global Studio and Avolon Youthreach Programme. The programme was launched by Domhnal Slattery, Avolon CEO; Mick O’Dea RHA President; and Patrick T. Murphy, RHA Director.

Avolon Global Studio: With Avolon’s support the RHA made a global call-out for an artist who will be awarded a 6-month studio placement, at the RHA during 2016, 2017 and 2018 with the first residency commencing in July 2016. This studio residency offers a once in a lifetime opportunity for an international, emerging artist to raise their profile on a global platform and to develop their practice within the environs of one of Irelands leading contemporary art organisations. On 22 April 2016 Avolon and the RHA announced the first participant of the Avolon Global Studio Programme would be Colombian artist, Adriana Salazar.^[34]

Avolon Youthreach Programme: Collaborating with the national Youthreach scheme, the RHA will invite 6 young students, selected from submissions from the 160 Youthreach Centres nationwide, to participate in four workshops to increase their art skills, introduce them to visiting art galleries and art colleges and offer basic tools of criticism. As well as developing practical skills, by working alongside a practicing artist, this opportunity will offer students the ability to explore the opportunities and challenges of being a professional artist in Ireland today.^[35]

References

External links

• Company homepage