Aircraft finance on cloud nine as new money pours in

Fri Jan 24, 2014 2:22pm EST
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By Victoria Bryan and Tim Hepher

DUBLIN (Reuters) - Crisis, what crisis? The good times are rolling in the aircraft finance industry as yield-hungry investors gamble on growing demand for air travel, banishing recent jitters over funding.

Despite new concerns over emerging markets that mounted on Friday, an annual gathering in Dublin this week attracted record numbers of lawyers, bankers and lessors who keep the $100 billion a year jetliner industry aloft with funding.

Just a few years ago, tougher capital regulations triggered fears that airlines would be unable to find the funds needed to pay for record numbers of aircraft being ordered from Airbus (AIR.PA: Quote) and Boeing (BA.N: Quote), as European banks scaled back.

But Asian banks helped fill the void and financiers in Ireland, the world's leading hub for aviation finance, said new money was pouring into the promising sector in their wake.

"I don't think there's a sector of the financing space that isn't open for business. Everything is very robust right now," Jude Bricker, treasurer of low-cost U.S. airline Allegiant Travel (ALGT.O: Quote), said at the Airline Economics conference.

With U.S. airlines back on a more stable footing and oil prices relatively calm, aviation is luring interest from longer-term investors such as insurers and pension funds, who hope to boost weak returns dictated by low interest rates.

"We've seen the pensions, endowments looking to make up lost investment time, and more hedge fund investors looking for stable spread over time but not necessarily a super-sized return to make it work," said Daniel Hartnett, partner at law firm Kaye Scholer.

Capital markets such as that in Enhanced Equipment Trust Certificates (EETC), a secured corporate bond structure typically used by U.S. airlines, are increasingly opening up to foreign airlines because of a recent treaty to protect lenders.   Continued...

An Allegiant Air MD-83 passenger jet takes off from the Monterey airport in Monterey, California, February 26, 2012. REUTERS/Michael Fiala