Global air finance titans ponder whether boom will ever end

DUBLIN - Reuters

As the titans of the $140-billion a year aircraft financing industry gathered in Dublin last week to celebrate an unprecedented boom, a few were casting a cold eye on mistakes of the past - and whether they could happen again.

Ireland owes its dominance of global aircraft finance to the rise and spectacular collapse in 1992 of industry pioneer Guinness Peat Aviation (GPA), which demonstrated both the risks and returns possible from financing airplanes. The former GPA executives who now dominate the industry were debating which of the new players and investors that have flooded in in the last five years might not have learned from those mistakes - and whether the industry had finally broken its cycle of spectacular booms and busts.

The five-star venues that every year host the sector’s showcase conferences were heaving with hundreds of new investors - many from China - who have poured in to a once-obscure industry as global investors engage in a desperate search for returns.

Throngs of financiers spilled into the street from the 200-year-old Shelbourne Hotel during the Airline Economics conference, whose delegate list has tripled to 3,000 in five years.

“Sentiment is as positive as I have seen it,” Alec Burger the head of No. 2 lessor GECAS - formed from the hulk of GPA - told a packed second conference, Global Airfinance, where airline executives buoyed by surging air traffic eyed funds to expand their fleets.

“This will be the fourth year of global airline profits above $30 billion and that is beyond unprecedented,” Flight Ascend chief economist Peter Morris said.

Optimists insist the flood of Asian money - around 20 Chinese lessors have opened Dublin offices since the start of the decade - confirms the emergence of air finance as a worthy asset class in its own right.

Aengus Kelly, the former GPA employee who is now CEO of the world’s largest lessor AerCap, said the number of banks and bond investors willing to lend to his firm has mushroomed from 50 to 500 in two decades.

“Is it the case that all of them are in for the long haul? - Of course not. Have they come in looking for yield? - Of course they have,” he said in an interview. “But I do think on a structural basis the industry is well understood and people are starting to divorce it from airline cyclicality.”