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Everest Events Benchmarking Aircraft Asset Management London Tuesday, October 18, 2005 Asset Risk Management Scope of Presentation

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Everest Events Benchmarking Aircraft Asset Management London Tuesday, October 18, 2005 Asset Risk Management Scope of Presentation Everest Events Benchmarking Aircraft Asset Management London Tuesday, October 18, 2005 Asset Risk Management Scope of Presentation Objectives of Aircraft Asset Management Overview of Aircraft Asset Management Industry Experience Top 5 Major Leasing Companies Market Churn & Trends Managing the lease term Asset Management The Asset Management Objectives: – Maintain the rental stream for the term of the lease agreement – Maintain the value of the asset and wherever possible effect an appreciation in value – Effect smooth transition from lease to lease – Minimise Asset Management cost burden – Minimise ‘off-lease’ time – Minimise refurbishment costs – Develop a good working relationship with Lessee Through: – A structured, professional and efficient monitoring programme, establishing a technical rapport with lessee – Risk driven and measured activity – To identify compliance with terms / covenants and lessee plans for assets – Establish recommended actions and progress these Asset Management Aircraft are complex mobile assets that are highly susceptible to a range of factors which can significantly influence their values. The degree of influence is greater for maturing assets than for new assets. The $ value of the influence is greater in new assets than in mature assets. There are no sovereign risk lessees. All assets need management Asset Management OPERATING LEASE RISK COMMERCIAL TECHNICAL FINANCIAL LEGAL POLITICAL AssetAsset ManagementManagement Commercial – Assess, monitor and advise the commercial well being of the lessee and the aircraft lease within the prevailing market and plan remarketing, renewals, sales and exits. Default resolution. Portfolio planning. Technical – Determine & manage any changes to specification, value, utility or marketability. Default resolution (operational). Financial – Manage the collection of income streams while maximising shareholder / bond holder value, minimising taxation burden. Management of cashflows, debt servicing, exchange rate hedging. Political – Assess, monitors and advises on current and developing changes in political environment for the operator Legal - Assess, monitors and advises on current and developing legislative regulations impacting on the operator, the lease agreement and the lessor. Insurances, Default resolution, documentation. Technical Asset Management Technical Inspections Understand the Role Required Lessee Lessor’s Inspector Asset Management Terry McGaughan & Hanspeter Baserga OPERATING LEASE RISK COMMERCIAL TECHNICAL FINANCIAL LEGAL POLITICAL Mike Skinner Angus Mackay Peter Moylan Austen Hall Angus Williamson Colin Short Paul Rofe Even The Profitable And Good - Have Risks to Manage There is only so much an airline can do to try and get cheap fuel WhereWhere DoesDoes OurOur AssetAsset ManagementManagement SitSit InIn TheThe IndustryIndustry CycleCycle 4RecoveryRecovery TimescalesTimescales……………….. Aviation Economic Recovery In 2005 ? Recovery Dependent on: 4 Oil Prices ($69.91 / Barrel 31st August) 4 Passenger loads being maintained 4 Yields on airfares increasing 4 Reduction in oil and fuel prices Increases in USA & European GDP 4 Increases in disposable income 4 Increases in consumer confidence IndustryIndustry BadBad SignsSigns AreAre TheyThey HereHere Again?Again? Biggest Backlogs ILFC JetBlue Airways 8% 6% Ryanair 4% General Electric Capital 4% Group 3% US Airways ANA - All Nippon Airways 3% Japan Airlines Corporat ion 64% 2% Sout hwest Airlines 2% Air Canada 2% Emirates Airlines 2% Ot hers Lessor Backlogs ILFC 2% 3% 2% 4% General Electric 5% Capit al Group 6% CIT Leasing Corp Singapore Aircraft Leasing Ent erprise Debis Air Finance BV 52 % The Flugleidir Icelandair Group 26% Finnair Aircraf t Finance Lt d Aviation Capital Group Lessor Backlog Total Backlog -Operating Lease Companies Aircraft % Share ILFC 298 50.85 General Electric Capital Group 147 25.09 CIT Leasing Corp 35 5.97 Singapore Aircraft Leasing Enterprise 28 4.78 Debis / AerCap BV 24 4.1 The Flugleidir Icelandair Group 15 2.56 Finnair Aircraft Finance Ltd 12 2.05 Aviation Capital Group 11 1.88 TOTAL 570 97.28 Biggest Backlogs Total Backlog -Top 10 Owners Aircraft % Share ILFC 298 8.28 JetBlue Airways 203 5.64 Ryanair 148 4.11 General Electric Capital Group 147 4.08 US Airways 116 3.22 ANA - All Nippon Airways 112 3.11 Japan Airlines Corporation 75 2.08 Southwest Airlines 74 2.06 Air Canada 66 1.83 Emirates Airlines 66 1.83 TOTAL 1305 36.24 Industry Participants Independent Independent Independent Manufacturer Servicer Lessor Supporter Boeing Aviation Sigma SH&E Capital Group Rolls Royce / AWAS GATX IBA Pembroke Babcock & BAE CIT BACK Brown Airbus Boulioun ILFC Airclaims Saab Debis / AerCap GECAS AMS Oasis Pegasus Focus Orix ALM Sale Tombo Lombard Market Churn Industry Cycle – Polarisation Legacy Carriers vs Low Cost carriers Asset Types – Short Haul Vs Longhaul - Boeing Vs Airbus Aircraft Vs Engines North American Market Issues Geographic Dispersement Portfolio Diversification Aircraft Vs Engines Geographics – North American Market Issues – Europe – Middle East – Asia Pacific Asset Types – Wide Body Vs Narrow body – Freighter Vs Passenger – Boeing Vs Airbus Top Lessors 2003 Rank Leasing company Fleet value $ Change Average aircraft Change 2003 million value $ million 1 GECAS 26,589.7 13.6% 18.7 -0.7% 2 ILFC 20,263.0 16.2% 34.6 1.2% 3 Boeing Capital 3,843.3 30.2% 11.3 -15.3% 4 debis / AerCap 3,267.5 5.6% 10.7 -5.7% 5 AWAS 3,220.6 -3.1% 12.2 -6.9% 6 CIT 2,877.6 48.3% 13.4 -4.4% 7 GATX Air 2,697.6 9.6% 13.0 -1.0% 8 Babcock & Brown 2,531.2 5.9% 12.3 -4.7% 9 SALE 1,920.6 38.3% 10.8 16.3% 10 Boullioun Aviation Services 1,773.5 29.0% 10.9 -0.9% 11 Pegasus Aviation 1,752.5 -15.4% 13.2 -10.2% 12 Pembroke Group 1,721.1 43.5% 13.8 13.3% 13 ORIX Aviation Systems 1,542.4 43.7% 12.4 15.0% 14 BAE Systems Regional 1,274.9 1.7% 10.6 6.8% 15 Tombo Aviation 1,022.3 17.3% 12.5 -6.2% 16 Airbus Asset Management 949.5 -20.7% 12.8 -20.7% 17 Lombard Aviation Capital 915.6 **n/a 13.5 -19.1% 18 Saab Aircraft Leasing 884.3 0.6% 13.0 -6.3% 19 Aviation Capital Group 842.7 1.4% 12.6 2.9% 20 IEM Airfinance 734.8 75.4% 11.3 29.9% LessorLessor ConsolidationConsolidation WhoWho IsIs Next?Next? ThereThere AreAre WorseWorse JobsJobs InIn Aviation!!Aviation!! International Aviation Services Group Module D, Jenner Road, Gatwick Airport, West Sussex RH10 9GA Tel: +44 (0) 1293 456105 / 6 Fax: +44 (0) 1293 456107 Email: [email protected] 24hr: +44 (0) 7968 062874.
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