Emerging markets exposure was partially credited for the "phenomenal" success of last week's $1.4 billion aircraft lease securitization from G.E. Capital Aviation's Lease Investment Flight Trust (LIFT), according to Neil McPherson, head of ABS research for lead manager Credit Suisse First Boston. Approximately one-half of the 39 aircraft leased out to back the offering are leased out to carriers located in emerging economies, McPherson added.
Of the roughly 50% leased out to these carriers, two-thirds are leased to the flag carrier for these countries, which are frequently supported partially by these country's governments. "If these carriers go under, then tourism dries up, not to mention the embarrassment," McPherson said.
As an example, McPherson cited MalaysiaAir, the flag carrier for Malaysia - run by the government of the Kingdom of Malaysia - as an airline that likely would not default on aircraft lease payments.
Of the carriers located in emerging nations the distribution is split equally between those located in Asia and those located in Latin America, countries whose economies rely heavily on American tourism dollars, according to a Moody's presale report.
Helping this aspect of the offering's success was the fact that many of the aircraft leased out in the pool are "young" and compliant with the ever tightening Federal Aviation Administration compliance. Many of the aircrafts have jet engines that are stage-three compliant, allowing them to land in every American airport, and therefore take passengers to and from the U.S. to these emerging nations.
Of course the company's affiliation with triple-A rated General Electric Co., one of the largest manufacturers of aircraft jet engines, means that these aircraft will likely be fitted with the newest technological advances as standards become more stringent in the future. Also, GE Capital Aviation has a solid track record when it comes to the re-leasing of aircraft as leases expire.
"GECAS is out marketing these airplanes up to 12 months before the expiration of the existing leases," added McPherson.