Flying straight and narrow
Last year, aircraft lessors introduced more complexity to pools of collateral backing securitizations; turbo-props and corporate jet fleets are increasingly being thrown in the mix. But unlike some other asset classes, where diversity boosts investor confidence, aircraft ABS buyers are more interested in keeping things simple.
Differing contract terms, markets, maintenance requirements and average age of regional or specialty aircraft can make pricing ABS deals “a little challenging for us,” said Keith Allman, a vice president for Loomis Sayles & Co. “It’s hard to see how sometimes securitization can actually be a good tool [for smaller planes]. They’re used in a lot of restructurings, [and] restructurings are quite volatile when you’re looking for consistent cash flow.”
The ideal in asset uniformity even boils down to the mix of short-haul narrowbody aircraft versus long-haul widebody jets. The fastest-growing aircraft markets are for narrowbody aircraft in domestic markets in China, Asia, North America and Europe, said Allman.