In a report released by Investec’s finance division, aircraft leasing was found to be beneficial in improving diversification, particularly during periods of financial asset distress, and in producing high returns. Emerging markets and the current cycle of aircraft replacement around the world is resulting in a strong period of growth for aircraft leasing.
“Based on our experience as both a principle investor and as a manager of third party capital, we believe this sector affords significant opportunities for institutional and high net-worth investors to deploy capital in investments which provide good regular debt like cash flows with equity upside,” said David Phillips, head of Investec aviation finance.
The report also found several other benefits associated with aircraft leasing: it is usually more liquid as an asset compared with property and infrastructure and is not predominantly influenced by local geography since aircraft can be relocated and re-leased into different areas. The market is also more dynamic in comparison to property and infrastructure. Aircraft assets do, however, require good liability management in order to reduce volatility in investment returns.
Mr Phillips stated that Investec had successfully developed two aviation funds over the past five years, Investec Global Aircraft Fund and Investec Syndicate Limited No.1 Fund.
“These have been backed by key Australian and European [clients], as well as significant high net-worth clients of Investec Bank,” he said.
Both of the funds have more than 30 aircraft, including Airbus A320s and A330s, Boeing B737-800s and B777s and regional jets such as Embraer aircraft.
“These are all leased to major airlines in Australia, Asia, Europe, Africa and the Americas. The specific airlines include Qantas, Jetstar, Virgin Australia, Air China, Shenzen and Xiamen of China, EVA Air and China Air of Taiwan, Indigo and Jet Airways of India, with European airlines including Air Berlin, Air France and Wizz Airr, together with LAN, Copa Airlines, Varig and Vueling of the Americas and Kenya Air in Africa,” he said.
