Operating lessors are experiencing a change in debt funding and benefitting from financial markets that are deprived of yield, according to Avolon's president and chief.
"A big change in the leasing industry is that aviation is moving away from being an asset class that is esoteric to a core asset repository for capital," says John Higgins, Avolon's president and chief commercial officer.
"Also, with yields for institutional investors and US Treasury bonds at century lows, aviation yields look relatively attractive," he says.
Last week Avolon announced its intention to partner with Wells Fargo to form a new joint-venture leasing business with a target portfolio of $500 million.
The new business, which would be called Avolon Capital Partners (ACP), is subject to a number of regulatory approvals.
"With a $500 million investment in mind that is about 12 aircraft, which would mainly be narrowbodies; however, we have the capacity to do one or two wideobodies such as 777s or A330s or maybe even some Embraer aircraft," he says.
Since its start in 2010, Avolon has raised a total of $3.7 billion of debt capital from a range of financial institutions, including Wells Fargo. The lessor has a fleet of 167 aircraft including 76 orders, according to its website,
ACP would build an aircraft fleet primarily through sale and leaseback transactions involving new aircraft, says Avolon.
Wells Fargo would be the majority shareholder and provide banking and debt financing facilities for the business.