FARNBOROUGH: CIT focuses on shareholder returns amid market heat

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CIT Aerospace is focused on level of return for shareholders as the sale-and-leaseback and bank markets heat up.

The lender evaluates sale-and-leaseback deals on a case-by-case basis, submitting proposals only where it sees sufficient returns, says Jeff Knittel, CIT president of transportation and international finance.

“What we do is very rigid in making sure our shareholders are getting the appropriate return,” he says. “In certain cases, the transactions we believe are not optimal for us to get the returns we require [and], in that case, we are not participating.”

Sale-and-leaseback volumes are up in 2014. Deals covering 183 aircraft were closed during the first six months of the year, 43 more than the same period in 2013, data from Flightglobal’s Ascend consultancy shows.

Knittel acknowledges this trend, saying there is “a lot of capital chasing airplanes”, and emphasises CIT’s flexibility to also lease directly to airlines or provide them with financing.

“When we have one of those channels that has what we view as too much competition, we tend to go towards other avenues,” he says. “In this case, we’ve been doing a fair amount of financing.”

Knittel argues that CIT’s $40 million secured loan to Allegiant Air in May is an example of the lender’s ability to do unique financing deals that other institutions may pass up. The loan is backed by six older Boeing 757-200s the carrier operates on flights to Hawaii.

Asked whether CIT is participating in what many consider a very competitive bank market, Knittel says the focus is on a unique niche market where asset management skills can be combined with a loan.

“It’s not our intent, in terms of our financing, to be all things to all people,” he says.

In June, JP Morgan credit analyst Mark Streeter cited the bank market as the primary reason for a low level of capital market activity so far in 2014.

Airlines raised $8.24 billion in bank financing for aircraft during the first six months of 2014, Ascend data shows. This is an increase of more than 60% from the same period last year.