US-based Macquarie Rotorcraft Leasing plans to enter the helicopter leasing market through sale and leasebacks before placing a speculative order with the manufacturers.
"In the first couple of years, or even 18 months, growth will be through sale and leasebacks as we are getting lots of requests already to become the source of funding for new deliveries," says Jeff Pino, chief executive officer of the new lessor, launched by Australian investment bank Macquarie Group earlier this month.
"I think strategically we would like to place speculative orders, but at this point and time, we are pretty much full speed on sale and leasebacks as there is a lot of demand for that side of the market," he says.
Pino envisions "at some point" operating a "triple digit-sized fleet" but would not be drawn on the exact time frame for such growth. "I can say it will be years rather than decades," he says, adding: "We want to be a substantial business, but we want to do it profitably."
The launch of Macquarie Rotorcraft Leasing is in response to the investment bank's desire to expand its existing leasing platform of aviation and rail, he says.
"Macquarie had been looking for the right asset class for a while and chose helicopters predominately based on the asset's strength," he says.
The move into leasing also coincides with a recent change in how operators purchase their equipment.
"In the last two years, there has been a shift in the way helicopter operators looked at funding their operations," he says. "Leasing was an occasional by-product of a stressed balance sheet and now it has become more of a strategic tool."
Spurring this change in fleet financing has been "tremendous renovations in helicopter fleets" as operators were flying "some pretty old equipment" as well as "solid growth in the oil and gas industry," he says.
As a new entrant, Pino says Macquarie Rotorcraft can bring competitive pricing and experience to the leasing market.
"Private equity and other sources of financing to the sector have "pretty healthy return expectations" - some of which "won't necessarily be passed back to the lessees," he says. However, as part of the Macquarie Group, Pino says the lessor can be different and offer a "competitive bid structure as it operates off in-house bank funding".
"One of the reasons why I decided to join Macquarie was because the competitive nature of the helicopter business," he says. "We are just going to be really competitive, I think that is rule number one for the lessor business."
Pino, a 35-year veteran of the helicopter business and, most recently, the former president of Sikorsky Aircraft, believes his team's experience is unique to the leasing sector.
"I have assembled the most experienced helicopter team in this space," he says. "Our chief marketing officer, Steve Estill, led the marketing at Sikorsky and Bell and he sold a third, or maybe even a half, of the assets we are actually chasing, so we have a lot of expertise in this field."
Working in favour of the leasing business is the "interesting" supply and demand equation in the helicopter market, says Pino.
"OEMs have not believed the demand signal and, as a result, have not ramped up their production, and that means there is more opportunity coming."
This is also means secondary market prices have been "relatively elevated", he says.
"Ultimately, this means the underlying residual values are really good and that's another reason why we like the asset so much."