AirAsia's Omar says the Asian banks hope to fill the void, but this is questionable in the immediate future. She says Asian banks are relatively new to aircraft financing, while European and U.S. banks have more than 30 years experience. However, more Asian banks are entering because they want to have a stake in the growth of the aviation industry, she says, adding that many are taking their first steps by participating in syndicates. She also says AirAsia has had success with Malaysian banks. “RHB Bank, Maybank and Bank Islam Malaysia have been supporting us since 2007,” says Omar, adding that AirAsia has found that some Malaysian banks have a stronger appetite for aircraft deals than some foreign lenders.
Industry executives say one reason Fernandes thinks highly of Omar is because she was able to secure aircraft financing for AirAsia's fleet expansion, even during the 2008 financial crisis. Omar says she likes to “lock up deals as soon as possible so we don't take the risk” of the financial markets later turning bad. She says she has already secured the financing for AirAsia's 2013 deliveries, but needs to get started soon on securing financing for 2014. “We have been talking to banks about it already, but I need to keep engaging them,” she continues. Omar is still responsible for arranging financing for all AirAsia group's aircraft, even though she recently became AirAsia Malaysia CEO.
Her ties with the Muslim banking community have proven to be a boon, but can she keep tapping the same banks? One issue airlines face is that banks have limits on how much exposure they can have to any one carrier. Omar says this is a problem AirAsia has yet to encounter. She says some banks have decided to limit their exposure to the aviation industry as a whole and “become quite selective about which airlines they want to be exposed to. But they still want to deal with us. ”
Another option for airlines is to do aircraft sale-leasebacks, but Omar says “it's not something we prefer to do, unless it is competitive with what we would get from the debt market.”
While AirAsia tries to avoid lessors, Rusdi is embracing the aircraft leasing business in more ways than one. He has established an aircraft leasing company in Singapore called Transportation Partners, headed by John Duffy, who formerly worked in Singapore for HSH Nordbank as head of Asian transportation.
Rusdi's move has proven to be timely. The fact that some European banks have closed their aviation lending businesses means there are experienced executives he can recruit. Transportation Partners has Valerie Tay as senior vice president for marketing and finance. She was formerly vice president of origination aviation finance at HSH Nordbank. The company has also hired Chan Boonsiong as chief risk officer. He was previously with GE Capital Aviation Services in Singapore.
The purpose of Transportation Partners is to lease to Lion and Lion-affiliated airlines, as well as to outside carriers. Industry executives say Rusdi needs to place aircraft with other carriers because Lion has too many 737s on order to absorb on its own. According to the Aviation Week Intelligence Network (AWIN) database, Lion has 123 737-900ERs, eight 737-800s, 201 737 MAX and five 787-8 aircraft on order. The fact that Rusdi now has an aircraft leasing company may explain why he would want to also have A320NEOs in his portfolio. Aircraft lessors generally have a diverse aircraft portfolio so as to minimize risk and cater to a broader group of airline customers.
Having some assets in Singapore, under the auspices of Transportation Partners, also minimizes risk because he no longer has all his aircraft tied up in Indonesia. And there is a tax benefit.
Aircraft leasing companies in Singapore can qualify for tax incentives under the Singapore Economic Development Board's Aircraft Leasing Scheme (ALS). The ALS and enhanced ALS provide preferential corporate tax rates of 10% and 5%, respectively. The tax concession depends on the funds an aircraft leasing company spends locally and how many employees it has in Singapore. The preferential rates apply only for a set number of years—usually five, although they are renewable.