Battered jet airline industry draws rich bargain-hunters
Carlyle Group wants to finance jets, a sign "things are at the bottom" and "traffic looks to pick up"
Airline industry financiers are taking last week's decision by Carlyle Group, Washington DC, and RPK Capital Management, Chicago, to raise a $1 billion-plus equity and debt fund to buy jets, engines, and aviation finance securities and loans, as a sign the industry has hit bottom and is starting to attract new dollars. Carlyle is the largest US private equity investor; RPK, founded in 2004, specializes in aircraft leasing.
Since at least the 1970s, most US airlines don't own their planes; banks and investors do; but jet finance capital has become difficult to raise from any souce in recent years. "All kinds of perfect storm events since 9/11 have caused issues for commercial carriers," says Chris Sponenberg, vice president for client development at Wilmington Trust Co., trustee for thousands of jet aircraft, power plants, railcars and other capital goods on behalf of their investor-owners.
"Shrewd investors realize things are at the bottom," Sponenberg told me. "Lease rates have fallen, but they're starting to stabilize. Folks are looking at this point as an opoprtunity to jump in. It's an indication that traffic looks to pick up, domestically and then worldwide. It bodes well for aircraft manufacturers, carriers and investors."
"Capital is chasing opportunity," affirmed his colleague, David Vanaskey, vice president for the bank's administrative, maintenance, compliance division which tracks jet investments. "Carlyle's an example of the firms we've seen beginning to position themselves to take advantage of the opportunity to fund new aircraft," and refinance what's still flying.