At the time of a fast-recovering international air travel market, the Saudi Public Investment Fund (PIF) has announced they are set to acquire the aircraft leasing division of Standard Chartered in a $3.6 billion deal. This move is part of Saudi Arabia’s larger strategy to diversify its economy and become a significant player in the global aviation investment scene, looking to enhance Riyadh Air’s competitive position against regional rivals Emirates, Etihad, and Qatar Airways. The deal, executed by AviLease, a PIF-owned company, will result in a business with 167 aircraft leased to 46 airlines globally. AIP Capital, a new global aviation asset management and investment company, discusses the recovery of the aviation industry and its role in driving alternative capital into the sector, creating a wave of new entrants into the leasing and private credit industry within aerospace. As the aviation industry recovers, with an estimated 4.35 billion people expected to travel in 2023 – closing in on the 4.54 billion who flew in 2019 – airline industry net profits are expected to reach $9.8 billion in 2023, which is more than double the previous forecast – asset managers are expected to reap the rewards.
Historically, banks have dominated the arena of aviation financing, yet with the retraction of these traditional lenders’ support throughout the years of the pandemic, private equity firms and alternative investment platforms are seizing the opportunity to enter the fold, purchasing the new planes originally ordered by airlines. This move indicates a big shift in aviation financing, a recent report published by Spherical Insights LLP expects the global aviation asset management market size to grow from USD 177.79 Billion in 2022 to USD 288.34 Billion by 2032.Launched in May 2023, AIP already has a $1.6 billion portfolio encompassing 30 aircraft, with another 68 Boeing 737 Max models on order. Its activities include aircraft management, operating and acquisition finance, and private credit investing, and currently has an additional $2.6 billion of capital deployed in investment grade, high-yield and distressed aviation credit. The AIP Capital team has a successful track record of leveraging relationships and a unique investment approach to deliver outsized returns on assets, with previous aircraft investments totaled approximately $5 billion across 119 assets.
Jared Ailstock, Managing Partner at AIP Capital has commented on why investors are increasingly turning to aviation leasing: “There is a lot of really different and attractive ways to get yield in the environment we are living in right now. I think a lot of people have looked at different parts of that market and said ‘Well, the risk/return in X, Y, Z investment is way better than aviation’, and I think some of those participants wouldn’t have said that a couple of years ago.“Where we have seen success are folks that have either been coming into the space for the very first time, because they view the entry point as being a lot more attractive today because there isn’t as much equity in the space, or guys who have been able to weather the storm and they view aviation as a core part of their strategy and they will continue to deploy equity throughout various cycles.”