Ramki Sundaram, previously Head of Aviation at Natixis, has officially launched his new venture, Airborne Capital, a new aircraft leasing and asset management company that has “aggressive” plans to grow its book to US$5bn in assets under management within give years.
Sundaram will be CEO of Airborne Capital and is joined by a very experienced team, including Anand Ramachandran, the former CFO of Goshawk Aviation, Cian Dooley, Jocelyn Noel, a former Natixis colleague, as well as two more ex-Goshawk corporate finance executives – John O'Flynn and Eugene Lui.
Airborne Capital, which is headquartered in Ireland, and initially with offices in Dublin and London, is backed by FEXCO Group, Ireland's largest privately owned financial services company, which is a fintech company specializing in multinational payments, financial and business solutions.
Airborne Capital is intended to “act as a bridge between investors seeking bespoke investment solutions in the aviation space, and issuers requiring aviation financing via differentiated capital solutions.” The team are seeking to capitalize on booming aviation finance market, which is predicted to double the size of its fleet in the next 20 years that traditional sources of capital will be hard pressed to meet alone. Airborne Capital says that it will provide solutions to fill this gap, and offer its expertise to new capital providers to meet the aviation industry's growth needs.
"We are very excited to launch this venture with the strong support of FEXCO,” says Sundaram. “The team at Airborne Capital has rich experience in setting up and managing innovative investment and fund platforms for investors globally who are looking to deploy capital in aviation."
According to FEXCO, financial services for aviation assets is as an attractive long-term investment opportunity for the group, which has underpinned its decision to invest in Airborne Capital.
"We are delighted to be working with the Airborne Capital team on this important initiative and we look forward to broadening our presence in this dynamic sector of the financial services market,” says Denis McCarthy, CEO of FEXCO. “With the financial support we can provide and the industry expertise of the team we believe this business can grow rapidly to play a major role in the market segments it is targeting."
The worst kept secret of recent weeks is out, Airborne Capital has launched. Goshawk has been stripped of serval key staff members and Natixis is having to re-group, after just 12 months or so of solidifying the aviation team in London.
This news and the entrance of other firms in recent months has some industry observers concerned that some of these new investors don’t really understand this business. Aggressive growth seemingly at all costs in the leasing industry is a dangerous tactic if growth is based on gaining market share. This drives downs pricing for everyone – great for airlines but for the rest of the market it will likely add even more pressure on lease rates and other deal sweeteners – relaxed covenants, no maintenance reserves… One source is predicting “blood on the streets” in the three years as these deals start going bad and that new money starts to dry up. Additional competition in this market will undoubtedly serve the influx of aircraft delivering over the same window but the consensus is that few are prepared for a default scenario nor a macroeconomic shock. That said, from discussing the market with all players over the past two months for a major industry survey (to be published in January) there are those that just cannot see a correction coming as passenger demand continues to rise. As this continues, and financiers and lessors continue to pursue aggressive growth strategies, the competitive landscape will become even more fraught and there will be casualties.
On the stage at Airline Economics Growth Frontier Hong Kong, we heard how some firms in the sale and leaseback market doing deals at a 0.48 lease rate factor. This seems like craziness in the cold light of day, but in this world of ultra-low interest rates and uncertainty, a 0.48 return pegged against a mobile tangible asset is not too bad, at least for the next five years maybe, after that the money will start to flood out as fast as it flooded in for many in this market. Come what may we are at a point where there is no safety margin for some companies, airlines need to keep growing or the resulting implosion of those asset managers and lessors on the thinnest of margins will see investors lose their shirts.
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Image 2: L to R: Cian Dooley, Partner Airborne Capital; Anand Ramachandran, CFO Airborne Capital; and Ramki Sundaram, CEO Airborne Capital. Image 1: Ramki Sundaram, CEO Airborne Capital. (Shane O'Neill, SON Photographic)[/caption]