Why was the decision taken to form Gateway Engine Leasing with your Japanese partners?
GA Telesis has always had a robust engine leasing enterprise. A few years ago, we and our shareholder Tokyo Century announced a $1 billion dollar engine initiative seeking to lease and finance new technology engines. When All Nippon Airways Trading Co. became a shareholder, it expressed interest in alternative strategies for the growth of its business and collectively we felt that there was room for another entrant in the long-term engine leasing space, and so, we formed Gateway.
Gateway’s initial portfolio will consist of established engine types such as V2500, CFM56-5B and CF6-80E engines already on lease. Why was it decided that these engines presented the best leasing opportunities for the company?
These are engines owned by GA Telesis engine leasing business. The credit profiles of the lessees along with the equipment profiles and platform mix made these a great seed portfolio for Gateway.
The business will be headquartered in the U.S. but has plans to grow into Europe and Asia. How will Gateway go about doing this and in what sort of timeframe?
All Nippon Airways Trading Co. will second a few employees to GA Telesis who will be instrumental in the development and growth of Gateway. Once things get rolling we plan expansion into the markets where we feel there is great demand in Europe and Asia.
The focus will be on long-term lease agreements rather than shorter ones. Why has the industry preference shifted towards longer-leases rather than shorter-term agreements?
In reality, the market has not shifted towards the longer-term lease. We feel the split is about the same. The difference is that there are a number of new technology engines introduced into the market and leasing engines in that realm leads to a lot of long-term leases. However, the short-term engine leasing market is quite robust and growing. As for Gateway, our decision to not focus on short-term leases is because of the complexity and resources it takes to lease engines short-term and Gateway just isn’t staffed at this point to do so.
Do you foresee any more trends for 2019 in the engine leasing segment?
The spare engine leasing market is a little sparse at present. That is because OEMs are using most of their engines to deal with operational issues surrounding new deliveries as well as supporting warranty claims. We do not see a major up tick in volume until 2020 and beyond.