Japanese Aircraft Financing Set To Return

Japanese financing has been an important source of funding for flag carriers, and it’s now opening up to low-cost carriers (LCCs). While one third of KLM’s fleet has been financed by Japanese investors, LCCs have typically been unable to benefit from the tax benefits of JOLCOs (Japanese operating leases with call options) as Japanese financiers considered them high risk until they had proven their long-term stability.

It seems that enough time has passed. Japanese financiers are showing more interest in LCCs – with Ryanair and easyJet leading the way with JOLCOs as far back as 2007.

Speaking at the International Society of Transport Aircraft Trading (ISTAT) Asia today, Vincent Hodder, SVP of operations at Jetstar Japan commented: “This change in mind set is a real positive for the LCC community going forwards.”

But the widening of Japanese financing is not limited to LCCs. Speaking at Boeing Capital Corporation’s financiers event held in Tokyo in April, the company’s VP for Asia, Greater China and India, Foster Arata, noted that back in the 1980s, Japan was at the ‘forefront’ of aircraft finance, and that its involvement is returning. “This year, we expect Japan to finance more than 10 per cent of Boeing deliveries, not only in the country but across the globe. Japan is in an excellent position to prosper from aircraft investment, thanks to its access to capital and low-cost funding, and a solid understanding of the associated strategies involved in financing and leasing.”

Speaking at ISTAT, Shiro Kambara, MD of Nomura Babcock & Brown, explained that Japanese leases have traditionally been limited to narrowbodies, such as the 737-800 and A320, but have more recently covered widebody transactions. However, this was essentially due to a shortage of narrowbodies, “so there was no choice but to welcome widebodies”, Kambara explained.

Mary-Anne Baldwin, Editor, Airline Fleet Management
[email protected]

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