Company Profile: Global Jet Capital Enjoys Market Expansion

Global Jet Capital Enjoys Market Expansion

Global Jet Capital is a dedicated international Business Aviation finance specialist, a market where most providers are either small or part of large banking organizations. With $2.6bn in assets under management, it’s certainly filling its niche, as Vivek Kaushal, president and COO tells Rohit Jaggi…

A relatively young company, Global Jet Capital was founded at the end of 2014 but today has one of the world’s biggest portfolios of business aircraft, with 180 aircraft spread across 150 customers, reveals Vivek Kaushal, president and chief operating officer.

“We’re a pure-play financier of business aircraft. And while there are no published statistics, we are likely among the top two operating lessors of business jets, globally with 100-plus aircraft under operating lease,” he adds.

The company has seen strong originations growth of nearly 20% annually since 2016, and is banking on strong growth in both Asia and Europe.

Vivek Kaushal

The Key to Success in Aircraft Financing

Kaushal is clear about what makes for success in aircraft financing. “It’s 100% relationship driven. You’ve got to know who you’re doing business with,” he says.

“I’m grateful to be an asset financier in this business. But it’s taken a lot of time [for us] to put together the skill and expertise.” (In fact the

management team has between it more than 255 years of business aircraft industry expertise, spanning more than 3,500 completed aircraft transactions.)

Kaushal came to the company when it acquired the GE Capital Business Aviation portfolio in 2015. “I led the divestiture of the business and once we brought it over, I joined the management team. We really got going in the second half of 2016, when we did $300m of transaction volume.”

The Company is capitalized by world-class private investors with expertise in the global aviation industry, including The Carlyle Group, AE Industrial Partners and FS/KKR Advisor, LLC, a partnership between FS Investments and KKR Credit.

“We provide leases and loans to customers who want to get into business aircraft. Our primary product is the operating lease, with 70% of our portfolio. The other 30% is straight finance,” says Kaushal. “The value proposition of the operating lease from a customer’s perspective is that you can get into the aircraft you want.

“You pick the aircraft, then we step into your shoes and purchase the aircraft and we lease it to you. You don’t have to worry about the value of the aircraft when the lease is over. You give us back the keys and move into your next aircraft.”

Aircraft Leases Without the Fuss

It’s very different from a bank loan. “A bank may require you to put up to 20% down, and also put some of your assets in a wealth management account at the bank before extending you a loan.

“Our alternative is that you put as little as 10% (or even less) down and you can be in your aircraft with much less investment, and if you choose the operating lease route, you never have to worry about the residual risk of the aircraft.”

There’s no quibbling over values, either, Kaushal insists. “There’s an emotional aspect to someone acquiring an aircraft, and it’s not productive to get in the middle of that. So, for example, if I value the aircraft at $14m and the customer paid a little more, we respect that and structure our lease accordingly.”

Enlarging the Market Through Aircraft Finance

The 30% of the business that is not operating leases comprises loans and finance leases. “The operating lease is compelling,” says Kaushal. “But if you want to do a straight financing we can still do it more efficiently than the private banks can.

“We don’t lock up your capital to the same degree. We don’t ask you to put assets under management. We’re not interested in your ancillary business.”

It may cost a little more than a bank, he explains, “but the rest of it can be really flexible. It depends on the credit, the structure, and the term. We give you a value-added option.”

For many buyers, this means they can leave their money in their business, where it is making more money than they are paying in interest charges for their new – or used – airplane.

“We’re already enlarging the market,” says Kaushal, “working with all the OEMs, helping them make sales to first-time buyers and people who have been in much smaller aircraft but really have a mission profile that’s consistent with larger aircraft.”

Growing Focus on Global Presence

Global Jet Capital has been busily expanding its global presence, opening offices in Hong Kong and Zurich last year. “Last year [our business was] about 60% US, 40% international.”

Those locations added to offices in the US and Mexico but marked a step change. “When we were servicing these countries from the US, we wouldn’t always get visibility to the entire flow of opportunities,” says Kaushal. “But when you have people in the market servici ng it regularly, you’re top-of-mind.”

He sees Europe as ripe for the company’s operating leases, adding, “We’re going from a very small base in both Asia and Europe. The market could shrink and we could still double our volume”.

Aircraft Agnostic Lease & Finance Solution Part of the Global Jet Capital offering is to be “aircraft-agnostic”, Kaushal says. “The type of person that is going to get into a business aircraft is very focused on the airplane, and we work with their preferences. We find that we almost never turn a deal away for reasons of the aircraft.

“I will say that if the aircraft is really old – 12- plus years – we’ll hesitate to do an operating lease. But at the same time if it’s in great condition, if we’re entering a relationship that will be with us for years, we’ll look at it long and hard.”

Fitting into the Sustainability Question Nevertheless, there are several challenges in the air, including questions about the sustainability of economic growth in the US, and the economic health of other parts of the globe. Another question is about environmental sustainability.

“This is a time of competing imperatives,” says Kaushal. “Carbon footprint is a huge imperative. It should be a huge imperative for the planet. But equally, breaking down barriers is important.

“We’re trying to work out how we fit into sustainability. We know there’s a role for us. Whether it’s financing carbon offsets our customers are acquiring, helping them transition into more fuel-efficient aircraft, or helping with the supply chains around sustainable aviation fuel – I can see a day where someone wants to purchase carbon offsets as part of their lease.”

But, he adds, “There is real urgency around it, and we are committed to add value to this part of the equation.”

Market Prospects for 2020… And what about the prospects for his company and his sector this year? “With the US election coming up we’re being a bit measured, but we’ve had a great start to the year,” Kaushal explains.

“We’ve done a lot of pre-owned business in the past couple of years and we know we’re going to do a lot more this year. There’s not the scarcity of aircraft like at the end of 2018. We’re set up for another banner year.”

More information from www.globaljetcapital.com ❚