LEASING ON THE RISE - LEASE CORPORATION INTERNATIONAL, Nigel Leishman, Executive Vice President & Global Head of Marketing
WORKING AT LEASE CORPORATION INTERNATIONAL (LCI), A COMMERCIAL AIRCRAFT AND HELICOPTER LEASING COMPANY WHICH IS GROWING ITS INFLUENCE IN ASIA, MR. LEISHMAN SHARES THE COMPANY’S MOST RECENT EXPANSION, THE MANY BENEFITS OF LEASING AN AIRCRAFT AND THE TREND IN DIFFERENT HELICOPTER MISSION SEGMENTS ACROSS ASIA PACIFIC.
WHEN DID LCI OPEN ITS OFFICE IN ASIA?
LCI has been active in the Asia Pacific region since starting operations in 2004. After our acquisition of a Boeing 747-400F on lease to Singapore Airlines Cargo in 2008, we subsequently grew to be the largest lessor to Singapore Airlines before launching LCI Helicopters in 2012.
As our focus has moved towards helicopters, we’ve recently expanded our Singapore office with the appointment of Chris Lloyd as Vice President Marketing and John Gumulak as Technical Director. Chris ran Lloyd Helicopters for over 20 years, while John worked for Leonardo and an Australian AW139 operator. We’ve also appointed Lan Cao as our Senior Advisor for China based in Beijing. Lan was instrumental in securing our first domestic helicopter leases in China last year, for three new AW139s with Shanghai Kingwing Aviation and helped establish our new company in the Tianjin Dongjiang Free Trade Port (DFTP) Zone to efficiently structure operating leases in the country.
WHAT ARE YOUR GOALS FOR LCI IN ASIA?
Asia-Pacific currently accounts for over 40% of our fleet, and given the expected growth and replacement needs, I can see that growing to 50% over time. We have aircraft on lease in China, Malaysia, Myanmar and Australia, and have recent experience of leasing to India which is also a promising market. This is one of the reasons I am based in the region and LCI is growing its team in Singapore.
China is an exciting market, although it takes patience and persistence to find the right opportunities. EMS operations are growing rapidly following recent easing of airspace restrictions, with our customer Kingwing being the country’s largest provider. We are seeing increased interest from Chinese offshore operators, who are seeking to upgrade their fleets and expand their international presence through the country’s “Belt and Road” initiative.
ARE THERE ANY NEW HELICOPTER LEASES IN THIS REGION?
There has been an increase in operator activity, particularly for AW139 and AW169 helicopters, as well as some Airbus types. We have several new helicopters on order this year, some of which I expect to come to this region, and customer commitments for several used helicopters which will be delivered to Asia and Australia in the coming months.
WHAT ARE THE BENEFITS OF LEASING AN ASSET RATHER THAN PURCHASING?
Operating leases have many benefits, but the key ones are cost, availability and risk. As such, the market is expected to grow by upto 20 percent in the next five years.
The up-front costs of an operating lease are typically limited to a security deposit and one month’s aircraft rental with no pre-delivery payments required. Operators can also benefit from the advance commitment LCI has made to purchase the latest aircraft. Should operators wish to purchase the same equipment now, manufacturers may not be able to deliver at the right time.
Finally, an operating lease moves much of an aircraft’s residual value risk from the operator to the lessor, who is better placed to manage the asset as part of a much larger portfolio. Further, end-users of helicopters often award shorter term contracts with near-term, or immediate, start dates. Lessors can assist by providing helicopters for lease and tailoring lease terms to match the underlying contract.
HOW DOES LCI HELP O&G OPERATORS MANAGE THEIR AIRCRAFT?
The O&G sector is showing signs of both stability and growth, and helicopter leasing is a proven way for O&G operators to manage their costs and risk.
Cost is crucial in this competitive market; with operating leases, minimal initial deposits can reduce mobilization costs, and LCI can forward fix monthly rental and interest rates to avoid adverse movements in exchange rates.
Most new helicopters are supported by the manufacturer’s costeffective power-by-the-hour program. LCI has already negotiated these agreements and can make them available to operators to ensure their maintenance requirements and cost risk are efficiently handled.
LCI builds in maximum flexibility to a new helicopter specification,with provisions for hoist, hook or additional equipment such as HF radios. This allows these helicopters to move easily between contracts, customers and mission types, at lower costs. Last year we delivered an O&G AW139 to an operator who reconfigured it for EMS missions. I expect we will see more of this type of transition in the coming years..
WHAT ARE LCI’S KEY MARKETS AND MISSION SEGMENTS IN ASIA?
EMS in China shows huge promise. A few years ago, the countryhad just a handful of dedicated EMS helicopters - now there are almost 50. There are still regulatory constraints, and it can be difficult to find enough pilots to train and operate the helicopters, so it will take time for this market to reach its full potential. We also need to understand better the EMS funding models, as none of the contracts are directly supported by the government, unlike other markets such as Australia and Japan.
We expect Australia and New Zealand to continue to upgrade their EMS fleets, which are already the largest in the region. Recently, there have been EMS contracts awarded by governments in South Korea and Taiwan, into which new AW169s were introduced.
Without doubt, O&G remains a major sector in the region, especially in Malaysia, Indonesia and Australia where we have seen a recent uptick in contracts and tenders, with a preference for new generation helicopters.