By all accounts the
Farnborough Air Show was a smash success. Over $40 billion in total
orders. Even BA caught a bid on the news. No doubt the ‘bubbly’ is
flowing. Of interest is that this group would be drinking seltzer water
were it not for the efforts of one man. Steven Udvar-Hazy bought 25% of
those planes.
Hazy has a great story. He took $150k of his own money, borrowed another
mil and started ILFC. International Lease Finance is one of the most
successful aircraft leasing outfits in history. In 1990 Hazy sold ILFC
to AIG. I am sure he cashed out a bundle for his effort. He stayed on
as CEO for another twenty years.
In 2006 his net worth was reported at $3.1b. He took a big hit with
shares of AIG that he must have owned but in 2009 another estimate comes
up at $2.2b. He did fine.
He must have struggled at ILFC the past few years. He was once partnered
with a strong AAA, now his parent is a ward of the state. ILFC may be a
crown jewel, but it was a tough sale. It’s too big. A transaction at
even a remotely fair price would have been difficult to achieve. There
simply is not enough private equity and public debt to swing a
transaction like that.
Four months ago Hazy left ILFC. He took with him his long time CEO John
Plueger. These two must have burned some midnight oil. They started a
new company, Air Lease Corp. Funded it with equity. Arranged a $10b
lending facility from 9 banks. Bought 136 aircraft and spent all the
money. Not a bad first four months.
The people in this industry think that Hazy walks on water. I got a kick
out of this lame comment from Norm Liu, president and chief executive
of General Electric Co.’s aircraft leasing unit:
“I sure hope he’s right because we’re ordering some too.”
I think Mr. Liu is just hoping (He better be; GE bought 100 planes) No
doubt Hazy is too. I for one, would not want to be going into a
capital-intensive business that is elastic to future global GDP. One
that is dependent on favorable tax laws, subsidies for half of all
deliveries and one that relies on the continued availability of cheap
credit.
I wish Mr. Hazy well. He has a good story. But he is going to cost the
US taxpayers some serious money. Whatever one might have thought of the
value of ILFC (the AIG sub) four months ago, that value is lower today. A
lot lower. My guess is that Hazy would like nothing better than to
crush the life from his former employer. He’s off to a great start.
Bruce,
Thank you, very interesting, I love stories about guys like Hazy. Maybe they're onto something, believing the global economic recovery will continue bolstering their business.
I for one, would not want to be going into a capital-intensive business that is elastic to future global GDP. One that is dependent on favorable tax laws, subsidies for half of all deliveries and one that relies on the continued availability of cheap credit.
But might this also be an advantage for Hazy's new venture in that it may drive more end users of planes to lease instead of buy as they face those same hurdles?
Plus, the low hanging fruit (such as it is) has to be picking off clients still with the AIG sub...
That's hot...
Aircraft leasing seems to be a colourful business all right. 'Round here we remember the rapid rise and prompt implosion of Guinness Peat Aviation.
Very nice picture of the dog and cat in battle at a crucial point of the attack.
I wrote one of my graduate level finance thesis on the airline leasing industry back in the late 90's.
Steven Udvar-Hazy is a god amongst men in the industry.
For those that don't pay much attention to this sector, GE Commercial Aviation Services controls everything that Hazy doesn't lay claim to in the industry. Boeing's 10K gives a good overview with charts of customers by purchase value and aircraft totals.
When Airbus and Boeing were in a pitched battle for marketplace dominance in the late 90's up through the market crash in 2007/8, Hazy and GECAS became the deciding factors on which of the two manufacturers would have a positive cash flow each of those years. (except maybe the one massive purchase year by Dubai Air??)
As GE controls so many mass media outlets in the USA, do not expect any mention of the slow death of ILFC in the coming years. The quieter the death, the greater the market share for GE to gain, and the more comfortable a situation it is for the thieving bankster-political cadre who subsidized AIG.