The answer to this question is just one of the many fascinating things the Reed Smith aviation finance team discussed around St Stephen’s Green this January, as members of our London, Paris and Miami teams attended aviation’s largest annual industry gathering in Dublin.
The presiding concern in discussions this year was where the industry is
Our aviation finance team has made it to the end of its first complete year since its relaunch in summer 2017 – and it has been a big one! We have worked on transactions involving over 100 aircraft and 19 different jurisdictions, we have met with clients and friends in Dublin, New York, Hong Kong and London, and we have seen our renewed team go from strength to strength as we welcomed new members in Paris and the United States.
Continue Reading So long, farewell … and happy new year! 2018 trends and 2019 opportunities
A 2017 survey showed that just 3% of airline chief executives are female, against the FTSE 100’s 7% at the same time. As of the middle of 2018, only 12 of the 286 IATA member airlines were led by women – a mere 4%. And with the future of Flybe under question at the time of writing, this number may yet be reduced.
Continue Reading Pipeline blues: Where are aviation’s female CEOs?
The Hong Kong conferences are over for another year, and our Aviation Finance team had another very productive week at the various sessions. It was great to see so many familiar faces and connect with new people, and doing so in what is fast becoming one of the world’s new aviation finance powerhouse jurisdictions gave the meetings a real buzz.
Continue Reading Aviation Finance: The Hong Kong Report
Aviation seems to be facing a fuel-related existential crisis at the moment, as pressures mount on the industry from various angles.
Within asset finance generally the major discussion is the looming bite of the IMO 2020 regulations, which will reduce the amount of sulphur permitted in ship fuel oil to a limit of 0.50 per cent mass by mass from 1 January 2020. Aside from the huge impact this will have on the world’s vessel owners and operators, it is also anticipated that there will be knock-on effects for aviation.
The heatwave may be over but the wave of August out-of-office responses is still building, so rather than post about controversial redelivery conditions or the fascinating behaviour of interest rates, and prompted by the striking intersection of aviation and literature recently, we thought it seemed high time to offer Legal Flight Deck: The Summer Reading Edition. You’re welcome.
Continue Reading Flypasts, Flybraries, Hurricanes and Paper Planes: The Summer Reading Edition
Summary
In last week’s case of Triple 7 MSN 27251 Ltd v. Azman Air Services Ltd,[1] Azman Air Services argued that two aircraft lease agreements were void under the English law doctrine of common mistake.
The High Court considered this question and found that common mistake is only sufficient to void a lease agreement (or any other contract) where:
Continue Reading When will a lease agreement be void for common mistake?
According to PWC research, half of the world’s workforce will be millennials (people born between 1980 and 1995) by 2020. It is also estimated that over the course of the ‘Great Wealth Transfer’ occurring over the coming 30 years, this generation will inherit wealth to the value of $30 trillion.
A lot of editorial ink has been spent on the analysis of millennials, especially on the ways in which their spending habits differ from those of previous generations (smashed avocado, anyone?). It has been reported that the particular context in which this cohort grew up – described by one columnist as ‘a series of moments when the big institutions failed to provide basic security, competence and accountability’ – has ‘fundamentally changed the game for Millennials’. They don’t buy houses in the way their predecessors did. They want access to cars, but not necessarily to own them, and would rather have a smartphone anyway. They are characterised by a ‘quirky eco-conscious individualism’. They want workplaces that offer flexible hours and feel like a community, and would rather keep their lives than work towards partnerships or corner offices.
Similarly, in recent months, we have seen a marked generational change in some of the lenders we work with. While some are determined to carry on as if the GFC never happened, others are looking at building brand new books with innovation and new technology at their core, even in more traditional fields like asset and equipment finance.
All of this has made us wonder. If millennial spending habits are so different from those of previous generations, why should their lending habits stay the same? What happens when the millennials are running those ‘big institutions’? Specifically, what will millennial asset finance look like?
Continue Reading The changing of the guard: Millennial asset finance
The aviation industry is a major contributor to the world’s carbon emission and greenhouse gas problem, generating 2% of the world’s carbon dioxide emissions and estimated to account for 3% by 2050. The UK’s aviation sector, for example, was responsible for 34 million tonnes of CO2 emissions in 2012, a figure forecast to rise to 43.5 million tonnes by 2030 [1].
The huge volume of commercial aviation activity, the long distances we now travel, the massive amount of fuel burned to power the equipment, the release of emissions directly into higher levels of the atmosphere, the ever-growing demand for capacity – this all adds up to a very knotty problem for the industry to address. How can we better balance the need to accommodate unprecedented growth in demand with the environmental imperative to fly far less than we already do?
There are a number of methods currently in use, of varying levels of effectiveness.
Continue Reading Wanted: Blue sky solution to big green problem
More data on aviation’s gender pay gap has become available since our first post on this in January, and a theme has emerged across the more prominent pay gap reports.
This is that although men and women may be paid equally for doing the same job, the figures are significantly affected by the fact that the vast – the very vast – majority of senior and therefore more highly paid jobs are held by men. In most cases, in aviation, this means pilots. We saw in the EasyJet report that just 86 of their 1493 pilots were female; at British Airways the figure is 94% male, at Jet2 it is 95%, and 95% again at Tui Airways. The BA report helpfully notes what their figures would look like if pilots were removed from the equation – there would be a 1% gap, in favour of women. It is clear where the problem is.
So how do we fix it? We have seen countless commitments to ‘close the gap’ and declarations of equal opportunity and gender-blind recruiting, but what does doing something about it actually look like? It may be, after all, that recruitment policies and retention initiatives are not the source of the problem. It may be that it begins much earlier than that.
Continue Reading Little Miss Pilot: Where next for aviation’s gender pay gap?
We are very excited to welcome our new Paris team, as we have now been joined by partner Victoria Westcott and counsel Florent Rigaud, as well as senior associate Elaine Porter (joining shortly) and associate Abdullahi Mohammed.
This new team brings significant diversification to Reed Smith’s global asset finance capability, adding particular expertise in working with lessors to our existing strengths on the financing and airline sides. Our colleagues in Paris are currently the only English and French law qualified team practising in both the English and French languages, giving us a unique ability to serve our clients not only in the United Kingdom and Europe, but throughout the Francophone world.
Florent’s client base includes a number of operating lessors, and he has kindly agreed to be interviewed for our blog – we hope you enjoy!
Continue Reading Meet the Team: Florent Rigaud
Australians are well known as keen travellers, and our geographical isolation has meant that air travel has long been a very important part of this aspect of our national identity. Perhaps unusually, this has grown into a strong local affinity for certain models of aircraft – especially the big ones. But is this set to change?
The Boeing 747, for example, has long held a special place in Australia’s heart. It was a 747 that set the then record for a flight carrying the largest number of passengers while evacuating 673 people from Darwin after Cyclone Tracy in 1974, it was the 747 called ‘City of Canberra’ that set the new commercial aircraft distance record in 1989 when it flew non-stop from London to Sydney, and it is a 747 immortalised by Paul Kelly in ‘Sydney from a 747’, still sometimes played while a flight circles the Harbour as it waits to land.
The current favourite is the A380, which was so quickly embraced and absorbed as part of our travelling lives. Its rock star status is such that Qantas have recognised that passengers may book particular flights just to fly in this model, with a section on its website headed ‘How do I book the Qantas A380?’ setting out the particular flight numbers and routes on which a passenger can be (almost) guaranteed to fly on one. It has become one of our familiar characters, and for a lot of expats the A380 is one of the important constants of our trips home. There is nothing like the feeling of stepping off QF2 in Sydney on Christmas morning – material worthy of the Qantas Christmas advert.
Continue Reading Notes from a large island: Australia and its aircraft models
The gender pay gap has been an issue of much public discussion in the last year. The latest figures show that the overall national average for the pay gap between male and female full-time employees stands at 9.1%. However, the aviation sector is one which has seen particularly negative results.
With new rules regarding pay gap reporting in place and the April 2018 reporting deadline looming, this issue will not be going away – rather, it is likely to become more prominent as more results are published. For example, EasyJet’s announcement of its figures in late November generated a number of headlines, many of which summarised the results as ‘EasyJet admits 45% pay gap between women and men’.
What a year it has been! At the start of 2017, Reed Smith had no aviation finance team. We have now established teams in London, New York and Abu Dhabi (and we’re not done yet!). Across the board we have structured and closed a diverse range of transactions for lenders, lessors and operators alike (and we still have one or two to go as we all race for the finishing line that is the Holidays).
Throughout, we have been grateful for the support of our clients who have stood by us during our respective moves, and we are excited to close the book on the first phase of our project as we move into 2018. The new year will see the continued development of our practice and will, we hope, give us the opportunity to form deeper partnerships with our existing clients as well as to establish new partnerships to support additional players in the aviation industry.
Establishing a new practice from scratch is inevitably somewhat turbulent for all involved and this got us thinking about the other turbulence and interruptions experienced on a sectoral basis by the industry this year. With this in mind, it seemed like a good moment for us to pause and take stock of 2017.
Continue Reading Farewell to 2017, and to the 747: An exciting year in review
The airline leasing sector has already had an incredibly busy year with major moves towards consolidation in the form of the purchase of lessor AWAS by DAE in April.
Leasing plays a significant role in the aviation sector as a whole – with leased aircraft estimated to account for 40-45% of new aircraft purchases. Consolidation is not the only factor driving change and shaking up the sector. Major players are increasingly noting competition from new Chinese entrants to the market. Many more have benefited from Chinese investment.
Chinese lessors are making real waves in the sale and leaseback market by the terms they can offer for new aircraft purchases. We know that the Chinese lessors we work with have ambitious plans, not least because of China’s huge domestic market (industry estimates put demand at around 6000 new aircraft over the next two decades).
What opportunities and challenges does this influx of new entrants pose for the aviation industry as a whole?
Continue Reading Asian lessors disrupt the worldwide aircraft leasing sector