Clear Skies Ahead? 2011 NZAAA - Conference GE Capital Asset Management Services
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Clear Skies Ahead? 2011 NZAAA Conference GE Capital Asset Management Services
GE Today – 2010 Revenue
GE Energy Infrastructure $37.5B Healthcare $16.9B GE Capital $47.0B
Energy
Aviation $17.6B Home & Business $25.5B
Solutions, Media
Oil & Gas
Transportation $3.4B
Power & Water
$12.6B earnings
~$150B Revenue $14.7B cash flow
2
Global Capability
• 30 years of experience financing aircraft around the globe.
• Large sales and underwriting team focused exclusively on facilitating aviation
transactions in New Zealand, Australia & Asia.
• Ability to take residual risk (no Residual Value Insurance (RVI) required)
• Global portfolio of over 2,000 aircraft and helicopters
• In-house legal, valuation and tax expertise
• New Zealand, Australia’s & Asia’s Leading Aviation Financier.
NZ’s Capability
• Dedicated Sales Team with strong industry knowledge.
• Strong geographical coverage across NZ.
• Aviation knowledge ingrained into the total business i.e Risk, Underwriting
US$25bn in aviation financing experience
Today's global market...
Recovery under way
Outlook for global real GDP % change
• Global equities up
• Global trade has recovered
• Financial markets are healing
• Business confidence returning
• China & Asia & emerging markets
leading the way
• Commodity-based following on
• U.S. leading developed countries
• Europe lagging but recovering
Source: IMF Outlook
Global Single Engine Helicopter sales
Source: AMSTAT
Source: AMSTAT
SE Helicopter “For sale” peaked in the first half of ‘09 and the
percentage continues to steadily decline
Global Turbine Helicopter sales
Source: AMSTAT
Source: AMSTAT
Source: AMSTAT
Turbine Helicopter reached plateau post Sept ‘09
Global Helicopter Average Asking Prices
Source: AMSTAT
Source: AMSTAT
Source: AMSTAT
Pricing appears in general to have reached a plateau
Global Helicopter Average Asking Prices
Source: AMSTAT
Source: AMSTAT
Source: AMSTAT
Newer Units outstripping older HelicoptersNewer aircraft sales recovering faster?
% of Used aircraft sold vs. listed “For Sale”
Source: AMSTAT
Sales of Newer aircraft are have faired
better than those of older vintageAircraft sales are recovering
Volume has increased & is trending positively
Source: Marketline
Change Of Ownership of aircraft has
increased since 20102011 Financing Environment
• NZ’s financial industry has hopefully peaked on the number
of collapses
• Remaining Financing institutions have increased capital
adequacy requirements & Prime borrowers able to access
capital BUT Funding costs for financing institutions have
increased
• Available funds tight for marginal credits
• More financing institutions are displaying increased
prudence with aviation assets
• Finance Institution advance rates against aircraft have
become more conservative
• Much more scrutiny by all financiers on business accounts
Industry Lesson Learned: Collateral not a substitute for creditGE’s approach to Valuations
Valuations
Valuations can be broadly classified into three categories, distinguished
mainly by the Assets anticipated use:
• Sale for removal for a similar or alternate use
• Continued (or installed) use of the asset for the purpose for which it
was designed and acquired
• Liquidation
So where do Valuers fit in?
• Sale & leaseback of existing assets – releasing equity
• Acquisition of new “used” assets
• Acquisition of a competitor / new company
• Review of existing assets to loan against, ensure insurance
coverage etcWhat are the key aspects we look at when completing a valuation? When conducting the primary equipment review we consider: • C ustomers reputation – critical in aviation and may / may not affect values! • Condition: Not just the one asset, but the overall fleet • Maintenance: Is there signs of irregular maintenance? • Operators: Any idea or no idea? • Log book History: Does the client have competent maintenance records for the asset? • Age of asset and ‘fit for purpose’
What does GE look at? At “GE” we provide our Risk people with an overview of the condition of the assets, general operational opinion and more. Our valuation commentary can include: • Size of target market (number of customers) in default • Competitors for the same target market (i.e none, considerable) • Growth of sales of same types, brands or equipment (i.e slow, strong etc.) • Timeframe for delivery of new equipment (i.e greater than 12 months, no lead time) • Risk factors. Among the risk factors are issues like legal exposure for safety, regulatory risks, risk of new competitors or products entering the market, and any other issues that could impact on the future values of the equipment. • Information on the industry and the general economy
Resale Market - Take Away’s
A va ila bility
Single Engine. Inventory continues to contract (6.9% today vs. 8.4% March ‘10). Contraction is
common across all segments (Newer, Older, Legacy) but greatest amongst Newer models.
Multi Engine. The Newer Multi Engine market is the only part of this market where inventory is
contracting (3.2% today vs. 5.4% November ‘09). Inventory of Older and Legacy Multi Engine models
continues to rise.
R e s a le R e ta il T ra ns a c tio ns
Single Engine. 2009 and 2010 were the worst years in the last 4. Newer Single Engine model sales
did show improvement in 2010 over 2009 and if Q1 2011 is any measure, this segment will do even
better in 2011.
Multi Engine. 2009 was the worst year in the last 4. 2010 showed a (relatively) nice overall
improvement in transactions in this market and Older and Legacy model markets showed greater
improvement than the Newer model markets. This mix has changed in Q1 2011 with early signs
suggesting that this year the Legacy and Newer segments will do better than the Older modelResale Market - Take Away’s
A s k ing P ric e s (g lo ba l view )
• Single Engine. Contracting inventory and level resale retail transaction activity in the Older and
Legacy segments seem to have been enough to cause a levelling off in previously declining Asking
Prices. Contracting inventory and a rise in transaction activity has prompted modest Asking Price
increases in the Newer segment of the market.
• Multi Engine. Lower inventory and modest increases in resale retail transactions in the Newer Multi
Engine market had been enough to level off previously declining Asking Prices, although we should
continue to watch a recent downward trend. In the Legacy Multi Engine market, high inventories have
trumped improved transaction activity (so far) and continue to push down Asking Prices. Asking
Prices in the Older part of this market continue to remain lower and flat.Questions
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