South African helicopter and business jet finance roundtable

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Senior representertives from Investec, Rand Merchant Bank, Wesbank, ExecuJet, National Airways Corporation, ENS and Clyde & Co met up in Johannesburg to discuss aircraft and helicopter finance in Southern Africa.

 

 

Corporate Jet Investor:         How active are the business aircraft and helicopter markets?

Melanie Humphries, Investec:          We've seen a lot of activity, certainly in the pre-owned market. The new corporate jet market is not where it used to be, but buyers are starting to come back into the market. 

When you're looking at the African continent a corporate jet is a business tool, as opposed to a luxury, so we have found that a lot of our clients that have bought jets have been less affected by the Global Financial crisis.

Their aircraft aren't just a luxury item that they could barely afford in the good times, but is critical, to get them from point A to point B, because of a lack of scheduled commercial flights and airline safety when travelling on the African continent.

Gary Phillips, NAC:    The aviation world revolves around America and we saw a slow-down that lagged behind theirs, probably by a year or more so. While we were hearing the horror stories in America about lack of funding, we were still doing all right down here. 

There was an order book that needed to be fulfilled and a lot of those guys took delivery of the aeroplanes, so for a while the effects were lessened on us, and they were delayed.  Going forward, we have seen a pick-up in activity, certainly this year, compared to last year. 

We're not going to see the market change in 2011.  I think we'll see the market trickling along and, next year, I think we'll start to see things turn around. 

You've got to bear in mind, from an aircraft value point of view, that two years ago a lot of manufacturers were sitting with white tails. They were standing on the ramp and they needed to get rid of these aeroplanes, so a lot of those were dumped on the market, which had an impact on the used market, and so, consequently, we end up with aeroplanes with values that are diminishing, because the supply exceeds the demand.

The manufacturers roped back their production.  Now, that takes a while to achieve, but they've got to the stage now where they're really only producing the aeroplanes that they have to produce for their orders. 

We are still seeing values drop, and some of the older assets are going to be basically worth scrap value. Some of the 20 to 30 year old aeroplanes are going to get to the stage where they're no longer worth anything.   But we will see values start to stabilise in later model aeroplanes and, of course, that's good for all of us, especially with regards to providing the funding and looking at some sort of equity in asset.

Robbie Irons, ExecuJet:         We've seen, since January this year, a marked improvement in interest from our high profile clients.  And not only just governments, we're talking corporates, VIPs, and top 20 to 30 corporates in each country.  The appetite that is very clear to us - and  I'm not sure if the financial services industry has seen this -but there's a definitive drive to new generation aircraft.  All the market reports are stipulating aircraft that exceed seven to eight years from date of manufacture will continue to depreciate going into the future. 

We are seeing a lot more interest in the market for new generation aircraft.  One of the biggest issues with that is the  delivery positions aren't available till 2013/2014, so there's no immediate solution to fill that gap. This is where the pre-owned solutions are coming in as an interim option before they get new delivery.

 

Melanie Humphries, Jaco Pietersen, Robbie Irons

Corporate Jet Investor: How active are the business aircraft and helicopter markets?

Melanie Humphries, Investec: We’ve seen a lot of activity, certainly in the pre-owned market. The new corporate jet market is not where it used to be, but buyers are starting to come back into the market.

When you’re looking at the African continent a corporate jet is a business tool, as opposed to a luxury, so we have found that a lot of our clients that have bought jets have been less affected by the Global Financial crisis.

Their aircraft aren’t just a luxury item that they could barely afford in the good times, but is critical, to get them from point A to point B, because of a lack of scheduled commercial flights and airline safety when travelling on the African continent.

Gary Phillips, NAC: The aviation world revolves around America and we saw a slow-down that lagged behind theirs, probably by a year or more so. While we were hearing the horror stories in America about lack of funding, we were still doing all right down here.

There was an order book that needed to be fulfilled and a lot of those guys took delivery of the aeroplanes, so for a while the effects were lessened on us, and they were delayed.  Going forward, we have seen a pick-up in activity, certainly this year, compared to last year.

We’re not going to see the market change in 2011.  I think we’ll see the market trickling along and, next year, I think we’ll start to see things turn around.

You’ve got to bear in mind, from an aircraft value point of view, that two years ago a lot of manufacturers were sitting with white tails. They were standing on the ramp and they needed to get rid of these aeroplanes, so a lot of those were dumped on the market, which had an impact on the used market, and so, consequently, we end up with aeroplanes with values that are diminishing, because the supply exceeds the demand.

The manufacturers roped back their production. Now, that takes a while to achieve, but they’ve got to the stage now where they’re really only producing the aeroplanes that they have to produce for their orders.

We are still seeing values drop, and some of the older assets are going to be basically worth scrap value. Some of the 20 to 30 year old aeroplanes are going to get to the stage where they’re no longer worth anything.   But we will see values start to stabilise in later model aeroplanes and, of course, that’s good for all of us, especially with regards to providing the funding and looking at some sort of equity in asset.

Robbie Irons, ExecuJet: We’ve seen, since January this year, a marked improvement in interest from our high profile clients.  And not only just governments, we’re talking corporates, VIPs, and top 20 to 30 corporates in each country.  The appetite that is very clear to us – and  I’m not sure if the financial services industry has seen this -but there’s a definitive drive to new generation aircraft.  All the market reports are stipulating aircraft that exceed seven to eight years from date of manufacture will continue to depreciate going into the future.

We are seeing a lot more interest in the market for new generation aircraft.  One of the biggest issues with that is the  delivery positions aren’t available till 2013/2014, so there’s no immediate solution to fill that gap. This is where the pre-owned solutions are coming in as an interim option before they get new delivery.

Corporate Jet Investor: Shall we run through some perceptions of the African market and you can say whether you agree or disagree?  One is that the Africa business jet market is all about small and old aircraft.  Is that fair?

Gary Phillips, NAC: I would say it was probably true 10 or 15 years ago but the nature of the fleet has changed. We haven’t just got little jets here anymore, It’s because business has changed – it has become global. People need to travel further away and Africa lends itself to the corporate jet, just because the airline connections are either unreliable or non-existent.  It was a small jet market maybe a few years ago but it’s certainly matured, certainly in the last 10 to 15 years, I would say.

Melanie Humphries, Investec: That’s because your clients’ businesses’ typically starts regionally, and as the businesses have expanded into Europe and the rest of the world, they’re looking for longer ranged aircraft.

Wouter du Preez, RMB: I think one needs to dissect the market in terms of whether you’re talking about value or volume. Colin would also be in a good position to comment.  In terms of volume, perceptions are that there’s a large market still very active around piston prop aircraft.

A perception that RMB has had, and it would be good to hear from the operators around the table, is that if you talk more specifically about the business jet market, maybe $5 million dollars upwards, then there seems to be a lot of interest specifically in long-range and ultra long-range.

When you’re talking new vintage aircraft, a lot of African market business comes from governments. Many of these governments that we’ve been approached by say they are not interested in medium-range aircraft, but rather in long-haul/ultra-range.  They would rather prefer a bigger aircraft. They need to be able to get from somewhere in Africa to London direct, Middle East direct etc

Robbie Irons, Execujet: I think this is getting back to the initial question.  Traditionally, there has been an international culture to take old generation aircraft and dump then into Africa. That was the easy solution out.  That is no longer the case.  The regional civil aviation authorities in each country now preclude that from taking place and, hence, the interest in – when I say newer generation aircraft, I’m talking up to ten years old, within that timeframe.  There are still substantial numbers of old generation aircraft in Africa but that is changing fairly rapidly.

You know, I’ve just come back from Europe speaking with all our sales directors in the various regions, and it’s very clear, there’s a lot of movement taking place, sales are happening , it’s a lot more difficult to finance aircraft, and when I say difficult I say it in the nicest sense, in that the banks are a lot more cautious in how they expose themselves to customers. The times in Africa are changing, there’s no question about it.

Melanie Humphries, Investec: I think the one thing that supports that argument is that percentage-wise, African’s divested of less aircraft during the recession, certainly in terms of the profile of clients that we deal with, than what we, for example, saw in the American market. In the African market, it’s not so easy to divest your aircraft because, practically, you need that aircraft in order to get from point A to point B, is that right?

Gary Phillips, NAC: Guys here need their aircraft and there’s a good analogy because, I mean, in the US, you know, it’s – being a very capitalistic market –  they’ll buy luxury goods, but they’ll dispose of them just as quickly if it’s seen as surplus to their requirements, or from a financial point of view.

Melanie Humphries, Investec: And they’re much more fickle owners of aircraft.

Colin Squair, Wesbank: The aviation industry in South Africa is very strong.  At the peak, we were seeing 25 to 35 deals a month, and that could be from a Cessna 172 to a Beech 1900.  It’s a very, very strong industry, and it covers a wide spectrum of customers. Wouter would be doing customers at one end of the spectrum (airlines and corporate jets), and we might cross a little bit, but we’d be doing more the higher volume – doctor, farmer, flight school, charter operator, contractor etc.

Corporate Jet Investor: How is the aircraft finance market?

Wouter du Preez, Rand: Were still in a tough market.  What we’ve seen definitely over the last three years is that there’s been a major introduction of increased asset volatility in this asset class, compared to previously very, very stable asset values.  We have seen values for different categories and sub-sector aircraft in the market from VLJ’s right through to ultra long-range come off 40% to 60% easily.

For any debt finance house operating in business jet finance, this has created an environment of substantial uncertainty.  Previously it was very easy to finance at 85% loan-to-value. The client puts in a small tranche of equity, goes to the bank and raises debt; everybody’s happy and a deal gets concluded.  I think that has changed quite dramatically.  Currently in 2011, we see the market has recovered to some extent, but we don’t believe that the increased underlying asset volatility has disappeared.

If we don’t see clear evidence of cash flows being able to service debt, we don’t just do the deal.

Colin Squair, Wesbank: We’ve seen exactly the same thing as Wouter in terms of asset values falling off. We were quite heavily exposed in the operator market.  I believe what happened  in the good times was a lot of guys built their businesses on the back of the reserves they should have been retaining  for future maintenance.  When the economy turned, there wasn’t enough money for maintenance and – so some of the planes we’ve been taking back have not even been in great shape.

We’re becoming a lot more careful in how we’re funding and, not only from a credit aspect, as Wouter touched on. I think, in the past, we’d look at the asset, and then we’d look at the contract revenue and finally we’d look at the balance and income statement.  I think that whole thing has now turned the other way, where we’re very critically looking at financial statements first, and the  asset as a final consideration.

We also found through the cycle that we were poor asset managers. So now, as well as doing  an annual credit review, we also check the stae of the aircraft as well, doing  annual maintenance checks. We’re insisting on satellite tracking on aircraft, making sure, you know, if the guy is saying he’s going to do 16 hours, if he does no hours in a month, we know that there’s a problem with maybe the next instalment, maybe the aircraft’s down for maintenance, maybe the engine’s on another aeroplane, so we’re doing a lot around managing that aspect

Corporate Jet Investor: How easy is it to find finance?

Jaco Pietersen, AFC: We have experienced a bit more of an appetite from the banks side in general but approvals are still tough to obtain. We’ve had quite a good start to the year but due to the cyclical nature of our business it is difficult to predict if this will continue through the remainder of the year.

Melanie Humphries, Investec: I’d like to throw a spanner in the wheel, just going on from what Jaco was saying.  My sense is that especially when it comes to the South African market, the volume of aircraft finance transactions that’s been done over the past two years has not been driven so much by appetite from banks but activity levels in terms of sales of aircraft.

It’s something unique to the South African market. I do think that the funding for the South African and African markets has certainly been there.

It hasn’t been at the sort of terms and conditions and pricing that clients were used to pre-2008, but certainly the funding lines have been there to support those clients, to the extent that the aircraft sales have happened, as opposed to funding in the commercial aircraft space, where it has been a significant constraint in terms of getting the sales of aircraft.  I’d like to hear the rest of the floor’s view on this.

Jaco Pietersen, AFC: Well, with regard to what Melanie said, I think it’s always easy for the banks to say, “The money’s there” but at what cost and with what other special terms?

For the right clients, I do agree. If you have a strong client you can still get a deal through, but we’ve had to be a lot more creative when it comes to credit proposals, in terms of structuring transactions with higher deposits and sometimes even shorter terms. Generally the local banks finance over a maximum 60 month term but if the age of the aircraft is maybe in question, they would insist on a shorter term.

It’s been tough in the sense that we’ve had good clients that I haven’t been able to get finance for due to a more conservative outlook from the banks, while we know that he is a good customer with proven repayment ability.

From the bank’s point of view, they are still quite hesitant and a bit more risk-averse as a result of what has happened with the drop in values of aircraft and getting back into lending money again.

Corporate Jet Investor: Gary, what do you think?  Have you lost sales because customers haven’t found finance?

Gary Phillips, NAC: Yes, we have. In the past people would probably buy aircraft or helicopters because they’ve done well and the asset basically stood on its own two feet.  It doesn’t any more. Banks now are looking a lot deeper with loan-to-values much higher than people were used to.

We also embarked on an initiative with WesBank, where we basically educated the credit people. We had the WesBank credit guys come up to our offices and spend a day there and, they were able to see and feel and touch some of the products we sell and it gave them a better feel for what they were dealing with, instead of just looking at something on a piece of paper.

Hopefully, it gave them a better feeling for the company that they’re dealing with and that the transactions that get put up to them are not frivolous things.

We do our homework before we got to the stage where we’d gone to see the banks and then apply for finance, because our mandate – our job – is to also educate customers.

Colin Swire, Sean Laderman, Gary Phillips

Corporate Jet Investor: Has the market seen a lot of repossessions or deals restructuring?

Sean Lederman, ENS: We’ve done a number of restructurings on deals which have gone wrong and we haven’t seen many repossessions.

Colin Squair, Wesbank: I think it’s a different customer base, so it’s likely that RMB’s not seen a lot, but certainly in our customer base, we’ve seen quite a few.

Paul Jebely, Clyde & Co: There was a time, about two years ago, when people, like me, were physically queuing up for what was to be an anticipated wave of repossessions in Europe, the US, the Middle East and Africa, and that never really happened in any place, except for the US.

In Africa, over the past two years, I have seen two repossessions, one with a Nigerian owner where we repossessed in Nigeria, and another which we repossessed in Europe, but it was an African-originated deal. We have seen some restructuring and work-outs, but nothing remotely akin to what our counterparts have seen in the US.

Sean Lederman, ENS: It is a paradigm in lending that lenders prefer a work-out to a repossession. Repossessions are always the end of day scenario, when nothing else can be done, so I think that always mitigates against this issue.

Melanie Humphries, Investec: It’s the worse position for a bank to be in because the only people that make money out of a repossession are the lawyers.

The other thing that’s very important when it comes to repossessions is your relationship with the operator. It is exceptionally important that, when you do come to those work-out positions, that you’ve got a very close working relationship with the operator of the aircraft. When we have had wobbles in the past in some of our deals, those relationships lend a lot of comfort to the banks in terms of looking after the asset, tracking its location and assisting with the work-out.

When we look at corporate aircraft deals, those relationships are very, very important.

Wouter du Preez, Rand: RMB has seen exactly the same thing as Melanie. As the due diligence and the level of scrutiny around deals and their approval process has increased, we’ve approached multi-jurisdictional transactions in Africa, by getting a reputable operator in Africa involved as one of the major mitigating factors.

We would say to the client: “Well, if you want to complete this transaction, you’ve got to make sure it’s maintained by a reputable operator, such as ExecuJet here in SA, somebody who’s got the capability, the skill, the track record, etc,” and that has been important mitigating factors we’ve tried to build into our deals, specifically as you’re moving out into the larger African space.

Melanie Humphries, Investec: Down cycles have positive spin-offs in that in enables you to demonstrate to credit committees, to legal, to compliance that the boxes that you ticked in your bank processes actually mean something.

It’s not just about having taken a cession of a maintenance agreement, or about having an operating agreementfor the sake of entering into the legals.

When it comes down to it, and perhaps things aren’t going as well as they should; that is when you do need to start relying on those relationships. Our relationships in the South African market have come out with flying colours when it comes to work-outs.

Gary Phillips, NAC: We did have a case or two of those and what Melanie’s referring to is, we were fortunate enough that we were the operator of the aeroplane. We could prove it and so, when the time came when there was no work-out that could be done, we were able to say to the crew fly it here. It meant that the bank’s asset was preserved.

I think the importance of relationships can be underestimated, because it’s not something that you can actually just bank on. “Okay,” you know, “We’re going to lend $20 million to that guy,” and the aeroplane goes and we check on it once a year.

Jaco Pietersen, AFC: If I could just add to that.  We pride ourselves in our close relationship with the banks and with our customers as well, so it’s a long-standing relationship that we’ve got. It’s just as important for us, as it is to the banks, that assets don’t get repossessed.

So, we’ve always – with our customers that we’ve seen run into some trouble, tried to get them to be proactive and get them out of those machines before they get to the point of being repossessed. We try and assist the banks as far as we can and, on the other side, with our relationships with many of the operators and other customers, we often know when one of our existing customers has a need for an aeroplane and, without being a sales organisation, we can put them into that machine and then help the bank out of their existing position.  We’ve had quite a few of those that we’ve been fortunate to be involved in.

Corporate Jet Investor: This is one for you Jaco, how competitive is the South African finance market?

Jaco Pietersen, AFC:  It has become a lot less competitive, I think, just in terms of for example how many approvals you would have had three or four years ago on the same transaction.  You’d have banks competing with the rate and all sorts of other terms. Now days if a bank does approve a transaction they are more than likely not competing against another approval and are in the position to dictate the terms. We have also seen some of the banks focusing less on Aviation finance which has resulted in fewer financing options out there for our clients.

Corporate Jet Investor: Loan-to-values?

Jaco Pietersen, AFC:  Yes, absolutely.  Deposits have increased on average by between 10%  and 20% of cost. To some extent where in the past customers wouldn’t even have to put down a deposit on a transaction now they would be looking at a LTV of between 60% and 80%. This was as a direct result of the large depreciation we experienced in aircraft ranging from Helicopters though to Jets

The availability of finance has reduced. There are less banks involved in finance than we had a few years ago. So if they choose to do a deal they can pretty much dictate what LTV they are comfortable with. The clients however are not always in a position to comply with these requirements

Melanie Humphries, Investec: I think when it comes to local vanilla Rand-based lending to South African clients, the competition is quite robust in South Africa.  I think that’s fair to say, Colin? In those transactions it comes down to terms and conditions, such as pricing, loan to value, relationship with your client etc.

Once we move into the rest of Africa, the transactions become more complicated, where significant cross-border structuring is involved.  I think there perhaps it comes down to more relationship or structuring ability and your ability to structure a bankable deal.

We see more international lenders entering the African market.

Paul Jebely, Clyde & Co: You can draw the distinction between South Africa and Africa.

In South Africa there’s a competitive landscape. Pan Africa is a bit of a different story for sure although there are strong markets like Angola or in Nigeria.

Nigeria in particular has a very strong appetite among the local banks for that type of transaction. As far as foreign lenders, you know, European lenders would be the only ones that I would have seen looking at deals in Africa which were eventually won by South African banks.

Africa right now very much is mainly for the African banks and some European participation. There’s various reasons for the shying away of the African market most of which are not necessarily valid, but that’s what I’ve seen.

Wouter du Preez, Rand: Paul, just a question. Something that you’ve touched on in countries like Kenya, Tanzania, Nigeria, Angola, is where local banks seem to be very, very willing to provide financing to some of their local customers.  It represents competition for us into Africa.  A concern I have is that, in many cases, this activity is seen as pure corporate lending from a local jurisdictional perspective, it’s not necessarily aviation structures, you don’t necessarily have aviation expertise within these banks etc. Banks such as RMB  have specialised people in our respective aviation functions.  Do you think this practise is continuing? Is our perception correct?

Paul Jebely, Clyde & Co: It is a fair statement to say that the vast majority of specialised expertise is quite squarely in South Africa. What you’re starting to see is non-African based transactions – with almost no African nexus – being shopped to some of the African lenders.  I think that means a common development of the level of sophistication and willingness to lend by that market.

Corporate Jet Investor: As we are in South Africa we need to talk about the Cape Town Convention. Has it made a difference?

Sean Lederman, ENS: In terms of the business jet market form what we see locally there is not a high level of sophistication amongst the borrowers, so they often don’t understand the requirement for lengthy and complicated documents and the heavy restrictions placed on operation, insurance and the like documents.

The fairly low level of buyer sophistication also ties into the Convention.  There hasn’t been a lot of publicity locally around the Convention and the Government has done very little to bring local law into line with the Convention to the extent required.

Lenders  still typically look at aircraft mortgages as the principal form of security, and so the Convention has not made a great impact on the market locally. The Convention does however provide lenders with an increased level of comfort, particularly where the aircraft are going across borders.

Corporate Jet Investor: Is there anything holding back the growth of the South African business jet market?

Robbie Irons, ExecuJet: I would think access more amenable access to finance, and that’s always a challenge in these times.

Jaco Pietersen, AFC: If there was more competitive funding available, that would improve the ultimate chances of selling an aircraft and therefore improve growth in the market.

Gary Phillips, NAC: I think the need has definitely come back.  If you go back a couple of years, a lot of the mining concerns just cut back completely on their capital projects and so the spending dried up. You can’t discount the level of service providers in mining, so while the mining houses might only certainly buy an aeroplane themselves, there’s engineering and building contractors that use aircraft.

We’ve seen that come back in again, and I think it’s driven by resource prices and so I think we’ll see an increase in activity and hopefully, sales.

Melanie Humphries, Investec: I’m cautiously optimistic.  I think I’m seeing pricing terms on transactions easing up from where it was a year or two ago, which hopefully makes the acquisition of an aircraft more commercial for a buyer.  Certainly from Investec’s point of view, we’re going to support the market, it’s a market that we’ve always been very seriously involved in and will continue to be involved in.

I don’t necessarily think it’s so much the money not being there, I think it has always been there. It perhaps is just trying to get to an alignment of expectations, from a client’s point of view, terms of pricing, terms of conditions, to get to a transaction that makes more commercial sense.

Colin Squair, Wesbank: From our perspective, it’s not about lack of money.  I can’t think of a transaction that WesBank hasn’t been able to do that hasn’t been done elsewhere- it might not be as easy as it used to, but the money’s there.

If I look at WesBank as a whole, last month was our biggest month ever, we wrote over R 5.6 billion worth of new business. So, the money is most definitely there.  But, then if I look at my prospect list in aviation, it reduced from over R1 billion that we’re working on down to R300 million so, if anything; it’s a lack of buyers.

I don’t understand this totally because, if you look inflation rates that are low, interest rates are the lowest, the Rand is as strong as ever, pricing on aircraft is as low as it’s ever been. So I think, when the buyers get their confidence are back we’re going to do well.

Robbie Irons, ExecuJet: Perhaps a mind-set change from the buyers, as well as stimulate sales, they should have stepped back and said, “We’re not going to do anything.”

Melanie Humphries, Investec: Sitting this out and waiting.

Robbie Irons, ExecuJet: Yes, as soon as they start getting back into the concept that we’re going to need to buy now for our future business and that sort of thing, I think that will stimulate sales.

Corporate Jet Investor: What, in a work-related context, keeps you up at night, keeps you awake at night?

Robbie Irons, ExecuJet: Yes, it’s a tough one.  You know, there are a lot of prospective buyers out there, as Gary was saying, they’re certainly trying to see out the market but it’s the challenge of trying to convince the client that the time is opportune to move ahead on transactions, because the market is changing so quickly.  And that’s one of the biggest challenges we have.  So that’s certainly one thing that is at the back of my mind all the time, trying to find ways to encourage the client to go forward, and you have to be quite ingenious about that.

Corporate Jet Investor: Particularly now, when you haven’t got 20 people bidding on a deal.

Robbie Irons: Correct.

Colin Squair, Wesbank: I think on the new business side, it’s just the lack of volumes.  As a bank, we need to grow our book and, when I look at what the book has done over the last two to three years from a new business perspective, it’s a lack of volumes coming through now.  And then, on the bad  debt side of the business, it’s just the surprise that hits you every day, there’s nothing like this industry to wake you up, the devil’s in the detail, and you learn something new every day, and I’m in fear of what’s potentially coming tomorrow.

Corporate Jet Investor: Melanie what keeps you awake?

Melanie Humphries, Investec: The past certainly doesn’t keep me awake, I think our book is robust. Of course, we take the maintenance of that book very seriously, in terms of making sure it stays that way and it doesn’t happen without active involvement.  I think, from a positive point of view, a lot of my time is spent driving the strategy of our Africa Aviation business going forward. This is very exciting in that we have support to build the aviation business.

It’s finding the deals, it’s finding the right deals, and continuing our relationships with the operators, the aircraft manufacturers, the agents that sell these aircraft.  So, I guess, if you’re asking what keeps me awake, it’s keeping those relationships current and  real, because that’s, at the end of the day, where our growth comes from.

Corporate Jet Investor: Sean?

Sean Lederman, ENS: Yes, I agree with Melanie, it is about relationships. We a are dependent on the market for work and we draw a lot of our work from the banks, so we place a lot of value in those relationships.

Jaco Pietersen, AFC: Yes, just from my side, the most important in our business is our relationship with the banks, and being able to build on our existing relationship with them and to have their continued trust and interest at heart. All good relationships that have been established can easily be placed under strain if a problematic account surfaces. We want to see the aviation industry as clean as possible in order to illustrate to the funders that it is worth investing in aviation.

Gary Phillips, NAC: I want to get our order book back to where it was three years ago. We’ve got some new products coming and that’s where our focus is. We’re a sales driven business and, you know, we had the luxury of an order book that was fairly predictable a couple of years ago.  That’s dried up now and now you’re looking at just knowing what’s going to happen in this quarter.  It would be nice to be able to get back to the luxury of being able to predict your revenues over a longer period of time.

Corporate Jet Investor: Do you think you’ll get there?

Gary Phillips, NAC: I think we’re going to get back to those days. As I said, we need a mind-set change from the customers to do something and, you know, I have to agree with what Melanie said, and Colin, the money has been there, the way it’s being offered now is what is different and that’s what people have to get used to.

Corporate Jet Investor: So banks are ready before the buyers for the next cycle?

Gary Phillips, NAC: They were. I mean, they were cherry-picking the transactions when the downturn came suddenly, because, if you’ve got some money to lend to somebody, you’re going to make sure you’re going to lend it to the person that’s the most favourable to you rather than give it to the higher risk one.  There was a capital liquidity squeeze on but the money was there, you could get it.

Paul Jebely, Clyde & Co:       I am in the privileged position of having deal work to keep me awake. Otherwise, I mean, Sean and I exist in a complex little world, where we are dealing with cross-border issues, conflict of laws, and all of that fun stuff, which is actually heightened in some of the jurisdictions in Africa which we deal with.  Changes in law, including changes in English law, keep me awake at night discussing with Sean and our clients.  Otherwise, nothing terribly concerns me above the state of the market, or the state of clients, or to the state of Sean for that matter.

Melanie Humphries, Investec: I think it’s fair to say that nothing keeps Paul awake. He keeps all of us awake, in spite of the time zone.

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