Aviation industry says investment trusts could boost its prospects of raising cash

Investors may soon be able to buy into the aircraft leasing business through trusts similar to those used to attract institutional and retail funds into property.

Last year, two real estate investment trusts (REITs) raised more than €700 million in new equity between them when they launched on the Irish Stock Exchange. Senior figures in the aircraft leasing industry believe the sector could benefit from using similar mechanisms to raise cash.

The stock exchange yesterday launched a dedicated platform for listing debt instruments used in aircraft leasing in a bid to exploit the opportunities arising from the Republic’s status as a global leader in the sector.

It already lists 26 aviation finance-related securities with a value of close to €13 billion, as well as equity listings for Ryanair and Aer Lingus.

Speaking after the announcement yesterday, Kostya Zolotusky, managing director of capital markets and leasing with US-based aircraft manufacturing giant Boeing, said most of the ingredients needed to create trusts for the aviation leasing industry are in place in the Republic.

They include recently passed legislation giving force to an international agreement that allows creditors to enforce their security over leased aircraft if an airline becomes insolvent.

US Airlines
At the same time, a number of enhanced equipment trust certificates (EETC) – quoted instruments used by US airlines to finance the purchase of their aircraft – are already listed on the Dublin market. "EETCs have outperformed most other asset classes in the last five years," he said.

REITs are quoted companies that invest solely in property and which pay 85 per cent of their rent roll to shareholders in the form of dividends. Mr Zolotusky said yesterday that aircraft are similar assets, as they are leased to airlines, rather than tenants, which pay rent for them.