AIRBUS Finance Company Limited, based in Dublin, will see the asset value of the planes it leases rise from $400 million to $2 billion within four years, according to its chief executive, Mr John McQuaid.
The company deals in big ticket leases. "Our cheapest widgets, the A320 jets, cost $40 million and the four engine A340s - which can fly from London to Tokyo - cost $120 million each," said Mr McQuaid.
The Dublin company currently has $200 million in equity and this will be doubled when assets reach $2 billion. Equity must equal 20 per cent of assets. The economic cycle is in an upturn - and the number of people flying is increasing steadily. Leasing, rates have hardened. Currently Airbus Finance is talking to customers in Britain, Europe and in North and South America.
Airbus Finance is a stand alone operation and operates on an arm's length basis from Airbus Industrie, the European manufacturing consortium. It has the same shareholders as the planemaker, based in Toulouse in France, and assists airlines to buy the consortium's aircraft.
Its methods differ from those which were employed at GPA.
The firm does not predominately provide operating leases, under which airlines would rent and return the aircraft. GPA would retain ownership of the planes.
When the Airbus Corporation in Toulouse sells a plane to an airline, the Dublin operation arranges a financial lease. This is a form of hire purchase and, typically, the airline will own the plane outright after 12 or 15 years. At GPA, by contrast, the average lease lasted for five years.
For example, Airbus in Toulouse will identify an airline prepared to buy an A320 plane. This aircraft has a price tag of $40 million. Using a $1.5 billion credit facility arranged with 50 banks worldwide, the Dublin operation borrows money, and the aircraft is bought.
On day one of the lease, the plane is given to the airline and it owes Airbus Finance $40 million over the next twelve years. "We work with regular commercial loans and we have to make a profit," said Mr McQuaid.
Airbus has had a treasury operation in Dublin since 1990. The pleasing operation located here in December, 1994, but only really got going in June, 1995. The company has ten employees in Dublin, all of whom are Irish, and another five will be taken on in the next year. Airbus is committed to move into the George's Dock 2 building at Dublin's IFSC in the autumn.
The company located its leasing arm in Dublin because of the favourable tax regime, as well as the expertise in aerospace leasing gained here in GPA's day. Professional firms such as KPMG A & L Goodbody, McCann Fitzgerald and others, along with certain Dublin based foreign bank have made Ireland a centre for aircraft finance, according to Airbus.
The heart of the new Airbus product line, the A310 and the A300-600, were developed from the original A300. This was the world's first twin engine wide body jet. The Airbus widebody fuselage allows flexible passenger accomodation. Up to nine people, can be seated abreast.
The A310 incorporates significant advances in aerodynamics, the company claims. The concept of fuel in the horizontal section of the tail was introduced, allowing the plane's range to increase to ever 5,000 nautical miles. Airbus claims that the A320 family are the most advanced single aisle jets in service today.
The A320, a 150 seat plane, is the first sub sonic civil aircraft with fly by wire flight controls. Airbus Industrie predicts that the world's airlines will require, nearly 1,100 aircraft in the 125 seat category, between 1995 and 2,009.
Well over half this total will be required by the major airlines. The A319, which will enter service this year, is aimed at this market. Airbus claims that it has lower operating costs than any of its competitors.
The A330 is a twin engined aide bodied jet with 335 seats, "with a range of 4,850 nautical miles. It is claimed to be ideal as a replacement for earlier generations of widebody planes. The A340-300 has seat mile costs on a level with those of the largest "four engine airliner, while the smaller A340-200 has the longest of any commercial airliner available.
The shareholders of Airbus Finance are the same as those which own the aircraft manufacturer - Aerospatiale of France (37.9 per cent); British Aerospace (20 per cent); CASA of Spain (4.2 per cent); and Daimler Benz (37.9 per cent).
