Author: lciaviation

On 12^th November 2020, LCI’s Executive Chairman, Crispin Maunder took part in a Town Hall hosted by Helicopter Investor.

You can watch a recording of the event here or read a transcript of Crispin’s discussion with Alasdair below. Please note, this transcript has been edited slightly for clarity.

Alasdair Whyte:

Crispin Maunder Executive Chairman LCI needs no introduction so he won’t get one. Crispin, I’m sure everyone knows about LCI but do you want to explain briefly what attracted you to helicopters and how are you enjoying being a helicopter lessor?

Crispin Maunder:

That’s an interesting one. At LCI we actually just celebrated our 16^th birthday so I suppose you could say we’re the unruly teenager now, but actually very much like milestone and now Macquarie Rotorcraft, we stretch over both fixed wing and rotary, albeit that we actually exited our last fixed-wing investment at the beginning of this year. Part of a transaction that we did last year so we are now currently essentially purely helicopters. We’ve had an interesting ride, certainly in the helicopter market it didn’t turn out to be exactly what we anticipated. Back in 2011 when we started looking at this. The same thing goes for certainly waypoint and milestone as well, but we’ve come out the other end and certainly I think you know we as an industry have matured a hell of a lot and have compressed probably 10 or 15 years of fixed experience into a matter of three or four. So you know I think we’re much wiser and we’re much more sanguine about our views of the roto-craft industry but I think that puts us in good stead. I think we’ve learned a lot of lessons and we’ve learned them well.

Alasdair Whyte:

Okay at the start we had a Sebastian gave us a great guide and Brad’s mentioned what are the main helicopter types you’re focusing on now and what are your thoughts on the technology cycle?

Crispin Maunder:

First of all we set off with the idea that we were purely going to look at the medium size helicopters twin turbine medium size so we actually shaped our market as the 145 up to the 175, 189 and then we moved towards placing orders directly with the manufacturers and working with the manufacturers to get our foothold shall we say into the market. So over the last seven, eight years we have now expanded our focus so we’re taking on slightly smaller twin turbines as well, still staying in that market and we have gone upwards to the 92. But our focus has been primarily in risk mitigation and being very careful in the way we’ve shaped our portfolio so for example, offshore oil and gas exposure is running at less than 30 percent of our overall portfolio, about 50 percent of it is EMS and the balances with search and rescue pilot transfers and other interesting markets and training helicopters so that’s where we are at the moment. Looking into and this is one of the things that I particularly like about this sector compared to fixed wing, the technology cycle is far longer than we see in fixed wing primarily due to really the nature of this business. The classic limit for a helicopter size is 19 passengers to go any higher, you need to have a cabin attendant on board. There is some interest in going faster but there is a natural technical limitation which I know that airbus in particular are trying to push out, but essentially, it’s more range and safety. I mean safety without doubt. As far as avionics are concerned, as far as performance is concerned single-engine performance rig and fly and all these things, don’t forget we must remember that our industry operates between effectively 8000 feet and sea level and it’s pretty murky down there. We are very much safety focused and indeed I was very interested in one of the questions about ‘are our operators beginning to cut corners too much, are they being pushed by the oil companies’. I fully agree with Chris that the industry has got to push back and just say fine I’m not going there. I’m not saying that any operator is wilfully operating unsafely or anything like that, but I do think that you know time has come for the people that show us they pay us pay all our salaries as such on this call need to actually reflect as to what sort of service standard and safety standard they are insisting on and we should therefore then manage our house accordingly.

Alasdair Whyte:

How do you value the lease rates in the next year and how have they been impacted by Covid?

Crispin Maunder:

Surprisingly in our market, not that much. To be perfectly honest we’re in an off cycle. I was listening to some of the comments made in particular Brad’s, I disagree with him. Now admittedly, I’m looking at it very much as a medium capacity helicopter lessor, but we’re seeing beginnings of an appreciable upward cycle at the moment, probably start at the back end of last year now obviously Covid had an impact, I mean Covid’s had several impacts that are not directly affecting the market but for example, obviously the oil price was badly affected so that has affected the offshore oil and gas market, but it wasn’t direct Covid, it was indirect Covid as far as the oil price coming down.Then we had the Covid impact directly on the operators and so far as they couldn’t get the people going out to the rigs or to the wind turbines or into the bases to fly them out so that had a direct impact, and certainly some of our operators have therefore suffered as a consequence. But it was relatively short term and certainly at the moment I’m seeing an up cycle, particularly on some of the more popular types like the 169 and the 139 lessor, at the moment in the super mediums 175 and the 189 but certainly the mediums 145 169 139 they are definitely positively trending upwards now which is good to see. There is without doubt replacement cycle that was going on and then to a certain extent stopped. It’s now come back again, and I can certainly see current technology aircraft, and doesn’t necessarily need to be new aircraft, it could be old current technology anything between five and ten years old, coming in to replace the older types such as the 76, the 412s dove guns and the like. This goes back to Sarah’s point and Chris’s point there are too many 76’s in offshore configuration but some of them are going to go to the knackers yard but some others are going to be repurposed. It’s a good utility helicopter so there will be secondary markets for them.

Alasdair Whyte:

Mark Kelly is asking will we see new entrants into the helicopter leasing space?

Crispin Maunder:

I think it’s an interesting market. I still think the value proposition is there, residual values whatever Sara comes up with later on. I mean the extravagancy consensus view is 30 years, and maybe that’s challengeable today, but it’s considerably longer than fixed aircraft where I suggest even economic lies for 20 years is being challenged now and spared, certainly on wide bodies. I think the technology cycle is a far more reliable cycle than this constant upgrading and indeed this what I call a transatlantic battle between airbus and boeing, each tried to outdo the other. I think we have a more mature OEM sector it’s far more collaborative in a lot of respects. Yes we see sort of head-to-head competition on things like the 175 and the 189, but generally they are not completely on top of each other like you have with the A320, 737 or 350 and 787. I think the general outlook for this business is therefore more stable and I think it’s certainly an extremely interesting market with regard to investors coming in. Also of course you know we’re a very different market to the airline market where the airline market is reliant on the passenger that’s us and we’re very fickle, so you might have a 10-year relationship with an airline when you finance an aircraft, but you don’t know what the management’s going to be doing in five years’ time. Whereas a lot of for example EMS contracts that the lessors get tend to get very much involved with their tenure relationships with either a government or sometimes an old company. Some of the contracts are ten years longer – search and rescue and the like so it’s much more analogous I would say to the old airline business back in the 70s and 80s where you could identify your customers customer and that customer’s customer quite often is a good investment grade customer so that provides the stability and of course, once the helicopter is embedded into an operation, it’s like a cog uh within a machine. Everyone’s interest is to make sure that that cog just does what it does, it’s well-oiled and it therefore performs its role in the industrial cycle, be it EMS or offshore oil and gas or whatever.

Alasdair Whyte:

Okay more questions for you: Jeremy Cox says the insurance market rate surprised you recently?

Crispin Maunder:

Well that’s more of an operator issue than us but yes obviously it’s a burden that the operators are having to take on and yes it there has been a substantial increase.

Alasdair Whyte:

Scott Ashton President O2 Aero Acquisitions: is there a market for these legacy aircraft with all the teardowns occurring? What will all these tear-downs do to the MRO supply chain for components?

Crispin Maunder:

Well I must confess that we are with a few exceptions and in fact only one exception which is 176C which we are actually in the process of parting out. We have some older aircraft which are in our managed portfolio, but the majority of our aircraft we acquired new, so we frankly aren’t in that market at the moment so i’m really not the right person to talk to that’s really one for maybe Brad or Sebastian.

Alasdair Whyte:

Okay question from uh Bobby Osan: is this time for small operators to take advantage of over capacity? Is this the time for them to get good leasing deals?

Crispin Maunder:

To a certain extent if you wanted to take advantage of the cheaper rates you should have been around about two or three years ago but they have been trending upwards as I said for the last couple of years for the more popular type, but certainly we’ve seen what i call a proper upcycle from the end of last year.

Alasdair Whyte:

Okay final question from Andre Cohen, CEO Cohen Financial: In evaluating a lease prospect, do you place more reliance on the underlying contract or the credit worthiness of the operator?

Crispin Maunder:

Well certainly we look at the underlying contract and the credit of the end user without doubt, and then we look at the operational capability of our customer being the operator, but obviously there are some operators that you don’t need to look through. Bristow as a classic case and Babcock but generally we would do the full due diligence from our customer, their credit standing, their ability to operate and who are they operating for and is the end user going to be around to provide the wherewithal for that contract to continue.

Alasdair Whyte:

Okay actually final comment, congratulations to Jaspal, I see you have a new CEO. What’s happened there?

Crispin Maunder:

Well we’re just sort of reshaping the business, we’ve just exited the fixed-wing market which turns out to be rather fortunate but obviously now we are really looking at the fixed-wing market. There could be opportunities next year but LCI has always been a cautious lessor so we’re now devoting some senior resources to looking at this market. Mike is now Vice Chairman with the focus on fixed wing but very much involved with me and Jas and Praveen Victorville in the strategy of the business overall but Jas is now in the hot seat as I call it. And Praveen who’s moved up from being out of structured finance he’s now our CFO. We’ve all been together for a very long time, it’s a fun company and we will work together really without status. We don’t use titles but sometimes they’re useful as far as a business card is concerned.

Alasdair Whyte:

Thanks so much to Sebastian, Chris, Sarah, Brad and of course Crispin Maunder.

See you soon, thank you very much.

Helicopter lessor LCI, asset manager Thora Capital and private equity firm Rive Private Investment have joined together to invest in nine helicopters worth more than $100m.

“We are delighted to be working with Thora Capital, LLC and RIVE Private Investment. This transaction will support the continued growth of our helicopter lease portfolio bringing in new sources of co-equity and finance partners,” said Crispin Maunder, Executive Chairman of LCI

LCI will be servicer for the six Leonardo AW139s and three Airbus H130 helicopters. All of which are debt financed.

“LCI’s proven track record as a helicopter lessor is greatly respected by the financial community, making it a strong partner for RIVE Private Investment to expand our investment footprint outside Europe,” says Camille Brunel, Partner at RIVE Private Investment. “After years of investing in this asset class and developing in-house expertise, we think helicopters are a very resilient and attractive asset class as long as you can rely on a strong technical knowledge (internal and with partners) and have a careful financial approach.”

LCI closed its first co-investment vehicle in 2019 with Flexam Tangible Asset Income Fund which owns three Leonardo AW139s and two Sikorsky S-92s.

Russell Christopher at Thora, said: “Helicopters have only recently been considered an asset class with potential by the investment community, which has limited the amount of capital available for operators to efficiently manage their balance sheet and optimize the mix of owned versus leased assets. We have long been impressed by the deep experience of LCI’s  leasing platform, sound and diversified portfolio, supported by unrivalled operational and technical expertise.”

LCI’s portfolio now comprises some $1bn of helicopters – including orders and helicopters under management.”

By Alasdair Whyte 

To view the article, click here. 

MOVING IN THE RIGHT DIRECTION

LCI specialises in leasing helicopter and commercial aircraft with a broad spread of types leased to operators around the globe. Its Vice-President of Marketing, Christopher Grainger, tells EUROPEAN ROTORS that while times have been tough for everybody, the helicopter market has bounced back strongly from early 2020 and is entering a period of growth, particularly in the top-performing sectors like EMS, SAR and wind farms.

“I think the industry has recovered, particularly in Europe, which is a very important market, although not all segments are necessarily doing as well,” he says. “All in all, we are seeing a significant level of activity, and more importantly, we’re seeing growth opportunities across the place.”

To make sure it is a part of that growth, LCI has raised more than US$1 billion in capital since 2109, which is clearly significant in a time when Grainger says banks and financiers have been turning their backs on aviation. “It’s no secret that we’re talking to several operators who tell us that they have difficulties financing their helicopters, so let’s not dream helicopters are in a different world,” he says. “And the operators we are talking to now are going for new technology, which is very exciting. And I think it’s driving the markets in the right direction to bring more deals in the future.”

Two things that make helicopters an attractive investment are their long operating lives and the types of missions and customers that operator’s contract with to provide services. The long lifecycles come from being non-pressurised aircraft, and Grainger points to aircraft such as Pumas and S-61s that have transitioned into new roles as examples. “

When you see aircraft more than 50 years old still being used, not necessarily for their original offshore applications but in utility work or firefighting, that’s pretty amazing,” he adds. “The second reason is more linked to the end-users, and in some European countries, an EMS contract can be for terms beyond 10 years, which is unique.

Putting the sanctity of contracts to one side, lessors still need to be aware that contracts can be terminated, as seen in the oil and gas sector, and he says it’s vital they know their operator and what they are getting into.

“Of course, you have to be selective, so when we’re approached with an opportunity, we like digging a bit further into the project to understand who’s the end-user and what’s the underlying contract,” he explains. “And all that together gives us a lot of security to the contract.”

Leasing aircraft to operators with firm contracts in hand seems to be a more effective strategy than selecting a popular aircraft type and adding that to a lessor’s fleet. Light to medium twin-engine aircraft form the backbone of LCI’s fleet, including Leonardo AW139/169, Airbus H135/145 and the super-medium H175 and AW189.

“We have a very positive long-term view of the super-medium, which more and more are competing with the heavier types,” he says.“We have a few heavies, so we’re not excluding anything, but the 139 and 169 are the core of our fleet at the moment.”

The commercial helicopter market leans heavily towards owned aircraft. Industry consultant IBA estimates less than 10% of the total commercial turbine fleet of nearly 24,000 aircraft is leased, which Grainger sees as a great opportunity for LCI.

“There’s huge potential, but it needs a very thorough and strict analysis project-perproject and operator-per-operator, so we take a meticulous approach,” he adds. “We don’t exclude anything in principle, but we certainly can’t and don’t take everything.”

To read the full article, click here

Fixed-wing and helicopter leasing company LCI finalised an agreement in December to acquire Nova Capital Aviation (Ireland) Limited, the twinengine rotary and fixed-wing aircraft lease division of the Nova Capital Group. The Nova Capital Group has retained single-engine operations.

The acquisition will result in a substantial expansion of LCI’s leasing platform to over 140 twin-engine rotary and fixed-wing aircraft. It will also take the proportion of aircraft deployed on emergency medical services (EMS), search and rescue (SAR), off-shore wind and utility missions, to over 80% of the entire leasing platform.

“The Nova brand is highly regarded, and is a major presence in the missioncritical EMS market which perfectly complements our own,” said Crispin Maunder, Executive Chairman of LCI. “Our agreement reflects the current trend towards industry consolidation, and is testament to the robust leasing platform we have built. It expands our customer base, introduces new aircraft types to our fleet, and cements LCI’s long-term commitment to growth.”

Last year, Nova Capital further expanded its fleet with the addition of eight factory new twin-engine EMS helicopters valued at over US$90 million, reaching half-a-billion total fleet value at 2021 year-end. Nova Capital stated that it will now focus on the development of its single-engine helicopter, light utility fixed-wing aircraft, and other advanced air mobility operations, in partnership with LCI.

“Over 20 years, we have developed a marketleading leasing operation that specialises in providing asset financing solutions to helicopter and fixed-wing aircraft operators, primarily in onshore mission critical services,” said Olivier Piot, Founder and CEO of Nova Capital. “We are delighted to conclude this agreement with such a complementary business as LCI. Their proven leasing platform, extensive experience in both the fixed-wing and rotary-wing leasing markets, and immersion in mission critical helicopter operations, make them a natural choice.”

To view the article in Airline Economics, click here

LCI, a leading aviation leasing company, has placed two Leonardo AW139 helicopters on long-term operating leases with its newest customer, Heligo Charters Pvt. Ltd.

The state-of-the-art aircraft were recently delivered to Heligo’s base at Juhu Airport in Mumbai, from where they will provide crew transfer services for India’s largest energy company, ONGC.

Nigel Leishman, executive vice president and global head of marketing at LCI, said, “Heligo is one of India’s foremost providers of onshore and offshore helicopter services, and we are delighted to support their operations.

“India and the wider Asia-Pacific region is a diverse and fast-growing market for helicopter leasing which today accounts for around a third of our global aircraft placements. We see huge potential for further long-term growth in the region across a range of operating sectors.”

Captain Padmanabhan, CEO at Heligo, said, “LCI’s expert team went above and beyond to meet our requirements swiftly and effectively, providing invaluable technical assistance. We’re looking forward to a productive, long-term partnership.” 

LCI’s rotorcraft fleet is focused on the latest technology medium and super medium helicopters manufactured by leading helicopter OEMs including Leonardo, Airbus Helicopters and Sikorsky. These are in operation across four continents in multiple sectors including emergency medical services, offshore wind, search and rescue, maritime pilot transfer and energy sector transportation.

The lessor has consistently grown in scale and value as it has diversified over time. LCI’s highly experienced management team has built strong relationships with manufacturers, customers and leading financial institutions, and has undertaken in excess of US$8 billion of transactions in the fixed-wing and helicopter markets since LCI’s inception in 2004.

To view the article in Vertical, click here

Aviation leasing specialist LCI has announced that its parent company, the Libra Group, has acquired the minority interest in LCI Helicopters held by global investment firm KKR.

Jaspal Jandu, CEO of LCI, said: “We would like to thank the KKR team for their exemplary support these last seven years, helping LCI grow across sectors including offshore wind power and search and rescue.

“We are equally delighted that the Libra Group has returned to principal ownership. It has always been a valued and supportive parent given its experience in building asset-intensive transportation businesses, particularly in the aviation space.”

LCI has undertaken in excess of US$8 billion of transactions in the fixed-wing and helicopter markets since it was founded in 2004. Its rotorcraft fleet comprises modern medium and super-medium helicopters manufactured by OEMs such as Leonardo, Airbus Helicopters and Sikorsky. These aircraft are in operation across four continents in a variety of sectors, including emergency medical services, search and rescue, offshore energy and maritime pilot transfer.

George Logothetis, chairman and CEO of the Libra Group, noted: “We are proud of what LCI has achieved and look forward to being fully invested in LCI’s future as the global market for helicopter deployment looks set to increase and fixed-wing aviation is on the road to recovery.”

To view the article in RotorHub, click here

LCI, an aviation leasing company, re-entered the fixed wing market with the acquisition of an Airbus A330-300 commercial aircraft.

This latest investment program builds upon LCI’s 17-year track record in the fixed wing market, during which it carried out more than 120 passenger and freighter aircraft transactions worth more than $7 billion.

LCI’s fixed wing strategy of undertaking aircraft investments timed with market cycles includes its $1 billion fleet divestment in 2007 and its $4.8 billion fleet investment and divestment cycles running from 2008 to 2020.

Deal origination, technical management and ongoing lease management will all be handled in-house via LCI’s leasing, management and investment platform.

The 2013-built Airbus aircraft is powered by Rolls Royce Trent 700 engines. It was acquired by a joint venture between LCI and Marathon Asset Management.

“LCI prides itself on being a prime mover in aviation leasing as demonstrated by strategic investments in widebody aircraft, freighters and helicopters, and this acquisition marks the latest chapter in that strategy,” Michael Platt, vice chairman of LCI, said. “The A330-300 is a proven and popular aircraft with airlines across the globe and a natural choice as the long-haul market recovers.

“We are delighted to be working with the Marathon Asset Management on this acquisition. Our combined aviation and investment expertise will make this a strong and successful partnership.”

“As the airline industry continues to build back from the pandemic, we believe the range of compelling aircraft investment opportunities is growing quickly,” Joe Thorstenson, managing director of aircraft leasing at Marathon Asset Management, said. “We are delighted to be partnering with such an experienced lessor as LCI.”

To view the article in Monitor Daily, click here