Issue 33: July/August 1986

Ansett again stunned the industry with its 1985 Paris Air Show order for up to 17 Airbus Industrie A320s. With Ansett so firmly in the Boeing camp literally nobody in the industry expected the airline to order an Airbus product. In fact many observers would go so far as to say that much of Ansett’s early eighties advertising was decidedly anti-Airbus in its character. The A320 is an excellent aircraft however and no doubt many of these twinjets will find their way into the various Ansett leasing organisations as demand requires. Previous to this the Group had ordered 15 Fokker 50 propjets. Most of these would be destined for Australian operation, replacing the venerable Friendships currently in service with Ansett’s siblings. A new Ansett company, Corsair (in partnership with Leslie Hong) however ordered an additional 7 Fokker 50s at the Paris Salon to bring the total purchase to 22 aircraft.

And so the buying spree rolled on. Three months after Paris, it was quietly rumoured that Ansett had started another leasing subsidiary titled Ansett Worldwide Aviation Services and had ordered 6 Boeing 737-300s and taken options on a further 6. This was in addition to the dozen of type that Sir Peter had ordered shortly after his Airbus purchase.

More was to come though. Rumours by this stage were flying higher than the company’s 767s, and while some were a little adventurous others held relevance to ultimate fact. One of these was the mooted purchase of McDonnell Douglas MD-80 series twinjets. This latest order was formally announced in March (though reported in the January edition of this magazine) and was for 6 MD-83s with a further 6 on option. The “buyer” in this case was yet another Ansett subsidiary, Trans Pacific Enterprises.

Ansett are not new to offshore leasing though. The company has had a number of 727s in the USA for several years now as a foretaste of what is to come. As one of their lessees, Wein Air Alaska, went bankrupt, Ansett would have also gained excellent practical experience in how to ensure that the security of the operating lease protects the lessor at all times The benefits of aircraft operating leases (not to be confused with routine finance leases) are many. Firstly the operator does not have to generate as much collateral in order to gain finance approval in the first place. If a number of finance sources are required, as is generally the case, the operator can save much time by taking an operating lease in preference to a regular finance package. If traffic is not up to expectations, the airline can opt out of the aircraft in question, something that they cannot do when technically “owning” the aircraft themselves. Additionally, the aircraft on an operating lease do not appear on the airline’s balance sheet and therefore do not affect adversely the carrier’s debt/equity ratio.

The drawback of this from the lessor’s point of view however is that they will need to be very careful not to overextend in case the international airline market should deteriorate rapidly. If this should occur, Ansett, and its overseas rivals, could end up with a lot of surplus aluminium on their hands.

In that regard, though the market, despite its regular ups and downs, is rather flexible in that aircraft are highly mobile assets and can be transferred from one region to another with relative ease. A traffic decline in Europe may not be reflected in Asia, for instance and thus if a carrier in one part of the world needs to divest itself of surplus capacity then it is likely that capacity can be used elsewhere.

Internationally Ansett has some tough competitors though, many are indeed legends and have been in the operating lease business for many years. Some of the largest are GATX (who recently signed for 10 A320s), Guinness Peat Aviation (GPA), who have more than 100 aircraft in inventory and have ordered more than 50 new Boeing jetliners in the past two years alone, and International Lease Finance who have on order 20 737s, 3 757s and 6 767s. A fourth company, Irish Aerospace, is a partnership between McDonnell Douglas and Guinness Peat and has on order 19 MD-80s with up to a further 21 on option.

GPA has also recently launched a subsidiary of its own called GPA Jet Prop, a company established specifically to promote the leasing of propjet aircraft. Like Corsair with their Fokker 50s, GPA believes that a whole new market for operating lease possibilities lies in the rapidly evolving world of the pressurised third-level airliner. Our article in the May edition analysing the growth of the US dual designator system outlined the very market situation that companies like Corsair and GPA Jet Prop are planning to attack. The advantages to the operators in this extremely cash-conscious environment is that they generally have less overall overheads and can explore new route possibilities with aircraft types previously beyond their fiscal capabilities. Depending upon the terms of the operating lease, if the aircraft requirement does not meet expectations then the operator is not saddled with equipment that he cannot support. You don’t have to have been a Harvard graduate to appreciate the implications of that flexibility in a relatively deregulated environment.

Operating leases are certainly one of aviation’s current buzzwords and our own Ansett Group look set to attain the world stage with a well-thought-out and deployed fleet of airliners that herald the beginning of a new era in airline capabilities.