The aviation industry has been through its version of a Hollywood movie in recent years: from the devastating impact of COVID-19 that saw flights grounded around the world, causing unprecedented losses for many airlines; to the strong rebound in travel since pandemic restrictions were lifted, a ‘happy ending’ that has propelled the industry back into the black with record numbers of flights and passenger numbers forecast for 2024.
Against this background of extreme volatility, ORIX Aviation, one of the world’s top aircraft leasing companies has flown a much steadier course, remaining profitable throughout the downturn and growing strongly since.
“The secret behind this consistent performance and our success overall is our unique business model,” says CEO James Meyler.
While the leasing sector itself is gaining market share and lessors own and manage over half the 25,000-strong global aircraft fleet, ORIX Aviation is the longest established firm in the sector, under the same ownership since its foundation in 1991.
Stable and seasoned
That stability brings a number of advantages. It has allowed ORIX Aviation to build a “best-in-class” global aircraft asset management team in house. that is unrivalled in the industry This is validated by having achieved the highest possible ranking – ‘Strong with a Stable Outlook’ – from S&P as an aircraft lease servicer ranking. Reaffirmed every two years since 2015, this is a testament to the company’s capabilities and provides investors and airlines with an independent validation of its expertise and ability.
This full-service aviation asset management expertise is coupled with an in-depth knowledge of the Japanese Operating Lease (JOL) market, developed with the help of its parent ORIX Corporation and the latter’s financial and brand strength in Japan. In fact, ORIX Aviation has completed over $6 billion of such JOL transactions, where Japanese investors have the title of the aircraft, in the past five years and half its fleet is leased on this basis.
On top of that, ORIX Aviation holds a 30% stake in Avolon, the second-largest leasing company, and together the two companies have some $38 billion of assets under management. Because the two companies secure and place their aircraft in different market segments, with Avolon buying directly from Airbus and Boeing, while ORIX Aviation trades in the secondary market, they do not compete directly and can help each other gain a fuller understanding of the market.
“This expertise, allied to a strong track record of investment returns and the steadfast support of our parent ORIX Corporation ensured we remained profitable throughout the pandemic, unlike many of our competitors,” concludes Mr. Meyler. It also helped that most airline customers are Tier 1 credits that were quickly able to raise the liquidity needed to survive the immediate risks to their business – and to continue rental payments.
Full throttle on sustainability
As the pandemic receded and travel rebounded, the firm has concentrated on helping customers extend leases and obtain aircraft in the secondary market to make up for delays at the big manufacturers. That is reflected in a continued strong financial performance, with pre-tax profits jumping from $38m in the year to March 2022 to $135m in fiscal year 2024 and the after-tax return on assets improving from 1.6% to 5.0%.
With air travel set to keep growing in coming years, ORIX Aviation will further expand its fleet. But it is also investing heavily in sustainability as one of the original signatories to the Aircraft Leasing Ireland Sustainability Charter – an initiative overseen by CFO Marie-Louise Kelly -- and has formed a dedicated Charter Team to record and report on its sustainability progress.
The firm is also funding pioneering university research on Sustainable Aviation Fuels (SAF), partnering on SAF feasibility studies and backing the development of electric flight through Avolon’s investment in Vertical Aerospace.
“Our industry is committed to Net Zero emissions by 2050 and there are billions of dollars being spent annually to get us there,” says Ms. Kelly. “We are on a journey to get us to carbon free flight.” Like other parts of ORIX Corporation, ORIX Aviation is “Finding Paths. Making Impact.”
