DB-Guide to Pooled Aircraft Lease



DB-Guide to Pooled Aircraft Lease














October 13, 2006 Table of Contents Introduction.....................3 Underlying aircraft market trends..................4 The lessees...................10

Aircraft valuation


Aircraft ABS lessors

and historical issuance..18

Aircraft ABS structures

and cashflow.................22

Relative value................27


Katie Reeves


(212) 250-2507


Karen Weaver, CFA

Managing Director

Global Head of Securitization

Research and Regional Head

of Research for the


David Folkerts-Landau

Managing Director, Head of

Global Markets Research Deutsche Bank@ Guide to Pooled Aircraft Lease Securitizations Grounded after 9/11, liquidity returns Following some very difficult years after September 11, 2001, the airline industry has recently been benefiting from strong global demand for air travel, helped by relatively healthy global economic conditions. These improved underlying fundamentals have helped resurrect the market for ABS backed by aircraft leases. New issuance activity has picked up, and liquidity has also improved in the secondary market. Many airlines have been successful in trimming their labor costs. However, the operating environment for commercial airlines is still very difficult, and recent savings achieved in labor costs in some cases have been more than offset by high fuel prices. Additionally, the industry remains vulnerable to unpredictable events such as terrorism, health scares (e.g. SARS), etc. This article will focus on ABS backed by pools of aircraft operating leases, sometimes referred to as “pooled aircraft lease ABS.” This asset class offers relatively short (3-5 year) average lives, with floating-rate coupons. Post 9/11, senior classes have been offered with surety wraps, with yields more typical of CDOs and home equity ABS. However, given the highly cyclical nature of air travel and the potential for negative industry-wide events, we believe a cautious stance is still appropriate for this asset class. IMPORTANT: All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research is available to customers of DBSI in the United States at no cost. Customers can access this IR at http://www.wendangwang.com, or call 1-877-208-6300 to request that a copy of the IR be sent to them. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.

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