Making intelligent investment decisions certainly does not mean shying away from large portfolio acquisitions or one-or-two aircraft deals – the team are prepared for all opportunities. “We are primarily focused on modern fuel- efficient aircraft. But we have the ability to do cargo, widebody aircraft as well as mid-life aircraft. The menu card is very similar to what we used to do at GECAS and PK Airfinance. There are portfolios that will be available and there are some in the market right now that we can consider. As interest rates rise and inflation continue to flush through, that will drive some different economic dynamics about what a good return looks like.”
With such strong capital backing and a desire to gain scale, a speculative order would usually be a logical step for such an ambitious new start-up lessor. However, the slot availability and other constraints lessens the attraction, says Conlon. “We certainly have a lot of experience with OEM orders but there needs to be three components that work together to make an order make sense: future visibility of demand, the right mix of assets and the scarcity of slots. Right now, those dynamics don’t align. However, things could change. In the meantime, we would certainly look at any opportunistic trades with OEM partners, or if an orderbook suddenly becomes available. But a speculative order wouldn’t likely be our first business imperative.”
High Ridge Aviation will focus on those modern fuel-efficient narrowbody aircraft, but with such a wide remit for building a strong leasing platform, the team will not hesitate to invest in widebody aircraft or even cargo assets for the right deal with the right credit.
Conlon notes that the challenging environment will eventually lead to an increase in lease rates, as those higher financing costs that are impacting all aviation companies are passed on, trickling down to the airline customers.
Despite the challenging geopolitical environment, with offices around the world located in Connecticut, USA, Dublin, Ireland, Dubai, UAE, Singapore and Australia, the team is already reconnecting with industry contacts to seek out transactions where they can add value and provide solutions for their clients.
“The good news is that the world needs to fly,” says Conlon. “It’s almost like a utility disguised as a business. Aviation drives international commerce – as freight and as the most efficient form of travel on the planet with no real practical replacement. The demand is undoubtedly something to be optimistic about. The inflationary environment certainly has economic repercussions, but asset values generally increase in the aviation space creating a natural a hedge on the balance sheet. And again, having a very experienced management team that is solely focused on this space is a major differentiator.”
Airline Economics Issue Seventy