Steven Udvar-Hazy, who left International Lease Finance Corp. in February, is seeking capital for a new aircraft lessor, Air Lease Corp., that he’s founding with former colleague John Plueger.
“It’ll be huge,” the 64-year-old Hungarian-born entrepreneur said of his new company in an interview during a conference in New York yesterday. Udvar-Hazy said it wouldn’t be “much longer” before he’s out of a quiet period and will be able to give details about Air Lease.
Udvar-Hazy built ILFC into the world’s largest plane lessor and the biggest customer for Boeing Co. and Airbus SAS before selling it to insurer American International Group Inc. in 1990. He left as chief executive officer of the Los Angeles-based firm more than a year after it lost funding options because of credit downgrades to AIG, which is divesting assets to repay a U.S. bailout of $182.3 billion.
Plueger, who was ILFC’s chief operating officer at the time, replaced him temporarily as CEO before leaving in March to rejoin Udvar-Hazy.
“The last financial nightmare taught us a lesson,” Udvar- Hazy told a roomful of bankers, lessors and aviation executives at Euromoney’s Airfinance conference. Before the financial crisis froze credit markets in 2008, a leasing company could have been started with a 4-to-1 or 5-to-1 ratio of debt to equity, he said. Greater difficulty in obtaining credit in today’s climate means that every dollar of equity invested in a new leasing enterprise now could expect to attract 2.5 or 3 times that in bank debt or bonds, he said.
New investment groups including Avolon, Greenstone Aviation and Jackson Square Aviation have begun assembling private-equity money to invest in aircraft assets at the bottom of the cycle, seeking to benefit from the recession-induced downturn in the air-travel industry.
Any investors putting equity into buying new or used aircraft would expect to leverage that by raising debt to pay for the planes, a strategy hindered by banks’ reluctance to lend money.
Udvar-Hazy said he is confident that strong management at newly formed leasing companies will be able to raise debt and that lessors are better bets than individual airlines.
“If you’re a bondholder or a bank lender, it’s safer to loan money to a leasing company because you’re loaning to diversified portfolios,” he said. Last year, he said, when parent company AIG “had one leg in the cemetery,” ILFC generated $1.4 billion in earnings on about 1,000 leased aircraft with 107 employees and had a 26 percent profit margin.