DAE not looking at portfolio acquisitions | News | Airfinance Journal

DAE not looking at portfolio acquisitions

Middle East-based Dubai Aerospace Entreprise (DAE) is not currently considering any platform acquisitions, chief executive officer Firoz Tarapore has suggested.

During the company’s financial results for the full year 2020, Tarapore said inorganic platform growth represents a “very low level of appeal to us at the moment”.

While Tarapore conceded that DAE had in the past stressed that inorganic activity was part of the lessor’s DNA, he added: “What has changed in 2020, in addition to the bid-ask between buyers and sellers, is that the value proposition of a speculative orderbook has been visibly shaken. Without that, all you are doing is buying existing current-tech metal. That for us has limited appeal and you will see us view inorganic growth is a less favourable way.”

Asked about aircraft investment this year via new sale and leaseback deals and OEM orders, Tarapore said the company has some firepower. 

“We lead with customers’ solutions,” said Tarapore, adding that the lessor's primary origination channel is to help long-term customers.

“In that process it does intersect with some of the solutions OEMs are looking for.

“We will continue to do that more than anything else because that’s the right way to deploy our capital,” said Tarapore.

Last autumn, DAE took delivery of the first of 18 Boeing 737 Max 8 aircraft under a purchase and leaseback mandate with American Airlines. The aircraft was part of an agreement signed between the two parties in the third quarter of 2020. The remaining aircraft are expected to be delivered to American Airlines in the coming months.

Tarapore said market conditions for investment improved “as we progressed through 2020”.

“Some of the return conditions that we see are beginning to tighten up but the movement is anecdotal and not applicable across the board. It depends on each individual carrier’s situation.”

He admits that lease rate factors are tighter but “so is the cost of funds”, which is materially lower.

“When we look at a deal, we look at returns not headline rates. From our perspective, returns are ok and not contracted as much as lease rates headlines are,” he commented.

Tarapore said DAE has some dry powder to do business for aircraft deliveries in 2021 and 2022.

“When you look at the euphoric sales that happened in the four years prior to 2020, there is still a lot of financing activity lying in front of us," he said.

“For people like us that can put different levers there is the right trade-off of good business from our risk and return standpoint still in front of us. We are going to approach the same way as in the past which means every element in our business comes into play: credit, liquidity, returns, risk.”

Transaction SnapshotDAE Capital | Bond issuance | 01-21 | $300m

Financial Close:
29/01/2021
SPV:
DAE Funding
Value:
$300.00m USD
Full Details

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