Figures released by the The International Air Transport Association (IATA) has shown that air traffic for June 2023 returned to 94% of the levels recorded pre-pandemic. Following a prolonged period of turbulence for the aviation sector, the European travel and leisure stocks index has outperformed other market favourites, rising 33% over the past year and 23 percentage points ahead of the broader market. Traders remain optimistic about the future, despite macro uncertainty and extreme weather challenges as consumers’ willingness to spend on travel has been evident, even amidst cost-of-living concerns, making travel a priority for many families.
AIP Capital, a new global aviation asset management and investment company, indicates the recovery of the aviation industry is driving a flurry of capital into the sector, creating a wave of new entrants into the leasing and private credit industry within aerospace. According to Jared Ailstock, Managing Partner of AIP Capital, this model empowers airlines to mitigate their financial risks and enables their growth in markets dominated by legacy carriers, while also providing private equity firms with a profitable investment opportunity.
For consumers, increased interest from private capital into airlines, particularly those at a point of nascency, will result in elevated levels of competition which could help curb the recent spikes in airfares. Price rises within the industry – around 20% in 2023, with the average price for UK consumers rising by 18% – have led to predictions of the 2030’s being the earliest that consumers can expect to see a return of low-cost air travel – highlighting the need for new players in the sector.
Historically, banks have dominated the arena of aviation financing, yet with the retraction of these traditional lenders’ support throughout the years of the pandemic, private equity firms are seizing the opportunity to enter the fold, purchasing the new planes originally ordered by airlines. This move indicates a big shift in aviation financing, a recent report published by Spherical Insights LLP expects the global aviation asset management market size to grow from USD 177.79 Billion in 2022 to USD 288.34 Billion by 2032.
Launched in May 2023, AIP Capital has already built a $1.6 billion portfolio encompassing 30 aircraft, with another 68 Boeing 737 Max models on order. Its activities include aircraft management, operating and acquisition finance, and private credit investing, and currently has an additional $2.6 billion of capital deployed in investment grade, high-yield and distressed aviation credit. The AIP Capital team has a successful track record of leveraging relationships and a unique investment approach to deliver outsized returns on assets, with previous aircraft investments totaled approximately $5 billion across 119 assets.
