CONFIDENTIAL SKY Leasing The Future of Aircraft Leasing – A View From a Veteran October/November 2017 PRELIMINARY │ SUBJECT TO FURTHER REVIEW AND EVALUATION
Successful History of Creating World Class Aircraft Leasing Companies 2007 1988-1995 1997-2001 2004 PAFCO sold in its entirety to Present Pegasus founded by Rich PALS Securitizations Pegasus management Terra Firma/AWAS for $5.2B Wiley • Launched four aircraft team founded PAFCO • Since 2004, PAFCO AWAS successfully merged • Acquired 300+ aircraft securitizations raising • Equity capital of $300M originated a fleet of 86 with DAE to create one of the valued at over $3.0B over $3.0B provided from Oaktree largest aircraft leasing aircraft and 39 commitments Capital and companies with a total value management valued at over $5.0B of over $14B • Fleet had an appraised value of $3.7B 2012 2010 JSA sold in its entirety to Present JSA founded Mitsubishi UFJ and Leasing § Equity capital of $500M (“MUL”), the largest leasing JSA has continued to scale provided from Oaktree the platform through organic company in Japan Capital and growth to become a $7.0B+ • Since 2010, originated a management platform fleet of 80 aircraft and 15 commitments valued at over $3.3B 2017 2015 2016 SKY continues strong fleet Present SKY founded by SKY SKY originates 18 growth management, ATL, and aircraft worth $1.0B+ • In year-to-date 2017, SKY SKY continues to scale its PSP • Closed 14 aircraft has originated a total of 23 existing platform targeting • $250M initial committed additional aircraft bringing $1.0B+ annually in fleet • Raised $750M debt capital with additional growth facility with DB, BAML, the closed and committed capital available as and CA as JLAs portfolio to 41 aircraft worth required over $2.5B CONFIDENTIAL 2
SKY Leasing Facts and Figures Total aircraft Q 41 owned / committed Fleet value 1 Q Over $2.5B Aircraft age 1,2 Q Under 3.0 years Aircraft portfolio 1,3 Q 64% Narrowbody, 21% Medium Widebody, 15% Freighter Aircraft manufacturer 1 Q 51% Airbus, 49% Boeing Customers Q 23 airlines in 17 countries across 5 major geographic regions Remaining lease term 1,2 Q Over 8.0 years Leadership Q Rich Wiley, Austin Wiley, and Steve Patch Global presence Q 31 employees across Ireland, San Francisco, and Hong Kong 4 Ownership Q ATL Partners, PSP Investments, and SKY Management 1. Fleet Values provided by MBA, ASG, and IBA as of September 2017 2. Calculated as of September 2017 3. Medium widebody = B787 family and A330 family (200-300 passenger seats) 4. Hong Kong office to be established Q1-2018 CONFIDENTIAL 3
Major Aircraft Leasing Trends Aircraft Replacement Cycle Increased Production from the OEMs Increased Lessor Participation Increased Institutional Investment Lessor and Institutional M&A Activity CONFIDENTIAL 4
Demand for New Aircraft Replacing Older Fleets Demand for new and young aircraft derived from increases in traffic growth and from the need to replace older, less-efficient aircraft ~18,000 new aircraft required to satisfy demand fueled by growth of 8,000 aircraft and replacement of 10,000 aircraft 2017 – 2026 FLEET FORECAST COMMERCIAL JETS 40,000 30,000 Retained and Growth Fleet 8,102 • Enhanced fuel efficiency • Lower maintenance costs • Improved capacity, range, and reliability 20,000 • Mitigates obsolescence 15,650 risk 24,846 10,000 Replacement Fleet Includes older current • 9,989 generation aircraft Less fuel efficient • 0 2017 2026 Replacement Retained Fleet Growth Source: ICF Analysis - July 2017 CONFIDENTIAL 5
Demand for New Aircraft Replacing Older Fleets Cont’d Aircraft from 2005 and older are expected to be replaced by young current generation and next generation assets Fuel efficiency, maintenance costs, capacity and range, reliability, and consumer preference are driving fleet replacement Cumulative Aircraft Count by Vintage 30,000 CFM56-7B E/PIP 9,989 Replacement Aircraft CFM56-7B /3 and and CFM56- CFM56-5B /3 Enter 5B E/PIP Enter into 25,000 into Service Service 20,000 V2500- Select One Sharklets Enter Enter into 15,000 into Service Service 10,000 5,000 0 Pre 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Cumulative A/C Source: ICF, Ascend, SKY Analysis CONFIDENTIAL 6
OEM Production Rate at All Time Highs Aircraft production has more than doubled since 2003 with airlines taking on more capacity per operation The average number of aircraft deliveries per airline has increased by over 2x This has increased airline concentrations for lessors and the need for active trading and M&A activity Historical OEM Delivery Schedule 1,429 1,600 8.0 Average # of Aircraft Delivered per Airline 1,400 7.0 # of Aircraft Delivered per Year 1,200 6.0 1,000 5.0 800 4.0 588 600 3.0 400 2.0 200 1.0 0 0.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Deliveries (left axis) Aircraft per Operator (right axis) Source: Ascend, SKY Analysis CONFIDENTIAL 7
Increased Lessor Participation The role of leasing companies has nearly tripled since 1990 with 43% of the global fleet leased by airlines from lessors Lessor activity is most prevalent in aircraft between 8 and 18 years of age 18+ year old aircraft has the lowest lessor participation as aircraft are ultimately sold back to the airline Source: ICF Analysis - July 2017 CONFIDENTIAL 8
Increased Institutional Investment Long stable cash flows and dollar denominated assets have attracted large institutional investors from all the major regions around the world Aircraft investment has seen a broader participation over the last two decades from pension funds, private equity, financial institutions, insurance companies, and sovereign wealth funds Present Early 2000’s CONFIDENTIAL 9
Lessor Consolidation and Platform Requirement for New Entrants Large lessors will continue to identify M&A and joint venture opportunities to increase growth and manage risk while new entrants will require experienced platforms to enter the industry Recent New Entrants Through Recent Large Lessor M&A & Joint Platform Acquisition Venture Activity M&A Growth M&A Growth M&A Risk Management M&A Risk Management CONFIDENTIAL 10
Conclusion Aircraft replacement cycle driving increase need for capital funding Increased capital requirements call for greater lessor participation Large lessors need to accelerate growth and manage risk through M&A and joint venture activity Increased demand for aircraft investment but barriers to entry require platform acquisition for new entrants CONFIDENTIAL 11
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