Risk Management for Airlines – Financial Risks

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Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK - June 27, 2013

Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK - June 27, 2013

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  • 1. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 0   ‘JOIN THE DEBATE’ Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK RISK MANAGEMENT FOR AIRLINES FINANCIAL RISKS: FASTEN YOUR SEATBELTS June 2013 The ‘idea factory’ thinking ahead strategies www.1bluehorizon.com  
  • 2. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 1 The aim of today presentation is to enhance our knowledge about Financial Risks and how to mitigate it within the Airline Industry F a c t ‘Air transportation is a fast growing sector of most emerging economy’ D i l e m m a s 2014 will mark the hundredth year of regular scheduled airline operations. In the last century, we will have served over 65 billion passengers and opened up new forms of family connections, friendship and business. The air transport industry supports 58.1 million jobs and US$2.4 trillion in global gross domestic product (GDP) according to a recent study . Of the 58.1 million jobs, 8.7 million are within the sector itself, working for airlines, at airports, in air traffic management organizations and for the makers of aircraft and engines. international tourists travelling by air, over 35 million tourism jobs rely on air transport. Based on current rates of aviation growth, the industry is set to support 103 million jobs and $5.8 trillion in GDP in 20 years, while security and risk management top the list of challenge…
  • 3. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 2 Obviously, the most common methods of financing the purchase of an aircraft are through Direct Purchase or through an Operating Lease  Under a direct purchase arrangement the airline purchases the plane direct from the manufacturer or vendor, using a secured mortgage loan or structured finance lease. The amount of the advance for the aircraft can vary up to 90% depending on the airline and its available capital. These loans are generally structured with a term up to 12 years with mortgage style amortization and either fixed or floating interest rates. It’s quite common for several lenders to work in a syndicate to provide larger loan packages.  There are several advantages and disadvantages with direct purchase of an aircraft, they include: Main Advantages:  Airline builds up equity in the aircraft as it pays down the mortgage or finance lease  The airline is the owner of the aircraft and so can modify it to its own exact requirements  As the owner of the aircraft the airline is able to gain significant taxation benefits in most countries Main Disadvantages:  The is subject to residual value risk at the end of the term  Less flexible method of ownership when compared to an operating lease  Heavily weighs down a company’s balance sheet which may affect other banking covenants Source: 1BlueHorizon Group | Management Consulting Methodology
  • 4. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 3  When acquiring an aircraft on an operating lease the airline signs a contract which allows it use of the aircraft for a specified period, for a set specified payment. This payment is known the 'rental'. Payment of this rental grants the airline the use of the aircraft, not the ownership. The entity that leases the aircraft to the airline is the owner of the unit retains title to it after purchasing it from the manufacturer. Leases are usually put in place for shorter terms than a finance contract, generally 3-7 years for narrow body aircraft and possibly longer for wide body units. At the end of the lease the airline simply returns the aircraft to the owner or can make an offer to purchase it (also lease purchase agreement).  In most cases the airline will be required to provide 3 months rental as a security deposit, which is returned to the airline once the lease is complete, provided the aircraft is returned in proper order. Monthly rental costs vary depending on market demand for aircraft though average approximately 1% of the new purchase cost of the unit. Main Advantages:  Reduction in initial capital requirements  Residual value risk is eliminated as it stays with the owner of the aircraft  The liability stays off balance sheet, having less impact of banking restrictions Main Disadvantages:  All equity built up in the unit is retained by the Lessee owner  Generally smaller tax advantages are available  Owner of the aircraft may impose onerous restrictions on its use Obviously, the most common methods of financing the purchase of an aircraft are through Direct Purchase or through an Operating Lease (cont’d)
  • 5. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 4 For sure, it is too late to consider Risk management when you require aircraft funding, finance for airline start-up or airline expansion  The general requirements to finance an aircraft include your companies last 3 years accountant prepared financials, evidence of capital and detailed business profile. If you’re attempting to start an airline the most important item you require is a fully detailed business plan and corresponding financial model. Without this you’re business won’t get off the ground.  As with any major financial decision the choice to lease or finance an aircraft should be made with the help of your professional accounting adviser. Once you've decided on the best option for your business situation contact an experienced, competent aircraft finance broker that can assist you further. Financiers will not only focus as mentioned above fully detailed business plan and corresponding financial model, they will conduct a full Risk Management Assessment of the airline (new venture or not) with a particular attention on the financial risks… What are we talking about? – ‘Fasten your seatbelts…’
  • 6. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 5 Before to talk about Risks, a quick appendix for people involved in the Middle East with Islamic Aircraft Financing  Islamic finance is broadly perceived as a way of managing money by taking into account Islamic religious requirements – Namely the Shariah. Shariah generally refers to the laws derived from the Qur’an and the Sunnah and provides guidance to Muslims in the way that they conduct themselves in their daily lives.  One of the most important tenets of Islamic finance is the prohibition of ’riba’, which in simple terms, means ‘extra’ or ‘excess’. This prohibition against excesses has been interpreted by Islamic scholars to mean a prohibition against the charging or receipt of any interest. As a result, interest is banned in all types of Islamic transactions.  Islamic Aircraft Financing in Practice – The Ijarah  An Ijarah refers to an arrangement where the owner/lessor enters into an agreement to transfer the right to use a certain asset to another person in consideration for prescribed rental payments. An Ijarah contract is equivalent to a conventional lease agreement and is therefore a popular choice in Islamic aircraft financing.  Some of the basic principles in an Ijarah contract are, amongst others, that the asset has to be of valuable use, that all risk of ownership is borne by the lessor and all liabilities arising from the use of the asset is borne by the lessee. Source: © 1BlueHorizon Group | Management Consulting Research & Analysis
  • 7. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 6 Shariah principles are the cornerstone of Islamic finance practices and will be considered in further detail in practice for an Aircraft Financing 3. SPV 1 will then enter into an Ijarah arrangement with the airline in which SPV 1 will execute a lease agreement with the airline to lease back the aircraft to the airline and the airline will pay lease rentals to SPV 1. The lease rentals will be equivalent to the principal and interest on the ‘loan’ obtained by the airline from Islamic financiers to purchase the aircraft. 4. In order to finance the purchase of the beneficial interest in the aircraft, SPV 1 can enter into a mudharabah arrangement with another special purpose vehicle ("SPV 2"). Under themudharabah arrangement, SPV 1 and SPV 2 can agree to share the profits derived from the purchase and leaseback of the aircraft at certain agreed ratios. Essentially, the profits to be shared will be the “interest” portion of the “loan” extended to the airline from the Islamic financiers to purchase the aircraft. 5. SPV 2 will then enter into an investment agency agreement with the Islamic financiers wherein the Islamic financiers will appoint SPV 2 as the investment agent in the Mudharabah arrangement. © 1BlueHorizon Group | Management Consulting SPV 1 SPV 2 Islamic Financiers Mudharabah Arrangement Dividends Investment Agency Agreement Dividends Airline Manufacturer Lease rentals Sell That illustration of the aircraft transaction may be described as follows: 1. The airline will normally enter into a sale and purchase agreement with the manufacturer for the purchase of a new aircraft at an agreed purchase price (the "Purchase Price"). 2. The airline will then enter into a lessor purchase agreement with a special purpose vehicle for the purposes of the financing structure (‘SPV 1’). Under such lessor purchase agreement, the airline will transfer the beneficial interest in the aircraft to SPV 1 for an amount which is equivalent to the Purchase Price.
  • 8. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 7 As per it definition, Risk is the potential of losing something of value, weighed against the potential to gain something of value  Business Risk  Financial Risk – market risk – credit risk – liquidity risk  Operational Risk  Legal Risk
  • 9. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 8 Risk management in the airline: Good or bad risk management is NOT the same as profits and losses  Airlines are doing everything to reduce costs  Some of the risks stem from complex industry structure  Necessary to reduce the risk  Much of this risk, however, could be identified and managed  Effective strategies, adopted by other sectors  In general, the financial markets do not trust airlines
  • 10. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 9 For the last decade, failure to manage the risks within the airline industry resulted in the evaporation of $46 billion US$ in shareholder value  Aviation encompasses a full spectrum of risk factors: International airline is exposed general entrepreneurial risks and industry-specific risks.  Key areas of exposure are capacity and utilization risks, strategy-related risks, political risks, operational risks, procurement risks, labor agreement risks, financial and treasury management risks. Four categories: - Hazard, - Strategic, - Financial, and - Operational
  • 11. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 10 Two main category of Risks: those Externally driven and those Internally
  • 12. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 11 Strategic risks are defined by business choices  Hazard events safety, liability, and war were the least  Strategic and financial risks were much more prevalent Strategic Financial Operational Hazard 49% 22% 18% 11%
  • 13. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 12 Many risks can be lessened through the selection of the business design, Southwest Airlines has designed a business to overcome major risks  attracts customers in good times and in bad because it is simple operationally and, therefore, cost effective  use of secondary airports insulates from competitive pressure  low debt levels make the company less vulnerable to interest rate fluctuations.  profit sharing and fun culture reduce the chance of labor difficulties. Source: © 1BlueHorizon Group | Management Consulting Research & Analysis
  • 14. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 13 Airlines are continuing to develop risk management strategies, but a better understanding of the financial implications of a crisis is necessary  Financial risks involve:  the management of capital and cash  including exogenous factors  affect the predictability of revenue and cash  Financial solutions may include the design of financial transactions:  structured finance  derivatives  insurance  contingent financing  debt equity offerings Source: © 1BlueHorizon Group | Management Consulting Research & Analysis
  • 15. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 14 Kay Operational Risks have also to be very carefully considered  Operational risks arise from the more tactical aspects:  crew scheduling,  accounting and information systems,  e-commerce activities.  Operational risks can be mitigated through organizational solutions:  process redesign  organization structural changes  improved communication  contingency planning  performance measurement and reward systems  capital allocation and pricing Source: © 1BlueHorizon Group | Management Consulting Research & Analysis
  • 16. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 15 To mitigate Risks, in the nineties the airlines explore diversification into non- flying businesses - successful for a period of time  Mitigating strategic risk:  Lufthansa’s diversification in 1994 by creating four companies (subsidiaries)  Lufthansa Technique  Lufthansa Cargo  Lufthansa Service  Lufthansa Systems.  Revenue growth has been highest 70 percent in 1996  Not all of the divisions have been successful.  Swissair known as a ‘flying bank’ pursued a similar strategy but they couldn't succeed.
  • 17. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 16 To mitigate Risks, some other airlines have contained strategic risk through aggressive cash management  During the 2001 crisis:  low-cost airline Ryanair an order for 100 Boeing 737s with 50 options, during a time when most airlines are deferring orders  They were able to negotiate a low unit price.  During the Asian financial crisis:  Singapore Airlines upgrades to their onboard product, for entrenching their leadership position during the later economic upturn.
  • 18. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 17 Impact of Jet Fuel Price increases Jet Fuel Prices (2010-2016) 110 112 114 128127 80 85 90 95 100 105 110 115 120 125 130 2010 2011 2012 2013 2014 2015 2016  Jet fuel accounts for approx. 30% of airlines’ operating expenses  Airlines have tried to pass on fuel price increases to consumers, but unless all airlines do this simultaneously, those that did it were at a competitive disadvantage  To minimize the impact of fuel price increases, airlines may cancel low-capacity routes, consolidate routes, and use one-engine taxiing at airports.  Proactively, most airlines engage in financial hedging to protect against fuel cost increases, and may buy newer planes and engines that are more fuel-efficient for a particular type of service.  Fuel consumption of aircraft varies widely: an Airbus 319 that carries 122 may burn 758 gallons of fuel per hour, while a Boeing 747-400 that carries 369 may burn 3,500 gallons per hour. Because of high fuel costs, newer planes and engines have been designed to be as efficient as possible for a particular type of service  However, jet fuel prices are expected to decrease further as from 2013 and will thus relieve airlines from increasing cost pressures (USD 110/bbl by 2016) 119 92 One of the main concern is to mitigate Risks related to jet fuel by hedging it, the largest portion of airlines’ operating expenses Source: BMI Freight Transport Report 2013, 1BlueHorizon Group | Management Consulting Analysis ACTUALLY 114
  • 19. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 18 The other one is to mitigate Risks related to the changes in the exchange rate and interest rate due to its operations based on USD$  There is a natural balance in the foreign currency risk  Foreign currency sensitivity:  The sensitivity of any currency* against 10 % change in USD (similar for EURO and British Pound Sterling) exchange rates  Negative amount demonstrates the such currency in the net profit for the year
  • 20. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 19 Even Techniques to mitigate financial risks are the most advanced, if such tools are not further leveraged, earnings will continue to be vulnerable.  While many airlines were able to maintain profits in the face of price increases, more aggressive strategies could have been used to further improve results.  There is a large third-party market dedicated to the effort:  including banks  credit specialists  derivative markets and others  Hedging is a common way to manage the financial risk:  no airline input is more volatile than fuel  hedging is not a core competency, and  as long as competitors are not hedged, it will be a level playing field  When fuel prices rise dramatically, airlines cannot pass all of the cost on to their customers
  • 21. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 20 One of the other well established technique for financial risk management involves guarantees for credit card transactions  In the new arrangement, a guarantor ‘insures’ the refunds to the bank, which then releases the cash in the escrow account. Customers Bank Escrow Account Guarantor Airline Credit card payments Refunds Payments Refunds Guarantor provides financial guarantee to the bank Airline receives from the escrow account, a lump sum equal to the guarantee amount Funds released as customers use tickets
  • 22. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 21 Over a broad risk events analyzed over a period of ten years (2000 – 2010), four main risk management trends emerged  60% could have been avoided using the types of approaches discussed above.  15% could have been mitigated through traditional means such as insurance or financial derivatives.  20% events could have been mitigated by more consistent and in-depth customer analysis, combined with scenario planning and game theory exercises.  5% of the events could have been mitigated through improved merger integration planning and improved execution. Source: © 1BlueHorizon Group | Management Consulting Research & Analysis,
  • 23. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 22 Risk management is an ongoing process, not a one-time event and over the long-term, the only alternative to it is crisis management  The risk of interest of companies has two sources:  The sensitiveness of assets and the sensitiveness of debts to the interests.  If the companies want to protect themselves on natural ways from the risk of interests,  positive correlation with the changes of interest should prefer the floating interest debt and  negative correlation with the changes of interests should prefer the fixed interest debt.  Distribution of foreign money on the revenues and the expenses are care about:  If the cost is low, a part of financing can be done on EURO beside dominant money US Dollar in aircraft market  Well managed currency provide positive contribution with the matching distribution of revenues and expenses in the future cash flows.
  • 24. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 23 A formally specified risk management should be available not only for new established airlines but also for legacy carriers and business aviation  Airline management manages the risks through their decisions and applications:  A formally specified risk management model is still not enough implemented in particular in Africa, Middle East and Asia  Corporate risk management model have been aimed there  Enterprise Risk Management (ERM) also comprise financial, strategic risks which will give many advantage to any airline:  With formation of ERM it’s planning to  identify risk appetite  risk strategy and create risk transparency  to create a strong risk organization, to inculcate sharing risk culture and effective risk processes
  • 25. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 24 Source: © 1BlueHorizon Group THANK YOU We are used to generate 1BlueHorizon® out of the Rough... Our turnkey solutions have continuously an implementation focus… Talking about Financial Risk Management helps also to understand why financiers are initially always skeptical to consider new airline venture… Aviation financing is a hot topic and likely to remain so over the coming years, as the demand for financing deliveries of new aircraft peaks at a time when long term financing becomes unattractive for some of the incumbent banks. There are a number of headwinds in the aircraft finance market which may make these orders more difficult to finance, and potentially, more expensive. Conversely, in tough economic times and a low interest rate environment attractive yields are harder to find. Investors are looking for hard assets with good returns.
  • 26. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 25   SOLUTIONS PACK 1BLUEHORIZON GROUP GENERETING THRUST TO PROPEL YOUR BUSINESS FURTHER... March 2013 We generate 1B l u e Horizon ® out of the Rough... www.1bluehorizon.com P R O P R I E TA R Y I N F O R M AT I O N A s s e t M a n a g e m e n t | M a n a g e m e n t C o n s u l t i n g | I n t e r i m M a n a g e m e n t   A b u D h a b i – B e r n – L o n d o n – P a r i s
  • 27. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 26 Source: © 1BlueHorizon Group Corporate profile 1BlueHorizon Group® value proposition is simple — Deliver great value through a network of senior aviation executives worldwide  1BlueHorizon Group® (Asset Management | Management Consulting | Interim Management) was established in 2007 as a network of International aviation professionals. is a specialist aviation consultancy providing objective, independent, evidence-based analysis, advice and implementation support. We build on the experience of our team to help clients realize real and measurable results, quickly. Start-ups, restructuring, cost cutting, project management office, due-diligence or exploiting growth opportunities, we have experts who have faced these challenges.  Our senior experts have experience from leading companies in both management roles within their disciplines and as senior level professional advisors throughout diverse and complex locations in the Middle East, Europe, Africa, Asia Pacific and North America.  Privately owned, 1BlueHorizon Group® is independent of any financial institution, manufacturer, operator, insurance company or maintenance provider assuring our clients the benefit of truly unbiased, comprehensive and flexible provision of service.  1BlueHorizon Group® believes in working closely with client staff to transfer our knowledge and experience, which means 1BlueHorizon Group® continues to deliver value long after the project is complete.  A unique blend of languages, age groups, cultural backgrounds and skills qualifies 1BlueHorizon Group® to provide turnkey solutions for any and all of your aviation requirements - worldwide.  1BlueHorizon Group® range of services is continuously tailored and adapted to suit the geographical scope and needs of our customers. P R O P R I E TA R Y I N F O R M AT I O N
  • 28. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 27 Interim Manage- ment Managing Consulting Asset Management  1BlueHorizon Group® | MC will work side by side with you with senior personnel having experience in various corner of the world and quickly understanding what you need when the margin of error is thin…  1BlueHorizon Group® | IM can help by giving comfort and control, ready to field a team of relevant seasoned advisors whenever and wherever they are needed…  1BlueHorizon Group® | AM team works individually with each of our clients to develop creative strategies and solutions for all types of aviation equipment.… Source: © 1BlueHorizon Group Practices Knowledge transfer Turnkey solutions Innovative Hands-on The 1BlueHorizon difference 1BlueHorizon Group® is build around three dedicated Practice to propel clients business further with a comprehensive approach ahead of strategies P R O P R I E TA R Y I N F O R M AT I O N
  • 29. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 28 Family conglomerates (Governance, Portfolio analysis and investment Strategy) Economic development (Business review / Cluster / Project Management office) Air Transportation (Airlines / Airport / General Aviation / Aerospace & Defence) Management Consulting Operational Improvement Our understanding of operational improvement is quite simple: Whereas restructuring is about stabilizing a company and fixing how it does things, operational improvement is about seeing a company through the transformation of becoming more competitive. Asset Management Fleet Strategy & Planning With our Fleet Solutions, we can help you expand your fleet, transition from older models to newer aircraft types, or provide interim capacity. We back our support with a global team of technical experts and industry specialists who will provide you with the fleet solution that meets your specific needs. Interim Management Knowledge transfer Finding talent is difficult even at the best of time. Finding resources to assist for a short- term assignment of a proven heavyweight interim executive manager to manage a period of transition, crisis or change within an organization or to take on critical projects or senior positions for a limited time is even more difficult. Ahead of Strategies Three Practices If you want a feasibility study or business plan to assess the case or are burning cash and running into trouble as you approach launch or help the executive teams assess the case for entering immunized joint ventures or looking for an interim management solution… 1BlueHorizon Group® senior personnel are helping along three dedicated Practices stakeholders and management of companies to maximize their potential by providing turnkey solutions, thinking ahead of strategies… Our Practices Service Lines are focused on Strategy and Performance Improvement, no matter how complex the issues Source: © 1BlueHorizon Group Business model with Sectors (Horizontals) & Practices (Verticals) P R O P R I E TA R Y I N F O R M AT I O N
  • 30. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 29 1BlueHorizon Group® Sectors expertise covers the entire breadth of the air- transportation, Economic development and Family conglomerates Airline Economic development Corporate governance structure  Portfolio analysis  Investment strategy  The family element  Performance Management  Organization Improvement  Privatization  Aerospace cluster  Logistic, Cargo, GH Airport Family conglomerate  Restructuring MRO, Aerospace & Defence  Performance Management  Organization and Change Management  Pricing and Revenue Management  Market Forecasting  Branding, Marketing and Sales General aviation Aerospace & Defence  Feasibility, Business Plan  Operations Improvement  Merger & Acquisitions  Due Diligence  Fleet Planning  Business review  Cluster strategy  Project Management office  Public–private partnership (PPP) Source: © 1BlueHorizon Group Core competencies in the main Three sectors P R O P R I E TA R Y I N F O R M AT I O N … and our clients well recognize this!
  • 31. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 30 “1BlueHorizon Group is the only consulting firm that works successfully on all levels: Board level, middle management, implementation" “1BHG senior personnel come in with strong views but integrate perfectly in our teams" “1BHG has convinced us through it's excellent industry- and technology expertise" "The 1BHG team knows perfectly well how to push the necessary change" "In each project step, we could clearly identify 1BHG's added value and improve the overall bottom line" “1BHG guys are implementation - oriented and their cooperation with my people is very good " “1BHG Practice has very qualified people who really know a lot about our industry" Clients Feedback - What do Travel & Transportation Customers or Family conglomerates think about 1BlueHorizon Group Note: Detailed references upon request P R O P R I E TA R Y I N F O R M AT I O N Partners Network – Aviation Sector
  • 32. Aspects of Aircraft Leasing and Financing (LAW 2013) – London City Airport, UK © 2013 1BlueHorizon Group - www.1bluehorizon.com All rights reserved1BHG | Aeropodium Conference LAW London 27.06.13 31 Contact: LEONARD FAVRE Partner, Managing Director Email: leo@1bluehorizon.com 1 BlueHorizon Group | Management Consulting| P.O. Box 34154 Abu Dhabi, United Arab Emirates M: +971 50 6164 007 (U.A.E.) M: +41 79 2080 256 (Switzerland) S: leof007