Newport Beach, California-based aircraft lessor Aviation Capital Group owns 450 jets leased to 85 airlines in 45 countries. Tom Baker, the company’s CEO and president, was interviewed onstage at a Wings Club event in New York by AW&ST Editor-in-Chief Joe Anselmo. Excerpts follow.
Russia’s Seizure of Western-Owned Aircraft
Russia was not a significant part of our network, but it was a nice growth market. We had airlines who were great customers and reliable partners, but because of actions of the government, where the aircraft were stolen, we had to write those down. It was approximately 3% of our portfolio, so not meaningful exposure, but I think the collateral damage will be felt for a long time. It will result in increased costs, whether it’s insurance or other things; it will rob the market of an opportunity to grow, and then it will bleed into China or other areas where there’s a geopolitical overlay that may not have existed before. I think we’re just starting to see it unfold.
Why ACG Has 96 Orders With Airbus and Only
13 With Boeing
We have always tried to strike a 50-50ish balance between Airbus and Boeing, but it is dramatically skewed toward Airbus right now. Some of that was the [Boeing 737] MAX. We had to restructure our orderbook after the tragic accidents [and 20-month grounding of the MAX]. We’re desperate to rebuild the parity, but it does not feel like there is traction on being able to count on Boeing to deliver aircraft at the same pace as Airbus right now. I’m thrilled for Airbus for its success, but I think there needs to be more diversity of choice and less OEM leverage. The sooner we can get back to much more of a dual manufacturing market, the better it will be for everybody: the market, the customers, the lessors, and even the manufacturers.
Airbus’ Long-Range A321XLR, Comac’s C919 and Widebody Jets
We added 60 more Airbus jets to our orderbook last December, from the XLR all the way down to the A220. Over time, you could see a bifurcation in the market where perhaps the 320 family becomes the core narrowbody platform for airlines. You upgauge to the 321, or you downgauge to the A220-300, and the 320 rounds out the core network lines. . . . We have not [looked at the C919]. I think there could be a situation one day where if a global lessor wanted to have a significant presence in China, there might be a requirement for 919 content. It’s just starting to fly, and I think there’s going to be an enormous domestic market for that aircraft. But we like ubiquitous aircraft with lots of users, and we like to be able to trade assets. Until we start to see that, it’s really hard for us to commit to investing in a platform of any kind. . . . The widebody will come back. There is definitely a need for new technology, medium widebody capacity [like] the A350 family or the 787. Boeing needs to get 787 capacity back into the market. We know a number of customers looking for that aircraft now, and it’s just not available.
Sustainability and the Viability of Hydrogen Propulsion
We’re focused on things that are actionable now. Sustainable aviation fuel [SAF], love it or hate it, feels like the nearest opportunity. So that’s where we’ll go, and I think you’ll see us try to create incentives for our customers to adapt SAF when it’s available. I read an article that said hydrogen is what happens when engineers and economists don’t talk to each other, at least for the actionable future. Five to seven years ago, our OEM partners struggled through the shift to the Neo and the MAX, and that was an incremental shift in technology. To try to transition to a whole new technological platform just feels way too disruptive over the medium term.
The Advanced Air Mobility Market
We think we can see tangible results in 3-5 years. ACG has chosen a company in Germany, Volocopter, as our partner. I think you’ll see Volocopter aircraft at the Paris Olympics [in 2024], you’ll see them deployed in Singapore soon. The key constraint for players like Volocopter or Joby appears to be the regulatory process. Right now, it feels like the European Union Aviation Safety Agency (EASA) is pulling ahead of the FAA. EASA looks much more supportive of getting that space certified and operational.
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