Battered and bruised - but the lessors are back November 2004
The world's aircraft lessors have been through their toughest ever period. Burdened by shrinking demand and a fixed supply of aircraft, the lessors have had to swallow plunging lease rates in order to keep their metal in the skies, while writing down business done with the more financially insecure airlines. But - at last - the cycle is upturning, and the irrepressible lessors are again optimistic.
Could the last few years have possibly been worse for the world's aircraft lessors? The traditional cycle in the leasing industry was already starting to head down in 1999 and 2000, but September 11, Gulf War II, SARS and rising fuel prices resulted in thousands of newly stored aircraft, lease rates plunging by up to 60% since 2001, and lessees having the upper hand in negotiations with lessors.
Rental relief was commonplace, as lessors took the pragmatic decision that keeping their portfolio in the skies at much reduced rates in the short- and medium-term was preferable to airlines refusing to honour contracts for unrealistic monthly rates.
One trend to emerge during the slump has been the rise of the sale and leaseback, as airlines have attempted to improve their cash flow by selling aircraft to the lessors and renting them back. Many lessors have been keen to do this, since few of them have placed new orders with the manufacturers since September 11 and they consider acquiring aircraft from airlines as being less risky than buying new aircraft (since the aircraft come with a ready-made lessee).
But while the lessors have been reluctant to order aircraft, this has presented an opportunity for others. LCCs and other start-ups - who traditionally had found it difficult to lease aircraft at decent rates because of their low credit scores - have been treated as royalty by both manufacturers and lessors eager for new business. At the same time, the LCCs knew the window for them to strike good deals for 737s and A320 family aircraft wouldn't last forever, so they were aggressive in getting the deals they wanted, knowing the lessors were in a tricky situation.
In recent years, it is the successful LCCs that have set the lowest unit prices for new aircraft, not the lessors. They are then able to further improve their financing costs by signing sale and leaseback deals with the lessors - as, for example, Ryanair and easyJet have with RBS Aviation Capital and SALE. The turning point But while LCCs have accounted for a major part of new business written at some lessors, the majority of the industry has been waiting for more established airlines to come back into the leasing market - and at long last this is starting to happen.
Many of the network airlines (which shifted much of their capacity to leases over the last couple of years in order to reduce balance sheet exposure and gain fleet flexibility) now appear to be willing to lease a larger proportion of their needs permanently, and as passenger demand picks up, they are starting to sign new leases.
Geographically, demand appears to be rising in regions such as China, India, the EU expansion countries and the CIS countries (for replacement of Soviet-produced aircraft).
In China, the Civil Aviation Administration of China (CAAC) is considering banning the import of all passenger aircraft into the country that are older than 10 years, with a 15-year limit for freighters.
If implemented, this will provide a boon to the lessors fighting for a share of a market where demand is forecast to rise anyway. Elsewhere, regional feed airlines appear to be hungry for aircraft, while there is increasing demand for freighters to replace ageing fleets of 727s and DC8s.
With traffic recovering through the year, lease rates have begun to nudge up over the last few months, though this is not even spread among all aircraft types. The biggest improvements are coming for the most popular aircraft types, whose lease rates fell the least since September 11 anyway (737NGs, A320s and A330s). But it's not just a narrowbody- inspired industry recovery. The 7E7 will replace A300s, A310s, 757s and 767s in many fleets, and both lessors and airlines are competing for the earliest available delivery slots, in 2008.
According to leading figures in the industry, there are very few A320s, 737NGs, A330s or 777s available for lease at the moment - the first time demand has outstripped supply for any model since early 2001, resulting in rises in lease rates for these models of up to 10% so far this year. However, other aircraft - such as the 737 classics and 757s - are still way behind their 2001 lease rate levels.
As for the overall fleet, the number of parked aircraft has decreased by 5% over the last year, but still stands at around 1,900 aircraft - though what proportion of these will return to the market is debatable. Up to three-quarters of the parked fleet are Chapter 2 aircraft, and if they do return it won't be to "First World" airlines.
And the future? Though the worst is over for the lessors, few of them escaped the last three years unscathed. Write downs have hit profitability at many lessors, and those companies that were heavily exposed to the US airlines that went into Chapter 11 (United, US Airways, Hawaiian etc.) have had to take some very hard financial knocks.
Among the casualties of the slump has been Abbey National's leasing business - IEM Airfinance - which it bought from ING for $38m in May 2001. New Abbey CEO Luqman Arnold decided to refocus the loss-making financial services company on core retail banking, and in February 2003 Abbey announced it was exiting the aircraft industry.
However, it couldn't find a buyer for the entire portfolio at a price that was acceptable and instead, in October 2003, Abbey passed management of its fleet of 30 aircraft to Boullioun, while mandating the lessor to sell off the aircraft when possible.
But perhaps the biggest effect of the aviation slump has been the thwarting of Boeing's attempt to make Boeing Capital Corporation (BCC) a real competitor to GECAS and ILFC.
Now, BCC is a "lender of last resort" to Boeing's clients (see profile, below).
The Big Two - ILFC and GECAS - maintain their grip on the leasing industry.
They account for almost 50% of the market, and still have huge power in securing discounts for large orders from the manufacturers - even if they haven't exercised that power much recently. For the Big Two, and the other more established players, a downturn in the aviation cycle is something they have all been through before - the last one occurred in the early/mid-1990s, (during which GPA went under) and though the current downturn has been the deepest ever, the big boys had the experience, financial strength and backing of their parent companies to survive the dip.
Although the industry is benefiting from an upturn in demand, the financial effects of the cycle turnaround are yet to filter down into the lessors' results, due to an inherent lag in contracts - i.e. though lease rates are improving, the majority of the lessors' existing contracts are at the rock-bottom lease rates prevalent over the last couple of years, and they will only gradually be replaced by higher margin contracts over the next few years.
Looking to the future, with the up-cycle likely to last through the next three to five years, it may be time for lessors to start ordering again. The leasing industry has 601 outstanding orders with the major manufacturers (two-thirds of which are for Airbus aircraft), although ILFC on its own accounts for 357 of those. New orders from lessors have been thin on the ground in 2004, particularly for Boeing aircraft. According to AWAS's September 2004 Industry Overview, this is partially due to "a halt on lessor orders across the board, a 'lessor satiation' of Boeing orders and aggressive Airbus pricing and marketing".
But if the big airlines have learnt their lessons, their mega-orders of the 1990s are unlikely to occur again, and a greater reliance on leasing is likely to result in the lessors having to place large orders themselves.
The order situation can change overnight, and it's possible that when one lessor makes a big order, others will quickly follow.
General Electric Capital Aviation Services (GECAS)
Still the world’s largest aircraft lessor by far, US–based GECAS owns around 1,200 aircraft and manages another 300 for approximately 230 airline customers.
The company has a network of 10 offices around the world, the latest, in Moscow, opened in August to exploit leasing opportunities among the CIS airlines.
In 2003 GECAS’s net profit was $506m — 11% up on 2002 despite the downturn in the aviation industry. And this year GECAS is forecasting a net profit of $525m, based on growth in five key areas — secured debt (via its subsidiary PK AirFinance, which was bought from Credit Lyonnais in 1999), engine leasing, regional jets, cargo aircraft and LCCs (its customers include easyJet, Jet Blue, AirTran and Air Asia).
Part of its resilience through the aviation downturn has been due to the strength of its parent, General Electric, but GECAS has also managed its portfolio effectively during the last couple of years. For example, 70% of its fleet are narrowbodies — which are easier to place than widebodies — compared with 54% of the total global fleet. (And regional jets account for more than 20% of GECAS’s portfolio).
Additionally, just 26% of GECAS’s fleet is more than six years' old, compared with 47% of the global fleet. As of July this year, GECAS had placed all of its 106 scheduled new aircraft deliveries in 2004, and all but three of the 60 scheduled deliveries for 2005.
This is much better than the industry–wide 40% of deliveries to all lessors in 2004 that have yet to be placed with airlines, and 75% of deliveries in 2005, according to UBS Warburg. All but two of the 79 aircraft in the GECAS portfolio that are rolling off the end of contracts during 2004 have been placed with new clients, as have 60% of the 71 aircraft rolling off contract in 2005.
GECAS has also been helped by its policy of cutting back aircraft orders before the downturn in the aviation cycle. Today it has 111 outstanding orders (almost evenly split between Airbus and Boeing aircraft) — well below that of its main rival, ILFC.
GECAS has not escaped pain altogether. It has taken big financial hits from leases to some of the world’s troubled airlines over the last 24 months, and has taken write–downs on some of its key contracts. The latest jolt came in September when GECAS suspended financing for 30 Embraer ERJ–170 regional jets destined for US Airways after the carrier yet again filed for Chapter 11 bankruptcy protection. GECAS is substantially exposed to the fortunes of USAirways, to which it currently leases more than 120 aircraft.
And GECAS had to offer $1bn+ of debtor–in–possession financing to Air Canada in order to protect its operating lease exposure there, while in March GECAS agreed to cancel part of the outstanding leasing payments owed to it by Varig in order to help the Brazilian airline to continue flying.
International Lease Finance Corporation (ILFC)
ILFC has a portfolio of more than 650 air–craft and manages another 101, placed with more than 150 airline clients through the world. In contrast to GECAS, ILFC has continued to place orders through the aviation downturn. It has taken advantage of the fact that it has been the largest single placer of orders through the period, and hence has enjoyed substantial discounts from manufacturers.
While this has stretched ILFC in the short–term, as the market improves this could prove to be an inspired move.
Though there have been some deferrals, at present ILFC is committed to a massive 357 new deliveries through to 2010, with an estimated purchase price of more than $20bn. At the same time, ILFC had placed all of its 2004 and 2005 deliveries, so it has little short–term risk.
ILFC is a subsidiary of US insurance and financial services giant AIG, but like GECAS, US–based ILFC has been exposed to the financial crises at the weaker large airlines. Yet with more than 80% of its fleet placed with non–US airlines, it has been less affected that many of its rivals. It has no exposure to United or USAirways, but in 2003 had to restructure terms for the lease of 12 aircraft to Air Canada. Other leases were renegotiated with Hawaiian Airlines, Avianca, Aero Lloyd and Aeris.
On the other hand, ILFC does have significant exposure in Asian markets, which was a problem during the SARS crisis in 2003. Around a third of its aircraft are with Asian carriers (its customers include Cathay Pacific and Dragonair) — most of them widebodies — and accounting for around 20% of total revenue. China alone accounts for 11% of ILFC’s revenues, and represents the largest single market for the lessor after France. ILFC is targeting this market hard, and in September the company announced it was supplying 23 new A319s to China Southern, for delivery between that month and the end of 2007, while in October a deal was signed to deliver six new 737–700s to China Eastern, for delivery in 2005.
ILFC’s lease margin has been declining for the last three years, and it continued to fall during the first half of 2004. However, with lease rates creeping back up, the margin should start to rise again. Net profit fell slightly in 2003, to $506m from a net profit of $528m in 2002, even though revenues rose to $3bn last year compared with $2.8bn in 2002. In the first half of 2004, revenues rose by 7% to $1.6bn, while net profit rose 6% to $256m.
Boeing Capital Corporation (BCC)
BCC has undergone a complete strategic about turn. The company was formed out of a financing offshoot acquired as part of Boeing’s merger with McDonnell Douglas in 1997, which then expanded into providing finance for all types of assets, from office equipment to oil rigs.
This initially proved lucrative, but the economic shocks of the early 2000s hit the unit’s financial results, and earlier this year Boeing decide to refocus BCC on solely supporting its aircraft sales efforts where needed (which is more in line with Airbus’s strategy, where financing is offered only when no other source is available to an airline).
In June, BCC sold its non–commercial aviation business to GE Commercial Finance for $2bn, leaving BCC with a portfolio of aircraft worth around $9.2bn. $1bn of the proceeds are being used to buy back outstanding debt.
Now that BCC is a "lender of last resort" for its parent, its profile in the leasing industry will be less prominent. However, it still has a substantial portfolio — as of mid–2004, BCC had a wholly owned portfolio of 337 aircraft, with an interest in another 224.
42% of its aircraft are more than five years' old, and like its larger rivals, BCC has been affected by the financial wobbles at some of its biggest customers. It is heavily exposed to US customers — 71% of its portfolio by value is with US airlines. BCC restructured leases for 14 aircraft with Hawaiian Airlines in September, but there are potential further worries ahead. United is BCC’s second largest customer, with leased aircraft worth $1.2bn. With 757 production now ending, BCC is also exposed to a potential further reduction in the model’s lease rates — and 757s account for $1.6bn worth of BCC’s portfolio.
And there could be an even greater–problem if 717 production is dropped.
But it’s not all bad news at BCC. Like others, the company is targeting the CIS market, and it opened a Moscow office in September.
This will provide finance for the aircraft Boeing expects to sell over the next few years now that Russia is entering the WTO (and which should lead to a reduction in import taxes), as the US manufacturer expects few of its new CIS clients to buy aircraft outright.
BCC saw revenues rise 5% in the first half of 2004, to $480m, with a net loss of $17m in January–June 2003 turning into a pre–tax profit of $89m in 1H 2004. Excluding the divested operations, net income was $59m in 1H 2004, compared with a $33m net loss in January- June 2003.
CIT Aerospace is part of the CIT Group, a large US commercial and consumer finance company. The aerospace subsidiary has a portfolio of 328 aircraft worth approximately $5.1bn with more than 90 customers.
72% of the fleet are narrowbodies, and with 16% of its aircraft being built before 1990, the average age of the total fleet is 7.1 years.
CIT has kept its utilisation rate high through the down–cycle, and as of end 2003, 1.3% of its portfolio was not placed with clients (compared with 100% in December 2001).
In 1999, 86% of CIT’s portfolio were Boeing aircraft, but today that has dropped to 55% as demand for Airbus aircraft has increased. CIT’s portfolio portfolio exposure to the North American market is 21% — its third largest market after Europe (42%) and Asia (22%), but considerably less than some of its rivals.
Nevertheless, CIT is exposed to business with Air Canada, United and Avianca, though it is difficult to gauge the hit on profitability as CIT Aerospace does not report standalone figures (being part of the CIT Capital Finance group, which also does business in the rail, power, energy and infrastructure industries). However, in a presentation to analysts given in June, CIT Aerospace was the only part of CIT Capital Finance that was not forecasted to hit the group Return on Equity target of 15% in 2004.
On the positive side, CIT believes improved demand out of Europe is leading the recovery in the leasing industry, helped by a weak dollar and EU expansion eastwards.
CIT’s regional aircraft business is also performing well, and the group is believed to be considering substantial orders in the 70–100 seat aircraft range. It currently has 52 aircraft on order, including 30 A320 family aircraft and 13 737s.
CIT has been helped by the fact that just 20 of its placed portfolio rolled–off contracts this year; roll–offs will be 31 in 2005 and 28 in 2006. CIT is receiving 19 new aircraft in 2004, of which all have been placed with customers, with 18 aircraft arriving in 2005 and 20 in 2006.
Schiphol–based debis has a portfolio of 250 owned and managed aircraft, placed with 80 airlines. debis has 29 A320 family aircraft on order for delivery between 2004 and 2007.
In the second quarter of 2004 debis delivered 14 aircraft to nine airlines, while also receiving three new A320s and an A321, and selling two 737–200s and two Fokker 50s.
It’s difficult to assess debis’s financial position, as 35% of the lessor is owned by financial services giant DaimlerChrysler Services, 10% by DaimlerChrysler Aerospace and 55% by a consortium of four German banks.
However, buried deep in Daimler Chrysler AG’s Form 20–F for 2003 is a statement that the group results include a 100m loss for its minority share in debis. This equates to at least a 222m loss at debis for 2003 (depending on whether or not the reported loss includes DaimlerChrysler Aerospace’s proportion).
San Francisco–based GATX Air is part of the NYSE–quoted finance and leasing company GATX Corporation (which Warren Buffet owns 9% of) and which includes businesses as diverse as locomotive leasing and shipping. In the first–half of 2004 the aircraft leasing unit earned revenue of $67.9m (compared with revenue of $69.4m in January–June 2003), and made a net profit of $4.6m (compared with a net loss of $2.4m in 1H 2003).
That result came after a net write–down of $5.9m relating to Air Canada debt, but nevertheless GATX Air has had a good start to 2004, with 97% of its fleet placed with customers as at the end of the half–year.
The company owns a fleet of 162 aircraft and manages more than 70 for third parties. GATX is a narrowbody specialist, with 123 of its owned fleet being either 737s or A320 family aircraft, though it only has a pair of A320s on outstanding order.
Seattle–based AWAS changed its name from Ansett Worldwide Aviation Services in July in order to escape any negative connotations associated with the bankrupt Ansett airline.
AWAS was acquired by Morgan Stanley in 2000, and today owns a portfolio of 176 aircraft placed with 78 customers around the globe. All but 28 of its fleet are Boeing aircraft, including 78 737s and 26 767s.
Today’s fleet is slightly down on the total at the end of 2003, when it had 180 aircraft. Just three new aircraft were delivered to AWAS during 2004, and it currently has no outstanding orders. Although the results of the aircraft financing business are included in Morgan Stanley’s Institutional Securities business segment, the 2003 annual report stated that: "Other revenues — consisting primarily of net rental and other revenue associated with the company’s aircraft financing business — decreased by 27% compared with 2002, reflecting the drop in lease rates."
And the second quarter 2004 financial results (covering the period March–May) included "a $109m pre–tax asset impairment charge related to the company’s aircraft financing business, which reduced net income by $65m". However, the SEC–filed 10- Q added that the "decline in lease rates improved somewhat towards the end of 2003 and in the first half of fiscal 2004 At May 31st 2004 the number of aircraft that were off–lease or not committed to a lease transaction had decreased significantly from the prior year".
One of the markets AWAS is looking towards is China. It has placed eight aircraft there so far, although this number was boosted by a contract for two 767–300ERs for Air China, which were delivered in August this year. The rest of its Chinese fleet is all 737 equipment, with three at China Eastern.
Babcock & Brown
Babcock & Brown was founded in 1977 in San Francisco, but today is headquartered in Sydney and arranges structured finance around the world in a number of areas, including property, aircraft, energy and infrastructure. The company manages a portfolio of 144 aircraft — mostly narrowbodies — with an average age of seven years. The company is expanding its fleet, which has increased by a quarter since the end of 2001 (though it has no orders at present), and 99% of its aircraft are currently on lease to 47 clients.
In October 2004 Babcock & Brown listed on the Australian Stock Exchange, raising US$390m to strengthen its balance sheet in an IPO that valued the company at US$1.1bn. Pre–IPO, 80% of the company was owned by management and 20% by German bank HypoVereinsbank (HVB), though HVB is now reported to be selling a 3% stake to UBS, which is making a strategic investment. This year Babcock & Brown is forecasting a net profit of US$72m, rising to US$110m in 2005.
Boullioun Aviation Services
Seattle–based Boullioun has a fleet of 121 owned or managed aircraft — all but a handful of which are A320s or 737NGs — and placed with approximately 50 airlines. Boullioun has 18 A320 family aircraft and two 737s on order, for delivery by 2006 and valued at $1.5bn.
But despite a modern fleet, the lessor is about to undergo its third change of owner–ship in six years. Deutsche Bank bought Boullioun from Sumitomo Trust and Banking in 1998, before selling it on to fellow German bank WestLB in 2001. However, this summer Boullioun was put up for sale yet again, as part of WestLB’s new strategy to concentrate on the banking business and dispose of all non–core subsidiaries.
This strategic rationale isn’t particularly convincing given that WestLB is to retain its 35.5% stake in another lessor — Singapore Aircraft Leasing Enterprise (SALE) — ownership of which was transferred from Boullioun directly to WestLB before the sale of Boullioun was announced.
And with the collapse in aircraft values over the last couple of years, the decision to sell couldn’t have come at a worse time for West LB. It’s reported that WestLB places a gross value of $300m-$400m on Boullioun — well below the $1.2bn it paid to Deutsche in 2001. Potential bidders may include debis, Aviation Capital Group and RBS Aviation Capital — existing lessors who might be looking for acquisitions in order to close the gap with GECAS and ILFC.
In October 2003 Boullioun was contracted to manage UK bank Abbey National’s $950m portfolio of 30 aircraft, most of are were A320 family aircraft and 737s, though with a mandate to "look for opportunities to sell the aircraft" when possible.
RBS Aviation Capital
Lombard Aviation Capital was launched in 2001 after the Royal Bank of Scotland enhanced its small aircraft portfolio with the acquisition of Irish–based IAMG. It acquired 30 leased aircraft and delivery slots from GECAS in 2002 and 11 737–800 delivery slots (plus options for 10 more aircraft) from Delta in 2003. In December 2003, RBS agreed a seven–year sale and leaseback deal with Ryanair for 10 737–800s being delivered in 2004, and this year agreed a similar deal with easyJet for 20 A319s.
The company was renamed RBS Aviation Capital last year, and the Dublin–based company currently has a portfolio of 113 aircraft, all of which are currently placed with clients.
It is a narrowbody specialist, with 87 737s or A320 family aircraft, and with an average fleet age of less than four years. Although it has been the most aggressively expansionist of the lessors in recent times, it currently has no aircraft on order.
Orix Aviation is based in Dublin and is owned by Tokyo–based ORIX, one of the largest financial services companies in Japan that owns more than 200 subsidiaries throughout the world.
But Orix’s size didn’t protect it from a six–year low in its share price in mid–2003 after it announced it would have to book a $25m loss from lease exposure to United and Air Canada. In the event, for ORIX’s fiscal 2003 year (ending March 31st 2004), the company included a provision for "doubtful receivables and probable loan losses" of $23m for aircraft leasing, though it is not possible to separate out specific figures for aircraft leasing from ORIX’s accounts.
Orix Aviation owns or manages a fleet of 68 aircraft, placed with 15 airlines around the world. All but 12 of its portfolio are 737s and A320 family aircraft, and currently all of its fleet apart from two A320s, three 737–500s and a single 777 are with clients. No aircraft are on order.
Singapore Aircraft Leasing Enterprise (SALE)
SALE, which was set up by Boullioun and Singapore Airlines in 1993, has 60 aircraft placed with 30 airlines, with total assets of around $2.5bn. Its average fleet age is five years, one of the best in the global leasing industry. It has 14 A320s on order, for delivery by the end of 2006, and is still adding to its fleet through purchase and leaseback deals with airlines. All the aircraft it is receiving this year have been placed with clients.
As well as West LB and Singapore Airlines, which own 35.5% each, the other shareholders are Singaporean state investment bodies Temasek Holdings and GIC (14.5% each). SALE insists there will be no change to its operation following the transfer of Boullioun’s stake to West LB.
It has 34 A320 family aircraft and 12 737s, and over the 12 months to the end of May 2004, SALE saw the proportion of business that it places with LCCs rise from 2.5% to 14%.
Abu Dhabi–basedOasis International Leasing placed a rights issue for $54m in October 2004 in order to raise capital for expansion — although it stated that it was also looking to expand into leasing sectors other than aircraft. Oasis was launched in 1997 by the Abu Dhabi investment company, BAe (which currently owns 11%) and the Gulf Investment Corporation, and in the first half of 2004 the company’s net profits increased by just under 40% to $1.2m. It currently has a portfolio of 20 aircraft, 11 of which are 737s or A320 family aircraft.
In September 2004, Singapore–based aerospace components companyA-Sonic (formerly known as Janco Aviation) said it would launch an aircraft leasing business, concentrating on A320s and 737–300/400s, which are in demand from Asian LCCs.
BAE Systems' Asset Management operates a portfolio of 330 turboprop and regional jets, and manages another 63 aircraft for third parties.
Irish lessorPembroke was launched in 1993 and is owned 50% by GATX and 50% by Rolls–Royce. It specialises in managing aircraft for clients, and of its portfolio of 148 aircraft, just 29 are owned. It has 14 717s on order.
California–basedAviation Capital Group owns or manages a fleet of 100 aircraft. It is a subsidiary of US insurance giant Pacific LifeCorp, and in 2003 saw revenues increase 59% to $103m. In August 2003 ACG launched successfully the first airline operating lease securitisation since September 11, with $1bn of securities backed by revenues on 37 aircraft on lease to 25 airlines.
Launched back in 1958, Munich–basedBavaria International Aircraft Leasing is today owned by the Schorghuber group, a large German conglomerate. It has a portfolio of 30 aircraft, all of which are narrowbodies, and no outstanding orders.
As part of Airbus’s "lender of last resort" policy, where it restricts financing to a maximum of 5% of total Airbus sales, in 2003 it launched Dublin–based financing companyAvion Capital, as a joint venture with CIT Group, Credit Agricole Indosuez, and Kreditanstalt für Wiederaufbau.
Guggenheim Aviation Partners was launched at the end of 2003 by US–based Guggenheim Capital with a $50m investment, and has a portfolio of around 20 aircraft, including 14 A320s, but with no known orders. Dublin–basedSunrock Aircraft Corporation is a subsidiary of Japanese trading house Nissho Iwai Corporation. It has an all–Boeing fleet of 18 aircraft, and has two 737s on outstanding order.