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REGULATORY IMPACTS ON HELICOPTER FINANCING LEASING By Sharon Desfor, ASA


 aircraft that is on an airline’s balance sheet.”


– Sir David Tweedie at the Empire Club of Canada, 25 April 2008


With that statement, Sir David Tweedie changed the world. For nearly a decade, the U.S. Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) labored to create a new set of accounting standards governing        leases, and IASB released IFRS 16 on leases. Let’s not rewrite the hundreds of pages that have already been written about the new standards, but do note         information at www.elfaonline.org/ Issues/Accounting/. (Look especially for articles by Bill Bosco, who has very clear explanations.) The major takeaway is that now leases have to appear on corporate balance sheets.


Reforming Regulations


• On top of the new accounting standards, over the past 15 years regulators            Canada, Germany, South Africa, France, Australia, India, Japan, Italy, Israel, and Turkey);


• Basel II and III (and the unnamed but still existing IV);


 the Volcker Rule, and credit rating agency reform have already appeared, and still more rules remain to be written, like the appraisal rule.


Why Is This Important To Helicopters?


While it’s a truism that the oil industry drives the helicopter industry, it’s seldom mentioned—but just as true—that the availability of capital equally drives the helicopter industry.


Consolidation in the aircraft leasing business affected liquidity by reducing competition. In the past two decades, GE Capital Corporation (GECC) bought either the entire business or the aircraft portfolios of Boeing Capital, Debis Financial, CIT Group, Merrill Lynch, and CitiCapital. To counter that contraction, Bank of America and Wachovia       JPMorgan and Royal Bank of Scotland were also        business for more than a decade.


Then in 2009, GECC got out of helicopters. Royal Bank of Scotland also got out of…well, everything. Wachovia was bought by Wells Fargo, who mostly does trusts in the aviation world, and Chase also reduced their helicopter deals.


So Who Rescued The Helicopter Industry?


The vast majority of money in the helicopter        private investors pooled into operating lessors. Richard T. Santulli cut his teeth in helicopters          He watched the major players leaving helicopter         position at Berkshire Hathaway and decided to create an aircraft operating lease model in the microcosm of the helicopter world by founding Milestone Aviation Group. A number of others then followed his path. Since 2011, almost all  operating lease market. Two operating lessors dominate the market at this       portfolio of $3.6 billion and 246 helicopters, and independent Waypoint Leasing with a current and        helicopters.


48


July/Aug 2016


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