Our approach to the advisor mandate was comprehensive, working to assess the market, the portfolio, and the platform.

1. Market

   With returns in the aircraft leasing sector frequently contingent on the ability to lease aircraft at attractive rates and achieve targeted residual values, it was first necessary to assess the current market and recovery outlook. Given that the transaction was contemplated during the COVID pandemic, Alton analyzed the current indicators of aircraft supply and demand, both at an aggregate level and in the market segments, the target lessor was most active in.

   Next, Alton put forward and agreed with the client on several potential post-COVID recovery scenarios, intended to reflect a reasonably expected range of outcomes for the industry in the medium-term and longer terms. Alton then leveraged its proprietary aircraft supply and demand forecast model, to provide mid-term and longer-term look-aheads on supply and demand balance – again at the aggregate level and within the area of focused investment.

   Given the recent changes in the supply/demand balance due to COVID-19 and near-term uncertainty, challenges for the aircraft leasing industry were anticipated, together with the possibility to deploy capital in a sector that retained long-term fundamental potential at possibly a more attractive entry point. Alton provided the client with a comprehensive assessment and outlook for the aircraft operating leasing environment.

2. Portfolio

   To properly diligence the opportunity, Alton embarked on a comprehensive and detailed assessment of the portfolio, considering the (i) lessee credits, (ii) assets, and (iii) leases and cash flows.

   Alton first applied its airline credit rating methodology to assign a rating reflective of each counterparty’s current state and outlook, combining financial analysis, data-driven analysis of fleet composition and operational metrics and benchmarking, as well as a thorough analysis of the airline’s corporate governance, strategy, competitive landscape, recent development, ownership status, and sovereign considerations.

   Since aircraft remarketing and sales are ultimately required following the expiration of contracted leases, Alton provided the client with a highly robust and critical assessment of the virtues and perils associated with each type of asset.

   We then prepared desktop appraisals, extended desktop appraisals, and lease encumbered valuations today and as projected in the future utilizing regression analysis, bottom-up / part-out valuations, and discounted cash flow valuations utilizing independently forecast cash flows under multiple scenarios.

3. Platform

   Finally, Alton provides an assessment of the target’s aircraft leasing platform and its positioning in the market compared to peers. The features to be benchmarked and considered included an assessment of the portfolio across all major dimensions, sourcing and disposition channels, lessee relationships, capability through the life cycle, etc.