Ruth Kelly’s Insight into Aircraft Leasing and the Future of Her Company

Over the next few pages you will be introduced to the career path and achievements of a lady who has devoted her career to the aviation sector. Ruth Kelly is the CEO of the aircraft leasing company Goshawk – headquartered in Dublin, Ireland where aircraft operating leasing is one of the major industry sectors.

 “We own a fleet of commercial aircraft which are on long leases (typically 8 to 12 years) to commercial airlines around the world. Many of the airlines are brand names such as Ryanair, American Airlines, Virgin Australia and many more. The airline is responsible for operating, insuring and maintaining the aircraft for the lease term, and at the end of the lease they will either renegotiate a new lease with us, or return the aircraft to us and we will find a new airline to lease the aircraft to.

 Goshawk is currently in growth mode so a lot of our time is spent sourcing and buying aircraft and putting leverage in place for our fleet. The day to day fleet management involves such things as collecting rent, monitoring and inspecting our aircraft to ensure the airline is taking good care of it as specified in the lease, monitoring our airline lessees to ensure their credit quality continues to be strong, monitoring the general market trends to ensure we acquire good aircraft types at the correct valuations, managing end of lease remarketing campaigns and of course managing any problems if or as they occur.”


Can you tell us a bit more about Goshawk? What were the company’s beginnings and how did it develop into the company that it is today?

Goshawk was established in November 2013 and is focused on building a portfolio of young, new technology, in-production commercial aircraft with a large and diversified commercial airline lessee base. During its first 18 months the business had no employees, rather was serviced by Investec Bank Plc, where I worked at the time. Investec was a founding shareholder in the business.

In early 2015 it was decided that Goshawk should have its own people and platform to manage its growing portfolio of aircraft, and at that time 7 colleagues along with myself transitioned from Investec into Goshawk. Since then we have hired to a headcount of now more than 40 people and completed the build out of our own platform.

Today Goshawk has a portfolio of 94 committed aircraft on lease to airlines around the globe. With aircraft costing between $40-$150m each, this represents a total asset value of approximately USD4.3 billion. We buy our aircraft using a combination of equity from our shareholders and third party debt, and consequently we have raised significant amounts of capital from both the banking and institutional markets in the US, Europe and Asia since our inception using a number of different structures and products.

Investec Bank Plc recently sold its stake in Goshawk to the remaining shareholders such that today the business is owned by 50% each by Chow Tai Fook Enterprises Limited and NWS Holdings Limited, two Hong Kong based enterprises which are related companies.


As a professional who’s been working in aviation for over 15 years – what would you say are the main challenges that the sector faces?

 I look at this business in a very simple way. At a very high level we are concerned about two things (a) will aircraft values be preserved for the long term and (b) will the airlines I lease to pay their rent.

Let’s look at aircraft values first. Like any product, value preservation comes down to the balance between demand and supply – too little demand is not good, too much supply is not good!

So what are the challenges we face around demand? Well there is nothing too profound here, the challenges are probably common to many other global sectors – softening in the global economy will dampen demand for air travel and so demand for aircraft, specific local challenges such as currency devaluations or political unrest will impact demand in that region, environmental regulations around carbon emissions and noise may lead to increased airline ticket prices and so decrease demand, imposition of passenger duties or price of oil increasing will also likely increase airline ticket prices and so lead to a falloff in demand. One thing to note about our market is that, because leases are long and terms are locked-in for the duration of the lease, volatility on the demand (i.e. our revenue) side is light. We are not operating in a rental spot market as such which means that so long as our portfolio and in particular our lease expiries are diversified, our revenues tend to be quite predictable.

And what are the challenges around supply? This is where our sector is a little different than others because supply tends to be controlled. Of the types of aircraft that we buy there are only two producers – Boeing and Airbus. They only produce to order, though the lead time to production is quite long so they cannot quickly speed up or slow down production if demand shifts quickly. The best they can do is try to get long term production rates right and in line with demand. So the big risk of course is if they get this wrong and in particular if they produce too many aircraft, and this is something we constantly have to monitor. Also, China is looking to become a producer of mid-size commercial aircraft, and while this will take many years to come on stream in a material way (aircraft are complex to manufacture!), in the longer term it will be interesting to see how a 3rd producer may impact global supply and so aircraft values.

Turning to the second challenge above – will airlines pay their rent? Fundamentally the demand for air travel is increasing, so the world needs airlines and this does not look like changing. For us, it then becomes about working with the right airlines who have good business models, solid financial footing and good management teams. Many aviation markets are now deregulated so we look at airlines as commercial entities who must be capable of commercial survival. However some markets continue to be closely regulated and airlines government owned (and therefore they act more like utilities rather than commercial enterprises) and the way we would assess the risks associated with those airlines would naturally be different. And of course any airlines operating in markets which are in the process of being deregulated need most analysis from us.


What goals did you arrive with as a CEO of the company?

The practical goals for the initial team were relatively straightforward – build a team and platform, whilst continuing to grow the business and raise leverage in what has been quite a competitive environment, and of course continue to meet our profitability and other financial targets!

The more subtle or personal goals that we set for ourselves were to find high quality people and convince them to join us in building Goshawk, to be smart and innovative in how we approached the buy market such that we could generate value outside of “paying the highest price” for an aircraft, to be ambitious and innovative in our approach to the leverage markets and diversify our sources of funding and financing structures, and to build an excellent leasing platform including systems capable of efficiently managing a large portfolio of assets and debt. I suppose we had an ambition to build a not only a credible Goshawk brand but an excellent business which delivers for its partners.


What have been your biggest accomplishments thus far and how have they impacted Goshawk’s performance?

Without question the biggest accomplishment has been in finding a great group of people to join us in building Goshawk. We have very supportive shareholders who have been steadfast in their provision of capital to the business, the rest of the success of Goshawk to date is down to its people. If any team is capable, personally vested in what they are doing, have a can-do attitude and feel they have a part to play in the end result, then success will follow. We are so lucky to have that bunch of people.

For the Goshawk team some of those successes include innovative structuring on the buy side such that we managed to win some very attractive mandates with some of the best airlines in the world, successful debut in the US Private Placement market after a less than 2.5 year history, the first aircraft leasing company and the first Irish company to successfully access the Schuldschein market, and the successful build of a full operating leasing platform including all systems in less than 15 months.


What potential for growth do you see for the company?

The world’s commercial aircraft fleet is expected to double in the next 20 years, driven mainly by demand in Asia. This translates into 4 trillion dollars’ worth of aircraft that are expected to be delivered in that period. Of the global fleet approx. 45% is leased today, and the leased share expected by some to increase even further. Even if it doesn’t, 45% of 4 trillion dollars is a lot of aircraft to be owned by aircraft lessors. Goshawks committed fleet currently is valued at about $4.5 billion (that’s billion not trillion!). So the potential for our business to grow is huge.


What has been the biggest disappointment in your career to date, and what did you learn from it?

 A few years ago, together with some colleagues, we attempted to raise equity and start a new aircraft leasing business. After 18 months and many “almost there’s” we finally had to concede that our attempts had been unsuccessful.

The learnings from that experience were far reaching. I guess during those 18 months I gained a much deeper understanding about the aircraft leasing sector because for the first time I had to really think holistically and strategically about our sector, what are we offering the world and why should people be interested in doing business with us or investing in us.

Other learnings included practical things such as how to pitch a business idea, what motivates different parties in a commercial transaction, the importance of communication, the importance of working with good people, having trust in business relationships, and how quickly the environment can change. I also learned things like how to change the toner in a printer (there were only 4 of us so we had to do everything!)

Probably the biggest learning of all for me though and the most difficult was that success doesn’t always happen, and things may go in a different direction than you had planned. The world doesn’t end, the experience makes you stronger and wiser for future ventures. A bit cliché but I didn’t truly understand it until I went through the experience and came out the other side.


In your opinion, how important is it that your staff feels they can come over to your desk and talk to you?

 For all of my career to date I’ve worked in an open plan environment where communication and mutual respect for colleagues has been the norm. I don’t know it any other way, and regardless of what role I happen to have in the organisation, I don’t believe the responsibility to communicate (both ways) is any different to the rest of my colleagues on the floor. Open plan and open communication leads to a more cohesive team, it promotes better understanding and therefore respect for colleagues, generally leads to better and quicker outcomes. While that is what I believe, I don’t pretend I am naturally the best communicator or most approachable person in the office (only because I tend to be a bit more introverted than extroverted!) – but hopefully people feel ok coming to my desk. If not, then I’m not doing a very good job.


What do you see as the most important challenges that Goshawk faces? What specific strategies are you implementing to overcome them?

Industry-wise, we face the challenge of competing capital entering the market driving down returns. We buy many of our aircraft from airlines using sale and leaseback structures. To compete, we try to differentiate ourselves by offering our airline clients innovative solutions to their balance sheet or financing requirements. That has helped us win many mandates in 2016 – but it gets tougher because todays innovation is the norm tomorrow, so you always have to think about the next thing to stay ahead. We also focus on achieving efficient leverage for the business, which also involves being innovative in addition to being ambitious. Similar to any business lower costs = more profit and/or more flexibility. The aviation industry, like many others, is cyclical and we will be focused on ensuring that our business is robust and well able to thrive through the cycles.

More specific to Goshawk because of the stage we are at, I think the greatest challenge will be to keep the team motivated and fresh as we mature. Our most important asset is our people. We are currently in the honeymoon phase, we are building something and each person can see their contribution to the bigger picture and so feel involved and proud. In this environment, is it easier for everybody is to give their best. When we become a bit more mature it can become more difficult to keep people energised. Not impossible, just requires more effort and this will be high on the agenda of the management team at Goshawk in the coming years.


What motivates you most about operating within the field?

 I’ve worked in this sector pretty much my whole career, falling into it by accident. Most people who join the sector never leave, and of course the longer you stay the more vested you become. It’s not a people intensive sector (relative to asset valuations) which means you get to know lots of people who work in it, many of whom become personal friends over the years. The sector is global and therefore, this means lots of variety and travel. In my case I have been really lucky and got to work in many different roles within aircraft leasing – from risk through finance to marketing, so I have always been challenged and rarely bored. It can be fast-paced, and again I have been very lucky to have had opportunities to work on many “growth type” projects within the sector. Ireland is a global centre for aircraft leasing, with most major aircraft lessors headquartered here – so it is an excellent sector for anybody wanting to progress a financial career in Ireland.




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