What is your overall assessment of the global aviation sector?

 

The global aviation sector is usually very robust and has seen good amounts of growth year after year in addition to sustainability. However, I believe the latest events of the economic downturn did have a tremendous effect. We have now seen signs of recovery and high load factors coming back to China and India. We believe the recovery will be sustainable by the end of 2010. The Middle East, however, is different because it is fueled by oil and government spending. If you look at the per capita figures in the Middle East you will see one of the highest rates in the world and people often spend money on travel and tourism. There are always capital expenditures on the part of the government for infrastructure projects and this invites movement in and out of the country as well.  I believe this will sustainable for the long term.

What is your overall assessment of the leasing business in Kuwait, especially in the aviation sector in the GCC and how does it differ compared to other markets?

In aviation you see a mix of airlines liking to own and lease aircraft. Owning can be on a small scale of direct-ownership or through finance leases. The others are covered by operating leases and we specialize in this at ALAFCO. The Middle East is also a mix of these three options but in Kuwait there has been more of a recent trend toward leasing. Wataniya has taken a lead in this and almost all of their fleet is leased.

As an industry insider what are the potential risk of leasing?

I believe that leasing will increase because the more the world goes into leasing the more benefits can be seen. It puts less of a burden on the airline’s balance sheets and it can be treated as expenditure. The burden is usually taken on by the leaser and the lending companies and turning over aircraft at the end of the lease allows companies to get new aircraft whenever their contracts are up.  

How do you assess the situation in the industry following the downturn and what are the positive developments that lead you to believe the slump is ending?

There are a lot of signs indicating there is a global economic recovery. In aviation we measure this by seat factors and yield. We see that seat factors are getting higher and the load factors in China and India are increasing. Yield is also improving which is a good sign of recovery.

What are some difficulties your customers face and how do you help them solve these difficulties?

Luckily all of our customers are doing very well and we have not seen any signs of stress- they pay on time and everything seems to be normal.  We have interacted with them in sale and lease buy-back situations by stepping in and buying aircraft from them to finance the endeavor for them and lease it back to provide a solution.  Without this solution these things wouldn’t have been possible for them directly.

How do you differentiate yourselves from the competition?

ALAFCO has built a good track record, a strong balance sheet, and earned trust among its customers, institutions, and investors. This combination leads to being a very bankable institution when it comes to financing and our business depends on this.  We are very keen on having a strong balance sheet and on time payment with the banks we deal with in order to sustain ALAFCO’s name like we have for the last ten years.

What is your message to your potential customers and partners in the future?

We would like to carry on working with our present customers and support them through the difficult times. The difficult times we are going through now did deprive a lot of airlines from access to financing and this is where ALAFCO has stepped in to arrange financing on behalf of these hairlines by acquiring assets and supplying the aircraft.

What are some of your major challenges?

We are a leasing company and we aren’t the first nor the last to be created.  Therefore, we are in a market full of competition.  We were performing very well but our competition is always there and sometimes we win and sometimes we lose- we accept this as a fact.  The challenge is sources of financing and if it weren’t for certain government agencies financing would have been very difficult for us too.  

What prompted these government agencies to trust you?

The government agencies, although they guarantee financing, need to see a strong balance sheet.  Luckily ALAFCO had a strong balance sheet that gave us merit to be accepted by the agencies.  Because of this we were able to step in and assume the role of financing airlines.

You declared ALAFCO delivered solid results despite adverse economic conditions. What is your general assessment of your financial performance and could you chart out the growth of the company?

We were blessed and did very well despite the economic downturn.  We are thankful for that and we are meeting all of our objectives.  Our short term was meeting the goal of fifty airplanes by the end of 2010. We have a good number of airplanes and we are diversifying out to Asia and we are becoming an international company on three continents- Europe, Africa, and Asia.  Luckily we have been able to meet our goals and perform well.

What is your long term vision?

To reach 100 airplanes by 2015.  Growth is very important and it will call for a capital increase and doing more in the business.  We are actively working in North and South America to try to tap into business opportunities for the future as well.  We would like to see ourselves as a global leasing company that covers all continents.

In order to attract customers what would you have to do?

We need to stay competitive.  Each airline wants to give the best deal and the best deal means the best conditions economically and otherwise. We have proven to be a very competitive company and this is why we have won all of these airlines on three different continents.  We will continue doing this as a small, dynamic company who makes wise decisions.  We try to work with out clients and provide timely decisions to be competitive. What makes us win a contract is winning a competition and to win a competition you need a very low overhead and to tap into good financing with low margins.  If you have good margins and low financing on your company this will give you all of the competitiveness possible in order to give you the best options to your customers.  We are well diversified in our marketing presence and we have representatives in various countries, for example, one in France, covering Europe.  It is only a matter of time until we have completely gone global.  On the strategy side we place aircraft orders ahead of time with the Airbus a350 and Boeing 787 Dreamliner and this puts us in a good position for when they come out on the market.

What is your strategy towards corporate social responsibility and how do you address these questions in your investments and internally?

Our goal is to build the ALAFCO brand name to yield wealth for our investors and a good return on their investment. We will increase our manpower and thus we try to focus on promoting aviation awareness in Kuwait by invited young, talented Kuwaiti people into the sector to understand the techniques and obtain the proper training to take over in the future. Within Kuwait and the region we are trying to promote leasing as a good method of purchase and show the advantages of leasing aircraft. Leasing has reached 40-50% in the region and this shows how acceptable it is becoming compared to the 10-15% it used to be a few years ago. The general public awareness about leasing is increasing and people are beginning to understand ALAFCO and how ALAFCO operates.  Through this understanding it encourages them to trade ALAFCO on the stock exchange and this creates wealth for them at the end of the day.

What is your final message about Kuwait and ALAFCO?

Kuwait has two great assets: wealth and a very young population that is also very educated and talented. This means good growth is possible for the country. Also, I was please to see the government and parliament of Kuwait agreeing on an economical development plan to invest billions of dollars into the infrastructure for years to come. We will see more participation from the private sector, more job opportunities, and more welfare and wealth for the people which I believe is excellent.