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MERCURY AVIATION PARTNERS, LLC
PORTFOLIO & ASSET
MANAGEMENT
STRICTLY PRIVATE
April 2007
& CONFIDENTIAL
Trends in the Marketplace
Supply/demand is tightening leading to higher prices for
three key reasons:
Airlines need lift
Investors need for product
Tear-down vendors need for inventory
Lease trends and values are not in sync;
Values are driven by investor demand exceeding supply
Lease rates are growing at a slower rate driven by airline demand
Large carriers are right-sizing fleets as smaller carriers
are upgrading aircraft
Manufacturers sold out for new aircraft until 2010/2011
How Does the Aircraft Life Cycle
Influence Investment Decisions?
PHASE TWO
11 TO 20 YEARS
3 TO 7 YEAR
LEASES
SECOND TIER
PHASE ONE CARRIERS PHASE THREE
NEW TO TEN YEARS 21 TO 30+ YEARS
GOAL
FIRST TIER CARRIERS 1 TO 3 YEAR
To recognize
LARGER FLEETS LEASES
where your
MEDIUM TO LONG TEAR DOWN
aircraft is in the
TERM LEASES
cycle and to
manage it
appropriately
Benefits of Professional
Management
Aviation professionals look at the aircrafts’ fundamentals:
Industry Status Know where we are in the cycle
Understand what future cycles will
offer with respect to market conditions
Anticipate the cycles and develop trading
strategies accordingly
Default Management In the event of default:
- Evaluate aircraft condition
- Renegotiate quickly and if unsuccessful:
- Move to repossess and remarket the
aircraft
Proactive management is the key to success in
aviation financing
What is Proactive Management?
Knowing how to manage asset risk & market
volatility
Requires active management of the aircraft and the
relationship with the airline including:
Management of maintenance reserves
Monitoring aircraft utilization ratios
Reviewing maintenance and shop visits
Understanding asset redeployment
Knowing when to place the asset on short term
lease, long term lease or when to offer it for sale
Profits are made over the life of the
transaction, not just at the front or the back
Maximizing Profits
Asset based financing relies on the asset for repayment
rather than just the credit quality of the borrower
Reliance on the asset requires :
Buying the aircraft right
Buying readily marketable types
What MAP does to achieve this is:
Structure the transaction to maximize gains
Proactively manages the asset
As opportunities arise we will be there to help you “buy
right” as well
Who is MAP?
Michael Stern is the President and CEO. He is
responsible for strategic planning and day to day
operations. Michael brings a wealth of lending and
leasing experience from his time at GE Capital and
Heller Financial.
Patrick Harris is the Executive Vice President
Business Development responsible for relationships
with banks and investors. He honed his asset
management skills with GPA and IACO and has
advised on over $2bn of aircraft transactions.
What We Have Done
Purchased new aircraft from the manufacturer
Purchased 100’s of used aircraft subject to lease
Converted passenger aircraft to freighter
Remarketed 100’s of aircraft and managed that
process
Purchased and leased engines
Financed aircraft with tax based, conventional debt,
operating leases and sale & lease back
Managed workouts and credit related restructurings
Repossessed aircraft on a friendly and hostile basis
Products & Services
Our combined experience exceeds 55 years
Proven track record as senior executives with the industry’s largest lessors
Significant aircraft portfolio management experience covering:
Aircraft Portfolio Management:
- Deal origination
- Cash management
- Contract documentation and negotiation
- Proactive portfolio management
Remarketing & Trading:
- New & used aircraft, engines and related equipment
Financial Engineering:
- Debt & Equity arranging, structuring & restructuring
Asset Management
- Technical & physical inspection/maintenance oversight
- Aircraft delivery, redelivery and repossession
- Compliance with contract terms
What Are the Benefits of MAP?
Proactive versus reactive transaction management
Knowledge of maintenance related issues such as
airworthiness directive implementation, maintenance
reserve collection and disbursement
Focused management of the airline relationship
Constant awareness of trends in aircraft-specific
supply and demand
Constant monitoring of the hold/sell review process
Planning and implementation of the remarketing
process well in advance of aircraft return
What Map Can Do for You
Our goal is to maximize portfolio values & returns
We do that on a transaction by transaction basis looking at:
Lease term (length of lease)
Lease terms (contract documentation)
Expected aircraft maintenance condition on redelivery
Credit quality
The airlines’ need to retain/dispose of the aircraft
Where future lease rates and values for the aircraft are trending
Our assessment of the demand for this type of aircraft
We make a “hold” or “sell” recommendation based on the
above
If it’s sell then there is a series of decisions to be made
If it’s hold a different series of decisions to be made
Sell Or Hold Recommendations
If it’s sell we:
Value the aircraft and any supporting lease
Prepare the marketing plan
Take the aircraft to market based on our
comprehensive knowledge of the buyers
If it’s hold we:
Continue to proactively manage the aircraft
Look for opportunities to release or extend the
lease to minimize risk and maximize cash flow
Continue to evaluate the hold/sell decision
We Have Global Access
Airlines
Banks
Manufacturers
Lessors
Investors
Overhaul Shops & Vendors
Professional Advisors
We live in this market every day
Transaction Exit Strategies
Portfolio sale
Sell the aircraft supported by a lease
Sell the aircraft at the end of the lease:
To the carrier
To another investor
Into the freighter conversion market
Into the tear down market
Why Let MAP Manage Your Aviation
Portfolio?
“We have lived through three significant cycles”
We have a proven track record
High degree of integrity and focus
The partners are proven performers
Skills are all inclusive
Respected by industry peers
Have reputation for closing deals
Have the skills and experience to manage the
business profitably
Call to Action
This is asset based financing
This is a cyclical market
Timing is everything
Manage Right
With Experienced People
Let MAP manage your aviation
investments
Contacts
Mercury Aviation Partners, LLP
815 Summer Court, Buffalo Grove, IL 60089
www.mercuryaviation.net
Michael Stern
President & Chief Executive Officer
Tel: 847-821-1162
Cell: 847-970-1161
Fax: 847-821-1862
Email: mstern@mercuryaviation.net
Patrick Harris
Executive Vice President Business Development
Tel: 561-447 9404
Cell: 561-702 7849
Fax: 561-892-2393
Email: pharris@mercuryaviation.net
