Aviation News Online

Korean investors retain widebody, tier one airline focus, but portfolio deals will grow in popularity

The second day of the Airline Economics Growth Frontiers Korea conference opened with a fascinating insight into the Korean investor market. Four investors shared their views on aviation as an asset class, emphasising the growing interest in the sector in the search for stable yields as returns from the more traditional shipping and real estate asset classes continue to disappoint.

To date, the main focus of Korean aviation investment has been on financing high quality assets, mainly widebody aircraft, for top tier airlines with strong credit ratings. The four investors on the panel from Lotte Insurance, the Police Mutual Aid Association, Korea Investment Trust Management and KTB Investment and Securities, agreed that this focus will continue but they all also recognised the growing concern of concentration risk for investors that have funded many aircraft for airlines including: Emirates, Etihad, Singapore Airlines and Finnair.

The first portfolio deal, Labrador closed in December, and investors expect, and want, more of these deals to come to market and close successfully. This will be achieved as investors learn more about the diversification benefits of portfolio deals that enable investment in lower tier airlines with more liquid, narrowbody assets within strong structured deals. The larger widebody transactions are expected to continue in the meantime, with portfolio deals likely to grow in popularity but slowly as investors become more accustomed to the structure, risk profile and expected returns.

The enthusiasm for this fledging market in Korea is encouraging and the large delegation is testament to the interest in the asset class and the desire to learn more about various opportunities in this space.

More from Korea tomorrow.

Date: February 21, 2017

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