Hear more from Bertrand during our main stage fan favourite ‘The Ishka Gameshow: Deal or No Deal’.

Société Générale has a well-established aviation finance presence in Europe, but you're representing the APAC side of that business. How different is the aviation lending market in Asia in practice - different borrower profiles, deal structures, risk appetite from local capital - and where do you find the most meaningful divergence from how the same deals would be structured and priced out of Paris or London?

APAC is the biggest aviation market, and remains the global growth engine for aviation finance, with traffic, fleet, and capex growth materially outpacing other regions. There are c.100 scheduled passenger airlines across Asia, with about a third accessing international debt. Europe has about the same number of airlines, but the overall ecosystem (offer/demand for air transport, currency, regulations, State supports) is more unified. In Asia each country has its own story, its own specific, e.g. in terms of enforcement of security and behaviours during Covid, which remain part of the equation when it comes to forging risk appetite views for investors. Defining the Tier 1 carriers in Europe is relatively straightforward, and results in c.10 names who are regular JOL/JOLCO issuers. In Asia it would also lead to 10-20 names, but it gets much more complex to differentiate lower tier 1 with upper Tier 2. Deal structures for airlines are broadly similar, due also to the usual process of issuing open RFP to get the best from global arrangers and bidders. Airlines, leasing companies, OEMs and the overall financial community are a small world.

I tend to think that many Asian airlines here, because of their big orderbook, have an interest for all products that only the leading Tier 1 European carriers would have : They target JOL/JOLCO, bank debt and private credit, EETC or ABS, SLB, tax schemes, mortgage lending, ECA maybe as well as private insurance… many products on which they already know a lot.

Basel IV is often cited as a headwind for bank lending, but the picture is nuanced. In practice, how much is regulatory capital pressure influencing the types of aviation deals Société Générale is prioritising, and which borrower profiles or structures are feeling that most acutely? How is this playing out in terms of the global ‘playing field’?

That’s right, Basel IV narrative is often oversimplified. There are general rules (LGD floor is one), but then still the way banks apply rules remain rather idiosyncratic. Nevertheless, in Aviation as in the banking industry overall, regulations are shaping the ways financial institutions deploy their capital and use their balance sheet. They shape how Aviation deals gets engineered and managed by banks. On the impact of regulations as defining forces, we’ve seen that before. It was the case from 2008 when securitization structures like ABS were redesigned (from insurers, so call “wrappers” who brought the AAA ratings to the senior tranches, to pure IG risk based on the assets).

Since then, “Originate-to-distribute” became core, not optional. For banks, cross selling is also a must. Airlines and lessors, our clients, play a central role in our product pushes. And on their side, they benefit from the variety of financing players, each obeying somehow by its own rules.

At the Ishka Airfinance Tokyo conference you're exploring whether we're moving toward a bank-and-private- credit market rather than a bank-versus-private-credit one - from your seat in Tokyo, do you see Japanese institutional capital as a key part of that collaborative picture, and what would it take to deepen that relationship further?

Japan’s ecosystem for aviation finance is really unique. It has a longstanding history. From manufacturing the assets, operating it, owning it… the Japanese Operating Lease product is here since more than two decades, bringing private credit investors, either directly or through intermediaries. Engaging in private meetings with all types of stakeholders is the best way to forging relationships. And events like the Ishka Tokyo conference is also a great way to expand the scope and deepen collaborations.