Inventory Leasing – Replace Inventory on Balance Sheet with Cash / by Kevin Geissler
One hundred ninety-eight times around the earth is a long way. IATA estimates airlines’ cash burn during the 2nd Quarter of 2020 at $51 billion, which, if broken down to US $100 bills taped together end to end, wraps around the earth one hundred ninety-eight times. As revenue uncontrollably plummeted, many airlines and supporting businesses have taken to harsh cost-cutting measures, including layoffs and furloughs of hundreds of thousands of highly talented employees. Even through all of that, the short and mid-term future of commercial aviation is still unpredictable. However, for the industry to recover, consumer confidence needs to be restored by demonstrating that flying is safe. Airlines and airports have done their part, swiftly implementing new safety standards and cleaning systems. Rapid tests are here. Vaccines are coming.
But it’s not enough. The industry has a funding gap problem. The $160 billion injected by governments across the world will dry up (Source IATA). Airline share prices remain 40% down, yet equity markets have recovered, indicating a lack of investor confidence compared to other markets (source: FTSE All World Share Index). Traditional financing programs are exiting aviation, and those that remain are making capital more expensive while tightening lending requirements. How are airlines expected to recover if capital is more costly and harder to access?
GA Telesis, LLC (“GAT”) is positioned to support airlines and MROs during this recovery through Inventory Leasing Solutions, which I introduced in a previous blog as an innovative source of cash pioneered by GA Telesis ten years ago. This is a clear-cut risk transfer from an airline to GA Telesis. GAT can pay cash now for a new generation inventory, assets, and GSE platforms and enter into a lease back on terms that align with the airlines’ fleet plans. Speaking of fleet plans, nobody can predict next year, let alone next month due to COVID 19. In response, we designed accordion, extension, and other flexible features so the lease can grow or shrink as needed.
The only way our industry recovers is through the creative development of win-win solutions with our airline customers. Contact your dedicated sales representative or me today so we can work together to develop your solution.