Kgal Expertise Aviation 09 2014 english

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AviationExpertise AND EXPERIENCE SINCE 1979

KGAL EXPERIENCE IN Aviation

1979 Structuring of the first aircraft leasing fund in Germany. 1989 Founded

the Lufthansa Leasing GmbH (first joint venture with Deutsche Lufthansa AG).

1990 First KGAL retail fund for financing an aircraft. 1998 Founded GOAL German

Operating Aircraft Leasing GmbH & Co. KG (the second joint venture with Deutsche

Lufthansa AG in addition to Lufthansa Leasing GmbH). 2001 First operational aircraft

fund. 2010 Financing Lufthansa‘s first Airbus A380 arranged by Lufthansa Leasing

GmbH (followed by four other Airbus A380 from 2010-2013). 2013 Implementing

a retail fund and five private placements for ten Airbus A319 for EasyJet. 2013 First

institutional aircraft portfolio fund APF1. 2014 Successful early sale of 12 Airbus A319

from a retail fund increases value for investors by over 20 %.

expertise / Aviation 3

THE KGAL GROUP

The KGAL Group’s service portfolio includes the design and management of funds for institutional investors as well as family offices and foundations. The Group manages an investment volume of EUR 24.6 billion and has 316 employees (as of 31.12.2013). The core asset classes are real estate, aviation and infrastructure.

Real asset investments are increasingly popular with investors, because they show little correlation to other asset classes. Portfolio diversification and using a professional management lead to a positive return on appropriate risk structures.

Since 1968, the KGAL Group has been designing innovative finance solutions for real assets. Over the past 35 years, they have created an increasing number of interesting investment solutions for private and institutional investors and have thereby established themselves as an asset manager for long-term real capital investment.

4 expertise / Aviation

Since 1979, KGAL has successfully executed more than 700 air-craft transactions. The first aircraft transaction was the design of a leasing fund for institutional investors. Since then, investors have been able to benefit from KGAL Group‘s profound experience and expertise – in-cluding two joint ventures with Deutsche Lufthansa AG.

As of 31 December 2013, KGAL Group has initiated 58 retail funds (of which ten were operational aircraft funds) as well as 66 private placements (of which 27 were operational aircraft funds) along with other investment mo-dels. The company has placed a total investment volume of around EUR 5.9 billion in the market.

At KGAL Group’s aviation department, the 20 experts have excellent access to the market, are able to develop attractive financing solutions, success-fully manage transactions and ensure a fast response to market develope-ments.

Aviation PORTFOLIO OF THE KGAL GROUP

EUR 2.4 billionActive investment volume in

aircraft as of 31.12.2014

Assets under Administration

approx. EUR 1.7 billionAssets under Management

approx. EUR 0.7 billion

8.31 % p. a.* AVERAGE ANNUAL cash distribution of ASSETS UNDER MANAGEMENT (EXCLUDING PROPRIETARY ASSETS EUR 83 Mio.)

Expertise In Aviation

a i r c r a f t

8.31%

Approx.

* Balance as of 2012


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German Operating Aircraft Leasing GmbH & Co. KG (GOAL)In 1998, GOAL was established as a joint venture between Deutsche Lufthansa AG and KGAL. GOAL allows Lufthansa and KGAL to pool their experience in:

◼ operations, ◼ technical support, ◼ marketing aircraft.

With a team that includes seven aeronautical engineers and technicians, GOAL has been managing the aircraft in all of KGAL‘s operating funds since 1998 and has also been successfully offering its services to third parties.

Lufthansa Leasing GmbH Back in 1989, Lufthansa Leasing GmbH became the first joint venture between Deutsche Lufthansa AG and KGAL. Deutsche Lufthansa AG and KGAL pool their knowledge of tailor-made aircraft financing in Lufthansa Leasing. In addition to consulting, it carries out cross border leasing structu-res for aircraft financing, such as US, Japanese or French leases.

Since its foundations, Lufthansa Leasing executed aircraft transactions for the Lufthansa Group with a total investment volume of over EUR 10 billion.

Joint Ventures


ASSET MANAGER GOAL

GOAL (German Operating Aircraft Leasing GmbH & Co. KG) is a joint venture of Deutsche Lufthansa AG and KGAL. Since it was established, it has successfully closed over 100 aircraft trans actions and, based on the number of aircraft in the portfolio, has become the largest aircraft operating lessor in Germany. GOAL ranks among the TOP 50 operating lessors in the world and currently has a total of 48 different types of aircraft in the total investment volume of over USD 1.0 billion.

RANGE OF SERVICESThe long-term success of an aircraft fund mainly depends on the quality of the technical maintenance and professional asset management:

◼ Regular aircraft inspections ◼ Detailed documentation management ◼ Organisation of maintenance and service jobs ◼ Remarketing services (follow-on lease & sale) ◼ Monitoring of the market

In addition to traditional aircraft operating leasing, GOAL offers a number of aircraft services to third parties. The active asset management ensures preservation of the value of the serviced aircrafts and improves their re-marketing potential.


“By pooling Lufthansa’s asset expertise with KGAL’s extensive experience in aircraft financing as part of GOAL, investors have at their disposal an exceptional platform for optimum asset management and fund performance.“ Christian Schloemann, Managing Director GOAL

GOAL’s market expertise was also called upon by the German Federal Government (Federal Office of Defence Technology and Procurement) in its work to acquire four Bombardier Global 5000 business jets as part of the programme to renew the medium-haul fleet for the German Armed Forces (Bundeswehr) between 2007 and 2011. As part of this project, GOAL was commissioned by Lufthansa Technik AG to acquire the aircraft from the manufacturer Bombardier in Canada.

GOAL’s services included setting the specifications of the aircraft, general project management, assembly support and final inspection at the manufacturer’s, as well as handling custom and export requirements for Germany and the hand over of the aircraft to the buyer.

◼ Many years of experience and excellent market access ◼ Pooling of technical and structuring expertise

(Lufthansa / KGAL) ◼ Use of Lufthansa’s global network if required

GOAL’s expertise

◼ Qualified, dedicated team (aeronautical engineers, technicians)

◼ IT-based aircraft documentation management system ◼ Additional insurance of fund aircraft via the GOAL

fleet policy

“GOAL does not make any purchases before one of our engineers thoroughly inspects the aircraft or personally accompanies it upon delivery. GOAL technicians are also present for all major checks and inspections. This means that, with 48 aircraft currently being managed, hardly a week goes by without an inspection taking place in the presence of one of our employees.“Jochen Baltes, Managing Director GOAL


SELECTED TRANSACTION PARTNERS OF KGAL, GOAL AND LUFTHANSA LEASING

CROATIA

SLOVENIA

ITALY

SPAIN

FRANCE

usa

Canada

SWITZERLAND

England

ROUTINE BRINGS SUCCESS KGAL, GOAL and Lufthansa Leasing GmbH have completed transactions with the following aircraft types: Airbus A300, A310, A319, A320, A321, A330, A340, A380, Boeing 737, 757, 767, 747, Fokker 50 and 100, Saab 2000, Dash 8-Q400,


china

China Eastern

GERMANY

malaysia

BAe Avro RJ85 and 100, Bombardier CRJ 100, 200, 700, 900, Embraer 145 and 195, McDonnell Douglas DC10 and MD-11F, Challenger 604, Learjet 60, Gulfstream G450 and Global 5000.

Aircraft purchases and leasing transactions

Countries in which aircraft sales took place


THE BENEFITS OF PORTFOLIO DESIGN

KGAl’s aviation funds combine several different types of aircraft and different lessees in one fund, thus allowing professio-nal and semi-professional investors to get closer to the asset class without having to enter classic bulk risk.

THE PortfolioAn aviation portfolio focuses on:

◼ marketable commercial aircraft, ◼ several airlines as lessees, ◼ without a focus on single credit standings of leesee/airline ◼ and is not limited to the marketing opportunities of one single asset type.

The main objective of the portfolio fund is to generate a risk-adequate return and, stable returns from the purchase, leasing and sale of aircraft.

PORTFOLIO FEATURESFund performance is not solely dependent on in the selection of suitable aircraft and airlines.

◼ The portfolio’s components must be actively managed from a technical, commercial and administrative point of view across the entire life cycle of the assets.

◼ A continuous observation of the market, in particular with respect to asset acquisitions and disinvestment is critical. ◼ Technical expertise during the hand-over of aircraft, ongoing maintenance and aircraft documentation. ◼ Investor reporting, made available on a regular basis, is tailored to the specific demands of investors.

BENEFITS OF DIVERSIFICATION ◼ Spreading the risk by purchasing several aircraft and different aircraft types. ◼ Limitation of risk by selecting suitable aircraft operators. ◼ Diversification contributes to the stability of distributions paid to investors.

DIFFERENT AIRCRAFT TYPES + DIVERSE Leessees

= DIVERSIFICATION FOR FUND STABILITY


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The quality of KGAL funds is based on the experience of our own in-house experts. They estimate risks and potential for added value and actively look after the assets for the duration of the funds.

Our asset classes demonstrate a clear separation of functions in the areas of transaction, asset, portfolio and risk manage-ment. The portfolio management assumes full responsibility for investments.

COMPREHENSIVE FUND MANAGEMENT FROM acquisition TO MARKETING

1 Transaction management ◼ Continuous market presence and monitoring ◼ Acquisition and sales of investment objects ◼ Ensure access to relevant markets ◼ Completion of individual transactions

3 RisK management ◼ Identification, measuring, managing and reporting

of relevant risks ◼ Regular monitoring of key parameters for the market,

fund and investment level ◼ Development of recommendations for action

2 Portfolio management ◼ Clear strategic guidelines for funds ◼ Continous monitoring to reach objectives ◼ Reacting to changes in the market ◼ Active management of the portfolio

4 Asset management ◼ Primary responsibility for the professional

management as well as the performance of the special purpose vehicle

◼ Close collaboration with portfolio management of the funds

Acqu

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ASSET MANAGEMENT

TRANSACTION MANAGEMENTTRANSACTION MANAGEMENT

PORTFOLIO MANAGEMENT

Risk Management / Fund Controlling

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THE AVIATION MARKET

AVIATION MARKET GROWTHOver the past decades, the commercial aviation market has experienced enormous growth. Since 1970, when the first Boe-ing 747 jumbo jet entered into service, one of the key industry performance figure revenue passenger-kilometres (RPK) has increased from 0.5 trillion to around 5.0 trillion. This corresponds to an average annual growth rate of around 6 %.

The commercial success of aviation funds depends crucially on the reliable payment of leasing instalments by the lessee and the re-marketing possibilities at the end of the lease of the aircraft (sale or continued lease). The return on investment, that can be achieved, is therefore closely linked to medium and long-term trends in the aviation markets.

ANNUAL GLOBAL AIR TRAFFIC IN TRILLION RPK

Number of Aircraft

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

Fleet GrowthReplacement purchasesRemaining Fleet

Number of aircraft: 20,3102012

Number of aircraft: 41,2402032 Year

20,93059 %

14,35041 %

5,960

35,280

Source: own image based on Airbus Global Market Forecast 2013–2032

DEVELOPMENT OF GLOBAL AIRCRAFT FLEETS:

OVER 50 % OF NEW DELIVERIES BASED ON FLEET GROWTH (FORECAST)

Number of Aircraft

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

Fleet GrowthReplacement purchasesRemaining Fleet

Number of aircraft: 20,3102012

Number of aircraft: 41,2402032 Year

20,93059 %

14,35041 %

5,960

35,280

Source: Boeing Current Market Outlook 2013–2032


“KGAL is a pioneer in the area of aviation funds.In view of the long-term growth trend, aircraft will remain an attractive asset in the future. With its strategic alignment towards solid and long-term, high-yield aircraft investments, KGAL is set to continue to create good investment opportunities in the future.“

Jochen Hörger, HEAD OF Aviation KGAL Investment Management GmbH & Co. KG

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kgal gmbh & co. kg

Tölzer Straße 15 · 82031 GrünwaldT + 49 89 64143 - 0F + 49 89 64143 - 150www.kgal-group.com

Kgal Expertise Aviation 09 2014 english

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