Supply Chain Finance and Aviation

28th October, 2018


The value of the global aviation market is expected to reach $15 trillion in the next 20 years, driven by an increase in passenger traffic and the retirement of legacy airplanes, according to aircraft manufacturer Boeing.

Within that, the aviation services market — which includes supply chain support, maintenance, engineering, and airline operations — will lead the surge at 4.2% growth per year, to become an $8.8 trillion market in its own right.

To fuel this expansion, the aviation industry is going to need a great deal of capital, and traditional bank financing is falling short.

In particular, there is a massive need for working capital finance in market segments such as maintenance repair & overhaul, ticketing, airlines, leasing companies, airport operations, travel agents, and much more, whether related to pre-delivery payments or inventory.

Interestingly, the export credit agencies and multilateral agencies are all increasingly supportive of exporter’s supply chains with working capital programs. Asian Development Bank and US Export-Import Bank, for example, already have guarantee programs in place.

"Led by increasing demand for commercial aviation services, the worldwide aviation market is expected to grow to $15 trillion over the next two decades, as the global fleet of airplanes will double in size to 48,540."

Greensill, a specialty provider of working capital solutions for companies globally, has already demonstrated its ability to deliver quickly on the needs of the aviation industry. It set a new standard in the $138 billion aircraft finance market with Norwegian Air Shuttle by helping the airline buy six Boeing 737 MAX 8 aircraft. By teaming up with Boeing, Norwegian, and insurance broker and risk adviser Marsh, Greensill was able to create a new way to finance aircraft using capital markets and insurance, born out of Marsh’s Aircraft Finance Insurance Consoritum (AFIC).

Notably, Greensill was able to meet Norwegian’s needs and launch the product in just six weeks, enabling the airline to expand its fleet in record time.

"Our team launched this product in six weeks, enabling Norwegian Air Shuttle to expand its fleet in record time. The Greensill team is proud to help Norwegian open the skies for the next generation of global travellers."

Lex Greensill, founder and CEO

The partnership was celebrated by Trade Finance Global, which named Greensill its Supply Chain Financier of the Year.

Launched in June 2017, AFIC provides an alternative aircraft finance insurance product for new aircraft deliveries. It is underwritten by four leading global insurance companies: Allianz, AXIS Capital, Sompo International and Fidelis.

"New airplane orders over the next 20 years will be dominated by a need for single-aisle models, making it alone a $3.5 trillion market. Demand will come from the growth of low-cost carriers, emerging markets, and replacements in China and Southeast Asia."

“The innovative response from Greensill enabled us to acquire the aircraft we needed when we needed them in line with our group strategy,” said Thomas Wellén, head of aircraft finance for Norwegian. “Importantly, this capital markets-based approach allowed us to continue our ambitious expansion plans while keeping a tight rein on the balance sheet.”

The deal between Norwegian and Greensill was struck at an opportune time: The aircraft industry is set to deliver $138 billion worth of planes this year, and that number is projected to surge to $185 billion by 2020.

Accordingly, Greensill expects to announce further deployments of its aircraft finance structure in the near future.

Beyond enabling Norwegian’s landmark aircraft deal, Greensill also spearheaded innovative Supply Chain Finance programmes with a major manufacturer in the aviation industry.

“Greensill’s ability to integrate capital, technology and expertise to deliver the right solution for each of our clients is at the core of everything we do,” said Lex Greensill, founder and CEO of Greensill.

For companies throughout the aviation industry, the message is clear: There is a great deal of untapped potential to unlock working capital. As a Fintech leader and a pioneer of Supply Chain Finance, Greensill offers a unique perspective on finance in a broad range of industries where it promotes the democratisation of capital. 

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28th October, 2018

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