Asset securitisation in aviation finance : a Maltese perspective

Abstract

The aviation securitisation market is changing and what used to be the preserve of the United States is increasingly attracting interest in Europe, opening new sources of capital to the European air transportation industry. Aircraft asset-backed securitisation in Europe is presently under-exploited but recent trends indicate that worldwide development will soon follow along US lines. The short-term outlook for the aviation securitisation sector remains negative, mostly due to lingering 9/11 effects, a number of high-profile carrier bankruptcies, record-high oil prices, compounded with global oversupply of available aircraft and new product rollouts by giants such as Airbus and Boeing depressing the values and lease rates of existing fleets. However, the writing is on the wall that structured securitised credit will, given the right volumes, displace to a considerable degree the classical bank lending system on which aircraft finance used to pivot. This dissertation is aimed at providing an introduction to the applications of securitisation in aviation finance and a brief critical evaluation of the Maltese legislator's recent initiative to facilitate securitisations in general, removing obstacles that can be traced back to the island's civil law background. The prospects of the applications of securitisation in Malta in the near future remain questionable, more so those related to aviation. Nevertheless there are considerable opportunities for Malta as a jurisdiction of choice for financial services. Earlier studies suggest that the proper hybrid of legal, fiscal and regulatory frameworks have to be in place for securitisations in Malta to become a reality as opposed to a mere theoretical possibility. The enactment of the Securitisations Act, 2006 represents the first step in this direction. But securitisation can only happen if the market players, originators and investors alike, are seriously attracted by its advantages.