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Credit Suisse Takes Aviation Game To Higher Altitude

Tom Burroughes Group Editor 17 January 2020

Credit Suisse Takes Aviation Game To Higher Altitude

The aviation financing and investment business is a major area, especially for those HNW and UHNW individuals who are able to afford and use assets such as private jets. The Swiss bank has built out a new separate subsidiary to extend work in this space.

Credit Suisse has set up a new wholly-owned subsidiary, SCALE Aviation, which is designed to work with investors, airlines and other aviation parties.

Based in Dublin, SCALE will focus on supporting Credit Suisse’s clients in driving increased aviation investment and helping to smooth the path for aviation deals. The announcement extends the Swiss bank's Global Markets Securitized Products’ platform.

SCALE will be a channel and liquidity provider for investors, aircraft lessors, airlines, and aviation manufacturers. It will help people and firms buy and sell aircraft, arrange financing and investment.

Targeting short-term warehousing of aviation assets, SCALE will assist aviation industry clients with fleet transitions, financing, and ease of execution to provide greater execution certainty for portfolio trading activities Credit Suisse said in a statement.

Such a move comes at at a time when UHNW individuals, for example, remain important users of private jets and associated aviation assets for work and play. (This publication has written about the sector here.) The health of this sector can illuminate some of the spending habits and risk tolerances of clients more broadly.

The bank said that SCALE is not an aviation lessor and will not be building a long-term investment portfolio of aircraft.

Aviation market
Earlier in January, Intertrust bought London-based Wells Fargo Trust Corporation to gain its aviation portfolio. The fund services group closed the deal in December for an undisclosed sum.

Rising affluence is propelling the trend. The past two decades, even allowing for the financial storm of 2008, have seen a rise in the number of ultra-HNW individuals, although 2018’s stock market falls dented total HNW wealth somewhat. Assuming this progress continues, Jetcraft, the jet broker, predicts that private jet sales from 2018-2017 to rise by 60 per cent in the US, 18 per cent in Europe and 13 per cent in Asia. Jetcraft also forecasts that there will be 11,765 pre-owned transactions over the next five years, equating to $61 billion in value, and 3,444 new deliveries, representing $90.5 billion. By 2023 it is expected that the industry value will reach nearly $30 billion per year. The planes are also getting bigger, both in pre-owned and new unit deliveries - highlighting that the average retirement age of a business aircraft is 32 years.

Family offices have been jet users in certain parts of the world, most notably the US. Citi Private Bank, for example, issued a white paper explaining to family offices how the sector is changing, and pointing out issues such as the difficulty in finding sufficient pilots. The business of handling the tax, registration, HR and related matters in private aviation around the world is complex.

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