Aircraft Securitization

Objective of Study
• 1. To Understand the growth and progress of aircraft
securitization

• 2. To do comparative study of two structures that is Enchanced

Equipment trust certificate (EETC) Securitization and the
Portfolio ABS Securitization.

• 3. To Study life cycle of aircraft inorder to understand the

amount raise from aircraft securitization deals

• 4. To do comparative study on Aircraft securitization regulation

in USA & India.
 Growth & progress of Aircraft Securitization

• First aircraft asset-backed security (ABS) came to market in 1992

in US.

• Aircraft ABS has grown at a 41.2% compound annual growth rate.

• Aircraft ABS offer investors attractive spreads versus other ABS.

• The events of Sept. 11 and the recession. On Sept. 20, 2001, Fitch
placed all aircraft portfolio lease transactions on Rating Watch
Negative.
 Comparative study of two structures
Enchanced Equipment trust certificate Portfolio ABS Securitization
(EETC) Securitization.
• Portfolio securitization relies on a
• EETC securitization enhances the diversified portfolio of aircraft on
creditworthiness of traditional equipment operating leases to a number of airlines,
trust certificates ("ETCs") secured by lease both in the U.S. and in other countries.
receivables and the leased aircraft
• The ratings of the debt securities issued in
• EETCs are tranched to take advantage of a portfolio securitization are based on the
the expected residual value of the aircraft existence of a worldwide aircraft leasing
market and the projected residual values
• liquidity facility is provided to ensure the of the aircraft in the portfolio.
continued payment of interest on the
EETCs
Aircraft-backed Securities Issuance by Type.

Current outstanding of approximately

Total Issuance of $68 billion $51 Billion

9% 10% ABS
ABS 25%
34% EETC
EETC
others
Others

57%
65%
 New Regulations Needed for Aircraft
Securitization.

• Securitized assets could be in various states, the incidence

of stamp duty would be different across states

• Tax laws also do not contain any specific provision about

securitisation

• The existing foreclosure laws impede development of

securitisation since they make it difficult to transfer
property rights in the case of default