The combination of steady cash flows, relatively higher yields, global diversification, strong industry fundamentals and the unique characteristics of mobile aircraft assets has continued to attract institutional investors and funds. Private equity, hedge funds, sovereign wealth funds, infrastructure funds and other types of funds all continued to seek aviation exposure in their deployment of capital.
In 2020, new institutional and fund capital stepped into the space as some in the bank market paused and as sector credit spreads widened relative to pre-pandemic levels.
Prior to the pandemic, the Japanese Operating Lease (JOL) and Japanese Operating Lease with Call Option (JOLCO) markets were evolving at a rapid pace, accepting new airline and lessor names and introducing innovative products. 2019 saw the closing of the first-ever credit enhanced-supported JOLCO and innovative ECA and enhanced equipment trust certificates (EETC) supported JOLCOs.
During the pandemic, the tax equity market, particularly JOLs and JOLCOs, effectively shut down to new deals while previously committed deals continued to close. The safe return to service of the 737 MAX has begun to attract Japanese investors. A gradual recovery, in line with Japanese economic growth and return of air travel demand, is expected.