PHOENIX, Arizona – March 3, 2025 – Al Wood, Chief Executive Officer of Aquila Air Capital, sat down with Hugh Davies of Airfinance Global during the ISTAT Americas 2025 conference to detail how Aquila was able to scale the business quickly in its first three years of operations to become a “household name” in the midlife-to-mature engine leasing space.

Interview: Aquila bullish following Wafra sale

Aquila Air Capital was able to scale the business quickly in its first three years of operations to become a “household name” in the midlife-to-mature engine leasing space, chief executive officer Al Wood tells Airfinance Global in an interview.

New York-based, global alternative asset manager Wafra completed the acquisition of the Aquila Air Capital platform from Warburg Pincus on 13 December.

Apollo affiliated ATLAS SP Partners provided a credit facility to Wafra support the acquisition of Aquila and fund its future growth.

“They were the ideal first sponsor,” Wood recalls. “They were seasoned and successful investors in the space and were able to provide us a lot of strategic and operational assistance in the early days.

Wood says that the main rationale for the sale was to lower its cost to capital. “While we had plenty of capital under Warburg Pincus, it was expensive money. We needed to lower that cost of capital and get into more of an infrastructure-like investment fund as opposed to a traditional private equity fund.”

“This a cyclical industry. You don’t want to be forced to do things that didn’t line up with the cycle the business was in. We wanted more patient capital and to lower our cost of capital.”

The sale received significant interest from both strategic investors as well as financial sponsors during the process, with the sale narrowed down to four parties by autumn 2024, prior to ultimately settling on Wafra.

“ saw the complexities of the older technology engines and the need for having engine technical expertise, and they saw it as a way for the strategics to expand their products and service offering beyond traditional new aircraft leasing.”

Airfinance Global reported in August that interest in the midlife-to-mature engine leasing business was centred around existing financial investors in aviation.

“Wafra was one of our top candidates that we wanted to get interested in the business… they are the perfect mix of patient capital, lower cost to capital, and also not to be understated, is that they were experienced. They know the space, had invested in the sector before and have been able to move a lot quicker than some folks that didn’t have relative experience in the space.”

Evolving industry

Wood tells Airfinance Global that historically, and certainly pre-Covid-19, investors looked at engine leasing through the same lens as aircraft leasing, evaluating it as a more difficult form of aircraft leasing given the lack of experience in the space.

This was reflected in covenant packages and yield expectations from a lender perspective, he explains.

“Fast forward to today, I think the equity investors specifically see this as a truly differentiated business model compared to aircraft leasing, especially new aircraft leasing.

“They’ve really learned to respect that it is a different offering. It requires a different skill-set and serves a much wider customer base, as both airlines and freighters need this to round out their supply chain needs.”

Wood recalls that the pandemic had a lasting impact on the engine MRO ecosystem.

“There were significant labour pullbacks and labour reductions. The tribal labour knowledge left the space and has been difficult for the engine MRO community to rebuild.

“Just look at turnaround times… if an engine was a 60-day turnaround time pre-Covid, that same engine today could take six months-plus to repair it, and the simple math of it is that requires more spares. This means the supply chain is not nearly as efficient as it used to be.”

In addition, OEMs have struggled to deliver new material, which has put pressure on the used serviceable material market.

“The third-party repair vendors have struggled to deliver, so all of that is just complexity feeding into the engine overhaul market that is reducing turnaround times, increasing prices, and is requiring further spares and further needs for the airlines to augment their powerplant operations to have more engines in circulation,” Wood says.

He notes that this plays well into Aquila’s business model and is “why our utilisation is extremely high today”.

“It’s a trend we don’t expect to be recovered in months or even frankly, the next year or two – that this is going to take many years to come back into equilibrium and the challenges are not easy ones to fix.”

This is reflected in customers starting to request two-year extensions to mitigate the spare parts deficit.

“In our space, a two-year extension is a rare commodity. People usually want month-to-month leases or at the most a 12-month lease. Today, we’re seeing lease terms of two, three years being not uncommon whatsoever. Any engine that has remaining useful life is getting extended,” Wood continues.

How does that influence availability of engines in the wider airline ecosystem?

“Today, 78% of our lease portfolio is with investment-grade credits. That would not have been the case five years ago,” Wood says.

“We have three levers we can pull: term, price and credit. Right now, we’re very fortunate that we’re able to pull all three levers.”

He also notes that lease rates have done nothing but increase in the last four years, exasperated by the fact that older Boeing 737NGs, 757s and 767s are flying much longer than expected.

“I would have said a year ago that we may have been rapidly approaching the peak, but when there’s a fundamental vacuum where the thrust just does not exist, airlines have to obtain it in order to fly their routes, and they’re willing to increase what they pay.

“On the positive side, they know that these are very reliable, predictable engines, and they’re not going to have the technical problems,” Wood concludes.

Read the story on Aifinance Global’s website

(Courtesy of Airfinance Global)