In this, episode of Flightpath with Alok, we hear from David Power, a much-respected figure in the world of aviation leasing. David currently holds multiple board and advisory positions within the aviation sector. These include being, a special advisor to Aergo Capital; Vice Chair of the Advisory Board - The Hague Court of Arbitration for Aviation and Chair of Technical Standing Committee; Board Member of AviLease; Founder and Principal of Solus Capital Partners, and Chair of the board at FADO an Irish manufacturing company. Prior to this, David was the Chair of Orix, Hong Kong. David held the position of Orix Aviation CEO until 2019, crowning a career with the company, spanning more than twenty-six years. David grew ORIX Aviation from a small 20-aircraft lessor to an Asset Management powerhouse and top 10 lessors. At the time David left Orix, it owned and managed a fleet of approximately 300 commercial aircraft, worth US$12bn as well as a 30% stake in Avolon, a top three Lessor. David talks to Alok about his early years, what it was like growing up in a rural setting on the west coast of County Clare, Ireland, his early career and studies, and how he found himself on the path of aviation leasing. David speaks openly about the highs, lows, and successes of his career. And, David’s professional experience certainly demonstrates the level of variety and longevity a career in aviation can offer to the next generation of young executives, possibly considering their own careers and whether aviation may offer them the opportunity, purpose, and fulfillment they are seeking. #assetmanagement #aviation #aircraftleasing #aviationfinance #flightpath #alok #flightpathwithalok Linkedin: https://www.linkedin.com/in/alokanand23/ Watch our video podcasts here: https://www.youtube.com/flightpathwithalok Instagram: https://www.instagram.com/flightpathwithalok Podcast: https://linktr.ee/flightpathwithalok Produced & Distributed by Spooler https://www.spooler.in Transcript: Alok: David, welcome to the show of this podcast Flight Path with Alok. This is the fourth episode I'm recording and I'm very grateful and thankful for your time, which you have especially made to join me today. You are in Portugal right now, morning 9am for you and I'm recording you all the way from India. So, let's get right into it. Just to know, if you can just tell me a little bit about yourself. I know you have been in the legal field in the very beginning of your career, right? And so I would just like to understand how you got into aircraft leasing. What has been your background? Where are you from really? A little bit about that.  David Power: Great, thanks, Alok. Good to see you. Good morning. And, you know, it's great. Technology is fantastic. Now we can have a proper fireside chat conversation. You're in Bangalore and I'm in Portugal. So, you know, the joy for technology. But yes, I did. I started my career as a solicitor and I trained in Dublin, Ireland, and I worked for a large firm called McCann Fitzgerald. And it was one of the top two or three firms in Dublin at the time. And I went to school in Dublin, but I grew up in West Clare, actually west of Shannon, which would have been just west of GPA, where GPA, Guinness Peace Aviation, one of the first aircraft lessors started in the late 1980s, 1985, 1986. And I grew up in a very rural part of the west of Ireland where there were not too many roads. A lot of singing and dancing and a lot of Gaelic sports and you know, a very, very nice place, but very rural and very poor actually at the time. And I was close to the Shannon Free Industrial Zone and that was the start of aircraft leasing and actually many other businesses that now form, not those businesses, but subsequent businesses that formed the core of the success of Irish society and Irish financial services. So there's a long and rich tradition, both of musical and heritage and young people and people going to the American US and then the Shannon Free Zone, and then ultimately the Dublin IFC growing out of that environment and Guinness Beat Aviation and the start of aircraft leasing. But back to myself anyway, that's a long, long way around. I grew up in the west of Ireland and then my parents moved to Dublin like almost everybody else. And I went to university in Dublin. I didn't study law though. I studied accounting, finance, maths. I got a bachelor of commerce degree. And during that degree I had to do a law module and I discovered that I liked it. So I sat night time exams, to do the solicitors exams. And I passed them and I got my apprenticeship or traineeship with McCann Fitzgerald. And then they, by coincidence, worked for Aer lingus. And Tony Ryan had left Aer lingus to set up GPA and they were acting for GPA. And given that I was not a lawyer as such, so I was an outsider to the lawyers because I had to be gone. I didn't do a law degree, but I'd passed the law exam. And this was good for McAnviss Herald, as they saw it at the time, and placed me immediately into the aircraft leasing section. So I grew up as a baby in aircraft leasing, basically, carrying various people's briefcases, learning how to draft documents, and learning about corporate debt facilities. And actually, I remember one of my first tasks was a task probably nobody wanted to do, but I thought it was great. It was great to be innocent and young. Like it's great to be young because you don't really sometimes understand things. So I was doing the worst job in the world, which to me was the best job in the world, which was going out to all the countries in the world because they had a corporate debt facility at GPA. Actually at the time it was even massive and it was almost a billion dollars. It was NatWest and Chemical Bank and others. And this was in the late 80s. It was, I think, it was extended from 800 million to 1.2 billion. So I put it in perspective, it was a big business even then. And my job was under Catherine Dean at the time. I think you know Catherine Dean. And she was chairwoman of, or I should say chairperson of McCann Fitzgerald. I don't know if she, maybe recently, I don't know if she still is, but she was directing me. I had to go out to all the countries with a questionnaire. and find out what the legal system was like. So India, China, you know, Saskatchewan, South America, you know, Brazil, places that were barely, you know, and that I'd barely heard of that were on my world map, my Atlas, you know, we had Atlas's then and we had Globes and things, you know, and so that was my job, go out to all of these countries, do a questionnaire, find out what the legal system's like. and get the legal opinion for placing aircraft in those jurisdictions. So a very, very great introduction to the world of aircraft leasing. I was also doing stuff like I specialized in tax for a while. So it wasn't all aircraft leasing, but one, I remember one of the jobs I had was to find out where, you know, I could set up companies with no capital tax. So I found out a great country, a great place is called Manitoba, Saskatchewan. And then you got Isle of Man, and you got Guernsey, and then of course you had Sartre and other places like that. Because at the time people were able to double or triple dip aircraft. So you could buy an aircraft one place, you could sell it to another place, you could lease it to another place, but you might get three sets of capital balances. Of course that was legal and permitted at the time, of course all of those things have changed. Another big part of my job was going to Sweden. with Mike Dolan and Mark Pearson and people like that. Mike Dolan passed away, may he rest in peace, and they used to sell the aircraft into Swedish investors. So very early on I was getting a broad taste of how aircraft leasing and financing worked. Alok: So David, through your career path, as I mentioned, after Audix, you moved on into various roles. And what you're currently doing is you're working as a member of board of directors of AV Lease. And I think you're also a special advisor in Ergo Holdings and principal in Solus Capital Partners. Right? If I may just request you to just give us a little understanding of your role in these organizations AV Lease, Ergo Capital, Solus Capital, that will be great to know please. David Power: Great, thanks Alok. So AV Lease has been set up over a year by the PIF of Saudi Arabia and it's a really exciting company. It's being run by Ted O'Byrne, who you know from Carlisle and from Air Cap days and it's growing very rapidly with a regional focus in the first instance and then a pivot internationally. Really proud of my involvement with that company and on the various committees audit committee, remuneration committee and transaction committee there and I think it's a company with great prospects and future obviously very well capitalized and looking forward to the growth there. With Ergo Holdings, I'm an advisor and given my background in asset management, I've set up for Ergo their asset management division. Historically, actually it goes back to your first question, historically there were balance sheet lessor managing funds for their main investor, which was Carval and now they've pivoted to be an international asset management company. And actually since then we added about, there's been added in the last two to three years, 6 billion of assets. So it's a very significant growth within Ergo, 4 billion of which are assets under management. So a very, a period of very strong growth. Solace Capital is an asset manager in the wealth management fund and I set it up in 2016 before I left Rx and it basically provides asset management and fund services as in It has set up a number of investment funds, particularly in Malta and it's UK regulated. And I'm the principal of that company. I founded it and we'll see where that goes. So far, so far it's still going good, which is, which is, which is good. And then there is the arbitration court issues as well. Alok:  That's excellent. It looks like you have 48 hours in a day, not 24. David Power: Yeah, Alok: That I can say already. David Power: yeah, well, it's Alok: You do so many things, you David Power: important to time yourself Alok: know. Yeah. Yeah. David Power: as well. I mean, you can play a role, but not In some occasions be too much in the weeds either. So it's important to have the right perspective. Alok:  Another thing which came to my notice was that the in your I mean, the since I have known you when I remember first meeting you were in Aurex Aviation. I remember how kindly you took out time to meet me a few times when you were the CEO in Aurex. And one of the things which stood out for me over last few years is a lot of the if I may say so the alumni, you know, in quotes of Oryx have spread out all around the world in some very important, I may say, leadership positions in different leasing companies and in the industry. So, it seems like Oryx aviation of that time was a great breeding ground for future leaders. And obviously, for me, in my mind, the connection is there with you being at that time, the lot of people whom I meet in the industry now have worked in some form or other under you directly or indirectly. So David Power: Yeah. Alok: I would like to know what do you think was the reason what what was unique one of the things possibly I can think is Oryx was an early starter in the industry obviously but other than that you know what played a role in shaping up these future leaders what do you think was was happening what was the secret sauce really which helped to groom these leaders.  David Power: Yeah, so I'm really pleased you asked that question. So I can quote a fact, which is that there are currently five CEOs of aircraft lessors who worked for me or with me in RX. So I think that's a pretty good track record to have. And I do think we did have a secret sauce. So let me take you back a bit before I answer the question to go to what is that secret sauce. Not so secret, but probably a combination of things that collided. When I became CEO of Oryx, I spent some time in asset management, in finance, and I spent a lot of my time working with technical people. One of the things which I really enjoyed in my career, and I enjoyed it intellectually and physically and mentally, was to be with technical people, engineers. Now, of course, I'm not an engineer and I don't think like an engineer. I hope I don't look like an engineer. I mean, as a pen, I can put in my pocket and I could imitate one. But we had great fun. And the fun we had was because we were different. So an engineer and a finance guy and a marketing guy, they're three different things, you know, they're chalk and cheese, really. And what I enjoyed, though, was when I was working with the engineers was we would be drafting the detail of return conditions or say an engine shop visit or say the maintenance reserves provisions. And there's big shifts in money in this and I think that I was lucky early on that I recognized and was part of drafting some very complex engine agreements and other things and I understood both the marketing implications and the financial implications, and I could translate for my technical friends, you know, and I had some really great people that I worked with, but I could translate their words and concerns and risks and opportunities into contracts. And I think that was a great foundation for me to become a CEO in the aircraft leasing space. And when I did, I set up a strong, separate asset management team, not reporting to finance and not reporting to, you know, slightly separate outside the core finance team so that we could manage technical. Alok: Was it something which was unique at the time? Because now it is that is how all the leasing companies are mostly now right or is that something which was a different thing to do at that point of time? David Power: Yeah. Well to be honest with you, when I didn't, another point that came up in some of the other interviews, I didn't spend much time worrying about other leasing companies. You know, I had my own job to do and so I had to carve out a business. When I started with as the CEO of Rx, we only had like 28 odd aircraft that were bought and they were A1 powered A320s. So they were problem aircraft technically. And I grew that company by 2020 to 300 aircraft and 12 billion of assets and a huge asset management business. So it was a vastly different business at the end than it was at the start. But the foundation throughout was the same. Oryx was a very disciplined, it is a very disciplined, technical company with a very strong asset management tradition and that's at the core of its activities. And that means we are not just a banking operation. In other words, buying paper with a certain yield and letting it out to the market. So the vision that I had for Rx at the time was it was very strong on both, of course, very low cost of funds, so it could compete very effectively, but also that it had a very strong asset, legal, technical capability. And that then leads itself into the market presence. You know, you get the market presence by having those other capabilities. And obviously, you know, I grew it through a number of crises. We had, you know, the SARS, we had, well, it's September 11th to start with. With them, with SARS, we had the global financial crisis and. The ultimate challenge of all of course was COVID, which I retired though from, I retired in 2019, leaving in June 2020. So I had, I'd done 30 years from, you know, starting really the company and growing it and developing it to a huge powerhouse in aviation at that stage. So it was good timing. But the secret sauce for us, and we didn't look, I don't think we were looking too much at what other people did. And it's an interesting point because I was always looking at the other top 20 aircraft leasing companies in terms of how they're all different. Not in terms of how we all do the same things or trying to copy what they emulate, what they were doing, but they're all different. They have a different shareholder, they have a different focus on the aircraft they want, they have a different ambition. They're sometimes more focused to be a fund. They're sometimes more focused to be a banking type operation. They're sometimes more focused on the Japanese operating lease market, the asset management side. So actually the segment is very differentiated in the top players. They're not the same, they're different and they behave differently and they chase different assets at different times. Alok: One question which maybe just to, this is very interesting what you have just explained about how Oryx was heavily focused on the asset management piece also, right? I mean, and I know a big part of, if I'm not wrong, Oryx business was from the asset management side. I mean, is there a way where you can maybe define for the sake of our audience how that... asset management model is different from just a pure leasing model for example. Just a way to and I think this is more like an academic question just to understand the difference. David Power: Yes, so Oryx was both a balance sheet lessor and an asset manager. So a balance sheet lessor is effectively buying, selling, trading aircraft, holding them, but not bringing in external investors or capital. Whereas an asset manager is either going out to the market and managing assets on behalf of existing owners or distressed owners. Or buying aircraft and specifically putting them in, say like Castle Lake to the ABS market, like Oryx to the Japanese operating lease market, like other, you know, B-BAM, etc. So they're asset managers and they're placing aircraft into specific marketplaces, be it the ABS market, like Carlisle, be it the Jarl market, be it US investors and funds who want to hold the assets for the yield, or pension funds who like the lower yielding but higher credit type assets. In fact, almost everybody is an asset manager as opposed to a pure balance sheet player. Aircap is the most pure balance sheet player, but you could say it's a public company which manages public money and puts it into aircraft. So ultimately, everybody's an asset manager. But some players are much like ALC and Aircap are much more focused on their balance sheet and taking public money, creating a balance sheet and creating profitability and growth for their investors, which is the public. So they are in effect an asset manager also, but they're more using their balance sheet as opposed to providing investment products in different segments. Alok: I think that's very well put. If I may try and summarize it, my understanding is that all lessors are effectively asset managers as you have already said, but that doesn't mean that all asset managers are necessarily lessors. There could be asset managers who are not lessors, but all lessors are definitely asset managers as you have rightly explained, I think even though they're managing public money. So, you know, looking at your illustrious career, if I may say David, this is really impressive. I have this list here of, since you moved on from Oryx, you have been on the board of various companies. And recently, you're associated with Airgo Holdings as a special advisor as well. And one of the things which I noticed, which you're doing, is a great initiative is on the Hague Court of Arbitration for Aviation, where you're working as a vice chair of the advisory board. David Power: Yeah, yeah. Alok: Would you just like to just? tell us a little bit because this is a new initiative. I think it will help the audience to understand what is this all about and what is your role in this and what is the hey code of David Power: Yeah, of course. Delighted. So, Paul Gepley, lawyer. Usp Pillsbury and is now with us, actually had the idea to set up the Hague CA, which is the Hague specialist court of arbitration, which works within the framework of the Hague international court of arbitration. And he started that endeavor 2020. And since then, it's obviously up and running. And I'm the vice chair of the advisory board. and the chair of the standing technical committee. So the court is designed really to be an arbitration court with very specialist focus on aviation. And that's why we've brought together over 80 experts from the aviation sector, from the lessors, the finance side, the MROs, the manufacturers. etc. to advise and input into the rules of arbitration in the first instance and now that the rules of arbitration have been settled with the Hague Court, with the rules of mediation. So our focus now just currently, and we just had a meeting on it last week with a large number of attendees, actually it's very challenging to have these meetings because we have so many attendees to get a time slot and to have an agenda and to get the minutes right etc. But what we're trying to do now is to have more influence on the mediation rules so that people in aviation can with confidence put in a mediation or arbitration clause into their contracts knowing that they won't just be going to a court where maybe that court doesn't have the specialist expertise and not just to an arbitral institute which you know so they go they can get a specialist arbitral and mediation service but actually, our viewpoint is that we want to promote arbitration generally whether it's in London or Singapore or the Hague court as well because it's a not-for-profit operation organization, it's a foundation. in fact and I think that over time It is not a quick fix. I mean, over a few years, three, four, five years, it'll begin to have a major impact. I mean, I was just thinking about it the other day and thinking about all the supply chain issues and Alok, you'll be seeing it in your business. Alok: Yeah. David Power: And there's terrible disputes can come out of that, but also it's not the forum to litigate either. So you have genuine... problems in the supply chain, but that doesn't obviate manufacturers or suppliers from certain responsibilities, yet litigation is not the answer in the first instance. So I think that's a very good example of where mediation or arbitration clauses in those contracts can be meaningful and it can also lead to much quicker resolution. And for example, the cost of mediation as compared with, I think, arbitration litigation is in the small percentile. I was told a percentage and I didn't believe it. It was so low. So it is significantly cheaper, quicker and more responsive. But in particular more, the experts that will be used are experts in the area, which is a much quicker way. to access as well as justice are the right answer in terms of these type of disputes. Alok: yeah. Yeah. So, and you're right. And this is where I was leading this question to the next point of a live example from where I am right now, which you must be very well aware, what is going on with Go First Airlines in India, it is going through a bankruptcy process. And they have said that their reasons are one of the reasons, key reasons is Indian issues with PW. While we may have our own opinion of why they are going down. But at least on the face of it, they're in a dispute now with the PW on their engine issues. And I believe they went through some arbitration, et cetera, et cetera. So I'm wondering, a HAC-CA possibly, when it David Power: Yes. Alok: Would be fully ready, can play in future a role in this kind of situation and help resolve the situation faster and in a more cost effective manner, isn't it? David Power: Yes, and that's a really good example and I believe also that India has, and you probably know more about this than me, but I think it's adapted some legislation or it's in process to demand that certain companies have arbitration clauses before they resort to litigation. And I think that could be a growing trend. internationally. Certainly it's far far sighted by the Indian government to be introducing such legislation I believe. Alok: Yeah, definitely. And in India, as you know, in the gift city of India on the West Coast, Gujarat state, they have they're setting up, you have mentioned the very beginning when Ireland was growing the air craft leasing business, they had set up an IFSC. So India has set up its first IFSC, so to speak. And it is in early days right now. But one of the positive steps they have taken is they have set up the Singapore arbitration bench there, so that the various parties who operate there can resolve matters through arbitration rather than through litigation. David Power: Yes. Yes. Alok: So I can imagine if tomorrow Hague CA is spreading and looking at various regions, possibly one of the places they would look at is also gift city in India. India is such a big country. And I think that's a very important point. India is such a big country. And I think that's a very important point. India is such a big country. And I think that’s a very important point. David Power: And possibly with my ergo hat as an asset manager, I'll have to go down to Gift City and see if there's any investors there. So yeah, you know, it's a big world and it's always opening up and new opportunities. I mean the growth in India over the next 10, 15 years will be phenomenal. Alok: Yeah, yeah, it looks like that. It definitely looks like that. I am going to change the beat a little bit because I have a set of special questions just for you David Power: Oh lovely, Alok: because David Power: lovely, Alok: I think  David Power: thank you. Alok: there are areas on which you can contribute. I mean, beyond the usual, because I pretty much have tried and summarized your career here and got a little understanding of the new initiatives. But there are certain things I think, which I believe, David, you are the best person to tell us. This is a topic you know very well about JOL and JOLCO and I'm going to just Spell out the full form because I got feedback from my audience That not everyone who is hearing this podcast knows everything about the full form of these terms, you know, so Japanese operating lease is JOL and JOLCO is Japanese operating lease with a call option now I think Oryx in your Oryx days and maybe even now you have been very close to these right and during the pandemic time especially till last year I know there was a case which was most publicized about JP lease and some assets in Vietnam which had some Jolco related issues and apparently at least what I have heard is there is an issue that maybe Jolco people are saying is a thing of the past I don't know. What is your opinion? Are they still active or will they not be active now anymore? David Power: Yeah, so I think the, actually I just read, before I actually started this, I did a bit of reading and I read because the Tokyo conference was on in Tokyo, obviously, Tokyo, conference in Tokyo Alok: Yeah. Yeah. David Power: just a couple of weeks ago. But it seems that the Jalco market has come back a bit. But let's just get back to a little bit of definition. So a Jal will be a single investor, and a Jalco will generally be multiple investors. So now, what happened in the years 2017, 18 and 19, which were obviously very good for aircraft leasing and aircraft leasing was growing. I mean it was growing as a percentage of aircraft operated from about 42% and heading up towards the 50% mark and the airlines were moving into profitability making about 30 odd billion in aggregates, and the JAL market had expanded to about $4 or $5 billion worth of assets annually or more. It's not really transparent. So a lot of Japanese investors had bought widebody aircraft with Southeast Asian carriers and then moving to Latin American carriers. So if you take initially that the credit risks of the Jalco Airlines was a top 15 to 20 in say 2012-13 and then by 2018-19 it was a top 40. So, as soon as COVID came, unfortunately for the Jalco investors, a lot of the airlines obviously had significant payment difficulties and problems which are well documented. So the JAL market has recovered to a stage where it's the top 15 airlines that can attract JAL funding and is beginning to recover. But there are other issues such as the strength of the dollar, you know, et cetera. So yeah, I expect the JAL market will recover. And I think the particular note is that the Japanese economy and the Japanese stock market is rising strongly and there's significant profitability within Japanese companies. So it's an improving situation for the JAL market, but slow. And credit is paramount to that market. I mean, investors need to know that the aircraft will be purchased in the case of the JALCO or that it'll get to the end of the lease term in the case of a single investor, JAL. And there is more debt in the aviation sector. I mean, debt had increased immediately post-COVID to about 800 billion, whereas pre-COVID, it was still a startling 600 billion. And I believe Ishka just issued numbers, so about 50 billion has been repaid. So there is a repayment going on by airlines. But post-COVID, what we see is that the percentage of the lease market controlled by the leasing community, is roughly 60 percent whereas pre-COVID it was you know touching heading towards 50 percent. Alok: Yeah. David Power: But this is a very big move upwards and also the ABS market is currently effectively sort of in hibernation until the interest rate issues. So the only market you've got other you're wondering why I'm answering that in the context of the JAL market. But the only other market you have other than the ABS market currently will be the JAL and JALCO market. And with the state of the Japanese economy being relatively strong, actually, but with the dollar, yen issues, that looks like a recovering market, but a focus really on the top, top 15 names, which actually compresses the JAL players into very tight economics with a few airlines who can command very good pricing on both the debt and the least rental side in that market place. Alok: JAL and JALCO market traditionally has always been particular about high credit worthy airlines only. David Power: Yes. Alok: But what I'm understanding you're saying is that possibly that will become even more stringent in the short term now for time being. David Power: Oh yeah, in the short term I think it's paramount that it's the top 15 of the airlines worldwide that can attract JAL or JALCO funding. Alok: 15 or 50, sorry, 15. David Power: No, 15. No, no, it's not top 50. No. Do you have a top 50 of airline credits? I'd love to see it. Alok: That's why I qualified. was wondering. David Power: I don’t mean that the bad way, but everybody knows airlines are, you know, airlines are very susceptible. That's why the industry is so interesting. We're all very susceptible to external shocks and to oil price movements, to GDP, to consumer demand etc. But the airlines are doing fantastically at the moment and it's great to see. I've been travelling a lot and I'm sure you have. Everywhere you go Alok: yeah, flights are full.David Power: it’s busy, it's very busy. I'm here in Portugal at the moment and it's, I would say, twice as busy as normal in the Algarve, which is a holidaying spot and it's very, very busy. Alok: Oh, you're right. David Power: It's great to see, but long may it last as well, but we are seeing a huge uptick in travel Alok: You absolutely right. Last week, I was in US, and a couple of airports I transitioned through, and there was no space to, frankly, one of the airports, there was no space to stand. It was that busy. I was surprised. David Power: Yeah. Alok: One flight was delayed by two hours, and the airport was just jammed. It David Power: Yeah, yeah. Alok: was a good problem to have for airlines. David Power: Oh yeah, it's definitely a parts world problem, but the only thing I wish actually, you know, I always feel sorry for my airline customers because I often think they're very let down by the airport authorities and I'd love to see better accountability by the airport authorities for some of their decisions around the way they, you know, load passengers onto planes to space to give to airlines. generally the security aspects as well, you know, going to some bizarre sort of queues and unnecessary hindrance to travel. It's probably quite something we should debate at some of the conferences, but there should be, you know, the airlines should be better served to get passengers in and out of airports. And it also goes actually to the environmental issue because we talk a lot about SAF, we talk a lot about you know, aircraft, but simple solutions such as not having aircraft, you know, idling and taxiing for hours might be a good way to start. Alok: Yeah, the full one is high and you're right, bad for environment. On the support to the airlines, you know, one area which maybe you can weigh upon even more, I was hoping to hear what is your thoughts on the supply chain issues. You mentioned that briefly in the previous answer, but those issues are very much here. They're staring us at the face now and we are seeing the impact real time. I am like the kind of the airplanes which we are managing, for example, through various processes for various clients. We are seeing airplanes getting delayed, stuck in MROs, waiting parts, all that is really happening. And engines taking time to come out of the shop. Do you see that ending anytime soon? Maybe do you have any inside knowledge to share with us as to what do you think will happen eventually? How will this play out the next few months? David Power: Well, I'm quite concerned about it because there's some conflicts of interest there. In fact, as you know, some suppliers may benefit from the supply chain issues in that they charge higher prices for their stock and also for the refurbishment of parts. There may be a shortage and they can charge what they want for exchange parts. So I think there is a real problem in the supply chain and I don't see any resolution to it within 2023, more likely 2024, 2025. Now in capitalistic systems, these things generally resolve themselves because the void is, the vacuum is met by somebody else producing and supplying. But in the case of aviation, you can't get the licenses. You don't have the intellectual property. So, you know, in a situation where you have a duopoly, effectively, there needs to be real focus on this by Boeing and Airbus and the major manufacturers, and it needs to be resolved. And I would suspect that people will soon become very tired of it and we'll see a lot of disputes. You know, because there is significant cost being added to the airlines by lack of parts and on occasion, lack of an ability to get an engineering drawing. So how long can it take to get an engineering drawing? In your mind, Alok, and you're well used to looking at reconfiguring aircraft, how long would you say it would be reasonable to procure the drawing? This is before you even start the modification work. Alok: Engineering order for a cabin modification matter of few days is what we have been used to at least in the past. David Power: Well, what would you expect it to be today? Alok: I think today it is a matter of it has gone maybe exponentially high. It's even taking two to months is what I’ve been told and in case of some of the parts as you rightly mentioned the pricing of refurbished parts, computers and all I've heard is gone three times now from pre-COVID times. So you're right there is a serious problem here and what you mentioned underlines to a large extent why that is happening. So hopefully it will come to a head and get resolved at some stage soon. But right there is only so much the industry can take. David Power: Yeah, I think it's a big problem and I think you'll get resolution through people having some hard conversations, maybe eventually through arbitrations or litigations, but unfortunately, but it's definitely a major feature of the world we live in, the transitions of used aircraft are all the more difficult in this environment. It sort of goes back full circle to where we are about asset management and that's why when you're dealing with asset managers are less or so to speak, you need to have people who can navigate their way through that just as you need sort of your technical guys and your technical team who have specialized and who have you know hands-on experience not like last year's experience, but you know experience within a continuum and that's why I think the aviation sector is so interesting because there's so many different experts that we have to draw them all together so we get good outcomes. Alok: This whole story, the way it is playing out now, like I mentioned to you about Go First and what is happening with Pratt engines. And I know Pratt has come back with their statements about Go First, and maybe none of us are in a position to basically say who is right or wrong. We don't know. Though we know there is some there is a middle ground, there is somewhere the truth is somewhere in between as always. But having said that, the fact remains that Pratt engines, the gear turbofan engine is causing problems worldwide. Yes, India is maybe the most affected due to other reasons too, but it is having an effect not just in India, it is having an effect in Europe and elsewhere too. That's what we know of. How will this, how is your opinion this affecting the market in the law? How like in your role as an advisor in various companies as a board member, what advice are you giving to those boards or what is your opinion on this? How this is weighing on the market? David Power: Yeah, so I don't want to comment specifically on that case or the practice with the engines, but I can tell you what the impact of such issues is, is that there is a shortage of aircraft at the moment and there's a shortage developing because more capacity has been put into the market and is being put into the market. But for the manufacturer in the long term. It means a residual value differentiator of their product versus other competing product. And that's not good for the engine type. Obviously, my early career was spent dealing with a rather difficult engine type, which was the A1 powered V2500 engine, which ultimately was resolved through various initiatives by the manufacturer.  Alok: Actually you have answered that question very well David without getting into the actual engine manufacturer whom I asked about but you have explained that point extremely well. So that is exactly what I was looking for just to get an understanding of the impact. And you know, I have a follow on question though. So we have been also seeing tri-party agreements. I know pre-COVID there was a lot of talk about tri-party agreements with between OEMs, lessers and airlines, PBH, total care etc. these are the names some of the names of these kind of agreements. Do you think as a lesser would you recommend that now knowing what you know now would you recommend that lessers enter into such agreements or asset managers lessers enter into such agreements now going forward? David Power: Well, in many cases you have no choice because the manufacturer is so well established with the airlines and has programs in place. Would I prefer to revert? So let's go back for those who probably don't know the full history, but originally the lessor would take a maintenance reserve for the unconditioned part of the engine and separately for the life-limited parts. And what you're talking about is tripartite agreements with GE or Rolls-Royce on the engine side. But now the GE and Rolls-Royce have set up systems to supply the parts of payment by the airline directly to Rolls and payment for the on-condition nature of the engine and then ultimately for the replacement and use of the engine life-limited parts. Those agreements can work well if well administered as between the airline and the engine manufacturer and there's clear visibility of what the payments are by the airline to the manufacturer and clear transferability in the event of a default of the airline. And I think these are the areas that the agreements may fall down as we see. You know, the lessors need to understand what the agreement is with the airline. They need visibility of what the payments have been. And if there has been any default by the airline, it should be notified to the lessor, but that hasn't always been the case. So the lessor can in some occasions be disadvantaged by these arrangements. In general though the arrangements should work well, whereby once it's in a TCA, total care arrangement, call it that, that the manufacturer and the airline are making sure the engine is fully funded because these on wide-body aircraft, you know, 777s, on, you know, A330s, 787s, these are massive amounts of money and it's right that there is proper provision made for those events. So you've asked a really close to the bone question as I've actually just placed on behalf of Virgo 7879s, 17878, and at the core, and we're marketing some A330s, so at the core of those arrangements are whether they're in the TCA or whether they're not in the TCA. and do we have visibility of how much it takes to put them back in the TCA and do we have visibility of how much the airline paid, the previous airline that may no longer exist, has paid to the engine manufacturer. So right because they're very complex arrangements as well and there can be significant differences between engines operated in, for example, India or Mexico, or North America, or Southeast Asia. And for example, in Southeast Asia, Thai, which went into restructuring, we saw a whole lot of problems arise due to certain humidity issues and other things like that. And then you see other things in India, depending on the climatic zone, and obviously in Middle East as well. tends to be very hot and sandy. So, you know, you've different environments as well. And in a way, it's, so there's positives and negatives. I mean, in a way, it's very good that the ultimate responsibility falls with the engine manufacturer. But I caveat that with a whole load of points around assignability, visibility of what the payments are and transparency in the arrangement. Alok: Yeah, because the new generation engines, let's move away from naming any engine manufacturer but new generation engines as they go to the airplanes on which they're fitted as this aircraft moved through the second phase of their lease life as they get re-marketed five years, six years. I am just wondering how will like PBH for example, for our audience sake, I'm just going to say power by the hour agreements. Let us say that is a name for such agreements. How will the rates change? What impact it will have? What role will that then play from a lessor's point of view for re-market ability of the asset? And someone will have to hold the, as they say, pay the check, right? Somebody will have to bear the cost of it. So I'm just wondering, how will that all? You may or may not have an opinion on that. David Power: I sort of already told you the answer because, but you know, I'm going to say you've gone very serious all of a sudden, we're getting into edge and total character. I mean, you told me this is going to be a light artist interview and now you're getting deep into the, into the book.    Alok: I can edit this out. I can edit this serious part out.David Power: Like this is about the most serious sort of really, I don't think, everybody's turned off about 15 minutes ago. Alok: Yeah, yeah, yeah. No, no, I'm trying to learn, you know, from you. I’m taking the opportunity to learn things which I don't know about. David Power: Yeah. Well, I think for me, the key thing is not so much. Well, it's that as an owner, you have visibility of the payments by the airline to roles or GE under the arrangement and that you have the ability to assign that arrangement to the next operator if your current operator, unfortunately, has problems. So it's an asset that should go with the aircraft. And that's where a lot of problems arise. There may not be the transparency that you thought there was, and there may be cross fertilisation of pots across engines. And we need to have accountability by the manufacturers in those arrangements. But I'm sure now you've really bored everybody. But if you're full of... Alok: It’s a great point.I tried to squeeze the juice out of this. David Power: Yeah. Alok: Okay, so I'm going to change the topic. I hint well taken. I'll change the topic and I'll ask you one more question about the market, but not about any of the engine issues. Air cut values, you know, at the long haul short haul airplanes. David Power: Yeah. Alok: You just mentioned about the kind of transactions you have been involved in. So which is a better or a safer investment in the current climate in your opinion? A long haul or short haul and why? David Power: Yeah, so again, you have to just have a really quick look at the past. And in the past, wide-body values have declined much more steeply in downturns. And I think in recent downturn, we've seen that some of the wide-body values are at 40% of what they were pre-COVID, which is a pretty dramatic loss of value in the aircraft. Now narrow body aircrafts recovered much more quickly and that's in part due to the fact that a lot of wide bodies are located in the APAC and Asian region and that was where zero COVID, the Chinese policy, extended into that whole region and really the opening up raid occurred in December 2022, January 2023. So it's actually just, it's hard to believe four months ago, like I was residing in Hong Kong and it was still zero COVID up to mid-December 2022. So the opening up and the renewed demand for A330s and 737 900s and you know, triple sevens, the bigger demand areas only occurring right now. Whereas narrow bodies to recovery began very strongly actually at the, It's hard to remember because things have happened so quickly, but if I'm right, it was about January 2022, it was really autumn 2021. And then, unfortunately, we had the Ukraine invasion by Russia. I think that was that February 2022. Alok: Yeah. David Power: Yeah, and that, so before that, actually a lot of confidence was returning to the narrow body market, but not to the wide body market. And that confidence was really dented until about, it took about three months to understand what was going on. And then through the summer of 2022, we saw marked uplift in narrow-body rentals, but very little uplift in wide bodies, which we began to see actually with the anticipation of China opening up in the autumn of 2022. And so much so that like 787s and A330 market has risen 30, 40, 50% in terms of lease rental. But you know, 50% of nothing is still not great and they're still way off where they should be. I mean these are aircraft that sold at over 120 million dollars say 2018. And I'm not going to say the trading price for them, for those few Alok: I'm gonna just ask that now. David Power: aircraft that did trade, But it was dreadful and I think the recovery is ongoing. I think there's about 110 store day 330s, which had been about 300 last year. So the storage level is going way down and the reactivation level is going way up. But these aircraft are also caught in the supply chain issue. So to get them back into service is taking six to nine months. But I do expect a continuing recovery and strong recovery, but strong because, you know, percentages don't tell you a lot. You had power by the hour arrangements plus minimums, they should be gone now. And the fundamental value of these aircraft is far more than even today's value, if you look at the valuers who would reflect. So I think I see strengthening demand and value for the triple sevens, the A330 and the seven eights. But they won't recover to their pre-COVID levels, those that have been caught in the situation.  Alok: They will not recover you are saying like for a while now. David Power: No, not recover fully because they've lost three years of value. Don't forget aircraft that have sat on the ground for three years, you have another issue around the maintenance cycle, etc. But the other point about it is they're bloody great aircraft because they haven't been used as much as long as they've been stored and brought back to life correctly, they have the effect of life in them of newer aircraft. Alok: Interesting you mentioned that because like in Acumen we have our iStat appraisers in our team and one of the topics which they told me they have been debating with customers back and forth especially since last year post the pandemic kind of getting ended was this exact topic of how the values are getting affected on the assets which have been grounded and also on the supply chain what you mentioned is I am sure you are aware of I heard that the first 787 just got parted out. So whoever parted it out must have done it with a solid business case, writing on the fact that there is a supply chain problem, and parting it out makes sense, and they can make good money on it. Yeah. David Power: Yeah. I think they did and I think that they'll make good money on it because there's a lot of 787 currently returning to service. Alok: Yeah. David Power: So it does make, it makes total sense. Alok: I am going to move on to a favorite topic of yours, not aviation.David Power: Uh, what? Alok: And a topic of a topic which is of which is your favorite but not aviation.  David Power: Oh good. Alok: Soccer. David Power: Oh soccer. Well my favorite is playing soccer, not talking about soccer. Alok: Yeah, so I should tell you why. I know that you love soccer and I have also heard that when you were in Oryx, you used to hold a weekly soccer match, David Power: Yes, yes. Alok: form teams and you used to play yourself. David Power: Oh yeah, of course, yeah.Alok: So my son, he's into soccer too. He's right now in school learning soccer. And I mentioned to him yesterday that I'm about to talk to someone tomorrow in my podcast who is into soccer. So he's like, please ask him what is his favorite team. So because David Power: Well, Alok: he loves soccer too and Thanks. David Power: my favourite team, this is going to shock you, but it's Chelsea because my son follows Chelsea, which is a bit of a disaster at the moment. But, actually, because I thought this was a light-hearted interview about the job and how you, I think soccer is a great metaphor for how you can be successful aircraft leasing companies should work. And it means that you pass the ball, you know, teamwork and passing the ball is really critical. So actually we had a great, we had great fun. And we played soccer actually sometimes twice a week in Winter League. There was quite tough, quite tough competition. Sometimes we lost like as much as 15-0 because Alok: Did you ever lose David? Did you ever lose or are you always in the winning team? David Power: No, actually, Alok: Tell me about that.   David Power: no, we played against GCast and we played against, we went down to town, we had, that was the full 11 aside with ourselves and we did well in all those matches actually. We did very well when we put the whole team together. But we played in Winter League, close to us, where we got trashed because the players on the Winter League were guys who were coming after work who probably played for a sort of League of Ireland team and wanted to get in a bit of practice. And they were really good. And they just ran rings around us. But we kept playing and we kept enjoying it. And that was the main thing. We won a few games as well. But I thought we had great team spirit from it. And soccer, basketball, anything you couldn't play as a team, I mean, anything. Tiger rugby, any of these sports, they're just great within companies. I think sports and companies go very well together in terms of inclusion. I mean, soccer probably isn't the most inclusive because that was a male team, but we had a mixed team as well. And, you know, so anything that promotes health and teamwork is great in the, you know, in the corporate environment. It also breaks down barriers because like nobody can be too snooty if they're on a soccer pitch on a cold wintry night in Dublin, you know, there's hailstones coming down them to have to kick a football, you know, you just it's a great leveller now Alok: Yeah, you're absolutely right. I mean, nothing like that to break barriers and build a team culture. David Power: Yeah, if I was in India, it would probably be a cricket team, but I don't know how Alok: Yeah. David Power: many players you need or all the rest. Of course, you Indians guys get too passionate about it, there might be a fight. Alok: So cricket is same 11 players but in our company here in Bangalore we, our teammates here they mostly play soccer too. They actually have been participating in local tournaments every once in a while. David Power: Yeah. It's actually, it's a great game for your health as well, because it pumps Alok: Yeah, David Power: your heart.Alok: it’s very popular in India now.  David Power: Yeah. Alok: Yeah, it's quite popular. And last year we had an Acumen offsite and we had a beach side soccer match. So that was a lot of fun. So David, we are at the very end. Thanks so much for giving so much time. I have a question I like to ask David Power: Cool. Alok: always, a couple of them actually, we need to end this. But first is like, you know what? What advice, from a career perspective, have such an impressive career you have had, such a long lasting innings and you're still going very strong, which is really impressive and inspiring, as far as I’m concerned, frankly. And I would love to know what advice you would give to the new generation of executives coming in the industry, the people who are, in fact, trying to get into the industry as well, those who are at junior, mid-level. What is one advice you think they should hear to grow in their career in their lives?  David Power: Yeah, probably there's a load of things that you touched on soccer. I think one thing because it's quite a hard and we travel is a bit of training. It's always good to keep some fitness, you know. It's also good to, you know, also socialize. So I think combining the two is a really important aspect to your life. And I think though that don't be afraid of the detail, don't be afraid of hard work. What this industry shows. And the word that comes through again and again is resilience. So it's a very resilient industry. And if you ever want proof of that, look at COVID. I mean, COVID was very, very destructive. We've sort of put it behind us now in our minds. But I remember you could almost cry. I was on the the cable car that goes to the big Buddha in Hong Kong, and I could see Hong Kong airport and there was no movement. There was a helicopter. flying over the airport and there was FedEx and Cathay aircraft all parked and you could see everything. I have the photograph and it was an amazing sight. You know, we've been through a hell of a lot and it recovered. We were through a hell of a lot in the global financial crisis. I mean, living in Ireland, we all got letters to say, oh, you've lost all your money, you know, so and we came through that as well. We had SARS, SARS was very severe in Asia in 2003. They had obviously September 11, a disastrous scenario. So aviation is very resilient, new challenges. I think the other thing, because you could labor it, but is to be very open and giving of your opinions with your colleagues is very much an interactive sport. And I say sport because I've always considered working to be fun. not working. So, you know, enjoy yourself, but be very, I mean, I learned so much from my technical colleagues and then more from the finance people as I had to raise money. And then I realized, God, the marketing side is great. So I sort of leant into every one of them at different stages of my career. And it's until you lean into these areas and sort of learn them that you really appreciate them. There's, I wouldn't, the one thing I'd be very against is being siloed. If I found in my career I was being siloed, in other words, oh, you do this, but they do that, and you can't talk to them, I'll talk to them, and they'll talk to me and I'll talk to you. Yeah, I'll move on from that sort of scenario. So I think, and the other thing is that in aircraft leasing and financing and there's great companies, you know, but they're all different so you have to pick which one suits your needs and your skill set. But I'd be very much in favour of people who are open and smile a lot and optimistic because God knows you've got to be optimistic. Alok: Yeah, optimism always wins the day, no doubt. Right, David, we are at the very end. Thank you very much for giving us so much time. Is there any closing message you would like to give, anything else you would like to say? And then we can wrap this up, because that message which you're going to give us, we'll put it at the end of this as like a closing message on your behalf. David Power: Oh, great. Alok: So my request is if there's anything. David Power: Thanks, Alok. It's great to see you. I actually must have the pleasure of a revenge interview with you at some stage. So that would be fun. But yeah, no, I'm looking forward to it. I'll probably work for another, I'm thinking about 30 years. though, you know, probably keep working for another 30 years and enjoying it. So I think I think there's plenty of room in aviation for expertise and people to expand what they do and how they do it. Alok: Right, right, right. Well, thank you very much, David. Wish you a David Power: Great. Alok: good day ahead.  David Power: Thank you.