A series of podcasts from Airline Economics speaks to veterans of the commercial aviation finance and leasing industry, who share their thoughts on the impact of the pandemic crisis on the aviation industry.

In the latest of the Sage Series of podcasts, Victoria Tozer-Pennington, editor and co-founder of Airline Economics magazine, speaks to John Feren, a partner at Split Rock Aviation, which boasts five industry veterans.

John Feren spent 30 years with Boeing in various sales and marketing roles for many aircraft types from the MD-80s right up to the 787. After Boeing, John spent 10 years with aircraft leasing company, Aviation Capital Group as senior vice-president of business development and as a member of the senior leadership team.

In 2018 Feren joined L3 Technologies where he supported commercial business development before forming Split Rock Aviation, an aviation advisory firm based in the US, with former ACG colleague Andy Mansell in late 2019. Tom Woodward, Clay Smith and Steve Welo complete the Split Rock Aviation team.

At troubled times like these for the aviation industry and the world, drawing on the experience of experienced industry veterans is a significant competitive advantage. For the Split Rock Aviation team, as Feren says in the podcast, those years of experience give a broader perspective on the current situation. After working through the period after 9/11 and then after the global financial crisis, the aftermath of the global pandemic is unprecedented. “[COVID-10] is global and it's an invisible disease, impacting the entirety of the travel experience,” he says. “The aftermath of 9/11 really only impacted a small component of the whole travel experience… Right now, the number of people traveling is at an insignificant number to sustain global operation. So not only do you have consumers quite traumatized by the disease, you also have a financial model that's really not working.” Added to those factors, says Feren, is the fact that the industry had been in a period of very high growth and airlines had been adding record amounts of capacity and ordering new aircraft for a growth curve that today may not be achievable for several years.

Feren shares his thoughts on the likely survivors of the crisis being those companies that prioritise strong cash management, act decisively and quickly to cut costs and capacity and that have a pragmatic plans in place that recognises strength, access to revenue generating channels and any controllable variables. Although government support at this time is needed and welcomed by airlines, that cannot be relied upon for the long-term, adds Feren, who suggests how airlines can manage their way through the next few months. Lessors, he adds, have slightly different challenges, not least managing their fleets, especially those with large widebody portfolios.

Despite the crisis and even though many investors have stalling their investment into the sector, Feren comments that for “every investor that wants to run from the space in downturns, there are many that want to get in because they think it's a good opportunity”. He comments on the private equity opportunists that see the aviation industry as a good place to deploy measurable amounts of capital. “It's a fairly well developed business. It's global. It's largely standardized, so airplanes are traded in dollars. It’s a very attractive investment proposition. And for long-term investors [looking over the] 15, 20 year horizon, [this] might be just the perfect investment time. I think that you'll see evidence of maybe five or six companies coming into the industry.”

On the flipside, however, there will be investors seeking to exit the business altogether that Feren expects may lead to a “changing of the old guard” in the aviation industry. Click here to listen to the full podcast interview with John Feren.