Finance to survive COVID-19

June 13, 2022
by Noriyuki Morimoto

Airlines used to own aircraft, but nowadays they lease aircraft from leasing companies. The leasing of transportation equipment, including aircraft as well as ships and vehicles, has grown into a large market. Ownership of transportation equipment is no longer a prerequisite for operating a transportation business.

In the past, airlines borrowed money to purchase aircraft. Finance used to be corporate finance, that is, finance for corporations. But today, airlines borrow the aircraft themselves, which used to be the purpose of the corporate financing.

Corporate finance is alive and well here, as the leasing companies own the aircraft and borrow the money to purchase them. Eventually, however, leasing companies are likely to sell aircraft to investment funds, lease back the aircraft, and sublease them to airlines. When this happens, finance will be provided to the investment funds.

Already in the hotel industry, hotel operators have become pure service providers that do not own properties, while hotel buildings are owned by investment funds such as REITs. And the financing for the purchase of real estate is made to investment funds.

COVID-19 dealt a heavy blow to the air transportation and hotel industries. If the financial structure had still been traditional corporate finance, the financial impact would have been extremely severe. It is undeniable that financial innovation saved them from a worse crisis.


[Category /Deconstruction of Finance]

Noriyuki Morimoto
Noriyuki Morimoto

Chief Executive Officer, HC Asset Management Co.,Ltd. Noriyuki Morimoto founded HC Asset Management in November 2002. As a pioneer investment consultant in Japan, he established the investment consulting business of Watson Wyatt K.K. (now Willis Towers Watson) in 1990.