We have affirmed our STRONG overall ranking on Orix Aviation Systems as a commercial aircraft lease servicer in Ireland. The outlook is stable.
Orix Aviation Systems, which is based in Ireland, is a wholly-owned subsidiary of ORIX Corp., which is a nonbanking financial services group based in Tokyo.
LONDON (S&P Global Ratings) May 25, 2017--S&P Global Ratings has today affirmed its STRONG overall ranking on Orix Aviation Systems Ltd. (OAS) as a commercial aircraft lease servicer in Ireland. The outlook is stable.
OAS has operated as a commercial aircraft lease servicer in Ireland since 1991. The servicer is a wholly-owned subsidiary of ORIX Corp., a Japanese
nonbanking financial services group listed on the Tokyo and New York stock exchanges with operations in over 36 countries, up from 24 reported in 2015.
As of December 2016, OAS' fleet totaled 146 leases, up from 113 in 2015. The fleet is made up of 137 narrowbody commercial jet aircrafts, eight widebody
commercial aircrafts, mainly Airbus and Boeing, and one spare engine. They have a solid and diversified lessee customer base of 51 of the world's leading
airlines in 26 countries. OAS currently employs 52 staff in Dublin. In November 2016, the company set up a new representative office in Asia to better serve this growing region. A team of five executives are relocating to Hong Kong (in addition to local hires) to drive business growth there.
Our STRONG ranking on OAS as a commercial aircraft lease servicer reflects our assessment of the company's operations based on the major ranking factors in our criteria (see "Related Criteria").
MAJOR RANKING FACTORS
OAS has consecutively exceeded its targets over the last few years. The company has recorded steady growth since our last review and expects to
grow further based on its current pipeline. It has positioned itself as a mid-range aircraft lessor to work on profitable mid-range deals and in collaboration with bigger platforms on the trading side. Similarly, it is expanding in Asia where it expects relevant opportunities to arise, given regional growth. The company has an experienced and stable senior management team. The organization structure remains robust, and turnover has been tamed since our previous review as a result of the implementation of more comprehensive training and development programs and HR functions. The company has sound audit discipline and governance in place which is in line with the Orix group's culture and best practices.
OAS has a streamlined workflow in place. In our view, the company's processes and procedures are effective. As part of OAS' continuous efforts to improve, the company appointed Accenture to assess them as an external provider in 2016. The advisory company identified minor recommendations which the servicer has already implemented. Moreover, OAS enhanced its lessee credit management scoring methodology and it now carries out rigorous credit assessments on current and potential lessees.
The outlook is stable as a commercial aircraft lease servicer. In our opinion, the company will sustain business at this standard.
MANAGEMENT AND ORGANIZATION
We have affirmed our STRONG subranking on OAS for management and organization as a commercial aircraft lease servicer in Ireland. The servicer has an experienced leadership team, which continues to successfully attract new business. The organizational structure is rational, in our view, with a large emphasis on governance and internal controls. The company has taken steps to improve its people management function to better engage staff in its long-term vision. OAS' IT systems remain sound and its business continuity plan is tested regularly.
We have affirmed our STRONG subranking on OAS for lease administration as a commercial aircraft lease servicer, based on its robust lease administration procedures. OAS has repeatedly demonstrated its ability to successfully onboard new and diverse transactions. Its workflows are clear to follow; they have stood the test of time, and are constantly reviewed and refined to offer the best service standards. While lately other servicers have been offering access to online data, OAS' clients currently have no online access. However, OAS has kept them constantly informed and, in our view, there is a reliable management meeting model in place.
We deem OAS' financial position to be SUFFICIENT, based on our long-term credit rating on ORIX Corp., the parent company.