Jetrader

Q&A With Austin Willis of Willis Lease Finance Corporation

Austin Willis, CEO of Willis Lease Finance Corporation, reflects on his unconventional path into aviation, the lessons learned building JT-Power and how those experiences shape his leadership. He also shares his perspective on today’s engine leasing market, from persistent supply constraints to the strategic importance of integration and customer-focused partnerships.

Jetrader: Tell me a little about your background and what first drew you into the aviation and engine leasing space.
 

Austin Willis (AW): I worked as a summer intern at a prestigious investment bank in New York during the summers of 1999 and 2000 while I was in college. I asked them in my second year what it would take to work for them when I graduated and was quietly told that the firm didn’t hire analysts who hadn’t attended Ivy League schools. I found this both insulting and motivating. Since I didn’t attend an Ivy League school, I transferred to the London School of Economics (LSE), which I was advised would “qualify,” and graduated two years later.

After graduating, though, I decided that the world of banking wasn’t for me, and I started a small parts business, JT-Power. At the time, I thought my experience sweeping floors at a parts business in high school somehow qualified me to be an entrepreneur in the space. Reality hit home when I quickly ran out of money and moved from my apartment to my truck (with a shell on the back to accommodate a twin bed). Thankfully, I was stubborn and, frankly, naive enough not to know how difficult it would be, so I persevered and eventually the business found its footing.

The experience I had from studying at LSE and working as an intern gave me the basic tools necessary to raise money, and that was the catalyst for making JT-Power successful.

As for what drew me to aviation, it was really all I knew. My grandfather was a World War II pilot and later an airline executive in the 1960s and 1970s. My dad started Willis Lease Finance Corporation in the 1980s, after flying refugees out of Vietnam on government contracts. He dragged me to meetings all over the world as soon as I learned to tie a tie. I remember sitting at his desk at our house in Mill Valley, California, at the age of 6 when he was just starting the business, pretending to be him on the phone, yelling at Leonard Simkovitz, his old friend who is a part of the fabric of aviation wheeling and dealing.

In short, it is what I knew and what I loved. I still do.
 

Jetrader: Looking back at your time building JT-Power, what did that experience teach you about the engine market that still shapes how you think today?
 

AW: It taught me the value of in-person interactions. After raising a US$100 million fund from Varde Investment Partners in 2005, we had to find a way to create a pipeline of assets to part out. That led us to green-time leasing of engines, meaning we would buy serviceable engines, lease them out until LLP expiration or performance degradation, and then part them out when they came back off lease.

However, our credit was not what you would consider “investment grade,” and our cost of funds reflected that. So, in order to generate the returns required by our investors, we leased to some of the more challenging credits. I learned quickly that if they can find a way to not pay you on time, they will. And the only reliable way to get paid was to get on an airplane and demand payment. If I wasn’t invited, I’d sit in the lobby until they saw me.

I became convinced that the CEO of Orient Thai, Udom Tanispronochi, would avoid paying me just to make me fly to Bangkok to see him and his number two, Mr. Cho. They would torture me by chain-smoking in Udom’s un-airconditioned office with the windows closed and make me listen to their stories about how things are about to turn around.

I would return home with partial payment and a mild case of emphysema. Udom became a good friend, and I was sad to see him pass a few years ago.
 

Jetrader: You joined WLFC in 2016 and became CEO in 2022. What were the biggest shifts you had to make in moving from an entrepreneurial/operator mindset to leading a public company?
 

AW: Somebody told me that when I took over as CEO of WLFC, I’d need to decide what type of CEO I was going to be: a deal maker, a manager or a transformational CEO. I had always been the deal guy at JT-Power. I hired people with the technical skills to understand part-out values, and I had a sales team to sell the parts. Eventually, I hired Ian McDonald, who ran much of the day-to-day for me so I could focus on my strengths: doing deals and raising money.

As the CEO of a public company, there are so many different elements to manage that you simply can’t be on the road all the time like you can as a young entrepreneurial deal maker. I think this is why most public company CEOs tend to be more manager-oriented. They are masters of operations and HR, finding, hiring and motivating the best possible people in the space to execute their and the board’s vision. The mindset is: How do I create processes that consistently deliver the desired outcome, rather than thinking, “I need to do it myself”?

That said, WLFC is not a Fortune 500 company. While we have recognized that improving processes and managing people effectively is critical to scaling, we still have a very strong entrepreneurial spirit, and we are constantly looking for and questioning bureaucracy.
 

Jetrader: What were your top priorities when you stepped into the CEO role?
 

AW: Candidly, my first priority was to listen and learn. I had inherited an amazing company with world-class people, and this was my first time being the CEO of a company this size. The last thing I wanted to do was “shake things up” just to make a mark. It took time, but I got a sense of the personalities, our strengths and our weaknesses.

I found that much of what was limiting us was efficiency-based. Our marketing reps were frustrated that it was taking so long to get leases out. Our trading team was saying it was taking too long to close on deals. We also had too many engines that were unserviceable and off lease without a clear strategy.

I sat down with Stephanie Sutherland, a vice president of ours who has a reputation for creativity and problem-solving, and we decided to explore lean business systems. By implementing SOAR (Strategy, Operations, Action, Results), we were able to significantly reduce these delays, close on assets faster and deliver our products more quickly to our customers with fewer complaints.

This enabled us to begin executing a larger growth strategy that would have been nearly impossible before, because we simply couldn’t keep up with the administrative functions necessary to serve a growing portfolio.
 

Jetrader: How has your experience in the military influenced your leadership style, particularly in a cyclical and high-stakes industry like aviation?
 

AW: I think there are three key areas where my military experience has helped me: stress, communication and teamwork.

Leading a company like Willis Lease Finance Corporation can be stressful. Meeting deadlines and targets, and putting yourself out there on earnings calls, can be challenging. But I believe that my experience in the military inoculated me, to a certain degree, to higher levels of stress. Jumping out of a helicopter at night over the ocean to conduct a night dive in waters where your “not so thoughtful” team sergeant showed you tracking reports from great white sharks is stressful. Driving through a checkpoint on deployment, where other soldiers were shot days before, is stressful. SERE Level C training is stressful. Getting asked pointed questions from analysts or investors all of a sudden seems manageable.

Communication is equally important. Be respectful but direct. There is no need to be a jerk, but don’t sugarcoat things either. During special forces selection, there is very little yelling, despite what Hollywood might depict. You are simply given instructions and told to execute. If you are successful, you continue. If you aren’t, you are gone. Learning to be clear and honest with people has been a big help. Avoiding unpleasant confrontation now just makes things worse down the road, in my experience.

Teamwork is another area that has been helpful. In the military, we were asked to do dangerous things, and you have to rely on your colleagues to successfully complete objectives. When we jump out of airplanes, we check each other’s rigging. When we conduct dives, we cross-check our gear and setup. When we leave a range, we double-check one another’s weapons to ensure they are clear. When you are on a multiday patrol, one person sleeps while the other guards the patrol base. Mistakes here can be costly.

I try to instill a culture of open, direct communication where we don’t point fingers at mistakes, but learn from them as a team. When we are successful, we win as a team. When we fail, we fail as a team.
 

Jetrader: The engine leasing business is highly technical but also relationship-driven. How do you balance those two sides as a leader?
 

AW: The two are not mutually exclusive. In fact, they are complementary. We strive to be more than just a lessor. At the risk of sounding cliché, we strive to be a partner.

A partner is someone who comes to the meeting with an understanding of the problems facing our customers. We had a marketing representative who joined me on a sales trip a few years ago, and the customer asked a rudimentary question about an airworthiness directive. Our marketing representative was not sufficiently prepared to address the question, and it was clear to the customer that we had nothing more to offer him than asset availability and dinner.

That marketing representative is no longer with the company. I have since promoted Alan Downey, our former vice president of technical, into the role of deputy chief commercial officer for EMEA.

I want our customers to come to us when they have a problem. I want our people to understand those problems and offer sound advice, even if it doesn’t directly benefit us in the short run. Again, we want to be partners, not just a money-oriented lessor.
 

Jetrader: What does WLFC do differently than other players in the market?
 

AW: There are a lot of companies that do some of what we do, but nobody does all of what we do. There are other lessors who do long-term sale and leasebacks. There are lessors who have an integrated maintenance platform. There are lessors with both current technology and modern technology assets, and others with asset management platforms. But we are the only lessor who brings all of these capabilities together.

Beyond that, we are different because of how we look at the market. Most lessors approach it as investors in assets. We think about it equally in terms of how we can satisfy a customer’s needs.

For example, a traditional lessor may evaluate an opportunity by determining an IRR based on an engine’s future cash flow. We do that, too, of course. But we also consider whether acquiring that engine will further our ability to offer ConstantThrust® to another customer, which can result in significant maintenance savings for them.
 

Jetrader: How would you describe the current state of the aviation leasing market?
 

AW: I think there are good long-term prospects for demand that fundamentally outpace supply projections, and that’s a good thing for lessors. However, I also think that there is a great deal of new capital that has entered the space post-COVID that hasn’t been through a cycle yet.

The past year has seen some exceptional transaction values and lease rates. The war with Iran seems to be tempering that somewhat. I think some of the buyers are waiting on the sidelines to see how things shake out over the next few months.
 

Jetrader: We’ve seen persistent supply chain challenges and production delays. How are those dynamics reshaping leasing strategies?
 

AW: It has been a real tailwind for midlife assets. Protracted delays in aircraft deliveries have caused airlines to extend fleets that would have otherwise transitioned. Supply chain issues have also led to higher engine repair turn times, requiring more engine leases and driving higher lease rates.

Those higher lease rates have, in turn, driven higher prices for engines, resulting in more engines being repaired that historically would have been parted out. These additional repairs are also contributing to more MRO congestion, which further perpetuates the supply chain problem.

This environment has pushed us to vertically integrate faster. By controlling the maintenance through our MROs and materials through our parts business, we are less reliant upon third-party MROs and the OEMs. Furthermore, this enables us to be more aggressive in offering programs to our customers where we insource their maintenance risk.

For engine types where we don’t have maintenance capability, we are relying more on longer-term leases where the maintenance burden remains with the lessee.
 

Jetrader: Are we in a structurally different market today than we were pre-pandemic, or is this still a cyclical recovery story?
 

AW: The big differences, as I see them, are around timing and maintenance costs. Delays in Boeing 737 MAX and Airbus A320neo deliveries have pushed out retirements of Boeing 737 NG and Airbus A320ceo aircraft, driving up their values.

I think the more long-term issue, however, is the additional maintenance cost that airlines are recognizing when operating a CFM LEAP or Pratt & Whitney GTF in comparison to a CFM56 or V2500. That gap existed pre-pandemic, but most viewed it as a “teething” problem. I think most operators now see it as more structural and long-term.

These additional LEAP and GTF costs are likely to perpetuate the longer operation of the NG and CEO aircraft past the point at which they otherwise would have been replaced. That said, the value proposition becomes more nuanced with the prospect of higher oil prices for longer, given the significant fuel efficiency advantages of the LEAP and GTF.
 

Jetrader: Engines have become one of the most constrained parts of the aviation ecosystem. How did we get here?
 

AW: It is a confluence of different things. We have long recognized the counter-cyclical nature of engine leasing. During recessions, airlines defer engine maintenance and lease spare engines. During COVID-19, many operators deferred overhauling engines, creating a scarcity of serviceable engines when the market returned and a necessity to repair a bow wave of engines that had been sitting idle for the prior few years.

At the same time, many skilled aerospace workers were furloughed during COVID-19 and didn’t return, creating a shortage of skilled labor in parts manufacturing and the MRO sector. You also had a new generation of aircraft, the Boeing 737 MAX and Airbus A320neo, whose engines had very short on-wing life, resulting in more shop visits and drawing on the same resources as other engines going through the shop.

Finally, delays in MAX and NEO deliveries have pushed back the retirements of Airbus A320ceos and Boeing 737 NG aircraft that otherwise might have been parted out. Those used parts and components would traditionally help ease the pressure on the OEMs to deliver new parts and on MROs to repair as many engines as possible.
 

Jetrader: Do you expect the engine supply imbalance to ease in the near term, or is this a multi-year issue?
 

AW: It is a multi-year issue, but I do expect it to ease in some areas. A global recession or slowdown, should it happen, would likely result in capacity reductions, which could temper demand to a certain extent and allow OEMs and MROs to catch up.

Short of that, I think you will see different asset types experience varying degrees of supply and demand. For us, this is why having a diversified fleet is so important. It allows us the flexibility to be opportunistic with assets.
 

Jetrader: How are OEM challenges — particularly around durability and maintenance intervals — affecting your strategy?
 

AW: We have been, and continue to be, thoughtful about taking maintenance and interval risk on modern technology assets. We are still a little way off from having clarity on real hourly costs, and until that happens, short-term leases will be a challenge, which is a shame because the market is hungry for them.
 

Jetrader: WLFC has expanded beyond traditional leasing into areas like engine pooling and MRO-related services. How important is that integrated model going forward?
 

AW: For us, it is very important. It helps us control our book values and maintenance turn times, resulting in higher lease rental factors and utilization rates, as defined by the portion of engines we have on lease.

It certainly isn’t for everyone, however. Having a US$3 billion-plus portfolio of engines is needed to help justify the additional cost associated with running maintenance operations. Having that maintenance capability also makes us more comfortable insourcing maintenance risk from airlines, enabling us to provide ConstantThrust® and deliver real value through maintenance avoidance.
 

Jetrader: Where do you see the biggest opportunities for growth in the engine leasing space?
 

AW: Not telling.
 

Jetrader: What keeps you interested and engaged in this business after all these years?
 

AW: It is the customers and the challenge. Aviation is an amazing industry, taking us all over the world to meet some real characters in an incredible variety of places. Each airline has its own personality; each country has its unique characteristics.

I love going to a foreign country, trying their local foods and customs, and sharing in the pride people have for their nation. It is a contrast to spending time in New York City and other financial capitals doing capital markets transactions, which are also exciting and challenging.

I like the rush you get when finishing a good earnings call or a live television interview, despite the work and pressure leading up to it. Most of all, I love working with our people, who are the best in the business, hands down. They all work harder than they should, but we share a common mission: to be the best!