Learning on the fly

Fiona Sun discusses her experiences navigating the pandemic as senior legal counsel of aviation giant Minsheng Financial Leasing. She talks to Lynn Zhang about the challenges faced in handling transactions and contracts, and the opportunities that can avail, even in a crisis

The covid-19 pandemic nearly grounded the global aviation industry in 2020. While China managed a quicker recovery, the international nature of the industry meant that businesses continued to suffer. Civil Aviation Administration of China figures show that passenger throughput in China’s airports dropped 36.6% in 2020 compared with the previous year.

However, the pandemic turned out to be a blessing in disguise for business aviation, as high net worth individuals (HNWIs) chose to buy private jets to meet their travel needs. Minsheng Financial Leasing, one of Asia’s largest business aviation leasing companies, while making the best of this opportunity, has also had to handle a fair share of turbulence. Here, Fiona Sun offers us a co-pilot’s seat to view the challenges she managed in keeping the business flying a steady course.

China Business Law Journal: You are involved in the financial leasing industry. What impact did the pandemic have on the aviation industry last year?

Fiona Sun: If you break it down, since the 1920s the aviation industry has been divided into three mutually independent but closely related industries, namely, aerospace manufacturing, civil aviation and military aviation.

Civil aviation is the general term for all aviation activities of a non-military nature (i.e., not defence, police or customs). Civil aviation is further divided into commercial aviation and general aviation. Commercial aviation refers to the aviation activity of carrying passengers and cargo by aircraft on a for-profit basis. The airlines or air cargo companies that we commonly see fall into this category. General aviation is then the catch-all term for civil aviation that does not fall into the category of commercial aviation.

Last year, commercial aviation faced great challenges due to travel bans and the closure of borders around the globe, and many of our regular commercial flights were reduced or cancelled.

In contrast, last year proved a pretty good year for general aviation. General aviation is more about private business flights. Because of the pandemic, certain entrepreneurs and HNWIs with travel needs opted to buy their own private aircraft to meet their travel needs, thereby making their travel safer and more convenient.

Last year was a very active year for market transactions in private aircraft, or what we call the business aviation industry.

CBLJ: Have general aviation transactions rebounded? What challenges does the pandemic pose for the financial leasing industry?

Sun: Transactions in general aviation have been quite active compared with the past. We had a lot of new aircraft change hands, along with some used aircraft, which was one of the better things we saw.

We also encountered many challenges. We are in financial leasing, mainly offering two types of service, one being financial leasing – that is to say, providing financing services; additionally, we are the largest business aircraft leasing company in Asia. We faced major challenges in both aspects.

The first issue is the financing aspect. The term of a financial lease is three to five years, being the period during which the lessee is required to repay the principal and pay the interest. The pandemic hit the lessee’s quite hard. Certain lessees are engaged in tourism or manufacturing, and the industry chain has had a major impact on them, they have problems repaying and their assets have also become overdue. This is a dilemma we encounter from the financing perspective.