Engine buyer: AIP Capital and Bridgepoint outline $1bn engine JV ambitions

Aircraft asset manager AIP Capital and UK mid-market investor Bridgepoint recently expanded their joint venture with several engine orders as they build out a $1 billion engine-leasing platform. Dickon Harris speaks with Mathew Adamo, AIP Capital’s Co-Founder, and Rohit Dhote, Bridgepoint’s London-based Partner and Co-Head of Credit Opportunities, on their engine strategy.
 

Ishka Airfinance: We are aware of the last two engine orders (an order for 10 LEAP-1B engines in 2024, and a recent order for 11 more LEAP-1B spares set to deliver between 2027 and 2029). I know there are plans to acquire more engines; can you briefly describe the engine leasing platform?

Adamo: “The last order was our first public announcement of this partnership, but we officially formed the joint venture in late 2024 and have been building up the portfolio steadily since then. In this same vehicle we're discussing here, we have already built a portfolio comprised of both next-generation and current-generation assets, which include the initial 10x LEAP-1Bs acquired in 2024, an additional four LEAP-1Bs acquired from the OEM in 2024, three newly built high -thrust V2500S acquired directly from Pratt & Whitney, and two V2500’s acquired on lease in the secondary market.“The portfolio construction goals are heavily weighted towards next-generation assets, but a minority portion of the capital, perhaps a quarter or a third, could easily be deployed into current generation assets.

“Regarding our origination strategy, we target three sourcing channels: direct OEM orders; airline sale-and-leasebacks; and the secondary trading market. We have placed most of the engines acquired through direct OEM order with MRO providers.”
 

Ishka Airfinance: As an investor, what is the appeal of engine leasing? A lot of engine leasing platforms tend to target mid-teen levered returns.

Dhote: “We think that the potential for residuals to outperform, based on scarcity of the assets over the next five years or so, builds in a degree of positive convexity to those returns, which we find really very attractive and quite unique to this asset class.

“In addition to this, we view these assets to have a strong cash flow with contracted rent and maintenance reserves providing yield and helping pay down an investor’s basis, without relying solely on residual value for attractive returns.

 

Ishka Airfinance: You’ve highlighted an MRO lessee base: Are you explicitly targeting MRO customers?
Adamo: “MROs are an important customer base, and we like that segment of the market but we're not only targeting MROs as lessees. We also market engines to airlines directly, acquire assets through the sale-leaseback channel and from lessors via the secondary market.”

“The MROs do need access to engines, and they like structures that generate income and ROE without tying up large amounts of capex on their own balance sheets under US GAAP/IFRS. Leasing spares allows them to generate net income, contribute positively to return on equity, and other income statement-based metrics.

“They use engines in different ways: some focus on short-term leasing markets; others may place engines on long-term intra-group leases, especially where the MRO is part of an airline group. There’s a spectrum of use cases, but the economic logic is consistent.”

Ishka Airfinance: Can you explain more about your orders? What’s your view on the V2500 market, and are you planning to do a GTF order?
Adamo: “We’re open to the Pratt GTF products and have actively bid on large GTF sale-and-leaseback packages – we were the runner up bid in a recent process and plan to bid these assets actively going forward. Pratt equipment is definitely part of the investment criteria.

“Pratt tends to market spare engines to a small group of qualified buyers rather than managing relationships directly through the sales team.  This is a bit different than how the other OEMs handle these transactions.  Pratt has a quarterly allocation process where they take products to market that are a mixture of spares or surplus

“On the V2500s, especially the 33k thrust engines, we think the LLP dynamic actually supports values. The LLP stack is a single-stage replacement at 20,000 cycles, and it’s very expensive; many operators don’t want to pay for a fully fresh stack.

“That creates strong incentives to substitute engines to keep aircraft flying, particularly on higher-thrust variants. We expect that to buoy residual values for some time.”

Ishka Airfinance: We discussed latest-generation narrowbody engines, but what current-gen engines are you looking to acquire, and is the platform planning to invest in widebody engines?
Adamo: “Both large fans and small fans are on the table. GE90-115Bs powering the 777 fleet are interesting but are in short supply.  We are selectively looking at Trent 700s, but need it to be on a good quality lease. Ours is not a narrowbody-only strategy.

“We are focused on next-gen assets that are already in service, and on current-gens we don’t go too far back. You shouldn’t expect us to be buying RB211s.”

Ishka Airfinance: Given your ABS experience, is there a plan to term out this platform via ABS, or are you looking at other structures?
Adamo: “We’re very open-minded on take-out financing. That could be a term loan A, another type of bank facility, or an ABS; nothing is off the table.

Ishka Airfinance: What’s different about your model versus traditional engine investors?
Dhote: “Most mid-life investors can show up at an auction and bid. Very few can go directly to the OEM and place an order – the OEMs don’t just sell engines off the shelf to anyone with capital. Our ability to originate directly from OEMs is a key differentiator. It’s a less competed part of the market, and we think it offers a differentiated return stream.”

Adamo: “We’re also very deliberate about maintaining all three origination channels – OEM, airline direct, and secondary market. A lot of platforms are overly focused on a single-channel of origination.

“The channels cross-pollinate: if we approach an airline for a sale-and-leaseback, they’ll call the manufacturer and ask if we’re credible. Our OEM relationships help there. In one Latin American deal, GE effectively introduced us because we could act fast on a spare engine financing with a short timeline. That is how these relationships reinforce each other.”

Ishka Airfinance: Is this JV your only aviation equity exposure at Bridgepoint, and could it eventually expand into aircraft as well?
Dhote: “At present, this JV is our sole asset-owning aviation exposure within our credit portfolio and is the vehicle through which we intend to build that exposure. Across the wider Bridgepoint Group, we’ve long invested in equity and credit in the aviation value chain – MROs, component businesses and so on – and have been able to draw on that deep knowledge bank to gain conviction, but this is the platform for owning engines and, potentially, aircraft.

“We’re open-minded: the point is to put capital where we see the best relative value at any point in time, using the full breadth of the Bridgepoint platform and our advisor network to unlock an opportunity set that others may not see. If at some point in the future that’s a different part of the market or a different way to express the theme, we can and will adjust.”

Ishka Airfinance: AIP’s growth has been unusually fast compared with many lessors. Are there common misunderstandings about what AIP does?
Adamo: “The core is that we’re comfortable working with partners which includes working cooperatively and ensuring aligned interests with intelligent, capable partners like Bridgepoint, Monroe, or specialist platforms such as BeYoke, our Japanese tax equity arranger.

“That willingness to partner across strategies and channels is a big reason why we have grown so quickly. We’re not limited to one capital source, one product, or one origination channel.”

The Ishka View

The engine leasing JV between Bridgepoint and AIP Capital has been steadily expanding over the last two years while remaining somewhat under the radar. AIP’s willingness and ability to place direct engine orders has helped create an organic supply of assets to the JV. It also helps differentiate it from many other engine leasing platforms which tend to exclusively target the secondary-market for engine acquisitions.

Generally, it is harder to find equity willing to place a direct engine order, given the placement risk. However, the scarcity of available engines and the cost (and length of shop visits), means there is ready demand from airlines and MROs for spare engines.

As an engine buyer on the secondary market, AIP Capital is clearly comfortable acquiring and leasing new to younger engines, but the platform appears to be flexible within that mandate and open to a relatively wide number of engine types, including widebody engines, as it builds scale.

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