"Wanted - rocket scientists," said the headline of the job advertisement in 1985. And hundreds of people decided that they qualified. But rather than applying to Nasa, the CVs were to work at GPA, the world's largest aircraft lessor and then just 10 years old.
The company's growth continued to be astounding. By the end of the 1980s GPA dominated aircraft finance. In 1988, ILFC, GPA's biggest rival announced contracts worth $1.2 billion, surprising many people who had not realized how important operating leasing had become.But the real shock came when, in response to ILFC, GPA stated it had closed deals worth $3.7 billion in just the first six months of the year.
The lessor was also becoming an increasingly important company to Ireland. At the end of the 1990s its aircraft orders with Airbus, ATR, Boeing, De Havilland Canada, Fokker and McDonnell Douglas - accounting for $8 billion - were worth more than half the country's GDP.
As the company grew staff also began talking about the company's planned IPO - part of the appeal to the budding rocket scientists had been potential equity options - but although this was eventually unsuccessful, GPA's legacy was to make Ireland one of the most important aviation countries in the world.
The start of operating leasing
GPA's creation was a lucky accident. In 1974 Aer Lingus had three 747s that it did not need, so Tony Ryan, then a manager at the airline, was asked to find a use for them. Ryan visited a few airlines and eventually signed a lease deal with Air Siam.
After finding strong demand for leases, Ryan decided to create one of the first operating leasing companies and persuaded Aer Lingus to join him. The Irish flag carrier had been investing outside of aviation and had recently bought finance house Guinness Peat so created Guinness Peat Aviation, or GPA, taking a 50% stake.
GPA's first years - as were those of Steven Udvar-Hazy's Interlease, which later became ILFC - were spent selling the joys of operating leasing to airlines which rapidly became fans of the product.
The base for GPA's operations was Shannon, a little town that had come to prominence in the 1940s when the airport was built to refuel trans-Atlantic flights. To outsiders it may have been a unusual choice to locate. But GPA, which became the first finance company to set up in Shannon, realized the importance of the tax breaks on offer and most of GPA's employees were seconded from Aer Lingus and worked in an office on Shannon's main industrial estate. (Another advantage for Ryan was that Shannon was close to Tipperary where he was brought up.)
From the start GPA was a marketing-led company. And to get business international travel became a way of life for everyone. "We were doing over 300,000 miles a year," says Liam Meade who joined GPA in 1977 as director of operations and is now China sales and marketing director at Shannon Engine Support.
"One year I flew home just in time for Christmas having been around the world visiting Sri Lanka, Japan, Oman, Los Angeles and other places on one business trip and this wasn't that unusual."
The growth years
GPA's real growth started in the 1980s. In 1981 it had nine aircraft on lease and with equity interests in just three aircraft. By 1991, GPA was managing a portfolio of 450 aircraft on lease to 100 airlines across the world and employing over 300 staff.
The lessor's first employees all had airline experience, but as the company grew the company started hiring younger staff from law firms and universities. Many of these found the move to Shannon difficult."We used to say that Shannon was the equivalent of Saudi Arabia with drink," says one former employee. "Although it has improved significantly since then."
GPA also started to develop a strong corporate culture. Staff worked long hours and travelled incessantly.
"It was impossible to plan anything," recalls Margaret Clandillion, former general counsel, a founder of Pembroke and now running MC Associates. "You would arrange to play a game of tennis with someone in the evening and then arrive at work and be told that you go to Costa Rica that day." While this made it difficult to mix with people outside the company many strong friendships were formed. "We were all younger then and enthusiastic about building a new market," says Clandillion.
"One reason that the company may have been perceived as being a bit cliquey by outsiders was because there a lot of Irish people at GPA," says Kieran O'Keefe now a senior vice-president at Seabury Group in Dublin. "A lot of people had the same background and it was a bit like being a member of the same club. After GPA was sold many dispersed but then moved back to Ireland and still socialise together."
GPA continued to be a sales driven company with the focus on winning deals. Peter Ellinson, joined as a technical coordinator in November 1985 and who now runs Lufthansa Technic's Budapest facility says: "We were writing the rules and trying to solve problems no one had encountered before. There was a real us against the world attitude."
Ryan controlled the business from Shannon, and followed deals closely. Marketing staff were responsible for a region or an aircraft product such as A320s or turboprops and typically were assigned major levels of responsibility.
"It was a dynamic company. GPA hired highly capable individuals who were expected to do deals," says Gerry Power, who worked at GPA between 1985 and 1993, working in a number of roles, including personal assistant to Ryan, before founding Power Aircraft Services. "Tony Ryan did not suffer fools gladly. But if you worked hard and you did well you were rewarded handsomely."
As well as the Shannon headquarters, GPA set up offices in Dublin, Miami, Stanford, Tokyo and Hong Kong.
"GPA was an extremely enjoyable place to work. It was a company where relatively junior employees were given a lot of responsibility early on and everyone from the top down worked hard and for the same reasons - and no one was more driven than Tony Ryan," says Garry Burke, now CEO of Pembroke.
At the start GPA focused on 737s and MD80s but as the airline started growing the company got worried. It knew that there demand was there and a regular concern from salespeople was that they needed more products to grow. With airlines keen to work with the company GPA started ordering more aircraft building up a huge range of products ranging from 747s to Fokkers.
At one point GPA decided to invest in helicopters forming a joint venture with a Canadian company before realizing that it was a very different market from its regular operating lease work. In the early 1990s GPA also considered offering to swap Russian aircraft for modern jets.
Each year Ryan would gather staff together to work out a new plan for the next year. "Tony would go in an write a number down saying that this is the next profit target for the year," says one former manager. "We would all gasp, but somehow we would all make sure that we reached it."
Few people realized that this focus on growth would eventually lead to GPA's downfall.
Financing and floatation
GPA was not just innovating with operating leasing and while marketing remained the company's priority, as GPA started ordering new aircraft, finance grew in importance.
In 1991 It was the first lessor to use export credits with a deal for Airbus aircraft and the company was also one of the biggest users of tax leases. GPA regularly combined tax leases, such as using Japanese-US leases for aircraft on lease to Braniff for example.
The company did not have problems raising finance and a large number of lenders were eager to work with it. In February 1990 some 57 banks agreed to extend a corporate credit from $900 million to $2.4 billion and the tombstone in Airfinance Journal listed some of the world's leading finance institutions.
GPA's Japanese office was largely there to work with local banks which at the time were the largest aviation lenders.
The lessor also issued bonds to raise capital, including a $500 million Eurobond. But the most important deal was Aircraft Lease Portfolio Securitisation 1992-1 (ALPS 92) the first securitization of an operating lease portfolio. ALPS 92 which was structured by Citigroup opened the way for other operating leases, and also provided a structure for Airplanes, the $4 billion securitization that would eventually refinance the company.
While few employees outside the finance and legal departments followed all the lessors' deals, most were obsessed with one transaction: GPA's initial public offering.
Most employees had received some shares on joining and they were given the opportunity to buy more when shareholders sold out.
With GPA growing fast many employees were able to buy shares at under $10 each to start with.
"There was also some pressure to keep buying shares from management. If you didn't buy you were certainly asked why not," says one former employee. But he admits that most did not need the encouragement. "At the start of the 1990s the hype grew. I remember when Air Canada sold a stake and quite literally no one was working - we were all too busy discussing the price."
The hype in 1990 reached a crescendo when it became clear that GPA was close to a public issue. However, Ryan and the board of directors did not decide to float the company until 1992.
In retrospect this was a mistake as it meant that Nomura and Goldman Sachs, which were bookrunners on the issue were trying to sell an aircraft leasing company during the aviation recession caused by the Gulf War. Had the company tried to launch in 1990 or 1991 the IPO might well have been a success and there is still much debate about why the issue was delayed.
"Maybe we were trying for too much money," says one ex-GPA employee. "As the company grew so did the dividends and we were all happy receiving these dividend payments for another two years."
The company had hoped to launch in April 1992 but had to move the issue date to June to avoid clashing with UK elections.
While Nomura was still optimistic about getting over $30 a share, key US investors were unwilling to pay over $20 and UK investors pulled out. Ryan was forced to cancel the IPO.
Rebuilding GPA
The morning after the float was a depressing one for everyone at GPA. Many employees and directors had not only been expecting a windfall but had also arranged loans backed by their shares. While some just handed over the shares some, including directors, ended up with sizeable debts.
It was also clear that the company was in trouble. Although GPA had successfully launched Aircraft Lease Portfolio Securitisation 1992-1 the cash it raised was not enough to repay its debts.
The lessor had already borrowed over $10.9 billion in mainly short term debt and had an order book worth $12 billion. With many airline customers struggling to meet lease payments the company did not have enough cash to meet its liabilities. With a surplus of aircraft in the market it could not sell assets to raise cash. The end was in sight.
GPA's only option was to find a strategic investor and General Electric Capital, a past shareholder which had recently bought Polaris Leasing, emerged as the most likely candidate.
Patrick Blaney, a senior vice-president in GPA's finance department, was given the job of negotiating with GE and trying to pay off the company's debts.
Blaney's first job was to defer all the lessor's orders. He then raised $130 million from existing shareholders and arranged a $1.5 billion facility from GE, as part of the deal, the US company won the option to acquire GPA.
One of the biggest jobs was to persuade the company's lenders to agree to defer principal on their loans. GPA and Clifford Chance, its lawyers, started negotiating in March 1993, some seven months later, all had signed up to new terms.
"October 29 1993 will be embedded on my mind for ever," says Blaney. "I then went to bed for a week."
At the same time as renegotiating the loans, GPA also had to get secured lenders to agree to allow the lessor to repay certain unsecured debts ahead of their secured loans. By doing this GPA managed to avoid defaulting on a $500 million SEC registered Yankee bond.
After GE agreed to provide the $1.5 billion loan it was clear things were going to change in Shannon and a number of employees left. "The writing was on the wall and it was clear that it would not be the same company if it was being run from Connecticut," says one consultant.
In April 1993 GE announced it would be cherry picking aircraft from GPA taking management of its portfolio in September 1993.
GE took many of the best assets with the rest being left on management contracts to GPA. Eventually about 200 staff were transferred to the GE. Although there were some exceptions, most staff who had been in contact with customers moved to GE, including the marketing and technical staff. Most legal and finance staff stayed with GPA although a number of structured finance specialists from GPA Capital also relocated.
Blaney and the team who were left at GPA had a bleak job ahead. They were left with some 380 aircraft, mainly assets owned through joint ventures, Shannon Aerospace and Shannon Engine Services and over $4.6 billion of debt.
GPA bought its way out of Shannon Aerospace leaving its joint venture partners Swissair and Lufthansa to run it, and despite launching in a terrible market the maintenance shop has gone on to provide employment in the area. CFM International also became sole owner of Shannon Engine Support.
But the biggest challenge was to refinance the aircraft debt and in March 1996 it launched a $4 billion securitization of 229 aircraft called Airplanes Pass Through Trust. The deal which it structured with Morgan Stanley left GPA with $1.6 billion in debt, $2.3 billion in assets and $900 million in cash - an amazing turnaround in four years.
Airplanes meant that GPA could start growing again. The only problem for GPA's owners, which included Blaney, former CEO Maurice Foley and Ryan, was the option that GE had won as part of its 1993 agreement which was valid until 2001.
Blaney realized it would be hard to motivate staff if they knew that one day GE could acquire them so eventually it renegotiated an agreement where GE could acquire guarantees and some assets in return for selling its stake and relinquishing its option.
GE agreed to this and in December 1998 private equity company Texas Pacific Group bought out most of GE's share, as well as stakes belonging to Air Canada, Aer Lingus and several banks. One other condition was that GPA changed its name, so in 1998 the company became AerFi. With Texas Pacific behind it AerFi grew quickly acquiring Indigo Aviation in 1998 and in 2000 AerFi was acquired by debis Airfinance for $750 million.
Although they had had to wait eight years after the planned IPO, the sale to debis allowed shareholders that had stuck with the company - including Texas Pacific, Ryan, Foley, Blaney and other AerFi shareholders - to finally cash in their shares at an attractive rate.
"With the benefit of hindsight it was a good decision to stay with GPA," says Blaney. "But in 1993 when a lot of colleagues had moved to GE, I did not want to be at GPA where I ended up."
While a large number of people that moved to GE are still there, not everyone who had the option chose to go, and some used the experience they had picked up at GPA to build their own companies. Four senior managers at GPA -Margaret Clandillion, Trevor Henderson, Brian Goulding and Mike Dolan - founded Pembroke Capital in Dublin.
A number of younger managers, including Domnhal Slattery and John Morrissey, also decided to set up their own company and as both had worked with South American airlines set up IAMG in the Caymans. In 2001 IAMG was acquired by Royal Bank of Scotland, forming RBS Aviation Capital.
Others dispersed throughout aviation and wherever you are in Dublin financial district you are probably never further than 100 metres from a former GPA employee. "The same faces turn up," says Clandillion. "It is just the business cards that change."