There’s things to buy, but we have defined that capital and we want to make sure we’re doing the best with it. So what are we buying and where do we see value, particularly in our own context? We like wide bodies, we actually think that they have a good value. There isn’t the supply side pressure in our view versus the narrow bodies. I’m really worried about that, and we also think that there is residual value pressure down the road from the new technology. Better credits, less competition, relatively speaking, and a better ability to finance. We’re looking at targeting ROEs that are basically in the mid-teens or more, as much as possible, within reason, and we do risk adjust.
Middle-aged aircraft. There’s always been a new car, showroom effect in terms of value, but more so now than ever, and there are very few people playing in this space, particularly as the bank market contracts. I’ll make a few comments about that later. Less competition, good airplanes, good demand, but we’re finding very little competition there. There we’re probably looking at financing aircraft with unencumbered bonds, unsecured bonds, so there’s nobody telling us, I don’t like this airplane or this maintenance is third rate, or [inaudible]. It’s our cash, and when we come into a situation where we’re cash buyers, it’s pretty powerful. We haven’t seen Mike competing with us in most of his deals.
We like the freight market. We’re a leader in this niche. The freight market’s under pressure today, so from a new business perspective, it’s not a situation where I’d take placement risk. In fact, I wouldn’t take placement risk on anything right now, new or used, big or small, passenger or freight. But there are better credits there, and there are good sale lease-back opportunities. Freight market I think will come back, it’s just a matter of time. It’s a little bit more volatile sector, but it’s more cyclically sensitive, but a lot less event risk sensitive, so if there’s, God forbid, a 9/11 or a flu pandemic, the boxes don’t get scared of getting on an airplane like passengers do. So we do think it’s an important part of what we do, and it’s something that sets us apart.
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