ISTAT News | 25 January 2022

Jetrader: Q&A With Mahoko Hara

Jetrader: Can you tell me a little about your background?

Mahoko Hara (MH): I was born on the outskirts of Tokyo. I spent a portion of my childhood in London/the United Kingdom and graduated from a high school in Los Angeles. My father worked for Japan Airlines, and the family went with him on his overseas postings. After high school, I went back to Japan to complete my studies and started my career in banking. I spent most of my career before joining Tokyo Century (TC) in fields unrelated to aviation. I never would have imagined back then that I would end up working in the same industry as my father and moving back to Southern California.

Jetrader: Where did you begin your career, and how did you get started at Aviation Capital Group?

MH: I started my career in a Japanese bank and worked in different areas of corporate and investment banking, including a few years in the London and New York offices. In 2000, when Japanese banks were going through a consolidation phase, I moved to a U.S. bank to broaden my experience and vision. I worked in structured/asset finance and  provided Japanese corporations solutions to strengthen their balance sheets. I then moved to another bank and focused on developing structured credit products for the Japanese investor base.

In 2011, I was invited to join TC, which was gearing up from being a domestic leasing company to becoming a global financial services company. My mandate was to strengthen our specialty finance business through strategic alliances and cross-border mergers and acquisitions. Although I worked on a few M&A deals outside of aviation, my focus from the early days had been on the aviation sector, where we saw the greatest potential for growth. We made an investment in GA Telesis, a leading aftermarket solutions provider, and became a shareholder in Jetstar Japan. In 2014, we formed a joint venture with CIT and jointly acquired 50+ aircraft, which TC now fully owns.

In 2017, an opportunity arose to become a minority shareholder in Aviation Capital Group (ACG), which was then owned by Pacific Life. We liked the solid foundation of the company and its well-managed portfolio, and the culture was a good match. In 2019, when Pacific Life decided to exit from the business, we took a big step in acquiring the entire company. It was the single largest M&A deal in TC history, and my team and I worked tirelessly over many months to bring the transaction to fruition. I have been on the board of ACG since 2017 and became the executive chair upon closure of the acquisition at the end of 2019.

Jetrader: What part of your career best prepared you for your role as executive chair an aircraft lessor?

MH: I have had the privilege of working with great professionals over the last decade who have helped me gain knowledge and understanding of the complexities and fascinating aspects of the aircraft leasing business. My prior career in banking provided me with a strong finance background and a broad perspective on risk and organizational management. Also, being a woman and having worked in various cultural and organizational settings, I believe I have a deep understanding of the true importance of diversity and hope to be a force in promoting diversity and inclusion in aviation.

Jetrader: Your ACG base is California. How easily can you get back to family in Tokyo or to the head office?

MH: The pandemic has unfortunately prohibited me from frequently traveling back to Tokyo to see my family and colleagues. I am eagerly waiting for the quarantine requirements in Japan to be lifted. Life here in Southern California is very much family-oriented, so I do miss my family and friends, although it is a beautiful place to live.

Jetrader: How do you feel being one of the most prominent women in the aircraft leasing industry? What would you like to change in the industry?

MH: I wouldn’t say I am the most prominent women in the industry since there are other wonderful professional women who have had successes in the industry over a longer period of time. It is also true, however, that the industry has for a long time been male-dominated. Although the situation has improved over recent years, we do need to make continuous efforts at both the company level and the industry level to remove unconscious biases (“airplanes are for boys”) and elevate women based purely on merit. ACG is fortunate to have some extremely talented women who are passionate about aviation and excel in their roles, so it makes me optimistic that women will become a key part of our industry’s future. Also, there are now organizations pushing these efforts forward across the industry, and I am fully supportive.

Jetrader: How do you view diversity and inclusion within the global aircraft industry, and particularly in Japan?

MH: One of the reasons that it has been difficult for women to advance within an organization in Japan is because Japanese companies have traditionally required people to experience a variety of jobs within an organization (to be a “generalist”), often times working in different locations/countries in order to advance into a management role. This has not been easy for women, since it makes it difficult to plan a family life while also pursuing a career. I have always felt that Japanese companies need more “true professionals” in a given field in order to compete in a fast-changing competitive world, and it is generally much easier for women to excel as professionals rather than generalists. In this respect, the global aviation industry provides a perfect opportunity to excel, as one can focus on becoming a professional in the field, whether it be on the engineering/technical, financial, marketing side of the business or otherwise. At Tokyo Century, a position in the aviation division is now one of the most popular for female college graduates to apply for when seeking a job with the company.

Needless to say, the aviation industry is truly borderless, and it is essential for companies to engage people of different backgrounds and with diverse perspectives in order to remain competitive.

Jetrader: What is your view on the recovery of the airline industry?

MH: COVID-19 variants have unfortunately delayed the recovery of air traffic. Although we are seeing strong recovery in some parts of the world (e.g., United States, China, Europe, Mexico), it may take a while longer for markets such as Southeast Asia to recover. So, overall, I think the recovery will be along the lines of what the International Air Transport Association is projecting, which is early 2023 for domestic and short-haul and 2024 for long-haul travel. Airlines, lessors and OEMs all play a vital role in the recovery of the industry, so we will have to continue to work together to find balanced solutions that will pave the path toward recovery for each one of us. I believe ACG’s recovery, once the countries open up, will be extremely strong, and I do not worry about the risk of some fundamental demand shrinking from our perspective.

Jetrader: What were the business and cultural challenges when Tokyo Century acquired ACG?

MH: The transition from the previous owner to Tokyo Century was extremely smooth. This is partly because we had two years as a minority shareholder, which gave us ample time to understand each other before we made the full acquisition. I really cannot think of any challenges that we faced culturally. Tokyo Century is known to be very nimble, unlike many “typical” Japanese companies with layers of bureaucracy. COVID-19 hit shortly after we made the full acquisition so, obviously, we faced many challenges business wise, but in a funny sense, the situation brought the education process forward and elevated TC management’s understanding of the aircraft leasing business — working through default situations, asset sales, reschedulings, etc., and understanding the full impact on the group. After about a year as executive chair while being based in Japan, I relocated to California at the end of 2020. Because COVID-19 has restricted travel, one benefit has been that ACG’s senior management team and I sit together almost every day. We share ideas and perspective in real time. We look at challenges holistically as we work through them. This open and seamless communication has helped us manage through this past year very effectively. Overall, TC management has gained a lot of confidence in how the company is being managed through this crisis.

Jetrader: Are there any aircraft types or assets that you particularly favor or dislike?

MH: ACG is 96% narrowbody, so I like all the new-generation narrow-body aircraft. We believe both the Airbus A320neo family and Boeing MAX family of narrowbody aircraft will play a key strategic role in the fleet plans of our global airline customers for years to come. ACG will be an essential partner in helping these airlines finance their fleet transitions to modern, fuel-efficient aircraft. I also see great potential in the A220 family. As a long-haul traveler, I do like the B787 and A350s.

Jetrader: What ambitions do you and Tokyo Century have for ACG? How will you measure that success?

MH: So long as ACG continues to be one of the leading players in the aircraft leasing industry and is able to assist airlines wherever and whenever globally, it is a success for us. We do, of course, hope to grow our portfolio, specifically to the mid-teens (US$ billions) within the next few years (from US$10 billion at year end 2020), but size is not the primary factor. It is also important for us to widen our reach to investors through securitization, etc., and be smart about financing and managing our portfolio.

Jetrader: For young people considering going into aviation, what thoughts or advice would you give them for how to approach their careers?

MH: Strive to be a true professional in what you do, but also seek to gain understanding of other areas of the business (e.g., financing structures, value of the assets, engineering/maintenance, legal, etc.). This all links into developing an understanding of how risks associated with the business can be managed and profits maximized. Otherwise, travel and meet people, and develop your network (as soon as you can)!

Jetrader: Any final words of wisdom you’d like to share?

MH: A very simple Japanese old proverb: It is always sunny above the clouds.