The Japanese operating lease with call option goes where
banks fear to tread. By Caroline Devlin, partner, co-head of tax
and leasing, and Laura Cawley, associate, aviation group, of Irish
law firm Arthur Cox.
After a dip in popularity during the economic downturn, the
Japanese operating lease (Jol) and Japanese operating lease with
call option (Jolco) structures continue their rise. It is perhaps
obvious because they offer up to 100% financing to airlines, and
produce an attractive internal rate of return to investors with
interesting tax allowances, a level of finance which is beyond the
appetite of banks.
Both new and traditional airlines are using this financing
arrangement, and it is becoming increasingly popular in Asia,
including with airlines with no Japanese routes.
