Are the links between the parties in the frothiest UK aviation dispute out in the open?

“It’s not what you know, it’s who you know.”

Although this ancient proverb is not claimed by any one author, its truth is universal, whether across cultures or geographies. To get ahead in business, it is better to know a lot of people than to know a lot of things.

And the more power and connections a person has, the more scope there is to use that power to secure an unfair advantage. Having watched U.S. President Donald Trump feather his nest during his first term in office, Democrats in Congress are now calling for an insider trading investigation into the president and his affiliates over the flurry of tariff announcements made by the Trump administration, moves which have sent shockwaves through stock markets, giving insiders, including Trump and his family, a chance to make millions of the swings.

Of course, the problem of insider trading in politics isn’t limited to Donald Trump. House speaker Mike Johnson has now given his support to the ‘Stop Trading on Congressional Knowledge (STOCK) Act’, an act that’s become necessary as stories have surfaced of members of Congress - from Nancy Pelosi to Marjorie Taylor Greene - allegedly using their inside knowledge for personal gain.

As the show Billions so successfully dramatized, no industry is more riven with insider trading than finance, including hedge funds and private equity. In finance, ‘edge’ is everything, no matter how that edge over your rivals is acquired. If you know more than the market, you can beat the market.

So, what qualifies as ‘unfair’ edge?

Oliver Stone’s Academy Award-winning film ‘Wall Street’ remains, nearly four decades after its creation, the ultimate dramatization of insider trading. “Greed is good” - the immortal words uttered by the villain Gordon Gekko - became a mantra in the go-go 1980s. And if the fictional Blue Star Airlines had to die to line a few already-rich pockets, then so be it.

And although Stone’s film career has gone down the toilet, the rapacious nature of modern finance remains.

In fact, a case now making its way through the English High Court involving an airline and a private equity fund has a little of the Gekko about it. Just how did a small, London-based private equity fund run by an Aussie ‘superstar’ banker happen upon a series of complicated Japanese loan structures financing a handful of planes for a growing Vietnamese discount airline?

If you step back to examine the connections between the players involved, one possible answer appears: inside knowledge.

First, a bit of context. Vietjet, the discount airline in question, had fallen into arrears on loans for four of its planes. This was perhaps no great surprise as these arrears accumulated during the Covid pandemic, when airlines were prohibited from operating for prolonged periods of time. Despite being in active negotiations with its lenders to renegotiate the leases - held by two banks, BNP and Natixis (the latter will become important later) - Vietjet suddenly found itself the recipient of four termination notices. What’s more, its lenders then informed the airline that its debt was now owned by an entity - FitzWalter Capital - that had only been in existence for a matter of weeks.

Even worse, FitzWalter Capital then quickly offloaded the assets to a subsidiary - FitzWalter Aviation - via a remarketing firm called Airborne Capital. And the end result of all of this manoeuvring for Vietjet? A claim against it worth hundreds of millions of dollars in the UK courts - an amount covering the loan arrears, all future loan payments, and the assets (i.e. planes) themselves.

If that all sounds hard to comprehend, join the club. Even the representative sent by FitzWalter to court to explain the deal - by then an ex-employee (albeit one with skin still in the FitzWalter game), who, according to the court proceedings, wasn’t the lead on the deal when he did work for the company - had difficulty explaining and/or justifying the twists and turns. It was almost as if the fund didn’t want its work too closely examined.

And perhaps for good reason.

At the time of the acquisition, none of the senior management at FitzWalter Capital Partners appear to have any experience in aviation finance. Most of its partners come from Australian investment giant Macquarie’s ‘Principal Finance’ group, not Macquarie’s AirFinance unit. But aircraft finance is a tricky beast (again, go read the court docs). So if the experience wasn’t in-house, where did it come from?

It could have come from the various FitzWalter partners, all of whom clearly have a wealth of experience with finance, writ large. But Airborne Capital, FitzWalter’s remarketing agent, is positively riven with aircraft finance experience. As well they should, given that’s their job. It’s where that experience comes from that’s interesting. Ramki Sundaram - the CEO of Airborne Capital - was formerly Head of Aviation at Natixis, one of the lenders involved. Jocelyn Noel, another key player in the firm, is also an ex-Natixis aviation finance employee.

It could just be a coincidence, and it must be stressed there is absolutely no proof whatsoever of any illegal behaviour by either FitzWalter Capital, its subsidiary, or its partners. But reading the court documents, it’s clear the plan hatched by FitzWalter wasn’t made up on the fly; it was complex and was clearly crafted ahead of the various elements being sprung. And the timings were very tight.

FitzWalter Capital Partners was incorporated in England on September 24, 2021. And yet, it was in conversation with Natixis and BNP - Vietjet’s lenders - within days after its creation. It was directing the banks to send termination notices to collapse the leases soon after that. And a few weeks after that the planes were in FitzWalter Aviation’s hands via a short and sharp sale handled by Airborne. All of these manoeuvres would have required extensive legal counsel. Nothing was left to chance.

Given the complexity of the plan, the targets mattered. The complicated and controversial move for the aircraft had to be worth the payoff. Hence the selection of four planes financed via the Japanese Operating Lease with Call Option (JOLCO); this was the structure with the most to gain from, penalties and assets-wise.

But why Vietjet? Why not any of the other airlines that use JOLCO finance? Surely some bigger aviation targets were ripe for private equity disruption during the pandemic? Surely not everyone was up to date on their loan payments. Or, was the hope that picking on a smaller and less prominent player - and perhaps, one presumed to be less sophisticated - would allow the reaping of gains without attracting any negative attention?

If that was the plan, it failed. One FitzWalter Aviation JOLCO purchase came unstuck in the US courts. The second, Vietjet, has just been through an appeal in the High Court. Given these difficulties, FitzWalter’s investors might be getting short of patience and wishing they knew more about this deal before it was hatched.

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