Pandemic Risk: Financial Point of View

When you get on an airline, JAL, ANA, American, and others, you might think that these companies own the planes because you see the big company name on them. That would be incorrect. It is said that there are roughly 20,000 commercial aircraft flying in the sky today, half of which are leased. Ultimately, tens or hundreds of thousands of investors around the world, including  Japan, are holding these aircraft.  This means that the majority of aircraft are securitized. Airplanes can be 5 to 6 billion yen even for a small private jet, and 30 to 60 billion yen for a big plane. It is not something you can buy by cash, even for the big airlines. Therefore, airlines lease the planes from leasing companies for a long period of time under "lease contracts" that last at least five years and up to 15 years or more. But since it is a lease,  you can' not say "I will stop it" in the middle of the contract. The lease contract does not allow you to say it. You hold...

This blog is the English version of a blog on pandemic risk written in Japanese. In addition to translating the original Japanese one into English, we would like to provide extra information for our international readers. I will be discussing, in particular, the impact of COVID-19 on financial markets and the macroeconomy. Because we are only in the midst of the ongoing crisis,  we can shed some light on the various financial events. I would like to discuss not only the position of financial economics but also from the perspective of insurance, actuarial finance, and corporate finance. I hope to be able to get some useful comments from you. April 25,2020 Soichiro Moridaira, Ph.D. Emeritus professor of Keio University