Net Worth: $4 Billion
Wealth Origin: Aircraft Leasing
Birthplace: Budapest, Hungary
Education: Bachelor of Arts/Science, University of California, Los Angeles
Growing up in Budapest, Hungary during the early 1950s offered Steven Udvar-Hazy a healthy helping of childhood adversity. His parents had already survived Hitler’s Nazi occupation during World War II and now, their entire country found itself locked behind the Soviet Union’s Iron Curtain. The walls of his first-grade classroom featured glorified portraits of Joseph Stalin and Vladimir Lenon, rather than Hungarian heroes, as he tends to point out.
“We had to sit every day for an hour and a half with our hands behind our backs as we listened to communist brainwashing about how decayed the American imperialist system was, how terrible it is in the states, and how the Russian socialist/communist system is the only way to live,” Hazy remembers. “When you listen to that as a child over and over, and you’re forced to learn Russian, and you’re forced to do everything that you do, you have no independence.”
There was an airshow happening at a small airport just outside of the city one day, and Hazy’s father got tickets. As a young boy, he was always yearning for freedom, for the opportunity to get out of this hypothetical eggshell that placed limits on his potential. Equating existence under communist rule to prison, he recalls the overwhelming sense of fascination he encountered when watching the airplanes take off and fade away into the soft blue sky; they had no borders or walls to stop them, no limits, and forever registered in his imaginative mind as a source of boundless possibilities.
Escaping the Iron Curtain
“My parents could have sat back and adapted to the oppressive Soviet Regime and accept their misfortune, and a life of misery and depression,” he explains in a commencement address for University High School, his alma mater. “But instead they envisioned a future of freedom and opportunity in the United States and acted with urgency, knowing that their actions, which took place during a time of life-threatening risks, would give their future family generations all the liberties they were lacking in their home country.”
The Hazy family’s first attempt to escape from Stalin’s totalitarian grip didn’t go quite as planned. “They had these barbed wire fences, then watchtowers, then a minefield, then a big ditch, then another minefield, and then more fences, and the snow was falling,” he recounts. “The guide told my father, ‘I kind of know my way around but with the snow on the ground, the chances of stepping on a land mine are increasing so we have to turn back.'”
Facing an ever-growing possibility of being blown to pieces with each step, 12-year-old Steven reversed course with his family and headed back home. They tried again that year, made it past the traps, and found their way to Sweden.
Hazy’s father had a sister who had already successfully made it to New York City from Hungary. Within six months, the family obtained green cards and visas to emigrate to the United States. Hazy arrived in New York with an English vocabulary that consisted of two words: “yes” and “okay.”
Adapting to life in the big apple offered its own unique challenges, such as an occasional fist-fight, for a little foreigner boy who knew no English and didn’t play baseball like the rest of the kids. After school, Steven Udvar-Hazy would often head to Idlewild Airport, as Kennedy International was known then, to watch planes take off and land. This reliable relationship with aircraft drifting overhead offered some degree of comfort and familiarity in the new world.
In response to Steven being constantly harassed by his classmates, his parents transferred him to a small parochial school on the west side of Manhattan. The strict and sometimes intimidating Catholic nuns at Holy Trinity helped with easing him into American Culture. All the while, his affinity for aeronautics continued to intensify.
At least twice a week, Hazy would take any combination of subways, buses, or cabs to LaGuardia or Idlewild airports to marvel at the activity, notes CSQ Magazine. Talking his way into control towers, hangars – anywhere to be near the action – Hazy would log information about the types of aircraft that different airlines flew, flight patterns, destination cities, and anything else related to air travel.
When his older brother earned a scholarship to UCLA, the entire family opted to ditch frigid northeast winters for year-round sunny skies in Southern California. The move led to Steven graduating from Los Angeles’s University High School with the class of 1965. During his commencement ceremony, he remembers feeling a sense of accomplishment, having a limited amount of self-confidence, and being scared and apprehensive of what the future might bring.
Life on the west coast brought brighter days both literally and figuratively, while enrolled at UCLA, he worked as a lifeguard during the summers on Manhattan Beach, Redondo Beach, and Zuma Beach. “It was a great job,” reminisces Hazy. “The starting pay was $2.04 an hour.” He and his brother shared a 1956 black Oldsmobile convertible with red interior and one dollar would buy them four gallons of gas, enough for a few round-trips to the beach.
Still steeped in aerospace culture, as a junior in 1966, he advised Aer Lingus on how to save money by reducing the number of aircraft types in its fleet. Hazy then caught wind that Air New Zealand had a plane they were looking to sell in order to purchase a newer model.
“I found an airline in Alaska that wanted to buy that plane,” recounts Hazy. “[Air New Zealand] wanted $1M. I said, ‘Will you pay me $50,000 if I have a buyer?’ They said, ‘Sure, come down.’ I had sent telegrams, so when I showed up with the pilot, they said, ‘Who is this kid?’ They had no idea I was just 21. That gave me confidence that this thing is doable.”
Steven Udvar-Hazy graduated from UCLA with a bachelor’s degree in economics a year later and immediately got to work on bringing his childhood dream of owning an airline to life. “In spite of all the valuable micro and macroeconomics courses that I took and all the wonderful professors I had at UCLA, I grossly underestimated the forecasted expenses of this operation and also miscalculated revenue projections due to over-optimism. This led to massive losses,” he discloses.
Steven Udvar-Hazy Career
Hazy believed the California market was ripe for a commuter airline, based out of Santa Barbara’s Vandenberg Air Force Base, to connect travelers flying from Los Angeles to the San Francisco bay area or vice versa. Pouring all of his own savings into the company and borrowing money from friends and family, he launched Astro Air at the age of 22 – making him the youngest CEO of a scheduled certified airline in the United States.
“I thought about it a great deal, I did a lot of research, I developed a plan, and I just did it,” says Hazy. “This new airline was flying passengers within months of my graduation. The concept was good, but the real marketplace and competitive realities resulted in a business that failed to reach break-even. By today’s standards, it was a financial disappointment.”
Over the course of a year or so, he had blown through his personal savings, along with all the money his loved ones gave him. Not only that, his girlfriend left him because she didn’t quite appreciate how he started asking her to pick up the tab on date night.
“At the time, I thought it was devastating,” he reveals, while also stressing how important it is to experience failure early in life. “At that young age, you’re almost like a spring. You get compressed but then you can go back to your normal state pretty quickly. If you’re gonna mess up, try to do it before 25 or 28 because that’s when you have room to experiment and do things that later on you maybe don’t have the latitude to do. It’s really important to go out of your comfort zone early.”
International Lease Finance Corp.
Because Steven Udvar-Hazy didn’t have enough money to own his airplanes, he had to lease them. Regardless of how many passengers he could get on board the aircraft for any given flight, he was liable to make those monthly payments. It eventually struck him, “the lessor was getting paid, no matter what. I said to myself, that’s a better business model [owning the airplane].”
He noticed another emerging trend, with rapidly developing advancements in technology, more and more companies were making the shift from propeller to jet engine planes. Based on his own turbulent experience in the aviation industry, he understood that most regional and start-up airlines, especially ones outside the United States, wouldn’t have the ability to buy a modern aircraft at five times the cost.
“I thought it was a good idea to create a mechanism where they could lease the planes for five, eight, or ten years, which allowed them the opportunity to operate new equipment even if they didn’t have the financial resources on day one to buy the planes,” he explains.
From the Ground Up
Hazy was a gritty 26 years old when he heard through the grapevine that Aeromexico was in need of a DC-8 to fulfill their new service route from LAX to Acapulco. He knew that Floridas’s National Airlines had a used one for sale with a price tag of $2.2 million. He and his two business partners arranged a meeting with Aeromexico, where the company agreed to put up three months’ rent, plus a $150,000 security deposit, which would be returned at the end of the lease.
If there was any silver lining to all the money he lost as a result of his first venture, it was that none of it belonged to a bank, therefore he had no record of unpaid liabilities. This time around, his business plan was much more accurate, and although nearly every financial institution turned him away, one of them felt it made sense and stepped up to the plate.
Recognizing the drive in this young man, United California Bank told Hazy that if he could get the Mexican government to guarantee all of Aeromexico’s lease payments, his loan could be approved. With haste, the partners arranged a last-minute meeting with and pitched the idea to a representative of the Mexican government, acquired their backing, and got them to sign all required paperwork that same evening. Hazy walked into the bank the following day with everything he needed – and, more notably, walked out with a loan.
“That was the beginning of aircraft leasing,” he says. “Once we established ourselves, we could at least get some financing as long as we put our own money in the deal.” Of the three original partners, Hazy was named president; they took ILFC public in 1983 on the over-the-counter market.
ILFC’s profits rose 55 percent to $51.2 million in 1987 on revenues of $179.6 million–mostly from lease payments. ILFC had just 16 employees. By this time, wrote the Financial Times, the company had leased 230 aircraft to 70 airlines, with only two bad deals, thanks to its detailed analysis of lessees. They also had a policy of withdrawing aircraft from lessees at the first sign of trouble. ILFC then specialized in smaller airlines that had difficulty obtaining traditional financing.
In May 1988 ILFC announced orders for 100 Boeing and 30 Airbus airplanes worth $5.04 billion – the largest single purchase of commercial aircraft to that date. The firm also took options for another $1.6 billion worth of planes. The orders were part of an effort to diversify ILFC’s fleet, although McDonnell Douglas was left out of this historic deal.
According to Funding Universe, the large order ensured that ILFC would have planes available as airlines across the globe were expected to replace their aging planes en masse in the 1990s. The company did not generally purchase planes on speculation, however; customers were already lined up.
Steven Udvar-Hazy oversaw ILFC’s record net income of $43.4 million on revenues of $213.2 million in 1988. The company had roughly 75 planes in its portfolio and intended to increase that number to 350 planes by 1994.
“He [Hazy] lives and breathes the industry,” said John Leahy, chief Airbus salesman. “When he was dating his wife, Christine, his idea of an exciting date was to go to the end of the runway and tell her about the DC-8 overhead.”
ILFC Sold to AIG
ILFC was acquired by American International Group (AIG), an insurance company, for $1.26 billion in June 1990. ILFC had debts of $2.3 billion and needed to raise $10 billion to pay for aircraft due to be delivered in the next five years. ILFC posted pre-tax profits of $139.7 million in 1991.
Edward E. Matthews, vice chairman of finance at AIG said in a statement, “our equity will enhance International Lease’s ability to raise funds. For any company that is relatively small and fast-growing, the question is always whether they can raise the equity they need to sustain growth.”
Steven Udvar-Hazy was able to hang onto his role as president of ILFC and with access to additional funding from AIG, the company placed a $4.1 billion order for 82 aircraft in January 1993 – this was risky considering the purchase was amidst an ongoing recession. Their bet paid off, as the airline-leasing market remained stable during the brief economic downturn and picked up exponentially thereafter.
By 2006, ILFC had pretax earnings of $716 million on revenue of $4.1 billion. In 2007 they had a fleet of 824 Boeing and Airbus planes, with 254 more on order, which dwarfed that of any airline in the world; American Airlines came next with 679, and for further reference, ILFC owned more than the combined holdings of Air France (265), Lufthansa (245) and British Airways (239).
When the great recession of 2008 hit the financial sector, AIG up to $182.5 billion in bailout money from the United States government after its near-collapse. The federal government soon began overseeing AIG’s day-to-day operations and placed limits on what the company could pay its top executives, including those at ILFC.
Air Lease Corporation
In May of 2008, The Wall Street Journal released an article headlined, “ILFC Founder Weighs Split From AIG;” needless to say, it was less than a secret that Hazy had doubts regarding his parent company.
As the piece points out, in the wake of AIG reporting a $7.8 billion first-quarter loss, largely the result of a sharp decline in the value of financial instruments tied to subprime mortgages. Two major rating firms downgraded ILFC’s credit along with that of the AIG’s, even though ILFC reported a winning first quarter with a 41% increase in operating income to $272 million.
The primary concern here was that ILFC’s downgraded credit rating – which occurred entirely as a result of its ties with AIG, rather than by their own doing – would affect the price at which they were able to purchase aircraft. Hazy said during an interview at the time that even a quarter-percent increase in interest “could tip us from being the most-competitive to being the third-most-competitive in some of these deals.”
Unable to work out more favorable circumstances, the Los Angeles Times documents Steven Udvar-Hazy leaving ILFC, and AIG for that matter, in 2010. That same year he launched Air Lease Corp, utilizing the same wildly profitable leasing model he pioneered throughout his legendary tenure at ILFC. His longtime associate, John Plueger, left AIG a month later after briefly serving as Hazy’s replacement. Plueger then became chief operating officer of ALC.
He Did it Again
Securing $3.3 billion in financing, Steven Udvar-Hazy set out to grow ALC’s fleet to 350 to 500 planes. By January of 2011, the company had acquired 40 aircraft, according to the SEC filing. Air Lease owned 244 aircraft, 38.9% of which were Boeing 737-800s, and had 391 aircraft on order in 2018.
“In the mid-1950s, you had maybe 20 million one-way passengers a year in the world,” Hazy says. “As the middle classes grow [worldwide], the potential for air travel is unbelievable. The number of people flying is growing faster than population or GDP around the world. This year , we’re projecting more than 4 billion [one-way] passengers. The U.S. will make up 25 percent of that.”
A Final Message
From Steven Udvar-Hazy:
Sir Winston Churchill once said: “We are making a living by what we get, but we make a life for what we give.”
By making the right life choices, you will also find that you will less likely experience degrees of regret in the future.
In their scientific article The Experience of Regret, psychologists Gilovich and Medved found that “time” is a key factor in what we regret. Over the short term, we tend to regret our actions. But over the long haul we tend to regret our inactions. Based on their exhaustive research: over the course of an average week, action regrets outnumber inaction regrets 53% to 47%. Over the course of a lifetime, inaction regrets outnumber action regrets 84% to 16%.
As you omit to your bright days ahead, face that future with strong determination, optimism, faith, and hope, while recognizing that there will always be steps backward.
I hope if you stumble you will pick yourself up and live the life you want to, and if you haven’t thus far, you can start it all over starting today:
- Dream big, and have high aspirations for the future
- Be willing to take a risk, do not be afraid of the future
- Do something transformational that will have a big impact
- Leave the world a better place than you found it
- Inspire those around you to be better human beings – because of you