Hong Kong Aviation Capital Co. plans to raise as much as $4 billion to buy planes as Chinese state- backed lessors tap surging domestic travel and challenge U.S. rivals in overseas markets.
The company may make “one good acquisition,” as it works on doubling its fleet from 68 planes within 18 months, Chief Executive Officer Mathis Shinnick told reporters yesterday in Hong Kong. It will raise money through sources including debt and private equity, he said.
The lessor, controlled by Hainan province’s HNA Group Co., and Bank of China Ltd.’s BOC Aviation has expanded as rising wages and economic growth stoke travel in China. The value of the nation’s leased fleet could surpass $130 billion by 2025 as airlines add planes and make more use of leasing, according to Lung Cheong International Holdings Ltd., which is taking over Hong Kong Aviation.
“The Chinese have the biggest orders in the world for aircraft,” Peter Harbison, chairman of the Sydney-based Centre for Asia-Pacific Aviation, said by telephone today. “It’s logical that they would be looking at the funding side of things too because there’s a lot of money to be made there.”
Boeing, Airbus
Hong Kong Aviation, which is also backed by Bravia Capital Partners, is mainly considering single-aisle planes such as Airbus SAS A320s and Boeing Co. 737s, as well as larger models including A330s, 777s and 787s, Shinnick said. The return on equity is typically between 13 and 15 percent, he said.
The company is aiming to become one of the five biggest lessors worldwide, Shinnick said, without providing a timeframe.
HNA Group earlier this week agreed to inject two leasing units into Lung Cheong to widen access to capital markets. The HK$6 billion ($772 million) deal is undergoing due diligence and may be completed in four months, Shinnick said.
Lung Cheong jumped as much as 25 percent, the most since October, to 49.50 HK cents in Hong Kong trading today.
Rebounding global air travel and the easing of the credit crunch is reviving investment in aircraft-leasing. Air Lease Corp., a new entrant formed by Steven Udvar-Hazy, said yesterday it had secured $3.3 billion in financing and plans to have more than 100 planes by early next year.
ILFC Orders
International Lease Finance Corp., which Udvar-Hazy founded and later sold to American International Group Inc., is also considering its first plane purchases since 2007, Chief Executive Officer Henri Courpron said earlier this month. The lessor hasn’t ordered any planes since the U.S. government took over AIG in 2008 to save the insurance company from bankruptcy.
ILFC has a fleet of about 1,000 planes, according to its website. General Electric Co.’s leasing arm owns and manages more than 1,800 aircraft.
BOC Aviation, Asia’s largest aircraft leasing company, owns 131 planes, manages 25 and has another 41 on order, according to its website. The company last year boosted profit 28 percent to $137 million. Bank of China injected an additional $100 million of equity into the unit last year. It bought the company for $965 million in 2006.
Hong Kong Aviation on July 12 announced a deal to buy three A320s that will be delivered to Indian carrier IndiGo from 2011. The planes, worth $200 million at list prices, were purchased with support from Chinese lenders, according to a statement.
The lessor earlier this year completed the acquisition of 68 planes from the collapsed Australian company Allco Finance Group Ltd. The planes are leased to carriers including Qantas Airways Ltd., Emirates Airline and British Airways Plc.
Source: Bloomberg