Leasing companies already own 40% of the world’s jet fleet, a number that is rising as more carriers opt for the flexibility provided by renting rather than buying planes.
Cheap capital and generous accounting policies can sometimes offer aircraft investors double-digit yields, and deals are being pursued by more Chinese companies that often have a funding advantage over Western counterparts.
Bidders for the CIT business include China's Ping An Insurance, Japan’s Century Tokyo Leasing Corp. and Irish aircraft-leasing company Avolon, according to a person familiar with the matter. Initial offers came in at more than USD 4 billion, another person familiar with the matter said.
Chinese conglomerate HNA Group last year joined the top 10 of global aircraft-leasing operations with its USD 2.6 billion acquisition of Ireland-based Avolon, and has its sights on more deals to claim a top-three spot.
Demand for air travel is skyrocketing. Traffic from China’s airlines increased 11% in the January-through-April period from a year earlier, according to the CAPA Centre for Aviation, an industry consultancy. International travel from China surged 29% in that period.
Some public investors have been less taken with China’s thirst for aircraft assets. Equity investors world-wide have been concerned about a potential bubble in demand that could depress rates. Singapore-based BOC Aviation, which is controlled by Bank of China, is down 9% since its Hong Kong IPO in June.
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