What is Aircraft Leasing Business means??
Aircraft
leasing is not a new business but it has developed rapidly over Asia Pacific recently,
even Li Ka-Shing , chairman of Cheung Kong Holding Limited shows his interests.
According to the aircraft manufacturers, the potential demand of aircraft
demand for Asia is more than 13,000 units and the potential business transactions
volume will be more than 2 Trillion USD.
Almost 90% of the aircraft leasing companies come from Europe country. However, the trend seems to be revised as more and more attentions are looking on Asia Pacific. Beside China Commercial Bank shows the interest to invest in this business, Cheung Kong Holding Limited also planned to go into this business with potential investment of 400 billion.
Basically,
aircraft leasing business do involve financial institutions and giant tycoons.
The overall operation will not complicated as they buy the aircrafts from
manufacturers in bulk to get discount and lease out to airlines companies in
the terms of 5 to 20 years. After the contract finished, they can either renew
the contract with existing airlines or lease out to other airlines or even sold
it out.
Why do the
airlines company decided to buy from third-parties but not aircraft manufacturers?
This is due to they need to purchase in bulk in order to get discounts and this
do not benefits those small airlines company. As we know, all of the 8 eight
aircrafts of Hong Kong Express Airlines are obtained from leasing. Another
reason is due to supply issue. If we take one of the examples of A320 neo which
costs about 9.44 million that will be launched next year already received
booking of more than 3,200 units. Hence, if you place a order now, then
possibly you would need to wait for 6 years.
Banks of
China , International and Commercial Banks of China and China Development Banks
have started to invest on this business since 2008. Although the size of operation
still consider small if we compare over Europe side, but China Low-Cost
Carriers market is huge which brings more chances to aircraft leasing business.
Leasing aircrafts is the good way for low-cost airlines to develop their
business rapidly.
According
to International Air Transport Association ( IATA), from 2004-2011, the
average Return of Equity ( ROE) for aircraft leasing business is 9% which makes
it to be lucrative compare to Aircraft Manufacturers (7%), Airports (6%) and
Airlines companies (4%).
Getting
Aircraft Leasing Companies Listed??
The first
aircraft leasing company (China Aircraft Leasing Group Holdings Limited) which
has listed in Hong Kong Stock Exchange. The company shares has rose up to about
24.6% since listed in July 2014. The good news even attract General Electric
(GE)’s subsidiaries GECAS which operates aircraft listing business to listed in
Hong Kong Stock Exchange in the form of business trust and target to raise 7
billion USD.
The interim
financial report for China Aircraft Leasing Group Holdings Limited was amazing
as the profit rose up to 42.3% to record a profit of 62.87 million.
So how do
you all think about this business? Who will be the next tycoon operates it in
Malaysia?
