Thursday 27 July 2017

China needs $1 trillion of new planes - Domhnal Slattery

Domhnal Slattery
Domhnal Slattery

Clement Tan

china, which needs $1 trillion (€910bn) worth of aircraft over the next 20 years, has under-ordered by some 750 planes over the next decade, the chief executive of lessor Avolon Holdings said, suggesting more orders lie ahead for Boeing and Airbus Group.

"The Chinese market is driven by demographics," Domhnal Slattery said yesterday in a Bloomberg TV interview.

"Quite simply, if we look at Asia there's 600 million to 700 million in the middle class. That's going to grow in the next 20 years to 2.6 billion people. That's 400pc growth."

China's Bohai Leasing completed its $7.6bn acquisition of Avolon over the weekend, paving the way for the formation of the world's fourth-largest air lessor by asset value.

With Boeing and Airbus projecting China to become the world's largest air travel market over the next 20 years, plane-leasing companies in China have been mentioned as parties to more than $16bn worth of mergers and acquisitions since last year, according to figures compiled by Bloomberg.

Rapid growth of air travel in Asia is lifting orders for Boeing and Airbus, with China forecast to soon surpass the US as the world's largest plane market.

The country's economic expansion is making air travel affordable to more people, prompting carriers such as China Southern Airlines and Air China to expand their fleets.

China's total aircraft fleet will surge to 7,210 by 2034 from 2,570 last year, Boeing said in August.

The Chicago-based company forecast China will need 6,330 new planes valued at $950bn in the next two decades.

Recent turmoil in Chinese financial markets hasn't led to major revisions to such forecasts.

Haikou, China-based HNA Group owns 44pc of Bohai, whose leasing business also includes containers, ships and infrastructure.

With the completion of the Avolon acquisition, Bohai will also combine Hong Kong Aviation Capital's aircraft leasing business with Avolon's, while retaining Avolon's management and base in Dublin, the companies said in a statement.

Mr Slattery said yesterday that he hopes to grow the combined company's balance sheet to $40bn in the next five to seven years, from a figure of $22bn now.

The company expects to see more opportunities for acquisitions in the coming year or two and hopes to become one of the top three air lessors in the world, Mr Slattery said.

"Our core DNA is to grow organically," he said, "but we are alive to M&A opportunities and my sense is that over the next year or two, there will be opportunities for acquisitions."

The merged Avolon-Bohai entity would have more than 410 planes, Mr Slattery said. (Bloomberg)

Irish Independent

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