Wednesday 21 February 2018

Aviation on the up as Irish firms spend $30bn at air show

Avolon, Gecas and AerCap among those unveiling aircraft orders, writes John Mulligan

A Boeing 737 Max
A Boeing 737 Max

Irish aircraft lessors, airlines and investors have announced deals at the Paris Air Show to buy aircraft with a combined list value of almost $30bn (€26.9bn).

Irish aircraft lessors, airlines and investors have announced deals at the Paris Air Show to buy aircraft with a combined list value of almost $30bn (€26.9bn).

And John Higgins, the chief commercial officer of the world's third-biggest lessor, Dublin-based Avolon, has insisted there's no "doomsday scenario" looming for the global airline industry.

Avolon, whose chief executive is Domhnal Slattery, placed an order for 75 single-aisle Boeing Max 8 aircraft yesterday, with a list price of $8.4bn (€7.5bn), and an option to acquire an additional 50.

Big aircraft orders typically attract chunky discounts and Mr Higgins told the Irish Independent that Avolon had secured "attractive terms and conditions" for its order having made "substantial progress" relative to pricing on previous transactions.

Mr Higgins said that while the Avolon order is for 75 Max 8 jets, he added that the lessor "could well" convert some of the orders to Boeing's new Max 10, which it unveiled in Paris this week. Avolon has taken an option over 50 Max jets. The latest firm order will boost the number of aircraft that Avolon either owns, manages or has on order to 925 jets. Of those, 360 are on order.

"We have complete flexibility to move up and down the variants in the Max family," said Mr Higgins. "We fully expect that when these planes deliver between 2021 and 2024 that there will be a mix of other Max variants in the actual delivery."

Avolon, acquired last year by Bohai Leasing, a unit of China's HNA conglomerate, has grown fourfold in the past 17 months, said Mr Higgins. Earlier this year, Avolon completed the $10.4bn acquisition of the CIT aircraft leasing business. But rivals Gecas and Aercap - both based in Ireland - still lead Avolon, being number one and two respectively in terms of fleet size.

"We have an extraordinarily supportive shareholder," said Mr Higgins. "It has been commented in the past that we would like to be number one. Size, or being number one for the sake of being the biggest, is not a metric that we're interested in.

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"Where we see an opportunity to grow, where it's financially accretive, where it's strategically accretive, we have a shareholder and a management team that has the ambition and the wherewithal to support that. I think our business is going to continue to grow."

He pointed to strong global passenger growth since the start of the year that bodes well for the airline industry and lessors.

"Airlines are much better managed now than they were five or 10 years ago," he said. "They're much better at managing their cost base and their revenue lines, and more people are flying. We don't see a backdrop that suggests there's about to be a major market correction.

"When I look at the demand that we have both for used and new airplanes in our portfolio, and I look at the availability of capital to finance the deliveries we've made and are making, I don't see a doomsday scenario."

Dublin-based lessor AerCap, headed by Aengus Kelly, placed an order this week for 30 Boeing 787-9 Dreamliners, with an $8.1bn list price. The order makes AerCap the largest customer for the hi-tech jet. AerCap has already taken delivery of 55 Dreamliners and now has a total of 67 in its backlog.

Also at Paris, Gecas placed an order for 100 single-aisle Airbus A320neo jets, with a total list price of about $10.8bn (€9.6bn) It brings the total number of A320 aircraft types ordered by Gecas to about 600.

Latin America's Viva Air, founded and backed by Declan Ryan's Irelandia Aviation, placed an order yesterday for 50 Airbus aircraft.

The order has a list price of about $5.3bn. The aircraft will be used by Viva Colombia and Viva Peru. Irelandia Aviation senior partner John Goode said the order reflects Viva Air's aim to expand its business across Latin America.

Ryanair said it will buy another 10 Boeing 737 Max 200 jets, with a $1.1bn list price.

Irish Independent

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