Sunday 21 April 2019

Avolon banishes GPA ghost with record NYSE debut for an Irish company

Avolon chairman Denis Nayden, chief operating officer Tom Ashe, chief commercial officer John Higgins, chief financial officer Andy Cronin and chief executive officer Domhnal Slattery on the New York Stock Exchange yesterday
Avolon chairman Denis Nayden, chief operating officer Tom Ashe, chief commercial officer John Higgins, chief financial officer Andy Cronin and chief executive officer Domhnal Slattery on the New York Stock Exchange yesterday
John Mulligan

John Mulligan

The ghost of Guinness Peat Aviation (GPA) has been banished with the flotation yesterday of Irish aircraft leasing firm Avolon, according to its founders.

Speaking from New York, Clare-born Domhnal Slattery, and John Higgins, who co-founded Avolon just four years ago with Andy Cronin, said the stock market debut was an opportunity to "rebase" the narrative surrounding what is already a highly successful Irish aircraft leasing sector.

Leasing firm GPA, founded by Tony Ryan, famously pulled the plug on a planned stock market flotation in 1992. Mr Slattery had been working there at the time. In 1993, GPA was rescued by General Electric.

But GPA provided a foundation for what has made Ireland one of the world's major centres for aircraft leasing and aviation finance.

Avolon, which has been backed to the tune of $7.2bn by private equity giants and banks, including Oak Hill Capital Parters, Cinven and CVC, priced its shares at $20, lower than an expected $21-$23 range.

The price saw the airline raise $273m (€218m) for its backers and gave the world's ninth-biggest aircraft leasing firm by assets an initial market capitalisation of $1.6bn (€1.3bn).

But the shares fell over 6pc immediately after trading opened on the New York Stock Exchange. By midday there, they were still changing hands at just under $19.

Still, the floatation was the biggest ever in the United States by a company founded in Ireland.

Mr Slattery, who is Avolon's chief executive, told the Irish Independent that he did not believe the decline indicated the initial public offering (IPO) had been overpriced. "I don't think so," he said. "The market is down today. I don't think it's anything to do with Avolon specifically."

He said there remains a big appetite among investors for the aircraft leasing business and that they're keen to see more players come to the market.

There are still just five aircraft leasing firms listed on the stock exchange in the United States.

Among them is Fly Leasing, which is headed by Aer Lingus chairman Colm Barrington.

The Irish Independent revealed this week that a group of seasoned Irish aviation executives are also planning to launch another major aircraft leasing firm, Octagon Aviation Capital.

Prior to its flotation, Avolon had been approached by China Investment Corporation and state-owned Chinese aerospace firm AVIC Capita, which were interested in buying the Irish company. The offer was rebuffed.

Mr Higgins, who is president at Avolon, pointed out that 40pc of the world's commercial aircraft fleet is currently leased, and that the figure continues to rise.

He also said the sharp fall in oil prices in recent months, while still being digested by the aviation industry, provided an opportunity for leasing companies, as airlines will be able to make bigger profits on the back of fuel price declines.

"Airlines that are more profitable tend to be more expansive," he said.

Avolon has the youngest fleet of any leasing firm. It has a committed fleet of 227 owned, managed and ordered aircraft, which serve 49 customers in 27 countries.

Avolon's clients include airlines such as China Airlines, Virgin Australia and Etihad.

Avolon placed orders with Airbus and Boeing this year.

Irish Independent

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