Avolon expansion plan drags on profits at aircraft leasing giant
REVENUES are up and profits are down at Avolon as the Dublin-based aircraft leasing company invests heavily in new engines for its expanding fleet.
Turnover at Avolon - the world's third-largest aircraft lessor - rose 7pc to $678m (€608m) for the second quarter ending in June.
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Profits declined by 26pc to $185m, hit by $83m in finance costs related to debt facility and refinancing activities.
Avolon CEO Dómhnal Slattery said the quarter was particularly significant because of the company's achievement in April of investment-grade credit ratings at Fitch, Moody's and S&P.
The agency upgrades allowed Avolon to sell $2.5bn in bonds maturing from 2022 to 2026 at competitive yields.
Mr Slattery said the fundraising "was delivered well ahead of the expected timeframe and affirms our long-held view that we have an investment-grade, quality business".
The company followed up that cash injection in June by signing a deal for 140 new engines at the Paris Air Show from CFM International, a joint US-French venture between GE Aviation and Safran Aircraft Engines.
The 140 CFM Leap-1A engines carry a list value of $2bn, making it Avolon's biggest single engine order since its 2010 foundation. Avolon has earmarked the Leap-1A engines for use in its expanding fleet of Airbus A320neo aircraft, 42 of which have been delivered and 198 remain on order.
Mr Slattery said Avolon's sale of 38 aircraft and delivery of 15 aircraft to 10 customers during the quarter helped the company to increase its liquidity by 12pc, to nearly $6.4bn.
That figure includes unrestricted cash, undrawn credit facilities and undrawn debt.
Avolon said it completed 24 new lease transactions during the quarter, including lease renewals.
At the end of June, Avolon said it had a fleet of 923 owned, managed and on- order jets, 4pc higher than a year ago.
Close to 300 of its existing jets already have CFM-manufactured engines.
Avolon has 149 airline customers, operating in 60 countries. It is 70pc owned by Bohai Leasing Co, a subsidiary of Chinese conglomerate HNA, and 30pc by Orix Aviation Systems, the Dublin-based aircraft leasing unit of Japanese investment group Orix Corp.