Thursday 18 January 2018

Avolon open to future M&A activity as first quarter profits hit $49m

Domhnal Slattery. Photo: Bloomberg
Domhnal Slattery. Photo: Bloomberg
John Mulligan

John Mulligan

Consolidation within the aircraft leasing industry will increasingly be a feature of the sector in coming years, according to Domhnal Slattery, the chief executive of Dublin-headquartered aircraft leasing firm Avolon.

He told the Irish Independent that while Avolon will be "alive to opportunities" if they arise, there is such significant growth expected in the market in coming years that there's sufficient business for all the major leasing firms.

He was speaking as Avolon reported first quarter results. Its net income jumped 36pc to $49m (€43.6m) in the first three months of the year, while revenue climbed 29pc to $175.7m (€156.5m).

Avolon, which has been heavily backed by leading private equity firms, floated on the New York Stock Exchange in December. While based in Ireland, it's incorporated in the Cayman Islands.

Ratings agency Fitch pointed out last week that there are now 20 major global aircraft leasing firms - most of them have either their headquarters or major offices in Ireland.

The agency predicted that consolidation and ownership change is likely in the sector in the longer-term.

Mr Slattery pointed out that there aren't many leasing firms with fleets of more than 100 aircraft that possess significant scale. He also said that over the next five years, the airline industry has demand for $800bn (€713bn) worth of aircraft. Lessors will handle about half of that, he said.

China also presents significant potential opportunity to aircraft leasing firms, as the country and the United States tread a path towards an open skies agreement. Avolon president and chief commercial officer Tom Ashe said that only 4pc-5pc of the company's portfolio is currently placed with operators in China.

"We definitely want to grow into that market," he said.

Avolon owns 132 aircraft and manages another 11. During the quarter, it sold two aircraft. It also has committed to buying 108 aircraft with deliveries up to 2022, involving a capital commitment of about $7bn (€6.2bn). The company's effective tax rate in the quarter was 6.3pc, compared to 3.7pc for the first quarter of 2014.

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