Saturday 17 March 2018

Avolon profits soared before $7.6bn sale to Chinese giant

Avolon's Dómhnall Slattery
Avolon's Dómhnall Slattery
John Mulligan

John Mulligan

Pre-tax profits at Dublin-headquartered aircraft leasing firm Avolon soared to $111.6m (€105m) in 2015, compared to a $28.8m (€27m) loss in 2014, as revenue rose 25pc to $677.2m (€637m), newly-filed accounts for the business show.

Avolon - previously listed on the New York Stock Exchange - was acquired by Bohai Leasing in January 2016 and delisted, and so did not have to file an annual report for 2015 with the stock exchange.

The accounts show that Avolon, co-founded by Domhnal Slattery, had 141 owned aircraft at the end of 2015, and had acquired 32 jets during the year and disposed of 17.

But in the space of just a year, the company has been transformed.

Its acquisition by Bohai Leasing, part of China's HNA group, marked the beginning of an aggressive expansion strategy under its new owners.

The sale placed a $7.6bn (€7.15bn) enterprise value on Avolon. It included about $5bn (€4.7bn) of debt.

Mr Slattery remains Avolon's ceo, while co-founders John Higgins and Andy Cronin also continue as chief commercial officer and chief commercial officer respectively. In the third quarter of 2016, Avolon agreed to buy 45 aircraft worth $2bn (€1.8bn) from GECAS, and also agreed to pay $10bn (€9.41bn) to buy the leasing business of CIT Group.

The CIT deal - expected to be finalised this quarter - will effectively double the size of Avolon.

Avolon currently has an owned, managed and on-order fleet of 429 aircraft.

Following the CIT acquisition, it will have about 910. It will also propel Avolon to being the world's third-largest aircraft lessor.

When Avolon clinched the deal to buy the CIT business last October, Mr Slattery told the Irish Independent that he now plans to make Avolon the world's biggest aircraft leasing firm.

"Our aspiration is to be the largest aircraft leasing company in the world, in terms of size, shape and scale," he said.

"We've got plenty of work ahead to get to that." Gecas, the world's biggest aircraft lessor, currently has a fleet of just under 2,000 aircraft, including 1,700 fixed-wing jets and 250 rotary aircraft.

Mr Slattery co-founded Avolon in 2010, securing $7bn (€6.5bn) in private equity backing.

The company floated on the New York Stock Exchange in 2014 but was sold to Bohai just months later.

The 2015 accounts for Avolon show it paid its 74 staff a total of $26.1m (€24.4m) in salaries and benefits. The company also paid $7.5m (€7m) in share-based compensation, compared to $53.6m (€50.4m) in 2014 - the year it hit the stock market.

Total management compensation totalled $4.7m (€4.4m) in 2015, down from $6.3m in 2014 when Mr Slattery received a discretionary $2.6m bonus. Also in 2014, the company repurchased shares valued to $5.6m (€5.2m) from Mr Slattery.

Avolon appointed three new non-executive directors this month: Ciarán Ó hÓgartaigh, Joe Nellis and Denis Kalscheur.

Mr Ó hÓgartaigh is the dean of UCD's College of Business.

Mr Nellis was most recently a managing director at GE Capital. Mr Kalscheur is a former ceo of Aviation Capital Group.

Irish Independent

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