Business Irish

Saturday 21 July 2018

Battle looms as Avolon, Aercap rival up for sale

Aircraft lessor GECAS set to spark global interest

'Avolon boss Slattery is on record as saying he wants to make another major acquisition to turn the business he co-founded in 2010 into the world's biggest aircraft lessor.' Photo: Jason Clarke
'Avolon boss Slattery is on record as saying he wants to make another major acquisition to turn the business he co-founded in 2010 into the world's biggest aircraft lessor.' Photo: Jason Clarke

Gavin McLoughlin and Fearghal O'Connor

One of the world's biggest aircraft-leasing firms is up for sale and looks set to spark a bidding war in an industry dominated by Irish-based firms.

In a development which could have significant implications for the sector here, GECAS, an arm of US conglomerate General Electric, is on the block, the Sunday Independent understands. New GE chief executive John Flannery is seeking to divest assets as part of a turnaround strategy.

GECAS is ranked alongside Domhnal Slattery's Avolon and Irish-based Aercap in the top three aircraft lessors in the world. Neither Aercap nor Avolon commented on whether they were interested in pursuing GECAS, which employs more than 250 people in Ireland.

SMBC Aviation Capital, another Irish-based lessor which is among the world's biggest, said it "can't comment on any rumours or speculation".

The company is likely to interest Asian leasing companies - the market has seen a large influx of Asian capital in recent years with air travel soaring in the Chinese market.

Reuters revealed earlier this week that GECAS had received a number of expressions of interest from competitors, and that GE was considering a sale or spin-off of the business.

Both GECAS and Aercap have links to Tony Ryan's collapsed aviation-leasing pioneer Guinness Peat Aviation (GPA). GECAS bought many of GPA's assets as part of a massive restructuring and the remaining company later became Aercap, run by Irishman Aengus Kelly.

Avolon boss Slattery is on record as saying he wants to make another major acquisition to turn the business he co-founded in 2010 into the world's biggest aircraft lessor. It recently bought rival CIT for $10bn. Slattery floated the business on the New York Stock Exchange in late 2014 and it was then acquired by Chinese conglomerate HNA Group.

"This is a very difficult market to get to number one in because most of our bigger competitors are growing and have aspirations for growth," Slattery said in a recent interview.

"I think there'll be one other major acquisition, rather than a series of small acquisitions and then we'll supplement that by organic growth."

Colm Barrington, chief executive of aircraft lessor Fly Leasing and an industry veteran, did not rule out a face-off between Aercap and Avolon for the stake but told the Sunday Independent that it would be "a very big nut for either to crack at the moment".

Barrington said that it was hard to predict what could unfold from the potential sale but that there was a possibility that a new player could emerge in the industry.

"There are about 70 different lessors in China at the moment and if a few of them got together and bought GECAS it could be very significant for them.

"It could also make a great play for someone who isn't in the industry but who would like to get into it, a sovereign wealth fund perhaps," Barrington said.

Sunday Indo Business

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