Monday 19 November 2018

Hong Kong's aircraft leasing push not a threat - SMBC chief Barrett

Best of both worlds: Peter Barrett said it suits SMBC to be in Hong Kong and Ireland as the industry faces rapid changes
Best of both worlds: Peter Barrett said it suits SMBC to be in Hong Kong and Ireland as the industry faces rapid changes
Donal O'Donovan

Donal O'Donovan

The rise of Hong Kong as an aircraft-leasing base is not a threat to Ireland, according to the head of Dublin-based SMBC Aviation Capital, one of the biggest aircraft lessors in the world.

Hong Kong's government has introduced a new regime which provides attractive incentives for aircraft-leasing companies to set up operations in the region.

SMBC CEO Peter Barrett said that can complement rather than threaten Ireland's status as a global aircraft-leasing hub.

He was speaking after SMBC Aviation established its own operating company in Hong Kong for the first time.

The growth of both Asian finance and of China as a market is changing the industry. That is a major focus for executives from the sector who are in Hong Kong this week for a conference organised by 'Airfinance Journal', where keynote speakers include Ruth Kelly, CEO of Dublin-based Goshawk.

SMBC Aviation itself is owned by one of Japan's biggest banks, and a raft of Chinese investors have taken significant stakes in other Irish lessors in recent years.

The growing importance of Hong Kong was not a threat to the Irish industry, Peter Barrett said.

"It makes sense for us to have people on the ground there, but it suits us to be in both."

Ireland's advantages include a tax treaty network that covers the bulk of countries where aircraft are leased and a proven track record in terms of people and fiscal infrastucture, he said. "Our owner remains committed to the business being headquartered in Ireland," Mr Barrett said.

Despite a push from other jurisdictions to attract and develop the sector, Ireland still stacks up well, he said.

SMBC Aviation Capital is one of the biggest aircraft lessors in the world.

Its latests financial accounts, published in August, show its pre-tax profit edge 2.2pc higher to $319.3m (€280.8m) last year as the sector continued to benefit from strong demand from airlines for jets.

Revenue fell 4.7pc to $1.03bn (€906m) in the 12 months to the end of March. That figure included $962.6m in lease revenue.

The company had $10.3bn (€9bn) in assets at the end of the financial year, alongside $7.2bn in borrowings.

The accounts show that SMBC Aviation generated 29.2pc of its lease revenue in Europe, 8.1pc in Asia, 18.5pc in emerging Asian countries, and 21pc in South America.

Another 11.9pc was derived from emerging European countries, 6.8pc from North America, and 4.5pc from the Middle East and Africa.

In its 2015 financial year, SMBC placed orders for 110 Airbus A320neo jets and five A321ceo aircraft.

It also has orders placed for 90 Boeing 737 Max8 jets. In 2017 and 2018 the lessor submitted orders for nine more aircraft.

It has 675 owned, managed and ordered aircraft.

All of the aircraft SMBC is due to receive by the end of March 2019 have already been placed with customers.

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