Monday 26 August 2019

Irish jet leasing firm Avolon posts $58m profit in Q3

Domhnal Slattery
Domhnal Slattery
John Mulligan

John Mulligan

Profits at Irish aircraft leasing firm Avolon jumped 33pc to $58m (€54m) in the third quarter of the year as the company benefited from a mix of lease revenue and jet sales.

The firm - which is in the process of being sold to China's Bohai Leasing in a deal that places a $7.6bn enterprise value on the business - said that total revenue in the latest quarter rose 23pc to $201.9m.

Its profit figure was ahead of analyst expectations, with the consensus forecast having been pencilled in at $51.5m.

Leasing revenue for the quarter amounted to $180.6m, which was 5pc ahead of forecasts at Davy Stockbrokers.

The company took delivery of $350m worth of new aircraft in the period. It delivered eight aircraft to seven customers in six countries in the three months to the end of September.

Avolon also sold seven aircraft with a net book value of $276m in the quarter. That made for a net gain of $21m, or a 7.6pc premium to the net book value of the assets.

Chief executive Domhnal Slattery, who co-founded the company, said that Avolon has also inked a sale and leaseback agreement for five Boeing 787-9 Dreamliner aircraft for delivery to China's Hainan Airlines in 2016 and 2017, subject to the closing of the sale to Bohai.

Avolon's committed fleet for delivery in 2016 now stands at 29 aircraft valued at $1.7bn.

At the end of the third quarter, Avolon owned 144 aircraft, managed 10 and had 104 on order.

"We have delivered on our committed pipeline and we are very pleased to reaffirm our 2015 full year guidance for reported returns on the back of our improving funding costs and a strong trading performance," said Mr Slattery.

The group is targeting a return on equity this year of between 12.8pc and 13.1pc.

Mr Slattery also confirmed that the sale of the business to Bohai - which was approved by shareholders last month - is on track to be completed during the first quarter of 2016.

Avolon was founded in 2010 and only floated on the New York Stock Exchange last December. The company will continue to be based in Ireland following its sale.

Avolon was backed to the tune of more than $7bn by private equity firms Oak Hill Capital partners, Cinven and CVC. Singapore's sovereign wealth fund also invested in the leasing company.

Between them, the private equity backers own about 75pc of Avolon.

The group also said that its effective tax rate in the latest quarter was just 7pc, compared to 2.5pc for the three months ended September 2014. Avolon is incorporated in the Cayman Islands and domiciled in Ireland, whereas its predecessor, Avolon Investments, was incorporated in Luxembourg.

"The increase to the effective tax rate in the current period was due to an increase in pre-tax income in Irish taxable entities while the tax benefit of non-taxable income stayed relatively constant," Avolon noted.

Avolon is currently the ninth biggest jet leasing company in the world.

Following its acquisition, it's believed the plan is to grow its business aggressively to make it more than five times its current size. Its airline clients include China Airlines, AeroMexico, KLM and Japan Airlines.

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